APPLIED CELLULAR TECHNOLOGY INC
S-3/A, 1998-07-30
TELEPHONE & TELEGRAPH APPARATUS
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                                               Registration No. 333-59523
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

   
                       PRE-EFFECTIVE AMENDMENT NO. 1 TO
                                    FORM S-3
                             REGISTRATION STATEMENT
                                      Under
                           THE SECURITIES ACT OF 1933
    

                        APPLIED CELLULAR TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)

              MISSOURI                               43-1641533
   (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)                Identification No.)

                          400 Royal Palm Way, Suite 4
                            Palm Beach, Florida 33480
                                 (561) 366-4800
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)
                               Garrett A. Sullivan
                          400 Royal Palm Way, Suite 410
                            Palm Beach, Florida 33480
                                 (561) 366-4800
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)
                        Copies of all correspondence to:
                             Denis P. McCusker, Esq.
                                 Bryan Cave LLP
                             One Metropolitan Square
                         211 North Broadway, Suite 3600
                         St. Louis, Missouri 63102-2750
                                 (314) 259-2000

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

   
     Amending the Prospectus, adding additional shares and adding exhibits.
    

   
                      CALCULATION OF ADDITIONAL REGISTRATION FEE
<TABLE>

- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
   Title of each class of         Amount to be        Proposed maximum      Proposed maximum         Amount of
 securities to be registered     registered (1)     offering price per    aggregate offering    registration fee (3)
                                                          unit(2)               price(2)
===================================================================================================================
   <S>                          <C>                        <C>                 <C>                    <C>   
   Common Stock, $.001 par
       value per share          432,010 shares             $2.9375             $1,361,959             $413
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  In the original filing, 412,574 shares were registered.  By this amendment,
     the  registrant  is  adding  19,436  shares  to  the  registration,  for an
     aggregate of 432,010 shares.

(2)  Pursuant to Rule 457(c),  the proposed  offering price and registration fee
     has been calculated on the basis of the average of the high and low trading
     prices for the Common  Stock on July 14,  1998 (in  respect of the  initial
     filing) as reported on the Nasdaq National Market, and on July 28, 1998 (in
     respect of the shares  added by this  amendment)  as reported on the Nasdaq
     National Market.

(3)  An initial  registration  fee of $396 was paid at the time of the  original
     registration, and an additional $17 has been paid with respect to the 1,436
     shares being added by this  amendment,  calculated  as indiciated in Note 2
     above.
    

     The Registrant  hereby amends this  Registration  Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further  amendment  which  specifically  states  that  this  Registration
Statement shall  thereafter  become effective in accordance with Section 8(a) of
the  Securities  Act of 1933 or until the  Registration  Statement  shall become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------

<PAGE>

================================================================================
     Information  contained  herein is subject to  completion  or  amendment.  A
registration  statement  relating  to these  securities  has been filed with the
Securities  and Exchange  Commission.  These  securities may not be sold nor may
offers to buy be accepted prior to the time the registration  statement  becomes
effective.  This  prospectus  shall  not  constitute  an  offer  to  sell or the
solicitation of an offer to buy nor shall there be any sale of these  securities
in any State in which such offer,  solicitation  or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
================================================================================


   
                  SUBJECT TO COMPLETION, DATED JULY 28, 1998

                             PRELIMINARY PROSPECTUS

                                 432,010 Shares
                           Applied Cellular Technology
                                 [LOGO OMITTED]
                                  Common Stock
    
                               ------------------

   
     This  Prospectus  relates to 432,010 shares (the "Shares") of common stock,
par value  $0.001  per share  (the "ACT  Common  Stock"),  of  Applied  Cellular
Technology,  Inc., a Missouri  corporation ("ACT" or the "Company") to be issued
from time to time upon  exchange  or  redemption  of  exchangeable  shares  (the
"Exchangeable  Shares") of Commstar  Ltd., an Ontario  corporation  ("Commstar")
which is a  wholly-owned  subsidiary of ACT. The  Exchangeable  Shares are to be
issued by  Commstar  as  consideration  for  certain  assets of Western  Inbound
Network, Inc., a Canadian corporation ("Western Inbound"), pursuant to the terms
of a Memorandum of Agreement dated as of July 14, 1998, among Commstar,  Western
Inbound  and  the  Company   (the   "Acquisition   Agreement").   See  "Plan  of
Distribution--The Acquisition" and "--Exchangeable Shares."
    

     This  Prospectus also relates to the resale from time to time of the Shares
after they have been issued in exchange for the Exchangeable  Shares. After such
issuance,  the Shares may be sold in one or more transactions (which may include
"block  transactions")  on the Nasdaq National Market,  in the  over-the-counter
market, in negotiated transactions or in a combination of such methods of sales,
at fixed prices which may be changed, at market prices prevailing at the time of
sale,  at prices  related  to such  prevailing  market  prices or at  negotiated
prices.  The selling  shareholders  may effect such  transactions by selling the
Shares  directly to  purchasers,  or may sell to or through  agents,  dealers or
underwriters  designated  from  time  to  time,  and  such  agents,  dealers  or
underwriters may receive  compensation in the form of discounts,  concessions or
commissions from the selling  shareholders and/or the purchaser(s) of Shares for
whom they may act as agent or to whom they may sell as principals, or both. Such
selling  shareholders and the brokers and dealers through which the sales of the
Shares may be made may be deemed to be "underwriters"  within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and their commissions
and  discounts  and  other   compensation   may  be  regarded  as  underwriters'
compensation.  The Company will not receive any proceeds from any sale of Shares
and will bear all the expenses  incurred in  connection  with  registering  this
offering of the Shares.

     The ACT Common Stock of the Company is listed on the Nasdaq National Market
under the symbol  "ACTC." On July 14, 1998,  the last reported sale price of the
ACT Common Stock on the Nasdaq National  Market was $3.25 per share.  See "Price
Range of ACT Common Stock."

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

     SEE "RISK  FACTORS"  BEGINNING ON PAGE 4 IN THE PROSPECTUS FOR A DISCUSSION
OF CERTAIN  FACTORS THAT SHOULD BE CONSIDERED BY  PROSPECTIVE  PURCHASERS OF THE
ACT COMMON STOCK OFFERED HEREBY.

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

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


                 The date of this Prospectus is __________, 1998.

<PAGE>
                              AVAILABLE INFORMATION

     ACT is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the  "Exchange  Act"),  and, in  accordance  therewith,
files reports,  proxy  statements and other  information with the Securities and
Exchange  Commission (the  "Commission").  These reports,  proxy  statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024,  Judiciary  Plaza,  450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located at
Northeast Regional Office,  Seven World Trade Center,  Suite 1300, New York, New
York 10048 and  Midwest  Regional  Office,  Citicorp  Center,  500 West  Madison
Street,  Suite 1400, Chicago,  Illinois 60661. Copies of such materials can also
be  obtained  from the Public  Reference  Section of the  Commission,  Judiciary
Plaza, 450 Fifth Street, N.W., Washington,  D.C. 20549, at prescribed rates. The
Commission  maintains a Web site that contains  reports,  proxy and  information
statements  and  other  materials  that  are  filed  through  the   Commission's
Electronic  Data Analysis and  Retrieval  (EDGAR)  System.  This Web site can be
assessed at  http://www.sec.gov.  Quotations  relating  to the ACT Common  Stock
appear on the Nasdaq National  Market,  and such reports,  proxy  statements and
other  information  concerning  ACT can also be  inspected at the offices of the
National  Association  of  Securities  Dealers,   Inc.,  1735  K  Street,  N.W.,
Washington, D.C. 20006.

     ACT has filed with the Commission a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act with respect to the shares of
ACT Common Stock offered  hereby.  This  Prospectus  does not contain all of the
information set forth in the Registration  Statement or the exhibits thereto. As
permitted by the rules and regulations of the Commission,  this Prospectus omits
certain  information  contained or incorporated by reference in the Registration
Statement.  Statements  contained in this  Prospectus  as to the contents of any
contract or other document filed or  incorporated  by reference as an exhibit to
the Registration  Statement are not necessarily  complete,  and in each instance
reference  is made to the copy of such  contract or other  document  filed as an
exhibit to the Registration  Statement.  For further  information,  reference is
hereby made to the Registration Statement and exhibits thereto,  copies of which
may be inspected at the offices of the  Commission  at 450 Fifth  Street,  N.W.,
Washington,  D.C.  20549 or obtained from the  Commission at the same address at
prescribed rates.


                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:

          1. the Company's  Annual Report on Form 10-K for the fiscal year ended
     December 31, 1997 (filed with the Commission on March 30, 1998);

          2. the Company's  Quarterly  Report on Form 10-Q for the quarter ended
     March 31, 1998 (filed with the Commission on May 14, 1998);

         3. the Company's  Current Reports on Form 8-K and Form 8-K/A filed with
     the Commission on June 26, 1998 and June 29, 1998, respectively

          4. the Company's  Current Report on Form 8-K filed with the Commission
     on July 14, 1998.

     All documents filed by ACT with the Commission  pursuant to Sections 13(a),
13(c),  14 or 15(d) of the Exchange Act  subsequent to the date hereof and prior
to the  termination of the offering shall hereby be deemed to be incorporated by
reference in this  Prospectus and to be a part hereof from the date of filing of
such documents.  Any statement contained herein or in a document incorporated or
deemed to be incorporated  herein by reference shall be deemed to be modified or
superseded  for  purposes  of this  Prospectus  to the extent  that a  statement
contained  herein or in any other  subsequently  filed document  incorporated or
deemed  to  be  incorporated  herein  by  reference,  which  statement  is  also
incorporated  herein by reference,  modifies or supersedes such  statement.  Any
such  statement  so modified  or  superseded  shall not be deemed,  except as so
modified or superseded, to constitute a part of this Prospectus.



                                      -2-
<PAGE>

     This Prospectus incorporates documents by reference which are not presented
herein or delivered  herewith.  Copies of these  documents  (excluding  exhibits
unless  such  exhibits  are  specifically  incorporated  by  reference  into the
information  incorporated  herein)  will be provided by first class mail without
charge to each person to whom this Prospectus is delivered, upon written or oral
request  by such  person to  Applied  Cellular  Technology,  Inc.,  James  River
Professional  Center,  Highway 160 & CC, Suite 5, P.O. Box 2067, Nixa,  Missouri
65714;  Attention:  Kay  Langsford,   Corporate  Controller  (telephone:   (417)
725-9888).

     No person has been  authorized in connection with this offering to give any
information  or to make any  representation  not  contained or  incorporated  by
reference  in this  Prospectus  and,  if  given  or made,  such  information  or
representation  must  not be  relied  upon as  having  been  authorized  by ACT,
Commstar or any other person.  This  Prospectus  does not constitute an offer to
sell, or a solicitation of an offer to purchase, any securities other than those
to which it relates,  nor does it constitute an offer to sell or a  solicitation
of an  offer  to  purchase  by any  person  in any  jurisdiction  in which it is
unlawful  for such  person to make such an offer or  solicitation.  Neither  the
delivery  of this  Prospectus  nor any sale  made  hereunder  shall,  under  any
circumstances,  create any implication that the information  contained herein is
correct as of any time  subsequent  to the date hereof or that there has been no
change in the affairs of ACT since such date.


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


                                TABLE OF CONTENTS


                Available Information..........................2
                Incorporation Of Certain Documents By Reference2
                Risk Factors...................................4
                The Company....................................6
                Use Of Proceeds................................7

                Description Of ACT Capital Stock...............7
                Plan Of Distribution...........................8
                Canadian Tax Considerations...................10
                United States Federal Tax Considerations......14
                Legal Matters.................................18
                Experts.......................................18
















                                      -3-
<PAGE>

                                  RISK FACTORS

     In  addition  to the other  information  contained  herein,  the  following
factors  should be  considered  carefully  in  evaluating  ACT before  investors
exchange  their  Exchangeable  Shares for the shares of ACT Common Stock offered
hereby.

