AMERICAN WIRELESS SYSTEMS INC, 10QSB, 1995-08-14

AMERICAN WIRELESS SYSTEMS INC
10QSB, 1995-08-14
MISCELLANEOUS AMUSEMENT & RECREATION

Previous: NETWORK GENERAL CORPORATION, 10-Q, 1995-08-14

Next: GEOTEK COMMUNICATIONS INC, 10-Q, 1995-08-14

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 1995

Commission File Number: 0-11412

AMERICAN WIRELESS SYSTEMS, INC.
(Exact name of small business issuer
as specified in its charter)

DELAWARE 41-1616965
--------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

7426 E. Stetson Drive, Suite 220, Scottsdale, AZ 85251
------------------------------------------------------
(Address of principal executive offices)

11811 N. Tatum Blvd., Suite 1060, Phoenix, AZ 85028
------------------------------------------------------

(Former address of principal executive offices)

602-994-4301
------------
(Issuer's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes X No
---- ----

Number of shares of common stock, $.01 par value, of registrant outstanding at
June 30, 1995: 5,709,187

<PAGE>

<TABLE>

<CAPTION>
TABLE OF CONTENTS

<S> <C>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements -

Balance Sheets - December 31, 1994 and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 1

Statements of Operations - Quarters Ended June 30, 1994 and June 30, 1995 . . . . . . . . . . . . . 2

Statements of Operations - Six Months Ended June 30, 1994 and June 30, 1995 . . . . . . . . . . . . 3

Statements of Cash Flows - Six Months Ended June 30, 1994 and June 30, 1995 . . . . . . . . . . . . 4

Notes to Financial Statements - June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Item 2. Management's Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

PART II. OTHER INFORMATION

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Item 2. Change in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 15

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Item 6. Exhibits & Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

</TABLE>

<PAGE>

PART I

Item 1. Financial Statements

AMERICAN WIRELESS SYSTEMS, INC.
BALANCE SHEETS - DECEMBER 31, 1994 AND
JUNE 30, 1995
(Unaudited)

December 31, 1994 June 30, 1995
----------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 376,621 $ 1,750,836
Due from affiliates (Note 4) 339,952 434,538
Note receivable (Note 4) 2,000,000 2,000,000
Prepaid expenses and other current assets 150,349 43,019
-------------- --------------
Total current assets 2,866,922 4,228,393
PROPERTY AND EQUIPMENT, at cost, net 431,790 227,632
INVESTMENT IN JOINT VENTURES (Notes 1 & 4) 1,139,994 1,054,075
INVESTMENT IN WIRELESS CABLE SYSTEMS
(Notes 1 & 4) 2,430,866 2,881,452
LICENSE DEPOSITS AND OTHER ASSETS 88,333 77,309
-------------- --------------
$ 6,957,905 $ 8,468,861
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 482,342 $ 591,609
Accrued liabilities 345,063 232,325
Current portion notes payable (Note 3) -- 1,116,364
-------------- --------------
Total current liabilities 827,405 1,940,298
-------------- --------------
Notes payable (Note 3) -- 1,800,000
Deferred compensation (Note 5) 354,636 276,045
-------------- --------------
Total liabilities 1,182,041 4,016,343
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (Notes 1, 6, and 7):
Common stock, $.01 par value,
40,000,000 shares authorized,
5,709,187 shares outstanding 57,092 57,092
Additional paid-in capital 20,239,069 20,239,069
Accumulated deficit (14,520,297) (15,843,643)
-------------- --------------
Total stockholders' equity 5,775,864 4,452,518
-------------- --------------
$ 6,957,905 $ 8,468,861
============== ==============

The accompanying notes are an integral part of these balance sheets.

<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

Quarter Ended Quarter Ended
June 30, 1994 June 30, 1995
------------- -------------

REVENUES:
Management fees $ 25,000 $ 25,000
------------ ------------
Total Revenues 25,000 25,000
------------ ------------

GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation 313,788 168,420
Outside services 81,126 102,848
Other 309,690 199,307
------------ ------------
Total Expenses 704,604 470,575
------------ ------------
LOSS FROM OPERATIONS (679,604) (445,575)
------------ ------------
LOSS FROM OPERATIONS OF JOINT
VENTURES (47,793) (39,018)
------------ ------------
OTHER INCOME (EXPENSE), net
Interest expense (340,386) (35,877)
Other (65,203) 35,139
------------ ------------
(405,589) (738)
------------ ------------
NET LOSS $ (1,132,986) $ (485,331)
============ ============
NET LOSS PER SHARE $ (.31) $ (.09)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 3,662,088 5,709,187
============ ============

The accompanying notes are an integral part of these financial statements.

<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

Six Months Six Months
Ended Ended
June 30, 1994 June 30, 1995
------------- -------------

REVENUES:
Management fees $ 33,333 $ 50,000
-------------- --------------
Total Revenues 33,333 50,000
-------------- --------------

GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation 637,256 473,220
Outside services 277,520 265,176
Other 532,869 510,155
-------------- --------------
Total Expenses 1,447,645 1,248,551
-------------- --------------
LOSS FROM OPERATIONS (1,414,312) (1,198,551)
-------------- --------------
LOSS FROM OPERATIONS OF JOINT
VENTURES (94,344) (85,919)
-------------- --------------
OTHER INCOME (EXPENSE), net
Interest expense (828,109) (49,453)
Other (43,305) 10,577
-------------- --------------
(871,414) (38,876)
-------------- --------------
NET LOSS $ (2,380,070) $ (1,323,346)
============== ==============
NET LOSS PER SHARE $ (.66) $ (.23)
============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 3,589,958 5,709,187
============== ==============

The accompanying notes are an integral part of these financial statements.

<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Six Months
Ended Ended
June 30, 1994 June 30, 1995
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,380,070) $ (1,323,346)
Adjustments to reconcile net
loss to cash used for
operating activities -
Depreciation and amortization 553,199 49,204
Loss on disposal of assets 3,565 200,347
Loss from operations of joint ventures 94,344 85,919
Changes in assets and liabilities -
Decrease in prepaid expenses
and other assets 100,662 107,330
Decrease in accounts payable
and accrued liabilities (191,468) (25,699)
------------ ------------
Net cash used for operating activities (1,819,768) (906,245)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (171,222) (32,388)
Investment in wireless cable
television systems (1,015,812) (393,590)
Sales of marketable securities 742,825 --
Increase in due from affiliates (120,353) (94,586)
Note receivable issued (2,037,851) --
Decrease in deposits -- 1,024
------------ ------------
Net cash used for investing activities (2,602,413) (519,540)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable -- 2,800,000
Net proceeds from sale of common stock 1,986,082 --
------------ ------------
Net cash provided by financing
activities 1,986,082 2,800,000
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,436,099) 1,374,215
CASH AND CASH EQUIVALENTS,
beginning of period 3,244,275 376,621
------------ ------------
CASH AND CASH EQUIVALENTS,
end of period $ 808,176 $ 1,750,836
============ ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 325,129 $ --
============ ============

The accompanying notes are an integral part of these financial statements.

<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)

(1) BACKGROUND, ORGANIZATION AND OPERATIONS:

Background and Organization

American Wireless Systems, Inc. (the Company) was originally incorporated
in Minnesota in 1988 as Short Takes, Inc. The Company ceased its prior business
activities in April 1991, at which time the Company began searching for a
suitable business for acquisition or merger. Its sole asset was cash of $669,000
on December 17, 1992, when it acquired certain operating assets and liabilities
of AWS, Inc. (formerly American Wireless Systems, Inc.), a California
corporation (Wireless California) in exchange for 2,572,000 shares of Common
Stock which represented 82.5% of the outstanding common stock of the Company
(the reverse acquisition). For accounting purposes, this transaction has been
treated as an issuance of Common Stock for cash by Wireless California. Wireless
California was subsequently liquidated into AWS Liquidating L.L.C., an Arizona
limited liability company (AWS L.L.C.).

In April 1993, the stockholders approved changing the Company's name from
Short Takes, Inc. to American Wireless Systems, Inc. In addition, the Company
was reincorporated in the state of Delaware and declared a reverse stock split
of 1-for-2.5. On October 18, 1994, the stockholders of the Company approved a
reverse stock split of 1-for-3. The accompanying financial statements have been
retroactively restated to reflect these reverse stock splits.

Operations

The Company currently owns an interest in and manages the operations of
wireless cable television systems in Minneapolis and Fort Worth, and holds an
interest in or owns the rights to certain wireless cable television channels in
Los Angeles, Dallas, Pittsburgh and Memphis. Wireless cable is an emerging
business that provides television programming to subscribers by transmitting a
signal via microwave frequencies licensed by the Federal Communications
Commission (FCC) to antennae located at the subscribers' premises.

The Company's wireless cable systems are all in either the initial
development stage or in the early operating stage; therefore, significant
additional investment will be required to develop those systems to a level that
will provide positive cash flow.