Taxability of the Exchange

     The  exchange  of  Exchangeable  Shares for  shares of ACT Common  Stock is
generally  a taxable  event in Canada and the  United  States.  A  holder's  tax
consequences can vary depending on a number of factors,  including the residency
of the holder,  the method of the  exchange  (redemption  or  exchange)  and the
length of time that the  Exchangeable  Shares were held prior to  exchange.  See
"Canadian Tax Considerations" and "United States Federal Tax Considerations."

Differences in Canada and U.S. Trading Markets

     The Exchangeable  Shares will not be listed on any stock exchange in Canada
or the  United  States.  ACT has  agreed  that the  shares of ACT  Common  Stock
issuable  from time to time in  exchange  for the  Exchangeable  Shares  will be
listed on the Nasdaq National Market.  There is no current intention to list the
ACT Common Stock on any other stock exchange in Canada or the United States.  As
a  result  of  the  foregoing,  ACT  believes  that  the  market  price  of  the
Exchangeable  Shares will reflect  essentially  the equivalent  value of the ACT
Common  Stock on the  Nasdaq  National  Market.  However,  if a  market  for the
Exchangeable  Shares should develop,  there can be no assurances that the market
price of the  Exchangeable  Shares  would  correspond  to that of the ACT Common
Stock.

Foreign Property

     The  Exchangeable  Shares and the ACT Common Stock will be foreign property
under the Income Tax Act  (Canada),  as amended (the  "Canadian  Tax Act"),  for
trusts  governed by registered  pension  plans,  registered  retirement  savings
plans,  registered  retirement income funds and deferred profit sharing plans or
for certain other tax-exempt persons. See "Canadian Tax Considerations."

Uncertainty of Future Financial Results

     While the  Company has been  profitable  for the last three  fiscal  years,
future  financial  results are  uncertain.  There can be no  assurance  that the
Company  will  continue  to be operated in a  profitable  manner.  Profitability
depends  upon many  factors,  including  the  success of the  Company's  various
marketing  programs,  the  maintenance  or reduction  of expense  levels and the
ability of the Company to  successfully  coordinate the efforts of the different
segments of its business.

Future Sales of and Market for the Shares

     As of July 14,  1998,  there were  29,821,891  shares of ACT  Common  Stock
outstanding. In addition,  4,523,288 shares of ACT Common Stock are reserved for
issuance in exchange for the Exchangeable  Shares of Commstar referred to herein
and in exchange for certain  exchangeable shares to be issued by ACT-GFX Canada,
Inc., a  wholly-owned  subsidiary of ACT. Since January 1, 1998, the Company has
issued an aggregate of 9,149,468  shares of ACT Common Stock, of which 7,874,937
shares of ACT Common Stock were issued in  acquisitions,  850,000  shares of ACT
Common Stock were issued upon the exercise of  warrants,  250,000  shares of ACT
Common Stock were sold to certain  directors and an officer of the Company,  and
174,531 shares of ACT Common Stock were issued for services rendered,  including
services under employment agreements and employee bonuses.

     Management  of the Company  anticipates  that the Company will  continue to
effect  acquisitions  and contract for certain  services  primarily  through the
issuance of ACT Common Stock or other  equity  securities  of the Company.  Such
issuances of additional  securities may be viewed as being dilutive of the value
of the ACT Common Stock in certain  circumstances and may have an adverse impact
on the market price of the ACT Common Stock.

Risks Associated with Acquisitions and Expansion

     The Company has engaged in a continuing  program of  acquisitions  of other
businesses  which are  considered to be  complementary  to the lines of business
carried on by the Company,  and it is anticipated  that such  acquisitions  will
continue to occur.  As of March 31,  1998,  the total assets of the Company were
approximately  $73.1  million.  As of December 31, 1997, the total assets of the
Company  were  approximately  $61.3  million,  compared to  approximately  $33.2
million at December 31, 1996 and approximately  $4.1 million at the end of 1995.


                                      -4-
<PAGE>

Net operating  revenues for the year ended December 31, 1997 were  approximately
$103.2 million compared to approximately  $19.9 million in 1996 and $2.3 million
in 1995.  Managing  these  dramatic  changes in the scope of the business of the
Company will  present  ongoing  challenges  to  management,  and there can be no
assurance that the Company's operations as currently structured,  or as affected
by future  acquisitions,  will be  successful.  The  businesses  acquired by the
Company  may  require  substantial  additional  capital,  and  there  can  be no
assurance as to the  availability  of such  capital  when needed,  nor as to the
terms on which such capital  might be made  available to the Company.  It is the
Company's  policy to retain  existing  management  of acquired  companies and to
allow the new subsidiary to continue to operate in the manner which has resulted
in its success in the past, under the overall  supervision of senior  management
of the Company. Accordingly, the success of the operations of these subsidiaries
will depend,  to a great extent,  on the continued  efforts of the management of
the acquired companies.

Competition

     Each segment of the  Company's  business is highly  competitive,  and it is
expected  that  competitive  pressures  will  continue.  Many  of the  Company's
competitors have far greater financial and other resources than the Company. The
areas which the Company has  identified  for continued  growth and expansion are
also  target  market  segments  for  some  of  the  largest  and  most  strongly
capitalized  companies in the United States.  There can be no assurance that the
Company  will have the  financial,  technical,  marketing  and  other  resources
required to compete successfully in this environment in the future.

Dependence on Key Individuals

     The future  success of the Company is highly  dependent  upon the Company's
ability to attract and retain qualified key employees.  The Company is organized
with a small senior management team, with each of its separate  operations under
the  day-to-day  control  of local  managers.  If the  Company  were to lose the
services of any members of its central  management team, the overall  operations
of the Company  could be adversely  affected,  and the  operations of any of the
individual facilities of the Company could be adversely affected if the services
of the local managers should be unavailable.

Lack of Dividends on Common Stock; Issuance of Preferred Stock

     The  Company  does not have a history  of paying  dividends  on ACT  Common
Stock,  and there can be no assurance  that such  dividends  will be paid in the
foreseeable  future.  The  Company  intends  to use any  earnings  which  may be
generated  to  finance  the  growth of the  Company's  businesses.  The Board of
Directors  has the right to authorize the issuance of preferred  stock,  without
further  stockholder  approval,  the holders of which may have preferences as to
payment of dividends.

Potential Conflicts of Interests

     Mr. Richard Sullivan,  the Chief Executive Officer of the Company,  is also
Chairman of Great Bay Technology,  Inc. and Managing  General Partner of the Bay
Group.  Both these  companies  conduct  business  with the Company,  and receive
compensation  from the Company for various  services,  including  assistance  in
identifying  potential  acquisition  candidates and in  negotiating  acquisition
transactions.  The  relationships  among such  companies,  Mr.  Sullivan and the
Company may involve conflicts of interest.

   

Possible Volatility of Stock Price

     ACT  Common  Stock is quoted on the Nasdaq  National  Market,  which  stock
market has  experienced  and is likely to experience  in the future  significant
price and volume  fluctuations  which could adversely affect the market price of
ACT Common Stock without regard to the operating  performance of the Company. In
addition,  the Company believes that factors such as the significant  changes to
the  business  of  the  Company   resulting  from  continued   acquisitions  and
expansions,  quarterly  fluctuations  in the  financial  results of the Company,
shortfalls  in  earnings  or sales below  analyst  expectations,  changes in the
performance of other companies in the same market sectors as the Company and the
performance  of the overall  economy and the  financial  markets could cause the
price of ACT  Common  Stock to  fluctuate  substantially.  During  the 12 months
preceding the date of this  Prospectus,  the price per share of ACT Common Stock
has ranged from a high of $9 3/4 to a low of $2 3/4.

    

                                      -5-
<PAGE>

Forward-Looking Statements and Associated Risk

     This  Prospectus,   including  the  information   incorporated   herein  by
reference, contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements regarding,  among
other items, (i) the Company's growth strategies, (ii) anticipated trends in the
Company's   business  and  demographics  and  (iii)  the  Company's  ability  to
successfully  integrate the business  operations of recently acquired companies.
These forward-looking statements are based largely on the Company's expectations
and are  subject  to a number of risks and  uncertainties,  certain of which are
beyond the Company's control.  Actual results could differ materially from these
forward-looking  statements  as a  result  of the  factors  described  in  "Risk
Factors,"  including,  among others,  regulatory,  competitive or other economic
influences. In light of these risks and uncertainties, there can be no assurance
that  the  forward-looking  information  contained  in this  Prospectus  will be
accurate.


                                   THE COMPANY

     The Company is a builder of  infrastructure  services and solutions for the
communications  industry.   During  the  first  quarter  of  1998,  the  Company
reorganized its business into four groups:

ACT Communications Group

     This group  consists  of  companies  that  provide  products  and  services
including  telephone  systems,  computer  telephony,  interactive voice response
systems,  flat rate  extended  area calling  services,  long  distance and local
telephone  services,  digital satellite  services,  networking  services and the
construction of microwave, cellular and digital towers.

ACT Software and Services Group

     This group consists of companies that develop and market software  products
and services  for  wireless-enabled  applications,  data  acquisition,  decision
support, point of sale and multi-function peripheral devices.

ACT Computer Group

     This group  consists  of  companies  that  provide  leasing,  re-marketing,
components,  peripherals,  parts-on-demand,  consulting and business  continuity
services for mainframe,  midrange and PC systems for industrial,  commercial and
retail organizations.

ACT Specialty Manufacturing Group

     This group  consists  of  companies  that  manufacture  analog and  digital
industrial temperature controls, analog and digital electrical products, factory
automation controls, environmental systems and satellite controllers, modems and
positioning systems for data broadcasting.

   
     The largest  part of the  Company's  current  operations  are the result of
acquisitions completed during the last two years. During 1995, the net operating
revenues of the Company were $2.3 million. For 1996, net operating revenues were
$19.9 million,  of which almost $14 million was from the Company's then services
and  solutions   segment.   In  1997,   the  Company   completed  14  additional
acquisitions,  of  companies  whose  aggregate  net revenues for 1997 were $62.4
million,  or 60.5% of the Company's  total  revenues of $103.2  million in 1997.
Since January 1, 1998, the Company has completed 14 additional  acquisitions  of
companies  whose  aggregate  net  revenues  for 1997 were  approximately  $109.4
million.
    

     The principal office of the Company is located at 400 Royal Palm Way, Suite
410, Palm Beach, Florida,  33480. Each operating business is conducted through a
separate  subsidiary  company  directed  by its own  management  team,  and each
subsidiary company has its own marketing and operations support personnel.  Each
management  team  reports  to a  Group  Vice  President  and  ultimately  to the
Company's  President,  who is  responsible  for  overall  corporate  control and
coordination, as well as financial planning. The Chairman is responsible for the
overall business and strategic planning of the Company.


                                      -6-
<PAGE>


                                 USE OF PROCEEDS

     Because  Shares  of ACT  Common  Stock  will be  issued  upon  exchange  or
redemption  of the  Exchangeable  Shares,  ACT will receive no net cash proceeds
upon issuance.

                        DESCRIPTION OF ACT CAPITAL STOCK

     The Company's Amended and Restated  Articles of  Incorporation,  as amended
("ACT's Articles of Incorporation")  authorizes the issuance of up to 80,000,000
shares of ACT Common  Stock and up to 5,000,000  shares of preferred  stock (the
"Preferred  Stock").  The Preferred Stock may be issued from time to time and on
such terms as are specified by the Company's Board of Directors, without further
authorization from the stockholders of the Company.

     As of July 14, 1998, there were outstanding 29,821,891 shares of ACT Common
Stock,  7,000 shares of  Preferred  Stock,  par value $10 per share,  redemption
value $100 per share, and one Special Preferred Share referred to below.

     As of July 14,  1998,  (i) there  were  outstanding  warrants  to  purchase
2,510,000  shares of ACT Common Stock at a weighted  average  exercise  price of
$2.71 per share,  and (ii)  options held by employees of the Company to purchase
7,012,100  shares of ACT Common Stock at a weighted  average  exercise  price of
$2.98  per  share.  All  of  the  warrants  are  currently  exercisable.  Of the
outstanding  options,  1,205,000  are  now  exercisable  at a  weighted  average
exercise  price of $4.43 per share,  and the rest become  exercisable at various
times over the next three years.

     ACT's Common Stock  trades on the Nasdaq  National  Market under the symbol
"ACTC."  The  following  table  sets  forth the high and low sale  prices of ACT
Common Stock as reported by the Nasdaq  National Market for each of the quarters
since the beginning of 1996.

                                       High            Low
                                       ----            ---
      1996
            First Quarter.........       6-7/8          2-3/4
            Second Quarter........       9-1/8          4
            Third Quarter.........       7-7/8          3-3/4
            Fourth Quarter........       7-3/8          4-1/2
   
      1997
            First Quarter.........       5-7/8          4
            Second Quarter........       4-3/8          2-5/8
            Third Quarter ........       8-3/4          3-1/16
            Fourth Quarter .......       9-3/4          3-15/16
   
      1998
            First Quarter ........       5-1/2          4-1/32
            Second Quarter .......       4-7/8          3-1/8
            Third Quarter 
               (through July 14)..       3-7/16         2-29/32


Rights of Holders of ACT Common Stock

     Subject to the prior rights of any shares of Preferred  Stock that may from
time to time be  outstanding,  holders of ACT Common Stock are entitled to share
ratably in such dividends as may be lawfully  declared by the Board of Directors
and paid by ACT and, in the event of  liquidation,  dissolution or winding up of
ACT, are entitled to share ratably in all assets available for distribution. ACT
is prohibited from declaring or paying  dividends on the ACT Common Stock unless
Commstar  is able to, and  simultaneously  does,  declare  or pay an  equivalent
dividend on the Exchangeable Shares. In the event of liquidation, dissolution or
winding up of ACT, each outstanding  Exchangeable Share (other than Exchangeable


                                      -7-
<PAGE>

Shares held by ACT, Commstar or a single wholly-owned subsidiary of ACT) will be
purchased by ACT in exchange for ACT Common Stock as described below under "Plan
of Distribution--  Procedures for Issuance of ACT Common Stock--  Liquidation of
ACT."

     The ACT Common  Stock is  entitled  to one vote per share held of record on
each matter submitted to a vote of stockholders. Except as otherwise provided by
law or ACT's  Articles of  Incorporation,  the ACT Common  Stock and the Special
Preferred  Share  referred to below will vote  together as a single class in the
election of directors and on all matters  submitted to a vote of stockholders of
ACT. The holders of ACT Common Stock have no  preemptive  rights to purchase any
securities of ACT or cumulative  voting rights.  All  outstanding  shares of ACT
Common  Stock are  validly  issued,  fully  paid and  nonassessable.  ACT is not
prohibited by ACT's Articles of Incorporation  from  repurchasing  shares of the
ACT Common Stock.  Any such  repurchases  would be subject to any limitations on
the amount  available  for such  purpose  under  applicable  corporate  law, any
applicable  restrictions  under the terms of any outstanding  Preferred Stock or
indebtedness  and, in the case of market  purchases,  such  restrictions  on the
timing,  manner and amount of such purchases as might apply in the circumstances
under applicable securities laws.

     The transfer  agent,  registrar and dividend  disbursing  agent for the ACT
Common Stock is Florida Atlantic Stock Transfer, Inc.

ACT Special Voting Preferred Stock

     The Board of Directors of ACT  authorized the issuance of a single share of
ACT Special Voting Preferred Stock (the "Special Preferred Share"),  to Montreal
Trust Company of Canada (the "Voting Trustee") under a Voting and Exchange Trust
Agreement  (the "Voting and Exchange  Trust  Agreement")  which was entered into
among ACT, Commstar and the Voting Trustee.  Except as otherwise required by law
or ACT's Articles of Incorporation, the Special Preferred Share will be entitled
to a number of votes equal to the number of outstanding  Exchangeable Shares not
owned by ACT or certain subsidiaries of ACT, and may be voted in the election of
directors and on all other matters  submitted to a vote of  stockholders of ACT.
The  holders of the ACT Common  Stock and the Voting  Trustee,  as holder of the
Special  Preferred  Share,  will vote together as a single class on all matters,
except to the extent voting as a separate class is required by applicable law or
ACT's  Articles of  Incorporation.  The Voting Trustee will exercise such voting
rights in respect of the Special Preferred Share on behalf of the holders of the
Exchangeable Shares, as provided in the Voting and Exchange Trust Agreement. The
Voting  Trustee will not be entitled to receive any dividends or to  participate
in any  distribution of assets to the shareholders of ACT. When all Exchangeable
Shares have been  exchanged  or  redeemed  for shares of ACT Common  Stock,  the
Special Preferred Share will be cancelled.

                              PLAN OF DISTRIBUTION

The Acquisition

     Pursuant to the Acquisition Agreement, effective as of July 14, 1998, among
Commstar,  Western  Inbound and ACT,  Commstar  will acquire  certain  assets of
Western Inbound (the  "Acquisition")  and, in consideration  therefor,  Commstar
will issue Exchangeable Shares of Commstar,  which will be further  exchangeable
into or redeemable for shares of ACT Common Stock as described below. Holders of
the  Exchangeable  Shares will have  economic  and voting  rights  which are, as
nearly as possible, equivalent to those of holders of ACT Common Stock.

Exchangeable Shares

     The Exchangeable Shares will be issued by Commstar in consideration for the
transfer to  Commstar  of certain  assets of Western  Inbound.  Thereafter,  the
Exchangeable  Shares may be exchanged for an equivalent  number of shares of ACT
Common Stock as  described  below and  pursuant to a plan of  arrangement  under
section  182  of  the  Business   Corporations   Act  (Ontario)  (the  "Plan  of
Arrangement").  No broker,  dealer or underwriter has been engaged in connection
with the offering of the ACT Common Stock covered hereby.

     The  Exchangeable  Shares are the same class of  securities  of Commstar as
were issued to the shareholders of Commstar pursuant to a Combination Agreement,
effective  as of May 15,  1998,  between  ACT and  Commstar,  pursuant  to which
Commstar became a wholly-owned  subsidiary of ACT and the outstanding  shares of
Commstar  were  exchanged  for  Exchangeable   Shares.   Any  reference  to  the
Exchangeable Shares herein, except as the context otherwise indicates,  includes
both the  Exchangeable  Shares issued to the shareholders of Commstar under such


                                      -8-
<PAGE>

Combination  Agreement and the Exchangeable Shares issued to the shareholders of
Western Inbound under the Acquisition Agreement.

     The  specific  terms under which ACT Common Stock may be issued in exchange
for  or  on  redemption  of  the  Exchangeable  Shares  are  set  forth  in  the
Exchangeable  Share  provisions  attached to the Plan of Arrangement  and in the
Voting and Exchange Trust Agreement.  The Plan of Arrangement and the Voting and
Exchange Trust Agreement are included as exhibits to the Registration  Statement
of which this  Prospectus  constitutes a part, and the following  description is
qualified in its entirety by reference to the Plan of Arrangement and the Voting
and Exchange Trust Agreement.

Procedures for Issuance of ACT Common Stock

     Upon any exchange or redemption of  Exchangeable  Shares  referred to below
(whether by Commstar or ACT),  the holders will receive an equivalent  number of
shares of ACT Common Stock,  plus an amount,  if any,  equal to all declared and
unpaid dividends on the Exchangeable  Shares. If only a part of the Exchangeable
Shares  represented  by  any  certificate  is  redeemed  or  exchanged,   a  new
certificate  for the balance of such  Exchangeable  Shares will be issued to the
holder at Commstar's expense.

     In lieu of any redemption of Exchangeable Shares referred to below, ACT may
elect to purchase such Exchangeable Shares. The ACT Common Stock (and additional
payment, if any,  representing declared and unpaid dividends on the Exchangeable
Shares)  to be  received  by the  holders  of the  Exchangeable  Shares  will be
unaffected by such election.

     Upon any exchange or redemption  of  Exchangeable  Shares,  the holder must
surrender the Exchangeable  Share  certificates  representing such shares,  duly
endorsed  in blank and  accompanied  by such  instruments  of transfer as ACT or
Commstar may reasonably require.

     Election  by Holders to  Exchange  Exchangeable  Shares.  At any time on or
prior to June 29, 2001,  holders of the  Exchangeable  Shares may retract (i.e.,
require  Commstar  to  redeem)  any or  all of  their  Exchangeable  Shares,  by
presenting the certificates representing the shares to Commstar's transfer agent
together with a duly executed  statement (the "Retraction  Request")  specifying
the number of  Exchangeable  Shares the holder  wishes to retract and such other
documents  and  instruments  as may be required to effect the  retraction of the
Exchangeable  Shares.  The  retraction  will  become  effective  at the close of
business on the sixth  business day after the request is received by  Commstar's
transfer  agent  (the  "Retraction   Date").   The  Retraction  Price  for  such
Exchangeable shares is to be satisfied by the issuance of Exchangeable Shares.

     The Retraction  Request shall be substantially in the form attached to this
Prospectus as Exhibit A or in such other form as may be acceptable to ACT or the
transfer agent for the Exchangeable Shares in their sole discretion. The initial
transfer agent is Montreal Trust Company of Canada.

     Redemption  of  Exchangeable  Shares.  Commstar  is  required to redeem the
Exchangeable Shares (by exchanging ACT Common Stock as described above):

          (i) on June 30, 2001;

          (ii)  on a  date  specified  by  Commstar  if  less  than  5%  of  the
     Exchangeable  Shares  originally  issued  under the  Combination  Agreement
     referred to above remain  outstanding  (as such number may be adjusted as a
     result of subdivision, consolidation, stock dividend or other events);

          (iii)  if there  shall be a  meeting  or vote of the  shareholders  of
     Commstar to consider any matter on which the holders of Exchangeable Shares
     would be entitled to vote as  shareholders  of Commstar (but  excluding any
     meeting or vote described in (iv) below); or

          (iv) if the  holders of  Exchangeable  Shares  fail to take  necessary
     action to the extent such action is required to approve or  disapprove  any
     change to, or in the rights of the holders of, Exchangeable Shares required
     to maintain the economic and legal  equivalence of the Exchangeable  Shares
     and the ACT Common Stock.

     Liquidation of Commstar.  In the event of the  liquidation,  dissolution or
winding  up of  Commstar  or any other  proposed  distribution  of the assets of
Commstar  among its  shareholders  for the  purpose of  winding up its  affairs,


                                      -9-
<PAGE>

holders of the  Exchangeable  Shares  will be  entitled  to ACT Common  Stock in
exchange  for  their   Exchangeable   Shares  as  described   above  before  any
distribution to the holders of the common shares or any other shares of Commstar
ranking junior to the Exchangeable  Shares. Upon the bankruptcy or insolvency of
Commstar,  the trustee under the Voting and Exchange Trust Agreement may require
ACT to purchase the  Exchangeable  Shares in exchange  for ACT Common  Shares as
described above.