The Company believes that it has sufficient funds to cover its overhead
expenses through January 1996, assuming the sale the Company's assets related to
the Pittsburgh market is consummated, at which time the Company will require
additional financing (see Note 3).

(2) BASIS OF PRESENTATION

The financial statements have been prepared by the Company without audit
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "Commission"). The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which are, in the
opinion of management, necessary to fairly state the operating results for the
respective periods. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations, although management of the Company believes that the disclosures
are adequate to make the information presented not misleading.

The Company follows the accounting policies set forth in its financial
statements filed on Form 10-KSB for the year ended December 31, 1994.

(3) FINANCING:

In April 1994, the Company filed a Registration Statement on Form SB-2 in
connection with a proposed public offering, which was amended to include the
offer and sale of 2,500,000 Units, each Unit consisting of two shares of Common
Stock and one Warrant to purchase one share of Common Stock. For a variety of
reasons, including the Company's difficulty in securing the necessary clearances
to offer and sell its securities from various government authorities and
obtaining approval to list its securities for trading on Nasdaq, as well as the
fact that the Company's independent public accountants currently cannot express
an opinion on the Company's December 31, 1994 financial statements that would be
acceptable under the provisions of the Securities Act of 1933, the Company has
been unable to complete its offering as contemplated. The Company does not
anticipate that public financing will be a viable option in the near future.
Therefore, the Company is pursuing various options, including the sale of one or
more of its assets, merger with a third party or the sale of the Company as a
whole. In connection with these efforts, on March 27, 1995, the Company executed
an agreement with Daniels & Associates L.P. ("Daniels") engaging Daniels as the
Company's exclusive representative with regard to a sale of all or a portion of
the assets of or an equity ownership interest in the Company.

In February 1995, the Company obtained a $500,000 loan from a shareholder
of the Company. The loan agreement was amended April 24, 1995 to provide the
Company with an additional loan of $500,000. The loan is secured by the
Company's interest in the rights to the wireless cable licenses and equipment in
the Memphis market and the proceeds from the proposed sale of the Company's
interest in either the Memphis or Pittsburgh markets. The loan bears interest at
15% per annum and is due on the earlier of the closing of the potential sale of
assets in Memphis, the closing of the potential sale of assets in Pittsburgh or
September 1, 1995.

On March 28, 1995, the Company entered into an agreement to sell all of its
interest in the assets of the Pittsburgh market for $1,250,000 in cash. Also, on
May 25, 1995, the Company entered into a letter of intent with another third
party to exchange all of the Company's remaining assets for cash and/or shares
of common stock of the third party. In connection with the May 25, 1995 letter
of intent, which expired by its terms on June 30, 1995, the Company received a
$200,000 non-refundable deposit on May 26, 1995 and a loan of $1,800,000 on June
23, 1995, evidenced by a promissory note ("Note") dated May 26, 1995. The
Company continues to negotiate an exchange transaction with the third party,
although no agreement has been reached and there can be no assurance that any
agreement will be consummated. The Note is due on or before July 1, 1996 with
interest, payable quarterly, at a rate of approximately 2% over the prime rate.
The Note is secured by the rights to the wireless cable licenses and equipment
in the Dallas market.

(4) WIRELESS CABLE TELEVISION SYSTEMS:

Jointly Owned Systems

The Company currently owns an equity interest in and manages the operations
of wireless cable systems in Minneapolis, Minnesota (AWS-Minneapolis) (25%
interest) and Fort Worth, Texas (AWS-Fort Worth) (20% interest). In addition,
the Company owns an equity interest in a wireless cable system under development
in Pittsburgh, Pennsylvania (25% interest).

The Minneapolis system has been in operation since March 1993. The
Company's joint venture partner is a general partnership which was formed to
acquire an interest in and jointly develop and operate the Minneapolis wireless
cable system. In accordance with the terms of the joint venture agreement,
losses are to be allocated in accordance with contributed capital and profits
are to be allocated (i) in accordance with contributed capital to the extent of
previously allocated losses and then (ii) 25% to the Company and 75% to the
general partnership thereafter.

In April 1994, the Company loaned the general partnership $2,000,000 to
fund additional development of the system. The loan bears interest at 8% per
annum and is payable in full by October 5, 1995. In the event that the loan is
not repaid, the Company will receive an additional equity interest in the
Minneapolis joint venture of approximately 10%. AWS-Minneapolis obtained a loan
of $550,000 from a third party on May 19, 1995. The loan is secured by a portion
of the assets of AWS-Minneapolis, bears interest at the rate of 12% per annum
and is due December 31, 1995. As manager of AWS-Minneapolis and with certain
staff reductions made in June 1995, the Company believes the loan proceeds will
allow the system to continue a minimal level of development and fund operating
overhead through December 1995. As part of the loan agreement, AWS-Minneapolis
entered into a letter of intent with the lender to merge or become a subsidiary
of the lender, subject to approval of the members of AWS-Minneapolis and the
board of directors and shareholders of the lender. The potential merger would
give AWS-Minneapolis a source of financing for long-term development. The
Company is currently assisting its joint venture partner in its efforts to
obtain additional sources of long-term financing to continue development of the
system.

The Fort Worth system has been in operation since November 1992. The
Company's joint venture partner is a general partnership which was formed to
acquire an interest in and jointly develop and operate the Fort Worth wireless
cable system. The Fort Worth system has been operated through an informal joint
venture agreement. The accompanying financial statements include an estimate of
the Company's pro rata losses in this system.

AWS-Fort Worth does not have sufficient funds to continue development of
the system. The Company's joint venture partner also does not have funds to
contribute to the joint venture and has expressed its belief that Wireless
California is obligated to provide additional funds to develop the system to a
positive cash flow position. The Company does not believe it has such an
obligation; however, as with AWS-Minneapolis, it is assisting its joint venture
partner in obtaining a source of long-term financing to continue development of
the system. The Company continues to negotiate the terms of definitive joint
venture and management agreements in order to formalize the two and one-half
year relationship. In order to protect the Company's interest in the assets of
AWS-Fort Worth, the Company has advanced approximately $366,000 from May 1,
1993, to June 30, 1995. The funds were used to fund the system's negative cash
flow and maintain the current subscriber base.

The Pittsburgh system is still in its initial development stage. On March
28, 1995, the Company entered into an agreement to sell all of its interest in
the assets of the Pittsburgh market for $1,250,000 in cash. The agreement
provides that the compensation will be paid at closing, which the parties
anticipate will be no later than September 30, 1995. The agreement is also
subject to other terms and conditions, including the approval of general
partners holding a majority of the interests in the Pittsburgh general
partnership, and accordingly, there can be no assurance that the agreement will
be consummated on a timely basis or pursuant to the terms contemplated by the
parties.

Wholly Owned Systems

The Company's investment in wholly owned systems consists primarily of the
costs to acquire the rights to FCC licenses in Dallas (16), Los Angeles (9) and
Memphis (22). The lease agreements provide for the Company to pay for the excess
airtime use, new transmission equipment and all other operating expenses of the
channels including co-location costs.

On March 31, 1995, the Company entered into a letter of intent with
TruVision Cable, Inc. ("TruVision") to sell all of the Company's interest in the
Memphis market for $2,200,000 in cash and a promissory note. The letter of
intent with respect to the Memphis market was terminated by the Company on May
17, 1995 (see Note 7). On May 25, 1995, the Company entered into a letter of
intent with another party to exchange all of the Company's assets, other than
those related to the Pittsburgh market, for cash and/or shares of common stock
of the third party (see Note 3).

(5) DEFERRED COMPENSATION

Effective August 1994, an individual who held the position of Chairman of
the Board, President and Chief Financial Officer resigned. In connection with
such resignation, this individual entered into a severance agreement with the
Company. The Company agreed to pay this individual his annual base salary, as
provided by the terms of his employment agreement, a bonus consistent with the
bonuses awarded to certain other officers, if any, and to reimburse certain
other expenses for a period of three years. As a result, the Company recognized
approximately $566,000 of compensation expense in the third quarter of 1994. The
liability as of June 30, 1995 is approximately $433,000, of which approximately
$276,000 is a long-term liability.

(6) STOCKHOLDERS' EQUITY:

Warrants and Options

The Company currently has outstanding 617,664 warrants and options to
acquire shares of the Company's Common Stock at a weighted average exercise
price of $9.79 per share. In addition, there are currently 163,666 options
outstanding to acquire shares of Common Stock under the 1993 Stock Option Plan
at a weighted average exercise price of $8.46 per share.

Escrowed Shares

Approximately 1.88 million shares of the Company's outstanding Common
Stock, which are owned by the former owners of Wireless California, were
released from escrow in February 1995. The shares were pledged by the former
shareholders to secure the indemnification of the Company by Wireless California
for potential losses incurred from claims arising out of the prior offerings of
general partnership interests by Wireless California. In December 1994, the
Company made a $35,000 claim on the escrowed shares for an advance to Wireless
California to pay administrative penalties assessed Wireless California by the
state of Arizona (see Note 7). All but 50,000 shares were released from escrow
and distributed to the members of AWS L.L.C. in February 1995. The remaining
50,000 shares have been retained to potentially fund a claim made by the Company
which is currently being disputed by AWS L.L.C. The shares will remain in escrow
until the dispute is resolved. No other claims were made on the escrowed shares.