     Liquidation of ACT. Upon the occurrence of an ACT  Liquidation  Event,  ACT
will be required to purchase the Exchangeable  Shares in exchange for ACT Common
Stock as described above. "ACT Liquidation Event" means (i) any determination by
ACT's Board of Directors  to institute  voluntary  liquidation,  dissolution  or
winding-up  proceedings with respect to ACT or to effect any other  distribution
of assets of ACT  among its  stockholders  for the  purpose  of  winding  up its
affairs or (ii) receipt by ACT of notice of, or ACT otherwise becoming aware of,
any threatened or instituted  claim,  suit,  petition or other  proceeding  with
respect to the involuntary  liquidation,  dissolution or winding up of ACT or to
effect any other  distribution of assets of ACT among its  stockholders  for the
purpose of winding up its affairs.

                           CANADIAN TAX CONSIDERATIONS

Canadian Federal Income Tax Considerations

     In the  opinion of Meighen  Demers,  who acted as counsel  for  Commstar in
connection  with the  Acquisition,  the  following is a summary of the principal
Canadian  federal  income tax  considerations  generally  applicable to Commstar
shareholders,  who,  for  the  purposes  of the  Income  Tax Act  (Canada)  (the
"Canadian  Tax  Act"),  hold their  Exchangeable  Shares and will hold their ACT
Common  Stock as capital  property  and will deal at arm's  length  with ACT and
Commstar.  This summary does not apply to a holder with respect to whom ACT is a
foreign affiliate within the meaning of the Canadian Tax Act.

     Certain  provisions  of the Canadian Tax Act (the  "mark-to-market  rules")
relating to financial  institutions  (including certain financial  institutions,
registered securities dealers and corporations  controlled by one or more of the
foregoing) will deem such financial  institutions not to hold their Exchangeable
Shares and ACT Common Stock as capital property for purposes of the Canadian Tax
Act.  Shareholders that are financial  institutions should consult their own tax
advisors to determine the tax  consequences  to them of the  application  of the
mark-to-market rules. In addition, all shareholders should consult their own tax
advisors as to whether, as a matter of fact, they hold their Exchangeable Shares
and will hold their ACT Common  Stock as capital  property  for  purposes of the
Canadian Tax Act.

     This  summary is based on the current  provisions  of the Canadian Tax Act,
the regulations  thereunder,  the current provisions of the Canada-United States
Income Tax Convention,  1980 (the "Tax Treaty") and counsel's  understanding  of
the current  administrative  practices of Revenue  Canada,  Customs,  Excise and
Taxation ("Revenue  Canada").  This summary takes into account the amendments to
the  Canadian  Tax Act and  regulations  publicly  announced  by the Minister of
Finance prior to the date hereof (the  "Proposed  Amendments")  and assumes that
all such Proposed  Amendments will be enacted in their present form. However, no
assurances can be given that the Proposed Amendments will be enacted in the form
proposed, or at all.

     Except for the Proposed Amendments, this summary does not take into account
or anticipate  any changes in law,  whether by  legislative,  administrative  or
judicial  decision  or  action,  nor  does  it  take  into  account  provincial,
territorial  or foreign  income tax  legislation  or  considerations,  which may
differ from the Canadian federal income tax considerations described herein.

     WHILE THIS SUMMARY IS INTENDED TO ADDRESS ALL  PRINCIPAL  CANADIAN  FEDERAL
INCOME TAX CONSIDERATIONS, IT IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO
BE, NOR  SHOULD IT BE  CONSTRUED  TO BE,  LEGAL,  BUSINESS  OR TAX ADVICE TO ANY
PARTICULAR  SHAREHOLDER.  THEREFORE,  SUCH HOLDERS  SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THEIR PARTICULAR  CIRCUMSTANCES.  NO ADVANCE INCOME TAX
RULING HAS BEEN OBTAINED FROM REVENUE CANADA TO CONFIRM  CONSEQUENCES  OF ANY OF
THE TRANSACTIONS DESCRIBED HEREIN.


                                      -10-
<PAGE>

     For  purposes  of  the  Canadian  Tax  Act,  all  amounts  relating  to the
acquisition,   holding  or  disposition  of  Applied  Common  Stock,   including
dividends,  adjusted cost base and proceeds of disposition must be determined in
Canadian dollars.

     In computing a shareholder's  liability for tax under the Canadian Tax Act,
(i)  any  cash  amount  received  by the  shareholder  in U.S.  dollars  must be
converted into the product obtained by multiplying the U.S. dollar amount by the
noon spot  exchange  rate on such date for U.S.  dollars  expressed  in Canadian
dollars as  reported  by the Bank of Canada and (ii) the amount of any  non-cash
consideration received by the shareholder must be expressed in Canadian dollars,
generally determined at the time such consideration is received.

Shareholders Resident in Canada

     The following portion of the summary is applicable to the shareholders who,
for  purposes of the  Canadian Tax Act, are resident or deemed to be resident in
Canada.

Dividends

     In the case of a shareholder  who is an individual,  dividends  received or
deemed to be received on the  Exchangeable  Shares will be included in computing
the shareholder's  income,  and will be subject to the gross-up and dividend tax
credit rules  normally  applicable  to taxable  dividends  received from taxable
Canadian corporations.

     The Exchangeable Shares will be "taxable preferred shares", "term preferred
shares" and "short-term  preferred shares" for purposes of the Canadian Tax Act.
Accordingly,  Commstar  will be  subject to a 66 2/3% tax under Part VI.1 of the
Canadian  Tax Act on  dividends  paid or deemed  to be paid on the  Exchangeable
Shares. In certain circumstances,  Commstar will be entitled to deductions under
Part I of the  Canadian  Tax Act which will  substantially  offset the impact of
Part VI.1 tax.  Dividends  received or deemed to be received on the Exchangeable
Shares  will not be subject to the 10% tax under Part IV.1 of the  Canadian  Tax
Act applicable to certain corporations.

     If ACT or any  person  with  whom ACT does  not deal at arm's  length  is a
"specified financial  institution" under the Canadian Tax Act at a point in time
that a dividend is paid on an Exchangeable Share, then, subject to the exemption
described  below,  dividends  received or deemed to be received by a shareholder
that is a corporation  will not be deductible  in computing  taxable  income but
will be fully includable in taxable income under Part I of the Canadian Tax Act.
Such  dividend will not be subject to tax under Part IV of the Canadian Tax Act.
A corporation  will  generally be a specified  financial  institution  for these
purposes  if it is a  bank,  a trust  company,  a  credit  union,  an  insurance
corporation or a corporation whose principal business is the lending of money to
persons with whom the  corporation  is dealing at arm's length or the purchasing
of debt  obligations  issued  by such  persons  or a  combination  thereof,  and
corporations controlled by or related to such entities.

     Subject  to  the  foregoing,  in  the  case  of  a  shareholder  that  is a
corporation,  other than a "specified  financial  institution" as defined in the
Canadian  Tax  Act,   dividends  received  or  deemed  to  be  received  on  the
Exchangeable Shares will normally be deductible in computing its taxable income.

     In the case of a  shareholder  that is a specified  financial  institution,
such a dividend  will be  deductible  in  computing  its taxable  income only if
either:

     (a) the specified  financial  institution did not acquire the  Exchangeable
         Shares  in the  ordinary  course  of the  business  carried  on by such
         institution; or

     (b) at the time of the receipt of the dividend by the  specified  financial
         institution,  the Exchangeable  Shares are listed on a prescribed stock
         exchange  in Canada and the  specified  financial  institution,  either
         alone or  together  with  persons  with  whom it does not deal at arm's
         length,  does not receive (or is not deemed to  receive)  dividends  in
         respect  of more than 10% of the issued  and  outstanding  Exchangeable
         Shares.  Commstar does not expect to list the Exchangeable  Shares on a
         prescribed stock exchange.

     A shareholder  that is a "private  corporation" (as defined in the Canadian
Tax Act) or any other corporation resident in Canada and controlled or deemed to
be  controlled  by or for the  benefit of an  individual  or a related  group of
individuals  shall be  liable  under  Part IV of the  Canadian  Tax Act to pay a
refundable tax of 33 1/3% on dividends  received or deemed to be received on the
Exchangeable  Shares  to the  extent  that  such  dividends  are  deductible  in
computing the shareholder's taxable income.


                                      -11-
<PAGE>

Redemption or Exchange of Exchangeable Shares

     On the  redemption  (including a retraction)  of an  Exchangeable  Share by
Commstar,  the holder of an Exchangeable Share will be deemed to have received a
dividend equal to the amount, if any, by which the redemption proceeds (the fair
market value at the time of the  redemption of the ACT Common Stock  received by
the shareholder from Commstar on the redemption plus the amount,  if any, of all
accrued but unpaid  dividends  on the  Exchangeable  Share)  exceeds the paid-up
capital, at that time, of the Exchangeable Share so redeemed.  The amount of any
such deemed dividend will be subject to the tax treatment  accorded to dividends
described  above.  On the redemption,  the holder of an Exchangeable  Share will
also be considered to have disposed of the Exchangeable Share, but the amount of
such deemed dividend will be excluded in computing the shareholder's proceeds of
disposition  for purposes of computing  any capital gain or capital loss arising
on the disposition of the Exchangeable  Share. In the case of a shareholder that
is a corporation,  in some  circumstances the amount of any such deemed dividend
may be treated as proceeds of  disposition  and not as a dividend  under certain
rules contained in the Canadian Tax Act.

     On the exchange of an Exchangeable Share by the holder thereof with ACT for
a share of ACT Common Stock,  including  pursuant to the retraction  call right,
the holder will realize a capital  gain (or a capital  loss) equal to the amount
by which the  proceeds of  disposition  of the  Exchangeable  Share,  net of any
reasonable  costs of disposition,  exceed (or are exceeded by) the adjusted cost
base to the holder of the Exchangeable  Share. For these purposes,  the proceeds
of  disposition  will be the fair market value of a share of ACT Common Stock at
the time of exchange plus the amount of all accrued but unpaid  dividends on the
Exchangeable Share received by the holder as part of the exchange consideration.

     Three-quarters  of any such capital gain (the "taxable  capital gain") will
be  included  in  the   shareholder's   income  for  the  year  of  disposition.
Three-quarters  of any capital loss so realized (the  "allowable  capital loss")
may be  deducted by the holder  against  taxable  capital  gains for the year of
disposition.  Any excess of allowable  capital losses over taxable capital gains
of the  shareholder  for the year of disposition may be carried back up to three
taxation years or forward  indefinitely and deducted against net taxable capital
gains in those other years.

     A   shareholder   that  is   throughout   the  relevant   taxation  year  a
"Canadian-controlled  private  corporation" (as defined in the Canadian Tax Act)
may be liable to pay an additional  refundable  tax of 6 2/3% on its  "aggregate
investment  income"  for the year,  which is  defined  to  include  an amount in
respect  of  taxable  capital  gains  (but not  dividends  or  deemed  dividends
deductible in computing taxable income).

     If the holder of an Exchangeable Share is a corporation,  the amount of any
capital loss arising from a disposition or deemed disposition of an Exchangeable
Share may be reduced by the amount of dividends  received or deemed to have been
received by it on such share or on the Commstar common shares  previously  owned
by such holder, to the extent and under circumstances prescribed by the Canadian
Tax  Act.  Similar  rules  may  apply  where  a  corporation  is a  member  of a
partnership or a beneficiary of a trust that owns Exchangeable Shares or where a
trust or  partnership  of which a corporation  is a beneficiary or a member is a
member of a  partnership  or a  beneficiary  of a trust  that owns  Exchangeable
Shares.