(7) COMMITMENTS AND CONTINGENCIES:

Prior to the sale of certain assets by Wireless California to the Company,
approximately $29,000,000 was raised in connection with the offering of general
partnership interests in three general partnerships, each of which was formed
for the purpose of acquiring an interest in the rights to develop and operate a
wireless cable television system in Fort Worth, Minneapolis and Pittsburgh.
Through an affiliate, Wireless California participated in the offer and sale of
the general partnership interests without registration under any federal or
state securities laws based on the belief that the general partnership interests
did not constitute securities under federal and applicable state laws. Certain
current and former officers and directors of the Company were formerly officers
and directors of Wireless California.

Following an investigation by the Commission involving the activities of
Wireless California in connection with the offer and sale of the general
partnership interests as described above, the Company and certain of its current
and former officers, without admitting or denying any wrongdoing, agreed to
consent to an order of the Commission to cease and desist from committing or
causing any violation and any future violations of the securities registration
provisions of the 1933 Act and the broker-dealer registration provisions of the
Exchange Act.

Securities administrators in 22 states also have conducted or are presently
conducting investigations of the activities related to the unregistered sale of
the general partnership interests described above. The actions taken by the
various state securities administrators range from no action taken to the
issuance of 15 cease and desist orders and consent orders pursuant to which
Wireless California, the issuing general partnerships, and certain officers of
Wireless California were required to cease selling general partnership interests
without registration, to offer rescission to individuals who purchased general
partnership interests and, in certain cases, to pay administrative penalties. In
addition, AWS L.L.C. has entered into a consent order with the State of Illinois
pursuant to which AWS L.L.C. agreed to cease and desist from selling general
partnership interests without registration, to pay an administrative penalty,
and to cause a rescission offer to be made to Illinois residents not later than
the earlier to occur of 45 days from the date of the Company's proposed public
offering or 180 days from the date of the order. Following an investigation by
the state of Arizona, AWS L.L.C. and current and former officers of the Company
consented to an order of the Arizona Corporation Commission to cease and desist
from selling securities unless the sale is registered or exempt from
registration and to the imposition of an administrative penalty against AWS
L.L.C. The Company also consented to a separate order that requires the Company
to make an offer of rescission to all general partners who are Arizona residents
or who were offered and sold their interests from Arizona. To the knowledge of
the Company, there are no other active federal or state regulatory proceedings
or investigations.

Following the completion of the Company's proposed public offering, the
Company intended to effect a rescission offer to offer to purchase the interests
of the general partners in the three general partnerships that own an interest
in joint ventures with the Company. Due to the Company's inability to complete
the offering and its current lack of funds, the Company is currently unable to
offer to purchase the general partnership interests, and will not have the
ability to complete the order of rescission imposed by the state of Arizona
unless alternative financing is obtained or alternatives to rescission are
arranged. Accordingly, the Company is currently attempting to amend the order to
provide for alternatives to rescission, although there can be no assurance that
the Company will be successful in this regard. The Arizona order currently
provides that if the offers to purchase are not made, the Company will be
required to pay to the Arizona Corporation Commission an amount equal to the
amount of the investment made by all general partners who are Arizona residents,
or approximately $566,000, plus interest from the time of investment. There can
be no assurance that the Company will be able to satisfy the Arizona rescission
order.

Since October 31, 1992, Wireless California, the general partnerships and
the current and former officers of the Company have ceased all activities
involving the offer and sale of general partnership interests, although one of
the general partnerships continued to raise funds through capital calls to
existing general partners after such date. In addition to the rescission offer
described above, Wireless California and the general partnership issuers
voluntarily elected to offer to purchase the general partnership interests of
certain general partners in exchange for cash in an amount equal to the funds
contributed by such general partners. As of August 12, 1995, approximately 1,170
of the approximately 1,930 purchasers of general partnership interests had been
offered rescission or a return of their investment by Wireless California or the
general partnership issuers and approximately 80 had accepted the offer, all of
which have been paid. None of such offers, however, were necessarily conducted
in accordance with the statutory requirements of the various states. To the
extent such requirements were not met, potential securities liability arising
from the offer and sale of the general partnership interests will not be
statutorily eliminated until the statutes of limitation with respect to such
claims have expired or an offer is made in accordance with the statutory
rescission requirements of any state.

There can be no assurance that current general partners or any governmental
agency will not institute proceedings against Wireless California or the Company
as the successor to Wireless California based on a failure to register the
general partnership interests in connection with a public offering or for
damages based on alleged omissions or misrepresentations of material information
in connection with the sale of such interests. In connection with the
acquisition of certain assets of Wireless California, the Company expressly
disclaimed any liabilities of Wireless California arising out of the offer and
sale of the general partnership interests described above. There is a
possibility, however, that a successful claim against Wireless California could
be asserted against the Company based on a number of theories involving
successor liability. The institution of legal action against the Company arising
out of the offer and sale of general partnership interests by Wireless
California could result in substantial defense costs to the Company and the
diversion of efforts by the Company's management, and the imposition of
liabilities against the Company could have a material adverse effect on the
Company. Based on its experience to date, however, taking into account the
status of investigations by various state securities administrators, the absence
of any asserted claim for rescission having been instituted by any of the
general partners against any of the general partnerships, Wireless California or
the Company, the Company's assessment of the current value of the general
partnership interests, the relatively small number of general partners who have
accepted previous offers by Wireless California or its shareholders to purchase
general partnership interests, the existence of a number of possible defenses to
any claims asserted against it, and other factors, the Company does not believe
the ultimate resolution of this matter will have a material adverse impact on
its financial condition.

The Company is currently named as a defendant in two separate lawsuits. On
May 16, 1995, William R. Jenkins, the former Chief Executive Officer of the
Company, filed a lawsuit in Arizona state court alleging breach of his
employment contract and claims damages for all amounts due under the employment
contract, treble damages under Arizona statute, attorney's fees and costs. On
June 2, 1995, the Company filed a Petition to Compel Arbitration, including
counterclaims. The Company estimates the amount due under Mr. Jenkins'
employment contract, if he were successful, is approximately $167,000. The
Company terminated Mr. Jenkins for cause on January 18, 1995. On June 21, 1995
TruVision, the third party to the letter of intent for sale of the Memphis
market (see Note 4), filed a lawsuit, as amended June 29, 1995, in the state of
Mississippi alleging that the Company breached the letter of intent dated March
31, 1995, that the parties entered into a binding agreement on May 18, 1995
which the Company has breached, and that the Company committed fraud and
negligent misrepresentation. The Company disputes these claims based on the
position that it lawfully terminated the letter of intent on May 17, 1995. The
Amended Complaint requests damages in the amount of $28,196,642, punitive
damages in the amount of $20,000,000, together with interest and all costs of
court. The Company believes it has adequate grounds to successfully defend both
lawsuits. The Company does not expect that a judgement against the Company, if
any, would have a material adverse effect on its financial condition or results
of operations.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------

The Company currently owns an interest in and manages the operations of
wireless cable systems in Minneapolis and Fort Worth and holds an interest in or
owns the rights to certain wireless cable television channels in Los Angeles,
Dallas, Pittsburgh and Memphis. Launched in March 1993 and November 1992,
respectively, the Minneapolis and Fort Worth systems currently serve
approximately 2,400 and 1,600 subscribers, respectively.

The wireless cable business is a capital intensive business and, to date,
the Company's existing wireless cable systems in Minneapolis and Fort Worth have
been financed primarily through joint ventures. Initially, significant capital
is required to acquire the rights to wireless cable channels, construct the
headend facility, co-locate the channels and fund negative cash flow until the
system is able to install a sufficient number of subscribers to fund its
operating expenses. After operations have been launched, the Company estimates
that the incremental cost per subscriber is approximately $520 (assuming
one-half of the subscribers order additional outlets which require additional
equipment and labor). The Company does not expect any of its systems to provide
cash flow to the Company unless significant additional capital can be obtained.

The Minneapolis and Fort Worth systems are currently operational; however,
the Minneapolis and Fort Worth systems are currently installing a minimal number
of subscribers each month in order to offset subscriber churn. The Company's
proposed wireless cable systems in Los Angeles, Dallas, Pittsburgh and Memphis
are currently in the development stage. None of these systems have subscribers,
or the financing necessary to add subscribers, to generate positive cash flow
from operations. A significant investment in equipment and engineering would
have to be made to ready these markets for launch. The Company does not
anticipate making this investment unless significant additional capital is
obtained.