     The cost base of a share of ACT Common  Stock  received on the  retraction,
redemption or exchange of an Exchangeable Share will be equal to the fair market
value of a share of ACT Common Stock at the time of such event.

     Because of the existence of the retraction call right, a holder  exercising
the right of  retraction  in respect of an  Exchangeable  Share  cannot  control
whether  such  holder  will  receive  a  share  of ACT  Common  Stock  by way of
redemption  of the  Exchangeable  Share by Commstar or by way of purchase of the
Exchangeable  Share by ACT. As described  above, the Canadian federal income tax
consequences of a redemption differ from those of a purchase.

     In order to ensure a holder of  Exchangeable  Shares will  receive  capital
gains treatment rather than dividend treatment,  ACT has convenanted to exercise
its retraction call right under the Voting and Exchange Trust Agreement.

     Applied Common Stock. Dividends on ACT Common Stock will be included in the
recipient's  income for the  purposes of the Canadian  Tax Act.  Such  dividends
received by an  individual  shareholder  will not be subject to the gross-up and
dividend  tax credit rules in the  Canadian  Tax Act. A  corporation  which is a


                                      -12-
<PAGE>

shareholder  will include such  dividends in computing  its income and generally
will not be entitled to deduct the amount of such  dividends  in  computing  its
taxable  income.  United States  non-resident  withholding tax on such dividends
will be eligible for foreign tax credit or deduction  treatment where applicable
under the Canadian Tax Act.

     Disposition of Applied Common Stock. A disposition or deemed disposition of
a share of ACT Common Stock by a holder will generally  result in a capital gain
(or capital loss) equal to the amount by which the proceeds of disposition,  net
of any reasonable costs of disposition, exceed (or are exceeded by) the adjusted
cost base to the holder of the ACT Common Stock.

     A shareholder  that is a  Canadian-controlled  private  corporation  may be
liable to pay an  additional  refundable  tax of 6 2/3% on dividends and taxable
capital gains.

Eligibility for Investment

     Qualified  Investments.  Provided  the ACT  Common  Stock  is  listed  on a
prescribed stock exchange (which currently includes the Nasdaq National Market),
such  securities  will be qualified  investments  under the Canadian Tax Act for
trusts governed by registered  retirement savings plans,  registered  retirement
income funds and deferred  profit  sharing  plans  (collectively,  "Tax Deferred
Plans"). The voting rights and exchange rights will not be qualified investments
under the Canadian Tax Act. However, as indicated above, Commstar is of the view
that the fair market value of these rights is nominal.  The Exchangeable  Shares
will not be qualified investments for Tax Deferred Plans.

     Where at the end of any month a Tax Deferred  Plan holds  property  that is
not a  qualified  investment,  a  penalty  tax is  imposed  by Part  XI.1 of the
Canadian Tax Act.

     Foreign Property.  The ACT Common Stock and the Exchangeable Shares will be
foreign  property  under the  Canadian  Tax Act as will the  voting  rights  and
exchange rights.

     A penalty  tax is  imposed by Part XI of the  Canadian  Tax Act if the cost
amount of a taxpayer's  investment  in foreign  property  exceeds the  statutory
limit.

     Foreign Property Information Reporting. A holder of ACT Common Stock who is
a "specified  Canadian  entity" (as defined in the Tax Proposals) and whose cost
amount for such shares at any time in a year or fiscal period  exceeds  Canadian
$100,000  will be  required  to file an  information  return in  respect of such
shares disclosing the holder's cost amount,  any dividends  received in the year
and any  gains or losses  realized  in the year in  respect  of such  shares.  A
specified Canadian entity means a taxpayer resident in Canada in the year, other
than a  corporation  or a trust exempt from tax under Part I of the Canadian Tax
Act, a non-resident-owned  investment corporation,  a mutual fund corporation, a
mutual fund trust and certain other trusts and partnerships.

Shareholders Not Resident in Canada

     The  following  portion  of the  summary  is  applicable  to holders of the
Exchangeable Shares who, for purposes of the Canadian Tax Act, have not been and
will not be  resident  or deemed to be resident in Canada at any time while they
have held the  Exchangeable  Shares or will hold the ACT Common Stock and in the
case of a non-resident of Canada who carries on an insurance  business in Canada
and  elsewhere,  the  shares are not  effectively  connected  with its  Canadian
insurance business.

     The Exchangeable  Shares will be "taxable Canadian property" (as defined in
the Canadian Tax Act) to non-resident shareholders.

     Generally,  ACT Common  Stock will not be taxable  Canadian  property  to a
non-resident holder,  provided that such shares are listed on a prescribed stock
exchange  (which  currently  includes the Nasdaq National  Market),  the holder,
persons with whom such holder does not deal at arm's  length,  or the holder and
such  persons,  has not owned (or had under  option)  25% or more of the  issued
shares of any class or series  of the  capital  stock of ACT at any time  within
five years preceding the date in question, and certain conditions set out in the
Canadian Tax Act are not met. A capital gain realized on a redemption (including
a  retraction)  of an  Exchangeable  Share  and a  capital  gain  realized  on a
disposition of ACT Common Stock which constitutes taxable Canadian property to a
shareholder will be taxable as discussed above, unless relief is available under
an  applicable  tax  convention,  such as the Tax Treaty.  Such  holders  should
consult  their own tax advisors to determine the tax  consequences  in their own
situation.

                                      -13-
<PAGE>

     Where a  non-resident  holder  can claim the  benefit of a  tax-treaty  and
exchanges the Exchangeable  Shares for ACT Common Stock, the non-resident holder
may be deemed to have received a dividend  subject to withholding tax (discussed
below) and  realized a capital  gain or loss  (generally  tax-free as  discussed
above).

     Unless the non-resident holder meets the requirements and complies with the
procedures contained in Division D of Part I of the Canadian Tax Act relating to
the  payment of tax,  Commstar  or ACT,  as the case may be, will be required to
withhold a portion of the  Exchangeable  Shares or ACT  Common  Stock  otherwise
receivable by the holder.

     Dividends  paid on the  Exchangeable  Shares are  subject  to  non-resident
withholding  tax under the  Canadian Tax Act at the rate of 25%,  although  such
rate may be reduced under the provisions of an applicable income tax treaty. For
example,  under the Tax Treaty,  the rate is generally reduced to 15% in respect
of dividends paid to a person who is the beneficial owner and who is resident in
the United States for purposes of the Tax Treaty.

     A holder whose  Exchangeable  Shares are redeemed  (either under Commstar's
redemption right or pursuant to the holder's  retraction  rights) will be deemed
to receive a dividend as described above,  which deemed dividend will be subject
to withholding tax as described in the preceding paragraph.

   
                    UNITED STATES FEDERAL TAX CONSIDERATIONS

     The following  summary of the principal  United States  federal  income tax
considerations generally applicable to a United States Holder (as defined below)
of Exchangeable Shares arising from and relating to the receipt and ownership of
ACT Common Stock  represents  the opinion of Bryan Cave LLP, who acted as United
States counsel to ACT with respect to ACT Common Stock offered  hereby,  insofar
as it  relates  to matters  of United  States  federal  income tax law and legal
conclusions with respect thereto.
    
     This  summary is limited to United  States  Holders  who hold  Exchangeable
Shares as capital assets.  As used herein, a United States Holder is a holder of
Exchangeable  Shares  who  is  a  "United  States  person,"  including:  (i)  an
individual  who is a citizen or resident of the United States for federal income
tax purposes, (ii) a corporation or partnership created or organized in or under
the laws of the United States, or of any political subdivision thereof, (iii) an
estate,  the income of which is subject to United States federal income taxation
regardless  of source,  or (iv) any trust if a court within the United States is
able to exercise primary  supervision over the  administration  of the trust and
one or more United  States  persons have  authority  to control all  substantial
decisions  of the trust.  This  summary  does not  address all aspects of United
States  federal  income  taxation that may be  applicable  to particular  United
States Holders subject to special provisions of United States federal income tax
law,  such  as  tax-exempt  organizations,   financial  institutions,  insurance
companies, broker-dealers, persons having a "functional currency" other than the
United  States  dollar,  Holders  who  hold  Exchangeable  Shares  as  part of a
straddle,  wash sale, hedging or conversion transaction (other than by virtue of
their  participation in an exchange of Exchangeable  Shares for ACT Common Stock
as  contemplated  herein) and Holders who  acquired  their  Exchangeable  Shares
through the exercise of employee stock options or otherwise as compensation  for
services.

     This summary is based on United States  federal income tax law in effect as
of the  date  of this  Prospectus.  No  statutory,  judicial  or  administrative
authority  exists that directly  addresses  certain of the United States federal
income tax  consequences  of the  ownership  of  instruments  comparable  to the
Exchangeable  Shares.  Consequently,  some aspects of the United States  federal
income tax  treatment of the exchange of  Exchangeable  Shares for shares of ACT
Common  Stock are not certain.  No advance  income tax ruling has been sought or
obtained from the United States Internal  Revenue Service (the "IRS")  regarding
the tax consequences of the transactions described herein.
   
     This summary does not address  aspects of United States taxation other than
United States federal income taxation under the United States  Internal  Revenue
Code of 1986, as amended (the "U.S.  Code"),  nor does it address all aspects of
United  States  federal  income  taxation that may be applicable to a particular
United  States  Holder  in  light  of  the  United  States  Holder's  particular
circumstances.  In addition,  this  summary  does not address the United  States
Holders' state or local tax  consequences or the foreign tax consequences of the
receipt and ownership of ACT Common Stock.
    


                                      -14-
<PAGE>

     UNITED STATES  HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE UNITED STATES FEDERAL,  STATE AND LOCAL TAX  CONSEQUENCES AND THE FOREIGN
TAX CONSEQUENCES OF THE RECEIPT AND OWNERSHIP OF ACT COMMON STOCK.

     Exchange of Exchangeable Shares. A United States Holder that exercises such
Holder's  right to  exchange  its  Exchangeable  Shares for shares of ACT Common
Stock generally,  subject to the discussion below, should recognize gain or loss
on such exchange, assuming such exchange does not constitute a reorganization.
   
     Such gain or loss will be equal to the  difference  between the fair market
value of the  shares of ACT  Common  Stock at the time of the  exchange  and the
United States Holder's tax basis in the  Exchangeable  Shares  surrendered.  The
gain or loss generally will be capital gain or loss,  except that,  with respect
to any declared but unpaid dividends on the Exchangeable Shares, ordinary income
may be recognized.  Noncorporate taxpayers generally are taxed at a maximum rate
of 20 percent on net capital gains attributable to gains realized on the sale of
property held for more than one year. A United States Holder generally,  subject
to the discussion below, will have a tax basis in the shares of ACT Common Stock
received  equal  to the fair  market  value  of such  shares  at the time of the
exchange.  The  holding  period  for  such  shares  generally,  subject  to  the
discussion  below,  will  begin on the day  after  the  exchange.  The IRS could
assert,  however,  that  the  Exchangeable  Shares  and  certain  of the  rights
associated  therewith  constitute  "offsetting  positions"  for  purposes of the
straddle  rules set forth in Section 1092 of the U.S.  Code.  In such case,  the
holding  period of the  Exchangeable  Shares would not increase  while held by a
United States Holder.

     It is also possible that the exchange of Exchangeable  Shares for shares of
ACT Common  Stock could be treated as a tax-free  exchange  if the  Exchangeable
Shares  were  treated  as stock of ACT for  United  States  federal  income  tax
purposes. Given the lack of authority on the treatment of shares having features
and attendant rights similar to the Exchangeable Shares, it is uncertain whether
the  Exchangeable  Shares will be treated as shares of ACT Common Stock for this
purpose. Even if the Exchangeable Shares are not treated as shares of ACT Common
Stock,  an exchange of  Exchangeable  Shares for ACT Common Stock that otherwise
would be taxable may be  characterized  as a tax-free  exchange  depending  upon
facts and  circumstances  existing at the time of the exchange,  which cannot be
accurately predicted as of the date hereof.