The Company will require additional financing in January 1996, assuming the
sale of the Company's assets related to the Pittsburgh market is consummated, to
fund its operating expenses. With respect to long-term funding, the Company is
pursuing various financing options including the sale of one or more of its
assets, merger with a third party or sale of the Company as a whole. In
connection with these efforts, on March 27, 1995, the Company executed an
agreement with Daniels & Associates, L.P. ("Daniels") engaging Daniels as the
Company's exclusive representative with regard to a sale of all or a portion of
the assets of or an equity ownership interest in the Company.

In Minneapolis, the joint venture agreement requires the Company's joint
venture partner to contribute all financing required by the system. Pursuant to
a management agreement, the Company currently serves as the manager of the
Minneapolis joint venture. The Company lent its joint venture partner
$2,000,000, which has been contributed to the joint venture to fund the
operations of the system. These funds allowed the system to install
approximately 2,700 subscribers. AWS-Minneapolis obtained a loan of $550,000
from a third party on May 19, 1995. The loan is secured by a portion of the
assets of AWS-Minneapolis, bears interest at the rate of 12% per annum and is
due December 31, 1995. As manager of AWS-Minneapolis and with certain staff
reductions made in June 1995, the Company believes the loan proceeds will allow
the system to continue a minimal level of development and fund operating
overhead through December 1995. As part of the loan agreement, AWS-Minneapolis
entered into a letter of intent with the lender to merge or become a subsidiary
of the lender, subject to approval of the members of AWS-Minneapolis and the
board of directors and shareholders of the lender. The potential merger would
give AWS-Minneapolis a source of financing for long-term development. The
Company is currently assisting its joint venture partner in its efforts to
obtain additional sources of financing.

In Fort Worth, the Company currently serves as the manager through an
informal management agreement, but to date has not been compensated for its
efforts. In addition, the joint venture agreement between the Company and the
Fort Worth general partnership is informal. Over the past two and one-half
years, the Company and the Fort Worth general partnership have been negotiating
the terms of a definitive joint venture arrangement and a management agreement
to formalize the relationship; however, to date, no agreement has been obtained.
At present, the Company is funding negative cash flow of approximately $25,000
per month to the Fort Worth system. As with AWS-Minneapolis, the Company is
assisting its joint venture partner in obtaining a source of long-term financing
to continue development of the system.

In Dallas and Los Angeles, the Company currently owns or leases the rights
to 16 and nine wireless cable channels, respectively. The Company anticipated
that funding for launch of a wireless cable system in Dallas and Los Angeles
would be available from the proceeds of the Company's proposed public offering
(see Liquidity and Capital Resources). Because this offering has not been
completed, preparation for any launch has been delayed indefinitely.

In Memphis, the Company owns or leases the rights to 22 wireless cable
channels. On April 3, 1995, the Company entered into a letter of intent with
TruVision Cable, Inc. ("TruVision") for the sale of the Company's interest in
the proposed Memphis system for $2,200,000. The Company terminated the letter of
intent on May 17, 1995. TruVision has disputed the termination and on June 21,
1995 filed a lawsuit, as amended June 29, 1995, against the Company (see Part
II, Item 1. Legal Proceedings).

On March 28, 1995, the Company entered into an agreement with CAI Wireless
Systems, Inc. ("CAI") to sell all of its interest in the assets of the
Pittsburgh market to CAI for $1,250,000 in cash. The agreement provides that the
compensation will be paid at closing, which the parties anticipate will be no
later than September 30, 1995. The agreement is also subject to other terms and
conditions, including the approval of general partners holding a majority of the
interests in the Pittsburgh general partnership, and accordingly, there can be
no assurance that the agreement will be consummated on a timely basis or
pursuant to the terms contemplated by the parties.

On May 25, 1995, the Company entered into a letter of intent with Heartland
Wireless Communications, Inc. ("Heartland") to exchange all of the Company's
remaining assets for cash and/or shares of common stock of Heartland (see
Liquidity and Capital Resources). Although the letter of intent has expired, the
Company continues to negotiate with Heartland to reach an agreement. There can
be no assurance that an agreement will be reached between these parties, or, if
an agreement is reached, what the terms of that agreement will be.

Results of Operations

As described above, the Company has interests in, but does not have any
wholly owned operating wireless cable systems, and therefore had no operating
revenue in either of the quarters ended June 30, 1995 or June 30, 1994. The
Company accrued management fees of $25,000 for both the second quarters of 1995
and 1994. Management fees are for services provided to AWS-Minneapolis.

For the quarters ended June 30, 1995 and June 30, 1994, the Company had net
losses of $485,331 and $1,132,986, respectively. General and administrative
expenses decreased by approximately $234,000 for the quarter ended June 30, 1995
as compared to the quarter ended June 30, 1994. The primary components of
general and administrative expenses include compensation, professional services
including legal and accounting services, rental expense, depreciation and travel
and entertainment. Compensation expense decreased approximately $146,000 for the
quarter ended June 30, 1995 as compared to the quarter ended June 30, 1994. This
decrease was due to the reduction of two executive officers in August 1994 and
January 1995 and approximately 50% reduction of other personnel in January 1995
and February 1995. Professional expense increased approximately $22,000 for the
quarter ended June 30, 1995 as compared to the quarter ended June 30, 1994,
primarily due to timing of legal, accounting and engineering services. Other
general and administrative expenses decreased approximately $111,000 for the
quarter ended June 30, 1995 as compared to the quarter ended June 30, 1994,
primarily due to expenses associated with relocating the Company's offices to a
more economical facility in February 1995 and staff reductions in January 1995
and February 1995.

The Company's loss from operations of joint ventures decreased slightly
(approximately $9,000) as the Company's joint venture partner contributed
$686,000 to the joint venture, thereby reducing the Company's loss allocation.
In Minneapolis, the Company's allocated losses are based on contributed capital
rather than its beneficial interest. Accordingly, the Company's allocated share
of the losses on a percentage basis is less than its beneficial interest. In
Fort Worth, the Company's recorded losses are based on the anticipated terms of
the joint venture agreement, which the Company currently is negotiating.

Interest expense for the quarter ended June 30, 1995 represents interest on
the outstanding notes payable. Interest expense for the quarter ended June 30,
1994 represents interest on the Company's 12% convertible, subordinated notes,
which were converted into shares of the Company's Common Stock as of September
1994, and amortization of debt issuance costs associated with these convertible
notes.

Other income for the quarter ended June 30, 1995 is primarily comprised of
$200,000 in other income related to the Heartland letter of intent (see
Liquidity and Capital Resources), net of approximately $174,000 of expense
related to a write-off of a majority of the assets related to an engineering
project that was discontinued by the Company in February 1995. Other expense for
the quarter ended June 30, 1994 represents a gain of approximately $40,000 on
the sale of assets, net of a $105,000 reserve for market valuation of the
Company's marketable equity securities.

Income Taxes

The Company follows the provisions of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes." In connection with the reverse
acquisition of Wireless California on December 17, 1992, the basis in the assets
acquired and liabilities assumed by the Company were substantially the same for
book and tax purposes; therefore, no significant deferred tax assets or
liabilities existed. During the year ended December 31, 1993, the Company was
able to utilize a portion of its losses generated to recapture previous taxes
paid by Wireless California. Such recapture has been treated as a capital
contribution to the Company by Wireless California.

At June 30, 1995, the Company had no significant deferred tax assets or
liabilities. The Company has available net operating loss carry forwards of
approximately $7,679,000 that begin expiring in 2009. No benefit from these net
operating loss carryforwards has been realized in the Company's financial
statements.

Liquidity and Capital Resources

All of the Company's wireless cable systems are either in the development
stage or early operating stage. The Company's efforts to date have been directed
primarily toward the acquisition of channel rights and launch of systems. The
Company has had limited sources of revenue and capital, has incurred losses
since inception, and expects to incur additional losses. Since none of the
Company's existing or proposed systems have advanced beyond the early operating
or development stage, the Company anticipates that it will be dependent upon
external financing and continue to incur losses. As a result, in their report on
the Company's financial statements as of December 31, 1993, the Company's
independent public accountants have included an explanatory paragraph that
describes factors raising substantial doubt about the Company's ability to
continue as a going concern. Due to the Company's prior financing constraints,
the Company did not engage its independent public accountants to perform an
audit for the year ended December 31, 1994 to be included in the Company's Form
10-KSB for the year ended December 31, 1994. Because additional financing was
secured (see below), the Company has currently engaged its independent public
accountants to perform an audit of its financial statements for the year ended
December 31, 1994. Upon completion, the Company will file the audit report as an
amendment to the Company's Form 10-KSB for the year ended December 31, 1994.

On March 28, 1995, the Company entered into an agreement with CAI Wireless
Systems, Inc. ("CAI") and the joint venture general partnership to sell all of
the Company's interest in the assets of the Pittsburgh market to CAI for
$1,250,000 in cash. The agreement provides that the compensation will be paid at
closing, which the parties anticipate will be no later than September 30, 1995.
The agreement is also subject to other terms and conditions, including the
approval of general partners holding a majority of the interests in the
Pittsburgh general partnership, and accordingly, there can be no assurance that
the agreement will be consummated on a timely basis or pursuant to the terms
contemplated by the parties.