     If the exchange of Exchangeable  Shares for ACT Common Stock did qualify as
a tax-free  exchange,  a United State's Holder would not recognize gain or loss.
The United States  Holder's tax basis in the shares of ACT Common Stock received
would be equal to such Holder's tax basis in the  Exchangeable  Shares exchanged
therefor.  The holding period of the shares of ACT Common Stock received by such
United States Holder would include the holding period of the Exchangeable Shares
exchanged therefor.
    
     For  United  States  federal  income tax  purposes,  gain  realized  on the
exchange of Exchangeable Shares for shares of ACT Common Stock generally will be
treated as United  States source gain,  except that,  under the terms of the Tax
Treaty,  such gain may be treated as sourced in Canada. Any Canadian tax imposed
on the  exchange  may be available as a credit  against  United  States  federal
income taxes, subject to applicable limitations.  A United States Holder that is
ineligible for a foreign tax credit with respect to any Canadian tax paid may be
entitled to a deduction therefor in computing United States taxable income.

     Passive  Foreign  Investment  Company   Considerations.   Commstar  may  be
classified as a passive foreign  investment  company  ("PFIC") for United States
federal  income tax  purposes  for any taxable  year if either (i) 75 percent or
more of its gross  income was  passive  income  (as  defined  for United  States
federal  income tax  purposes)  or (ii) on average  for such  taxable  year,  50
percent or more of its assets (as determined in accordance  with Section 1297(f)
of the U.S. Code)  produced or were held for the  production of passive  income.
For purposes of applying the foregoing  tests,  the assets and gross income with
respect to which  Commstar owns at least 25 percent of the stock (by value) will
be attributed to Commstar.
   
     While  there can be no  assurance  with  respect to the  classification  of
Commstar as a PFIC,  Commstar  believes that it did not constitute a PFIC during
its taxable years ending prior to consummation  of the transaction  contemplated
by this Prospectus.  Moreover, in connection with the transactions  contemplated
herein,  no opinion  will be  rendered  regarding  Commstar's  status as a PFIC.
Currently,  Commstar and ACT intend to endeavor to cause  Commstar to avoid PFIC
status in the future,  although there can be no assurance that they will be able


                                      -15-
<PAGE>

     
to do so or that their intent will not change.  Commstar will endeavor to notify
United States Holders of Exchangeable  Shares if it believes that Commstar was a
PFIC for that taxable year.

     If Commstar were to be classified as a PFIC, the  consequences  to a United
States Holder will depend in part on whether the United States Holder has made a
"Mark-to-Market  Election" or a "QEF  Election"  with  respect to  Commstar.  If
Commstar is a PFIC during a United States Holder's holding period and the United
States Holder does not make a  Mark-to-Market  Election or a QEF  Election,  the
United States Holder  generally  will be required to pay a special United States
tax, in lieu of the United States tax that would otherwise apply, if such United
States  Holder (a)  realizes a gain upon the sale or  exchange  of  Exchangeable
Shares  or  (b)  receives  an  "excess   distribution"   from  Commstar  on  the
Exchangeable  Shares.  If a  United  States  Holder  makes  a  QEF  Election  or
Mark-to-Market  Election,  it generally  will be required to include  amounts in
income,  based upon Commstar's  income or the value of the Exchangeable  Shares,
even if Commstar does not make actual  distributions  to Holders of Exchangeable
Shares.
    
     The  foregoing  summary of the  possible  application  of the PFIC rules to
Commstar and the United States Holders of Exchangeable  Shares is only a summary
of certain  material  aspects of those rules.  Because the United States federal
income tax  consequences  to United States Holders under the PFIC provisions are
significant  and  complex,  United  States  Holders  are urged to discuss  those
consequences with their tax advisors.
   
Shareholders Not Resident in or Citizens of the United States.

     The following summary is applicable to Holders of Exchangeable Shares or of
ACT  Common  Stock  that  are not  United  States  Holders  ("non-United  States
Holders").  Dividends received by a non-United States Holder with respect to ACT
Common Stock that are not effectively  connected with the conduct by such Holder
of a trade or business in the United States  generally will be subject to United
States withholding tax at a rate of 30 percent,  which rate may be reduced by an
applicable  income  tax  treaty in effect  between  the  United  States  and the
non-United   States  Holder's  country  of  residence   (currently  15  percent,
generally, on dividends paid to residents of Canada under the Tax Treaty).
    
     Under current  United States  Treasury  Regulations,  dividends  paid to an
address in a country  outside  the United  States are  presumed  to be paid to a
resident of such country for purposes of the withholding discussed above (unless
the payor has knowledge to the contrary) and under the current interpretation of
United  States   Treasury   Regulations,   for  purposes  of   determining   the
applicability of a tax treaty rate (the "address rule"). Thus, non-United States
Holders who receive  dividends at addresses  outside the United States generally
are not yet  required to file tax forms to obtain the  benefit of an  applicable
treaty rate. Under recently issued Treasury Regulations scheduled to take effect
January  1, 2000 (the  "Final  Regulations"),  the  address  rule will no longer
apply,  and a  non-United  States  Holder  who seeks to claim the  benefit of an
applicable  treaty rate would be required to satisfy certain  certification  and
other  requirements.  The Final Regulations also provide special rules regarding
whether,  for purposes of determining the applicability of an income tax treaty,
dividends paid to a non-United States Holder that is an entity should be treated
as being paid to the entity itself or to the persons holding an interest in that
entity.

     Subject to the discussion  below, a non-United States Holder generally will
not be subject to United States federal  income tax on gain (if any)  recognized
on the exchange of the  Exchangeable  Shares for ACT Common Stock or on the sale
or exchange of shares of ACT Common Stock,  unless (i) such gain is attributable
to an office or fixed  place of business  and is  effectively  connected  with a
trade or business of the non-United  States Holder in the United States or, if a
tax treaty applies, is attributable to a permanent  establishment  maintained by
the non-United  States Holder in the United States,  (ii) the non-United  States
Holder is an individual who holds the  Exchangeable  Shares or ACT Common Stock,
as the case may be, as capital  assets  and is present in the United  States for
183  days  or  more  in the  taxable  year of  disposition,  and  certain  other
conditions  are satisfied,  or (iii) the non-United  States Holder is subject to
tax pursuant to the U.S. Code  provisions  applicable  to certain  United States
expatriates.  If an individual  non-United States Holders falls under clause (i)
or (iii) above,  he or she will be taxed on his or her net gain derived from the
sale under regular  United States  federal  income tax rates.  If the individual
non-United  States  Holder  falls under  clause  (ii)  above,  he or she will be
subject to a flat 30 percent tax on the gain derived from the sale, which may be
offset by United States source capital losses  (notwithstanding the fact that he
or she is not considered a resident of the United States).


                                      -16-
<PAGE>

     United  States Real Property  Holding  Corporation.  The  discussion of the
United States  taxation of non-United  States Holders  assumes that ACT is at no
time a United States real  property  holding  corporation  within the meaning of
Section  897(c) of the U.S.  Code.  Under present law, ACT would not be a United
States real property holding corporation so long as (a) the fair market value of
its United States real property interests is less than (b) 50 percent of the sum
of the fair market  value of its United  States  real  property  interests,  its
interests in real property  located  outside the United  States,  plus its other
assets that are used or held for use in a trade or business.  ACT believes  that
it is not a United States real property holding  corporation and does not expect
to become such a corporation.

     Federal Estate Tax. ACT Common Stock (or a previously  triggered obligation
of ACT or any of its  subsidiaries to deliver ACT Common Stock along with unpaid
dividends)  held by a  non-United  States  Holder  at the time of death  will be
included in such  Holder's  gross estate for United  States  federal  estate tax
purposes, unless an applicable estate tax treaty provides otherwise.

Information Reporting and Backup Withholding Tax

     Dividends paid to non-United  States Holders outside the United States that
are subject to the  withholding  described  above  generally will be exempt from
United States  backup  withholding  (which  generally is imposed at a rate of 31
percent on certain payments to persons that fail to furnish certain  information
under United States  information  reporting  requirements),  but ACT must report
annually to the United States  Internal  Revenue  Service and to each non-United
States  Holder the amount of dividends  paid to such Holder and the tax withheld
from such dividend  payments,  regardless of whether  withholding  was required.
Backup withholding and information  reporting generally will apply,  however, to
dividends paid on shares of ACT Common Stock to a non-United States Holder at an
address in the United States,  if such Holder fails to establish an exemption or
to provide certain other information to the payor.

     Generally,  ACT may rely on the non-United  States Holder's address outside
the United States  (absent  knowledge to the contrary) in  determining  that the
withholding  tax discussed  above  applies,  and  consequently,  that the backup
withholding provisions do not apply.

     Under the currently effective Treasury Regulations ("Current Regulations"),
the payment of the  proceeds  of the sale of ACT Common  Stock to or through the
United  States office of a broker will be subject to  information  reporting and
possible  backup  withholding at a rate of 31 percent unless the owner certifies
its non-United States status under penalties of perjury or otherwise establishes
an exemption.  The payment of the proceeds of the sale of ACT Common Stock to or
through the foreign  office of a broker  generally will not be subject to backup
withholding.  In the case of the payment of proceeds from the disposition of ACT
Common Stock through a foreign office of a broker that is a United States person
or a "United States related person," the Current Regulations require information
reporting on the payment unless the broker has documentary evidence in its files
that the  owner is a  non-United  States  person  and the  broker  has no actual
knowledge to the contrary or the holder otherwise establishes an exemption.  For
this purpose,  a "United  States  related  person" is (i) a "controlled  foreign
corporation"  for United  States  federal  income tax purposes or (ii) a foreign
person 50  percent  or more of whose  gross  income  for a  specified  period is
derived from  activities  that are  effectively  connected with the conduct of a
United States trade or business.

     Under the Treasury  Regulations  effective for payments made after December
31,  1999,  the  payment  of  dividends  or the  payment  of  proceeds  from the
disposition of ACT Common Stock to a non-United  States Holder may be subject to
information  reporting and backup  withholding  unless such recipient  satisfies
applicable certification requirements or otherwise establishes an exemption. Any
amounts  withheld  under  the  backup  withholding  rules  from a  payment  to a
non-United  States  Holder  will be allowed as a refund or credit  against  such
non-United  States Holder's United States federal income tax,  provided that the
required information is furnished to the IRS.

                                  LEGAL MATTERS

     Certain legal  matters with respect to the ACT Common Stock offered  hereby
will be passed upon for the Company by Bryan Cave LLP, St. Louis, Missouri.


                                      -17-
<PAGE>

                                     EXPERTS

     The  consolidated  financial  statements  of the Company as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, have been audited by Rubin,  Brown,  Gornstein & Co. LLP,  independent
public accountants,  as indicated in their report with respect thereto,  and are
included in the  Company's  Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, and are  incorporated  herein by reference,  in reliance upon
the authority of such firm as experts in accounting  and auditing in giving said
reports.


                                      -18-
<PAGE>

                                                                     Exhibit A
                              NOTICE OF RETRACTION

TO:  Commstar Ltd. (the  "Corporation")  and Applied Cellular  Technology,  Inc.
     ("Applied")

The undersigned  hereby notifies the Corporation that, subject to the Retraction
Call Right referred to below,  the  undersigned  desires to have the Corporation
redeem in accordance with Article 5 of the Share Provisions:

             [__]     all shares(s) represented by this certificate.