On May 25, 1995, the Company entered into a letter of intent with Heartland
to exchange all of the Company's remaining assets for cash and/or shares of
common stock of Heartland. Although the letter of intent expired in June 1995,
the Company and Heartland continue to negotiate the terms of an agreement under
which Heartland would acquire the Company. In connection with the Heartland
letter of intent, the Company received a $200,000 non-refundable deposit on May
26, 1995 and a loan of $1,800,000 on June 23, 1995, evidenced by a promissory
note ("Note") dated May 26, 1995. The Note is due on or before July 1, 1996 with
interest, payable quarterly, at a rate of approximately 2% over the prime rate.
The Note is secured by the rights to the wireless cable licenses and equipment
in the Dallas market.

The Company estimates that the above proceeds will fund its operations
through January 1996, assuming the sale of the Company's assets related to the
Pittsburgh market is consummated. During this time, the Company will pursue
various long-term financing options, including those outlined above that propose
to sell or exchange assets with a third party. In connection with these efforts,
on March 27, 1995, the Company executed an agreement with Daniels engaging
Daniels as the Company's exclusive representative with regard to a sale of all
or a portion of the assets of or an equity ownership interest in the Company.

In April 1994, the Company filed a Registration Statement on Form SB-2 in
connection with a proposed public offering of the Company's securities. For a
variety of reasons, including the Company's difficulties in securing the
necessary clearances to offer and sell its securities from various government
authorities and obtaining approval to list its securities for trading on Nasdaq,
as well as the fact that the Company's independent public accountants currently
cannot express an opinion on the Company's December 31, 1994 financial
statements that would be acceptable under the provisions of the Securities Act
of 1993, the Company has been unable to complete its offering as contemplated.
Accordingly, the Company currently does not have sufficient funds required to
develop, launch and grow the existing and proposed wireless cable systems in
which it holds an interest. In addition, due to its limited cash reserves and
lack of available long term financing, the Company does not believe it currently
has the ability to secure the necessary funds for development of these systems.

In connection with the proposed public offering, the Company signed a
letter of intent with Laidlaw Holdings, Inc. ("Laidlaw"). The letter of intent
contemplated a firm underwriting by Laidlaw of the Company's Common Stock for
$30,000,000, in exchange for which Laidlaw would receive a 7.5% underwriting
discount, reimbursement for out of pocket fees and expenses, and warrants equal
to 7.5% of the offering, exercisable at 120% of the public offering price. The
letter of intent also provided that if the Company terminated the offering prior
to May 20, 1995, it would be required to pay Laidlaw's out of pocket fees and
expenses, which are approximately $190,000, and a break-up fee equal to $200,000
if the Company merged with another company within six months of such
termination. Following the termination of Mr. Jenkins in January 1995, Laidlaw
informed the Company that it believed the Company had effectively terminated the
offering and requested that the Company reimburse it for its out of pocket
expenses. The Company responded to Laidlaw by denying that it had terminated the
offering.

The Minneapolis and Fort Worth systems currently are owned by joint
ventures and, following completion of their initial development phases, the
systems were launched in March 1993 and November 1992, respectively. Currently,
the Minneapolis and Fort Worth systems have approximately 2,400 and 1,600
subscribers, respectively; however, additional subscribers must be added to each
system to enable either system to achieve positive cash flow from operations. In
April 1994, the Company lent $2,000,000 to the Minneapolis general partnership,
which was contributed to the Minneapolis joint venture to fund installation of
additional subscribers and operating expenses. AWS-Minneapolis obtained a loan
of $550,000 from a third party on May 19, 1995. The loan is secured by a portion
of the assets of AWS-Minneapolis, bears interest at the rate of 12% per annum
and is due December 31, 1995. As manager of AWS-Minneapolis and with certain
staff reductions made in June 1995, the Company believes the loan proceeds will
allow the system to continue a minimal level of development and fund operating
overhead through December 1995. As part of the loan agreement, AWS-Minneapolis
entered into a letter of intent with the lender to merge or become a subsidiary
of the lender, subject to approval of the members of AWS-Minneapolis and the
board of directors and shareholders of the lender. The potential merger would
give AWS-Minneapolis a source of financing for long-term development. The
Company is currently assisting its joint venture partner in its efforts to
obtain additional sources of financing.

The Company's Fort Worth joint venture partner currently does not have
additional capital to fund continued growth of the Fort Worth system. The
Company has advanced the system approximately $366,000 since May 1993 in order
to fund the systems's negative cash flow and maintain the assets. The Company
has not entered into a formal written agreement with the Fort Worth general
partnership regarding the Company's interest in and management of the operations
of the joint venture. Over the past two and one-half years, the Company and the
Fort Worth general partnership have been negotiating the terms of a definitive
joint venture arrangement and a management agreement to formalize the
relationship, however; to date, no agreement has been reached. At present, the
Company is funding negative cash flow of approximately $25,000 per month to the
Fort Worth system. As with AWS-Minneapolis, the Company is assisting its joint
venture partner in obtaining a source of long-term financing to continue
development of the system.

Significant development beyond the stage of acquiring the rights to
wireless cable licenses for the Company's proposed systems in Dallas, Los
Angeles and Memphis has not commenced. The Company does not anticipate using a
significant amount of additional funds to further develop these markets and the
Company may sell one or more of these assets. As described above, the Company
currently is negotiating an agreement to exchange all of its assets with a third
party for cash and/or shares of common stock of the third party.

Given the Company's inability to acquire sufficient financing to launch and
add a significant number of subscribers to its wireless cable systems, the
Company does not believe that any of its systems will generate sufficient cash
flow to meet operating expenses in the near future. Since none of the Company's
systems are expected to generate sufficient cash flow, the Company is pursuing
alternative financing options including the sale of one or more of its assets, a
merger or other combination with a third party, or sale of the Company as a
whole. If additional financing is not obtained to continue development of its
systems or if the Company's alternative financing options, outlined above, are
not successful, the Company's assets and current operating activities could be
materially and adversely affected.

PART II

Item 1. Legal Proceedings
-----------------

The information required by Part II, Item 1 is incorporated by reference
from Note 7 to the Financial Statements included in Part I, Item 1 of this Form
10-QSB.

Item 2. Changes in Securities
---------------------

None.

Item 3. Defaults upon Senior Securities
-------------------------------

None.

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

None.

Item 5. Other Information
-----------------

None.

Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits

Exhibit No.

10.28 Promissory Note dated May 26, 1995 between the Registrant and
Heartland Wireless Communications, Inc. in the amount of
$1,800,000.00.

10.29 Security Agreement dated May 26, 1995 between the Registrant
and Heartland Wireless Communications, Inc.

27.1 Financial Data Schedule for the interim period ended June 30,
1995.

(b) No reports on Form 8-K were filed during the quarter ended June 30,
1995.

<PAGE>

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

AMERICAN WIRELESS SYSTEMS, INC.
-------------------------------
(Registrant)

DATED: August 14, 1995 By: /s/ Steven G. Johnson
---------------------
Steven G. Johnson
President and Chief Executive Officer

DATED: August 14, 1995 By: /s/ Daniel A. Cartwright
------------------------
Daniel A. Cartwright
Chief Financial Officer

PROMISSORY NOTE

$1,800,000.00 May 26, 1995

FOR VALUE RECEIVED, on or before July 1, 1996 ("Maturity Date"), the
undersigned (hereinafter referred to as "Maker"), promises to pay to the order
to HEARTLAND WIRELESS COMMUNICATIONS, INC. ("Payee") at its offices at 903 N.
Bowser, Suite 140, Richardson, Texas 75081, the principal amount of ONE MILLION
EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000.00) ("Total Principal Amount"),
together with interest on the unpaid principal balance hereof from time to time
outstanding until paid at a fluctuating rate per annum which shall from day to
day be equal to the lesser of (a) the Maximum Rate (as hereinafter defined), or
(b) a rate ("Contract Rate"), calculated on the basis of the actual days elapsed
in a year consisting of 365 or 366 days, as the case may be, equal to the sum of
(i) the Index Rate (as hereinafter defined) plus (ii) two percent (2.0%), each
change in the rate to be charged on this Promissory Note ("Note") to become
effective without notice to Maker on the effective date of each change in the
Maximum Rate or the Index Rate, as the case may be; provided, however, that if
at any time the Contract Rate shall exceed the Maximum Rate, thereby causing the
interest on this Note to be limited to the Maximum Rate, then any subsequent
reduction in the Index Rate shall not reduce the rate of interest on this Note
below the Maximum Rate until the total amount of interest accrued on this Note
equals the amount of interest which would have accrued on this Note if the
Contract Rate had at all times been in effect. As used herein, the term "Index
Rate" shall mean a fluctuating rate per annum equal to the "Prime Rate"
published in the "Money Rates" table in The Wall Street Journal from time to
time, and if multiple rates are published, the highest such rate. The term
"Maximum Rate," as used herein, shall mean at the particular time in question
the maximum rate of interest which, under applicable law, may then be charged on
this Note. If such maximum rate of interest changes after the date hereof and
this Note provides for a fluctuating rate of interest, the Maximum Rate shall be
automatically increased or decreased, as the case may be, without notice to
Maker from time to time as of the effective date of each change in such maximum
rate. If applicable law ceases to provide for such a maximum rate of interest,
the Maximum Rate shall be equal to eighteen percent (18%) per annum.

The principal of and all accrued but unpaid interest on this Note shall
be due and payable as follows:

(a) interest shall be due and payable quarterly as it accrues,
commencing on the first day of October 1995 and continuing on the first day of
each successive January, April, July and October thereafter during the term of
this Note; and

(b) the outstanding principal balance of this Note, together with all
accrued but unpaid interest, shall be due and payable on the Maturity Date.

Maker may from time to time prepay all or any portion of the principal
of this Note without premium or penalty. All regularly scheduled payments of the
indebtedness evidenced by this Note shall be applied first to any accrued but
unpaid interest then due and payable hereunder and then to the principal amount
then due and payable. All non-regularly scheduled payments shall be applied to
such indebtedness in such order and manner as the holder of this Note may from
time to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Note shall be made in lawful money of the
United States of America in immediately available funds, at the address of Payee
indicated above, or such other place as the holder of this Note shall designate
in writing to Maker. If any payment of principal of or interest on this Note
shall become due on a day which is not a Business Day (as hereinafter defined),
such payment shall be made on the next succeeding Business Day and any such
extension of time shall be included in computing interest in connection with
such payment. As used herein, the term "Business Day" shall mean any day other
than any day on which commercial banks in the State of Texas are authorized to
be closed. The books and records of Payee shall be prima facie evidence of all
outstanding principal of and accrued and unpaid interest on this Note.

This Note has been executed and delivered pursuant to that certain
Letter of Intent for Exchange dated May 25, 1995 between Maker and Payee (the
"Agreement"), and evidences the absolute and unconditional obligation of Maker
under Section 13(d) of the Agreement to pay to Payee the principal amount of
this Note together with interest thereon as provided in this Note. This Note is
secured by, inter alia, the Security Agreement dated May 26, 1995 by and between
Maker and Payee covering certain collateral as more particularly described
therein. This Note, the Agreement and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Note, including but not
limited to those documents described above, are hereinafter collectively
referred to as the "Transaction Documents." The holder of this Note is entitled
to the benefits and security provided in the Transaction Documents.

Maker agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):

(a) failure of Maker to pay any installment of principal of or
interest on this Note or on any other indebtedness of Maker to Payee
when due; or

(b) the occurrence of any event of default specified in any of
the other Transaction Documents; or

(c) the bankruptcy or insolvency of, the assignment for the
benefit of creditors by, or the appointment of a receiver for any of
the property of, or the liquidation, termination, dissolution or death
or legal incapacity of, any party liable for the payment of this Note,
whether as maker, endorser, guarantor, surety or otherwise;

the holder of this Note may, at its option, unless the Event of Default is cured
within thirty (30) days of the occurrence thereof, without further notice or
demand, (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Note at once due and payable, (ii) foreclose all liens securing
payment hereof, (iii) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to such rights,
remedies or recourses under the Transaction Documents, at law or in equity, or
(iv) pursue any combination of the foregoing.

The failure to exercise the option to accelerate the maturity of this
Note or any other right, remedy or recourse available to the holder hereof upon
the occurrence of an Event of Default hereunder shall not constitute a waiver of
the right of the holder of this Note to exercise the same at that time or at any
subsequent time with respect to such Event of Default or any other Event of
Default. The rights, remedies and recourses of the holder hereof, as provided in
this Note and in any of the other Transaction Documents, shall be cumulative and
concurrent and may be pursued separately, successively or together as often as
occasion therefore shall arise, at the sole discretion of the holder hereof. The
acceptance by the holder hereof of any payment under this Note which is less
than the payment in full of all amounts due and payable at the time of such
payment shall not (i) constitute a waiver of or impair, reduce, release or
extinguish any right, remedy or recourse of the holder hereof, or nullify any
prior exercise of any such right, remedy or recourse, or (ii) impair, reduce,
release or extinguish the obligations of any party liable under any of the
Transaction Documents as originally provided herein or therein.

This Note and all of the other Transaction Documents are intended to be
performed in accordance with, and only to the extent permitted by, all
applicable usury laws. If any provision hereof or any of the other Transaction
Documents or the application thereof to any person or circumstance shall, for
any reason and to any extent, be invalid or unenforceable, neither the
application of such provision to any other person or circumstance nor the
remainder of the instrument in which such provision is contained shall be
affected thereby and shall be enforced to the greatest extent permitted by law.
It is expressly stipulated and agreed to be the intent of the holder hereof to
at all times comply with the usury and other applicable laws now or hereafter
governing the interest payable on the indebtedness evidenced by this Note. If
the applicable law is ever revised, repealed or judicially interpreted so as to
render usurious any amount called for under this Note or under any of the other
Transaction Documents, or contracted for, charged, taken, reserved or received
with respect to the indebtedness evidenced by this Note, or if Payee's exercise
of the option to accelerate the maturity of this Note, or if any prepayment by
Maker results in Maker having paid any interest in excess of that permitted by
law, then it is the express intent of Maker and Payee that all excess amounts
theretofore collected by Payee be credited on the principal balance of this Note
(or, if this Note and all other indebtedness arising under or pursuant to the
other Transaction Documents have been paid in full, refunded to Maker), and the
provisions of this Note and the other Transaction Documents immediately be
deemed reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder or thereunder. All sums paid, or
agreed to be paid, by Maker for the use, forbearance, detention, taking,
charging, receiving or reserving of the indebtedness of Maker to Payee under
this Note or arising under or pursuant to the other Transaction Documents shall,
to the maximum extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full so that the rate or amount of interest on account of such indebtedness
does not exceed the usury ceiling from time to time in effect and applicable to
such indebtedness for so long as such indebtedness is outstanding. To the extent
federal law permits Payee to contract for, charge or receive a greater amount of
interest, Payee will rely on federal law instead of TEX. REV. CIV. STAT. ANN.
art. 5069-1.04, as amended, for the purpose of determining the Maximum Rate.
Additionally, to the maximum extent permitted by applicable law now or hereafter
in effect, Payee may, at its option and from time to time, implement any other
method of computing the Maximum Rule under such Article 5069-1.04, as amended,
or under other applicable law by giving notice, if required, to Maker as
provided by applicable law now or hereafter in effect. Notwithstanding anything
to the contrary contained herein or in any of the other Transaction Documents,
it is not the intention of Payee to accelerate the maturity of any interest that
has not accrued at the time of such acceleration or to collect unearned interest
at the time of such acceleration.

In no event shall TEX. REV. CIV. STAT. ANN. art. 5069 Ch. 15 (which
regulates certain revolving loan accounts and revolving tri- party accounts)
apply to this Note. To the extent that TEX. REV. CIV. STAT. ANN. art. 5069-1.04,
as amended, is applicable to this Note, the "indicated rate ceiling" specified
in such article is the applicable ceiling; provided that, if any applicable law
permits greater interest, the law permitting the greatest interest shall apply.

If this Note is placed in the hands of an attorney for collection, or
is collected in whole or in part by suit or through probate, bankruptcy or other
legal proceedings of any kind, Maker agrees to pay, in addition to all other
sums payable hereunder, all costs and expenses of collection, including but not
limited to reasonable attorneys' fees.

Maker waives presentment for payment, notice of nonpayment, protest,
demand, notice of protest, notice of intent to accelerate, notice of
acceleration and dishonor, diligence in enforcement and indulgences of every
kind and without further notice hereby agree to renewals, extensions, exchanges
or releases of collateral, taking of additional collateral, indulgences, or
partial payments, either before or after maturity.

THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT AS SUCH LAWS ARE
PREEMPTED BY APPLICABLE FEDERAL LAWS.

MAKER:

AMERICAN WIRELESS SYSTEMS, INC.

By:______________________________

Its:_____________________________

ASSET SECURITY AGREEMENT

THIS ASSET SECURITY AGREEMENT (this "Agreement") is entered into this
26th day of May, 1995 by and between AMERICAN WIRELESS SYSTEMS, INC., a Delaware
corporation ("Debtor"), and HEARTLAND WIRELESS COMMUNICATIONS, INC., a Delaware
corporation ("Secured Party").

W I T N E S S E T H:

WHEREAS, Secured Party and Debtor have executed and delivered that
certain Letter of Intent for Exchange dated May 25, 1995 (the "Letter
Agreement"); and

WHEREAS, as described in the Letter Agreement, Secured Party has made a
$1.8 million loan (the "Loan") to Debtor; and

WHEREAS, Debtor has agreed to execute this Agreement and, pursuant
hereto, to pledge the Collateral (as defined hereinafter) as security for the
prompt satisfaction of the Secured Obligations (as defined hereinafter).

NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, Debtor and Secured Party agree as follows:

A. COLLATERAL

1. Description of Collateral. A security interest is hereby granted to
Secured Party by Debtor in and to all present and future rights, interests,
properties and assets of Debtor, whether tangible or intangible, wherever
located, associated with the wireless cable television market of Dallas, Texas
(the "Market"), including, without limitation, all of the following rights,
interests, properties and assets of Debtor associated with the Market (all of
such assets and properties being herein sometimes called the "Collateral")
(Secured Party acknowledges and agrees that the wireless cable television market
of Fort Worth, Texas is separate and distinct from the Market and is not
included within the Market):

(a) all of Debtor's accounts, accounts receivable,
and book debts, whether now owned or hereafter acquired or
arising;

(b) all of Debtor's rights in, to and under all
subscriber orders, sales contracts, instruments and other
documents evidencing obligations for or representing payment
for goods sold or leased and/or services rendered by Debtor,
whether now owned or existing or hereafter acquired or
arising;

(c) all monies due or to become due to Debtor under
all contracts from subscribers or from the sale or lease of
goods and/or the performance of services by Debtor, whether
now existing or hereafter acquired or arising;

(d) in each case of any item described in (a) through
(c), such property now owned by Debtor or hereafter acquired,
created or arising therefrom (hereinafter sometimes
collectively called the "Accounts" or singly the "Account");

(e) all of Debtor's leasehold interest in and to all
ITFS and MDS or MMDS lease agreements pursuant to which Debtor
has been or hereafter shall be granted excess channel or
related rights in and to the Market (collectively, the
"Channel Leases");

(f) solely to the extent permitted by applicable law
and not otherwise, all of Debtor's ownership rights in and to
MDS and/or MMDS licenses (if any) associated with the Market
(collectively, the "Licenses");

(g) all of Debtor's leasehold interest in and to
all tower land lease agreement(s) associated with the
Market (collectively, the "Tower Leases");

(h) solely to the extent permitted by applicable law
but not otherwise, all of Debtor's rights under construction
permits and related documents associated with the Market
(collectively, the "Documents");

(i) all inventory and equipment of Debtor located in
the Market, whenever acquired and whether now or hereafter
existing, including, but not limited to all transmitting
equipment, waveguides, antennas, combiners, and subscriber
receive equipment now owned by Debtor or hereafter from time
to time existing or acquired and all accessions and
appurtenances thereto;

(j) all of Debtor's contract rights, merchandise,
general intangibles and other personal property now owned or
hereafter acquired;

(k) all policies of insurance covering the Collateral
and proceeds thereof, including all proceeds and claims for
insurance in respect of the Collateral;

(l) all security for the payment of any of the
Collateral, and all goods which gave or will give rise to any
of the collateral or are evidenced, identified or represented
therein or thereby; and

(m) all products and proceeds of the Collateral.

2. Secured Obligations. This Agreement is being executed and delivered
to secure and the security interests herein granted shall secure full payment
and performance of Debtor's obligations under the Loan and the Promissory Note
(the "Note") issued pursuant thereto, and all renewals, extensions and
modifications thereof (all of such debts, indebtedness, liabilities, obligations
and duties referred to in this paragraph A-2 are hereinafter collectively
referred to as the "Secured Obligations).

3. After Acquired Consumer Goods. The security interest
hereunder shall attach to after acquired consumer goods only to the
extent permitted by Texas Uniform Commercial Code.

B. DEBTOR'S WARRANTIES

Debtor represents and warrants as follows:

1. Claims of Debtors on Collateral. Debtor is the legal and
beneficial owner of the Collateral, including, without limitation, the Channel
Leases, the Tower Leases and the Documents, free and clear of all liens, claims
and encumbrances. A true and correct summary of Leases is set forth in Schedule
1 hereto.

C. DEBTOR'S COVENANTS

Debtor covenants as follows:

1. Ownership Of Collateral. At the time Debtor grants to
Secured Party a security interest in any Collateral, Debtor shall be the
absolute owner thereof and shall have the right to grant such security interest;
currently with respect to Channel Leases for 8 Channels. Debtor shall defend the
Collateral against all claims and demands of all persons at any time claiming
any interest therein adverse to Secured Party. Debtor shall keep the Collateral
free from all liens, claims and encumbrances.

2. Secured Party's Cost. Debtor shall pay all reasonable out
of pocket costs necessary to preserve, defend and enforce this security
interest, and preserve, defend, enforce and collect the Collateral, including
but not limited to taxes, assessments, insurance premiums, reasonable attorney's
fees and legal expenses. Whether Collateral is or is not in Secured Party's
possession, and without any obligation to do so and without waiving Debtor's
default for failure to make any such payment, Secured Party at its option may
pay any such costs and expenses, discharge encumbrances on Collateral, and pay
for insurance of Collateral, and such payment shall be a part of the Secured
Obligations. Debtor agrees to reimburse Secured Party on demand for any costs so
incurred.

3. Additional Documents. Debtor shall sign any papers
furnished by Secured Party which are necessary in the reasonable judgment of
Secured Party to obtain, maintain and perfect the security interest hereunder
and to enable Secured Party to comply with the Federal Assignment of Claims Act
or any other federal or state law in order to obtain or perfect Secured Party's
interest in Collateral or to obtain proceeds of Collateral.

4. Parties Liable on Collateral. Debtor will preserve the
liability of all obligors on any Collateral and will preserve the priority of
all security therefor. Secured Party shall have no duty to preserve such
liability or security, but may do so at the expense of Debtor.

5. Right of Secured Party to Notify Debtors. Upon the
occurrence of a Default (as hereafter defined) and the written notice to Debtor
of its intention to do so, Secured Party may notify persons obligated on any
Collateral to make payments directly to Secured Party and Secured Party may take
control of all proceeds of any Collateral. Until Secured Party elects to
exercise such rights, Debtor, as agent of Secured Party, shall collect and
enforce all payments owed on the Collateral.

6. Records of Collateral. Debtor at all times will maintain
accurate books and records covering the Collateral. Debtor immediately will mark
all books and records with an entry showing the absolute assignment of all
accounts in Collateral to Secured Party. Debtor shall disclose to Secured Party
all agreements modifying any account, instrument or chattel paper and/or any
other Collateral which could have a material adverse effect.

7. Location of Collateral. Subject to Paragraph C-9 of this
Agreement, the Collateral is and shall remain in Debtor's possession or control
at all times at Debtor's risk of loss and shall be kept at Debtor's places of
business where Secured Party may inspect it at any reasonable time, except for
its removal in the ordinary course of business or unless Debtor notifies Secured
Party in writing and Secured Party consents in writing in advance of its removal
to another location.

8. Use of Collateral. Until a Default occurs, Debtor may use
the Collateral in any lawful manner not inconsistent with this Agreement or the
Letter Agreement or with the terms or conditions of any policy of insurance
thereon and may also sell or lease the Collateral in the ordinary course of
business. Until a Default which has not been waived occurs, Debtor may also use
and consume any raw materials or supplies, the use and consumption of which are
necessary to carry on Debtor's business.

9. Possession of Collateral. If the Collateral is chattel
paper, documents, instruments or investment securities or other instruments,
Secured Party may deliver a copy of this Agreement to the broker or seller
thereof, or any person in possession thereof, and such delivery shall constitute
notice to such person of Secured Party's security interest therein and shall
constitute Debtor's instruction to such Person to deliver to Secured Party
certificates or other evidence of the same as soon as available. Debtor will
deliver all investment securities, other instruments, documents and chattel
paper which are part of the Collateral and in Debtor's possession to the Secured
Party immediately, or if hereafter acquired, immediately following acquisition,
appropriately endorsed to Secured Party's order, or with appropriate, executed
powers.

10. Consumer Credit. If any Collateral or proceeds includes
obligations of third parties to Debtor, the transactions giving rise to the
Collateral shall conform in all respects to the applicable state or federal
consumer credit law. Debtor shall hold harmless and indemnify Secured Party
against any cost, loss or expense, including reasonable attorney's fees, arising
from Debtor's breach of this covenant.

11. Power of Attorney. Debtor appoints Secured Party Debtor's
attorney-in-fact with full power in Debtor's name and behalf to, following a
Default, do every act which Debtor is obligated to do or may be required to do
hereunder; however, nothing in this paragraph shall be construed to obligate
Secured Party to take any action hereunder.