             [__]     or ________________ share(s) only.

The  undersigned  acknowledges  the Retraction Call Right of Applied to purchase
all but not less than all the  Retracted  Shares from the  undersigned  and that
this notice shall be deemed to be an  irrevocable  offer (subject as hereinafter
provided)  by the  undersigned  to sell  the  Retracted  Shares  to  Applied  in
accordance  with  the  Retraction  Call  Right  on the  Retraction  Date for the
Retraction  Call Purchase Price and on the other terms and conditions set out in
Section 5.3 of the Plan of  Arrangement.  If Applied  determines not to exercise
the Retraction Call Right,  the Corporation  will notify the undersigned of such
fact as soon as possible in which event,  the offer contained in this notice may
be revoked by the  undersigned by a further  notice in writing  addressed to the
Corporation and Applied  specifically  referencing this Notice of Retraction and
delivered to Montreal Trust Company of Canada (the "Transfer Agent").

The  undersigned  acknowledges  that if, as a result of solvency  provisions  of
applicable  law or  otherwise,  the  Corporation  fails to redeem all  Retracted
Shares,  the undersigned will be deemed to have exercised the Exchange Right (as
defined in the Voting and Exchange Trust  Agreement) so as to require Applied to
purchase the unredeemed Retracted Shares.

        The undersigned  hereby  represents and warrants that within the meaning
of the Tax Act the undersigned:

             [__] is not a non-resident of Canada, or

             [__] is a  non-resident  of Canada in which  event the  undersigned
                  acknowledges that mandatory withholdings may be required to be
                  made in connection with this request for retraction unless the
                  undersigned  produces a  certificate  under Section 116 of the
                  Tax Act. The undersigned is urged to consult a tax advisor.

The  undersigned  hereby  represents and warrants to the Corporation and Applied
that the  undersigned  has good title to, and owns, the share(s)  represented by
this  certificate to be acquired by the Corporation or Applied,  as the case may
be, free and clear of all liens.


- -----------------  ------------------------------------ ------------------------
      (Date)             (Signature of Shareholder)    (Guarantee of Signature)

         Please check box if the securities and any cheque(s) resulting from the
         retraction  or  purchase  of the  Retracted  Shares  are to be held for
         pick-up by the  shareholder  at the  principal  transfer  office of the
         Transfer  Agent  in  Toronto,  failing  which  the  securities  and any
         cheque(s)  will be mailed to the last address of the  shareholder as it
         appears on the register of holders of Exchangeable Shares.

NOTE:    This panel must be completed and this  certificate,  together with such
         additional  documents  as the  Transfer  Agent  may  require,  must  be
         deposited with the Transfer Agent at its principal  transfer  office in
         Toronto. The securities and any cheque(s) resulting from the retraction
         or purchase of the Retracted  Shares will be issued and  registered in,
         and made payable to,  respectively,  the name of the  shareholder as it
         appears on the  register  of the  Corporation  and the  securities  and
         cheque(s)  resulting from such retraction or purchase will be delivered
         to such  shareholder  as  indicated  above,  unless the form  appearing
         immediately below is duly completed.



- ----------------------------------------------     -----------------------------
   Name of Person in Whose Name Securities or                    Date
   Cheque(s) Are To Be Registered, Issued or
            Delivered (please print)



- ----------------------------------------     -----------------------------------
        Street Address or P.O. Box                Signature of Shareholder


- ---------------------------------------      -----------------------------------
                City-Province                      Signature Guaranteed by  

NOTE:    If the  notice  of  retraction  is for less  than  all of the  share(s)
         represented  by  this  certificate,   a  certificate  representing  the
         remaining  shares of the  Corporation  will be issued and registered in
         the  name of the  shareholder  as it  appears  on the  register  of the
         Corporation,  unless the Share Transfer Power on the share  certificate
         is duly completed in respect of such shares.


                                      -19-
<PAGE>


                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14.  Other Expenses of Issuance and Distribution.

         The following  table sets forth the expenses  (other than  underwriting
discounts  and  commissions),  which  other  than the SEC  registration  fee are
estimates,  payable by the Company in connection with the sale and  distribution
of the shares registered hereby**:

   
         SEC Registration Fee ....................... $       413
         Accounting Fees and Expenses................       2,500 *
         Legal Fees and Expenses.....................      10,000 *
         Miscellaneous Expenses......................       1,104 *
                                                      -----------
                     Total .......................... $    14,017 *
                                                      ============
    
- -------------
*     Estimated
**    The Selling  Shareholders  will pay any sales  commissions or underwriting
      discount  and  fees  incurred  in  connection  with  the  sale  of  shares
      registered hereunder.

Item 15.  Indemnification of Directors and Officers.

         Sections 351.355(1) and (2) of The General and Business Corporation Law
of the State of Missouri provide that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action,  suit or proceeding by reason of the fact that he is or was
a director,  officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director,  officer,  employee or agent of
another  corporation,  partnership,  joint venture,  trust or other  enterprise,
against expenses,  judgments,  fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he  reasonably  believed  to be in or not
opposed  to the best  interests  of the  corporation  and,  with  respect to any
criminal  action or proceeding,  had no reasonable  cause to believe his conduct
was  unlawful,  except that, in the case of an action or suit by or in the right
of the  corporation,  the  corporation  may not indemnify  such persons  against
judgments and fines and no person shall be indemnified as to any claim, issue or
matter as to which  such  person  shall  have  been  adjudged  to be liable  for
negligence  or  misconduct in the  performance  of his duty to the  corporation,
unless  and only to the  extent  that the court in which the  action or suit was
brought  determines upon  application  that such person is fairly and reasonably
entitled to indemnity for proper expenses.  Section 351.355(3) provides that, to
the extent that a director,  officer,  employee or agent of the  corporation has
been  successful  in the defense of any such action,  suit or  proceeding or any
claim,  issue or  matter  therein,  he shall be  indemnified  against  expenses,
including  attorneys' fees,  actually and reasonably incurred in connection with
such action, suit or proceeding.  Section 351.355(7) provides that a corporation
may  provide  additional  indemnification  to  any  person  indemnifiable  under
subsection (1) or (2), provided such additional indemnification is authorized by
the  corporation's  articles of  incorporation  or an amendment  thereto or by a
shareholder-approved  bylaw or  agreement,  and provided  further that no person
shall thereby be indemnified  against conduct which was finally adjudged to have
been knowingly fraudulent, deliberately dishonest or willful misconduct or which
involved an accounting  for profits  pursuant to Section 16(b) of the Securities
Exchange Act of 1934.

         The bylaws of the Company provide that the Company shall indemnify,  to
the full extent permitted under Missouri law, any director, officer, employee or


                                      II-1
<PAGE>

agent of the Company who has served as a director, officer, employee or agent of
the Company or, at the  Company's  request,  has served as a director,  officer,
employee or agent of another corporation,  partnership,  joint venture, trust or
other enterprise.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors,  officers or persons  controlling the
Company pursuant to such  provisions,  the Company has been informed that in the
opinion of the  Securities  and  Exchange  Commission  such  indemnification  is
against public policy as expressed in such Act and is therefore unenforceable.

Item 16.  Exhibits.

         See Exhibit Index.

Item 17.  Undertakings.

     (a) The undersigned small business issuer hereby undertakes:

          (1) To file,  during  any  period  in which  offers or sales are being
     made, a post-effective amendment to this Registration Statement:

               (i) To include any prospectus required by Section 10(a)(3) of the
          Securities Act;

               (ii) To reflect  in the  prospectus  any facts or events  arising
          after the effective date of this  registration  statement (or the most
          recent post-effective amendment hereof) which,  individually or in the
          aggregate, represent a fundamental change in the information set forth
          in this Registration Statement;

               (iii) To include any  material  information  with  respect to the
          plan of  distribution  not previously  disclosed in this  Registration
          Statement  or  any  material  change  to  such   information  in  this
          Registration Statement;

     provided,  however,  that  paragraphs  (i)  and  (ii) do not  apply  if the
     information required to be included in a post-effective  amendment by those
     paragraphs  is  contained  in  periodic  reports  filed  by the  registrant
     pursuant to Section 13 or Section 15(d) of the  Securities  Exchange Act of
     1934 that are incorporated by reference in this Registration Statement.

          (2) That,  for the  purpose of  determining  any  liability  under the
     Securities Act, each such post-effective  amendment shall be deemed to be a
     new Registration  Statement relating to the securities offered therein, and
     the  offering  of such  securities  at that time  shall be deemed to be the
     initial bona fide offering thereof.

          (3) To remove from registration by means of a post-effective amendment
     any  of  the  securities  being  registered  which  remain  unsold  at  the
     termination of the offering.

     (b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors,  officers and controlling
persons of the small business  issuer pursuant to the foregoing  provisions,  or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is,  therefore,  unenforceable.  In the event that a
claim for  indemnification  against such liabilities  (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling  person of the registrant in the  successful  defense of any action,
suit or proceeding) is asserted by such director,  officer or controlling person
in connection with the securities  being  registered,  the small business issuer
will,  unless in the  opinion of its  counsel  the  matter  has been  settled by
controlling  precedent,  submit  to a  court  of  appropriate  jurisdiction  the
question  whether  such  indemnification  by  it is  against  public  policy  as
expressed  in the Act and will be  governed  by the final  adjudication  of such
issue.


                                      II-2
<PAGE>


                                   SIGNATURES

   
     Pursuant to the  requirements of the Securities Act of 1933, the Registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for  filing  on Form S-3 and has duly  caused  this  Amendment  to
Registration Statement to be signed on its behalf by the undersigned,  thereunto
duly authorized, in the City of Palm Beach, State of Florida, on July 28, 1998.
    


                                   APPLIED CELLULAR TECHNOLOGY, INC.

                                   By:      /S/ DAVID A. LOPPERT    
                                         -----------------------
                                         David A. Loppert, Vice President, 
                                         Treasurer and Chief Financial Officer

       

     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.


   
         Signature                     Title                     Date
         ----------              -----------------             ---------


                           Chairman of the Board of Directors,
                             Chief Executive Officer and
                             Secretary(Principal Executive
 /S/ RICHARD J. SULLIVAN*    Officer)                         July 28, 1998
- -------------------------
 (Richard J. Sullivan)
                           President and Director (Principal
                           Operating Officer)                 July 28, 1998
 /S/ GARRETT A. SULLIVAN*
- -------------------------
 (Garrett A. Sullivan)

                           Vice President, Treasurer and Chief
                             Financial Officer (Principal
                             Accounting Officer)              July 28, 1998
  /S/ DAVID A. LOPPERT*
- -------------------------
  (David A. Loppert)


                           Director                          July 28, 1998
  /S/ ANGELA M. SULLIVAN*
- -------------------------
  (Angela M. Sullivan)

                           Director                          July 28, 1998
  /S/ DANIEL E. PENNI*
- -------------------------
   (Daniel E. Penni.)