12. Other Parties and Other Collateral. No renewal, extension
or increase of or any other indulgence with respect to the Secured Obligations
or any part thereof, no release of any security, no release of any person
(including any maker, endorser, grantor or surety) liable on the Secured
Obligations, no delay in enforcement of payment, and no delay or omission or
lack of diligence or care in exercising any right or power with respect to the
Secured Obligations or any security therefor or guaranty thereof or under this
Agreement shall in any manner impair or affect the rights of Secured Party under
the Law, hereunder, or under any of the Documents. Secured Party need not file
suit or assert a claim for personal judgment against any person for any part of
the Secured Obligations or seek to realize upon any other security for the
Secured Obligations, before foreclosing upon the Collateral for the purpose of
paying the Secured Obligations. Debtor waives any right to the benefit of or to
require or control application of any other security or proceeds thereof, and
agrees that Secured Party shall have no duty or obligation to Debtor to apply to
the Secured Obligations any such other security or proceeds thereof.

13. Consents under Leases. Debtor shall, promptly upon request
from Secured Party, utilize all reasonable efforts to secure consents to the
pledge of the Collateral (and realization thereon under any sale or foreclosure)
to Secured Party from all parties, including, without limitation, licenseholders
of MDS and MMDS commercial channels subject to the Leases and educational
institutions holding licenses and interest as lessors under the Leases and of
landowners under the Tower Leases.

D. DEFAULT

1. Remedies Upon Default-General. Upon the occurrence of a default in
payment of the Loan which is not cured within thirty (30) days, or of a default
in the representations or covenants set forth in this Agreement which is not
cured within thirty (30) days (each a "Default"), Secured Party is authorized,
at its election, to take possession of the Collateral and of all books, records
and Accounts relating thereto, and to exercise without interference from Debtor
all rights which Debtor has with respect to the management, possession,
protection or preservation of the Collateral, including the right to sell the
same for Debtor and to deduct from such sales proceeds all costs, expenses and
liabilities of every character incurred by Secured Party in collecting such
sales proceeds and in managing, selling, maintaining, protecting or preserving
the Collateral. All such costs, expenses and liabilities incurred by Secured
Party in selling, managing, maintaining, protecting or preserving the Collateral
shall constitute a demand obligation owing by Debtor and shall bear interest
from the date of expenditure until paid at the rate of interest per annum from
time to time in effect under the Note, all of which shall constitute a portion
of the Secured Obligations. If necessary with respect to the foregoing, Secured
Party may use any and all legal remedies to dispossess Debtor of the Collateral,
including specifically one or more actions for forcible entry and detainer. In
connection with any action taken by Secured Party pursuant to this Paragraph
D-1, Secured Party shall not be liable for any loss sustained by Debtor
resulting from any failure to sell or lease the Collateral, or any part thereof,
or from any other act or omission of Secured Party, its officers, agents or
employees in managing the Collateral unless such loss is caused by the gross
negligence, bad faith or willful misconduct of Secured Party.

2. Additional Remedies of Secured Party Upon Default. Upon the
occurrence of a Default, Secured Party shall have all the rights of a Secured
Party after default under the Uniform Commercial Code of Texas in conjunction
with an in addition to those rights and remedies provided for herein:

(a) Secured Party may enter upon Debtor's premises to take
possession of, assemble and collect the Collateral or to render it
unusable;

(b) Secured Party may require Debtor to assemble the
Collateral and make it available at a place Secured Party designates
which is mutually convenient to allow Secured Party to take possession
or dispose of the Collateral;

(c) Written notice delivered to Debtor as provided herein ten
(10) days prior to the date of public sale of the Collateral or prior
to the date after which private sale of the Collateral will be made
shall constitute reasonable notice;

(d) It shall not be necessary that Secured Party take
possession of the Collateral or any part thereof prior to the time that
any sale pursuant to the provisions of this Paragraph is conducted, and
it shall not be necessary that the Collateral or any part thereof be
present at the location of such sale;

(e) The sale by Secured Party of less than the whole of the
Collateral shall not exhaust the rights of Secured Party hereunder, and
Secured Party is specifically empowered to make successive sale or
sales hereunder until the whole of the Collateral shall be sold; and,
if the proceeds of such sale of less than the whole of the Collateral
shall be less than the aggregate of the Secured Obligations secured
hereby, this Agreement and the security interest created hereby shall
remain in full force and effect as to the unsold portion of the
Collateral just as though no sale had been made;

(f) In the event any sale hereunder is not completed or is
defective in the opinion of Secured Party, such sale shall not exhaust
the rights of Secured Party hereunder and Secured Party shall have the
right to cause a subsequent sale or sales to be made hereunder;

(g) Any and all statements of fact or other recitals made in
any bill of sale or assignment or other instrument evidencing any
foreclosure sale hereunder as to nonpayment of the Secured Obligations
or as to the occurrence of any Default, or as to Secured Party having
declared all of the Secured Obligations to be due and payable, or as to
notice of time, place and terms of sale and the properties to be sold
having been duly given, as to any other act or thing having been duly
done by Secured Party shall be taken as prima facie evidence of the
truth of the facts so stated and recited; and

(h) Secured Party may appoint or delegate any one or more
persons as agent to perform any act or acts necessary to incident to
any sale held by Secured Party, including the sending of notices and
the conduct of sale, but in the name and on behalf of Secured Party.

E. GENERAL

1. Parties Bound. Secured Party's rights hereunder shall inure to the
benefit of its successors and assigns, and in the event of any assignment or
transfer of any of the Secured Obligations or the Collateral, Secured Party
thereafter shall be fully discharged from any responsibility with respect to the
Collateral so assigned or transferred, but Secured Party shall retain all rights
and powers hereby given with respect to any of the Secured Obligations or
Collateral not so assigned or transferred. All representations, warranties and
agreements of Debtor shall be binding upon the successors and assigns of Debtor;
provided, Debtor shall not be entitled to assign its rights or obligations
hereunder without the prior written consent of Secured Party.

2. Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder or
of any Default by Debtor shall be binding upon Secured Party unless in writing,
and no failure by Secured Party to exercise any power or right hereunder or
waiver of any Default by Debtor shall operate as a waiver of any other or
further exercise of such right or power or of any further Default.

3. Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties.

4. Definitions. Unless the context indicates otherwise, definitions in
the Uniform Commercial Code apply to words and phrases in this Agreement. If
Uniform Commercial Code definitions conflict, Chapter 9 definitions shall apply.

5. Notice. Notice shall be deemed reasonable if delivered at least ten
(10) days before the related action (or if the Uniform Commercial Code elsewhere
specifies a longer period), unless otherwise specified herein. Any notice to be
given or other communication to be delivered hereunder shall be given in writing
and shall be deemed to have been given or delivered, as the case may be, the
date it is personally delivered by a recognized local or overnight courier or
delivered by telecopy at the addresses hereafter set forth:

Heartland Wireless Communications, Inc.
903 N. Bowser, Suite 140
Richardson, Texas 75081
Attention: John R. Bailey
Telecopy No.: (214) 479-9244

with a copy to:

Victor B. Zanetti, Esq.
Arter, Hadden, Johnson & Bromberg
1717 Main, Suite 4100
Dallas, Texas 75201
Telecopy No.: (214) 741-7139

American Wireless Systems, Inc.
7426 E. Stetson Drive, Suite 220
Scottsdale, Arizona 85251
Attention: Stephen Johnson
Telecopy No.: (602) 994-4325

with a copy to:

O'Connor Cavanagh
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012
Attention: Richard B. Stagg, Esq.
Telecopy No.: (602) 263-2900

6. Modifications. No. provisions hereof shall be modified or limited
except by a written agreement expressly referring hereto and to the provisions
so modified or limited and signed by the Debtor and Secured Party, nor by course
of conduct, usage of trade, or by the law merchant.

7. Severability. The unenforceability of any provision of this
Agreement shall not affect the enforceability or validity of any other
provision.

8. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

9. Financing Statement. A carbon, photographic or other reproduction of
this Agreement or any financing statement covering the Collateral shall be
sufficient as a financing statement.

[Signature page follows]

10. Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile signature.

DEBTOR:

AMERICAN WIRELESS SYSTEMS, INC.

By:_________________________________
Title:______________________________

SECURED PARTY:

HEARTLAND WIRELESS COMMUNICATIONS,
INC.

By:_________________________________
Title:______________________________

SCHEDULE 1
LIST OF DALLAS CHANNEL LEASES
------------------------------

I. C and F Group Channels

Dallas ITFS Airtime Royalty Agreement dated February 16, 1994 between
Alliance For Higher Education and American Wireless Systems, Inc.

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet as of June 30, 1995 and Statement of Operations for the Six Months Ended
June 30, 1995 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<PERIOD-START> JAN-01-1995
<CASH> 1,750,836
<SECURITIES> 0
<RECEIVABLES> 2,434,538
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,228,393
<PP&E> 227,632
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,468,861
<CURRENT-LIABILITIES> 1,940,298
<BONDS> 1,800,000
<COMMON> 57,092
0
0
<OTHER-SE> 4,395,426
<TOTAL-LIABILITY-AND-EQUITY> 8,468,861
<SALES> 0
<TOTAL-REVENUES> 50,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,248,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,453
<INCOME-PRETAX> (1,323,346)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,323,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,323,346)
<EPS-PRIMARY> (.233)
<EPS-DILUTED> 0

</TABLE>