                           Director                          July 28, 1998
  /S/ ARTHUR F. NOTERMAN*
- -------------------------
  (Arthur F. Noterman)


* By:  /S/ DAVID A. LOPPERT
       --------------------
         David A. Loppert
         Attorney-in-Fact
    

                                      II-3
<PAGE>



                                  EXHIBIT INDEX

   
Exhibit
Number                              Description

4.1  Amended and Restated Articles of Incorporation of the Company (incorporated
     herein by reference to Exhibit 4.1 to the Company's  Registration Statement
     on Form S-3 (File No.  333-37713) filed with the Commission on November 19,
     1997)

4.2  Amendment of Restated Articles of Incorporation of the Company*

4.3  Resolution of the Board of Directors of the Company setting forth the terms
     of the Special Voting Preferred Stock (incorporated  herein by reference to
     Exhibit 4.2 to the Company's  Registration  Statement on Form S-3 (File No.
     333-57613) filed with the Commission on June 24, 1998)

4.4  Amended  and  Restated   Bylaws  of  the  Company   dated  March  31,  1998
     (incorporated   herein  by  reference  to  Exhibit  4.1  to  the  Company's
     Registration  Statement  on Form S-3 (File No.  333-51067)  filed  with the
     Commission on April 27, 1998)

5.1  Opinion of Bryan Cave LLP regarding the validity of the Common Stock

8.1  Opinion of Meighen Demers regarding tax matters

8.2  Opinion of Bryan Cave LLP regarding tax matters

23.1 Consent of Rubin, Brown, Gornstein & Co. LLP

23.2 Consent of Bryan Cave LLP (included in Exhibit 5.1)

24.1 Power of Attorney (included in Signature Page)*

99.1 Form of Plan of  Arrangement  of  Commstar  Ltd.  (incorporated  herein  by
     reference to Exhibit 99.1 to the Company's  Registration  Statement on Form
     S-3 (File No. 333-57613) filed with the Commission on June 24, 1998)

99.2 Form  of  Voting  and  Exchange  Trust  Agreement  among  Applied  Cellular
     Technology,  Inc.,  Commstar  Ltd.  and  Montreal  Trust  Company of Canada
     (incorporated  herein  by  reference  to  Exhibit  99.2  to  the  Company's
     Registration  Statement  on Form S-3 (File No.  333-57613)  filed  with the
     Commission on June 24, 1998)

99.3 Form of Support  Agreement  between Applied Cellular  Technology,  Inc. and
     Commstar  Ltd.  (incorporated  herein by  reference  to Exhibit 99.3 to the
     Company's  Registration  Statement on Form S-3 (File No.  333-57613)  filed
     with the Commission on June 24, 1998)

99.4 Memorandum of Agreement among Applied Cellular  Technology,  Inc., Commstar
     Ltd. and Western Inbound Network Inc.*

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

*  Previously filed.
    








                                      II-4

   
                                                                     Exhibit 5.1

                                 BRYAN CAVE LLP
                             ONE METROPOLITAN SQUARE
                           211 N. BROADWAY, SUITE 3600
                         ST. LOUIS, MISSOURI 63102-2750
                                 (314) 259-2000
                            FACSIMILE: (314) 259-2020


                                  July 28, 1998


Board of Directors
Applied Cellular Technology, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480

Ladies and Gentlemen:

     We are acting as counsel for Applied Cellular Technology,  Inc., a Missouri
corporation (the "Company"),  in connection with the preparation and filing of a
Registration  Statement  on Form S-3  (the  "Registration  Statement")  with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The  Registration  Statement  relates to 432,010 shares of the Company's  common
stock, $.001 par value per share.

         In connection herewith, we have examined and relied without independent
investigation as to matters of fact upon such  certificates of public officials,
such  statements  and  certificates  of officers of the Company and originals or
copies certified to our satisfaction of the Registration Statement, the Articles
of  Incorporation  and  By-laws of the  Company  as  amended  and now in effect,
proceedings  of the Board of Directors  of the Company and such other  corporate
records, documents,  certificates and instruments as we have deemed necessary or
appropriate  in order to enable us to render this  opinion.  In  rendering  this
opinion,  we have assumed the  genuineness  of all  signatures  on all documents
examined by us, the due  authority of the parties  signing such  documents,  the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.

         Based upon and subject to the  foregoing,  it is our  opinion  that the
shares of common stock of the Company covered by the Registration  Statement are
legally  issued,  fully paid and  non-assessable  shares of Common  Stock of the
Company.

         We hereby  consent  to the  reference  to our name in the  Registration
Statement under the caption "Legal Matters" and further consent to the filing of
this opinion as Exhibit 5 to the Registration Statement.


                                 Very truly yours,

                                 /s/ Bryan Cave LLP

                                 BRYAN CAVE LLP

    

   
                                                                     Exhibit 8.1
July 30, 1998

Commstar Ltd.
555 Richmond Street West
Suite 1108
Toronto, Ontario
M5J 3B1
         
Ladies and Gentlemen:

                             REGISTRATION STATEMENT
                             ----------------------

     We have acted as Canadian counsel to Commstar Ltd., a Canadian  corporation
("Commstar"), in connection with the transaction contemplated in the Acquisition
Agreement,  effective as of July 14, 1998 (the "Acquisition  Agreement"),  among
Commstar,  Applied Cellular Technology,  Inc. a Missouri corporation ("Applied")
and Western  Inbound  Network  Inc., a Canadian  Corporation.  Unless  otherwise
defined  herein,  capitalized  terms used  herein have the  respective  meanings
ascribed to those terms in a Combination  Agreement between Commstar and Applied
dated as of May 15, 1998 (the "Combination Agreement").

     In arriving at the opinion  expressed  below,  we have  examined and relied
upon the following documents:

     (a)  the Form S-3  Registration  Statement as filed with the Securities and
          Exchange Commission on July 30, 1998 (the "Registration Statement");

     (b)  the Acquisition Agreement, including the Schedules thereto;

     (c)  the Combination Agreement, including the Exhibits thereto;

     (d)  the Voting and Exchange Trust Agreement between Applied,  Commstar and
          Montreal Trust Company of Canada;

     (e)  the Support Agreement between Applied and Commstar;


<PAGE>

    (f)  the Plan of Arrangement of Commstar;

     (g)  the Exchangeable Share Provisions; and

     (h)  the Call Notice executed by Applied,  with effect as of June 30, 1998,
          regarding Applied's blanket exercise of their Retraction Call Right.

     We have also  read and  relied  upon  originals  or  copies,  certified  or
otherwise  identified  to our  satisfaction,  of such  records of  Commstar  and
Applied   and  such   certificates   and   representations   of   officers   and
representatives of Commstar and Applied, and we have made such investigations of
law, as we have deemed  appropriate as a basis for the opinion  expressed below.
In our examinations, we have assumed the authenticity of original documents, the
accuracy of copies and the  genuineness of signatures.  We understand and assume
that: (i) each agreement or document referred to above or otherwise  referred to
in the Registration Statement represents the valid and binding obligation of the
respective parties thereto, enforceable in accordance with its respective terms,
and the entire agreement  between the parties with respect to the subject matter
thereof; (ii) the parties to each such agreement have complied, and will comply,
with all of their respective  covenants,  agreements and undertakings  contained
therein; (iii) the transactions provided for by each such agreement or otherwise
referred  to in the  Registration  Statement  were  and will be  carried  out in
accordance  with their terms;  and (iv) each  agreement or document  referred to
above  continues  in full force and effect,  without  amendment,  as of the date
hereof.

     Our  opinion  is based  upon  existing  Canadian  federal  income tax laws,
regulations  and  judicial  decisions  and  takes  into  account  administrative
pronouncements  and proposed  amendments that have been publicly announced as at
the date hereof (the "Canadian Tax Laws"). No assurance can be provided that any
proposed  amendments  will be  enacted  in the  manner  proposed  or at all.  No
assurance  can be  provided  as to the  effect  any  legislative  changes to the
Canadian  Tax Laws might have on our  opinion.  We are  solicitors  qualified to
practice in the  Province  of Ontario,  Canada and our opinion is limited to the
laws of such province and the laws of Canada  (including the Canadian Tax Laws),
applicable  therein.  No advance income tax rulings have been sought or obtained
from Revenue  Canada,  Customs,  Excise and Taxation  ("Revenue  Canada") and no
assurance can be given that Revenue  Canada or any court of law would agree with
the opinion set forth herein.

     We have advised Commstar in connection with the summary of Canadian federal
income tax  consequences  that appears in the  Registration  Statement under the
caption "Canadian Tax Considerations" and we confirm that, in our opinion,  such
discussion  describes the material  Canadian  federal income tax consequences of
the  Arrangement  and the ownership and  disposition of Commstar  Common Shares,
Exchangeable  Shares and Applied  Common  Stock to a holder  resident in Canada.
While such  description  discusses  the material  anticipated  Canadian  federal
income tax  consequences  applicable to certain  holders  resident in Canada and
holders  not  resident in Canada,  it does not  purport to discuss all  Canadian
federal  income tax  consequences  and our opinion is limited to those  Canadian
federal income tax consequences specifically discussed therein.


<PAGE>

     We are  furnishing  this  letter in our  capacity  as  Canadian  Counsel to
Commstar and this letter is solely for Commstar's benefit. This letter is not to
be used,  circulated,  quoted or  otherwise  referred to for any other  purpose,
except as set forth below.

     We consent to the  reference  to our firm under the caption  "Canadian  Tax
Considerations"  in the  Registration  Statement and we consent to the filing of
this  opinion  as an  Exhibit  to the  Registration  Statement.  In giving  this
consent,  we do not  thereby  admit that we are within the  category  of persons
whose consent is required to be filed with the Registration  Statement under the
provisions of the United States Securities Act of 1933, as amended, or the rules
and regulations promulgated thereunder.

                                 Yours truly,

                                 /s/ Meighen Demers

                                 MEIGHEN DEMERS

    

   
                                                                     Exhibit 8.2
                                 July 30, 1998

Applied Cellular Technology, Inc.
James River Professional Center
Highway 160 & CC, Suite 5
P.O. Box 2067
Nixa, Missouri  65714

     Re: New Exchangeable Shares
         -----------------------

Gentlemen:

     We have  acted  as  counsel  to  Applied  Cellular  Technology,  Inc.  (the
"Company") in connection with the Registration Statement on Form S-3, as amended
(the "Registration Statement"),  relating to the shares of Common Stock issuable
to the holders of Exchangeable  Shares pursuant to the terms of the Exchangeable
Shares. Unless otherwise indicated, capitalized terms used herein shall have the
meaning  ascribed  to  them  in the  prospectus  included  in  the  Registration
Statement (the  "Prospectus").  We hereby confirm that,  assuming that shares of
Common Stock are issued to holders of Exchangeable  Shares pursuant to the terms
of the Exchangeable Shares as described in the Prospectus,  the discussion under
the caption "UNITED STATES FEDERAL INCOME TAX  CONSIDERATIONS" in the Prospectus
expresses  our  opinion   regarding  the  material  United  States  Federal  tax
consequences  to holders of  Exchangeable  Shares that  receive  Common Stock in
exchange for such Exchangeable Shares pursuant to their terms, and the ownership
and disposition of Common Stock acquired in the exchange.

     We hereby  consent  to the  filing of this  opinion  as an  exhibit  to the
Registration  Statement  and to the use of our name  under the  caption  "UNITED
STATES  FEDERAL INCOME TAX  CONSIDERATIONS"  in the  Prospectus.  In giving this
consent,  we do not thereby  admit that we are in the category of persons  whose
consent is required under Section 7 of the Securities Act of 1933, as amended.

                                 Very truly yours,

                                 /s/ Bryan Cave LLP

                                 BRYAN CAVE LLP

    

                                         

                                                                    Exhibit 23.1


                          INDEPENDENT AUDITORS' CONSENT

     We hereby  consent to the  incorporation  by reference in the  Registration
Statement (Form S-3) of Applied Cellular  Technology,  Inc. of our report, dated
February 24,  1998,  on Applied  Cellular  Technology,  Inc.  and  Subsidiaries,
included  in Applied  Cellular  Technology,  Inc.'s Form 10-K for the year ended
December 31, 1997, and to the reference to us under the heading "Experts" in the
Prospectus which is a part of this Registration Statement.


                                             /S/  
                                        RUBIN, BROWN, GORNSTEIN & CO. LLP
St. Louis, Missouri
July 28, 1998
                                           
    



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