AQUIS COMMUNICATIONS GROUP INC, S-1, 2000-09-29

AQUIS COMMUNICATIONS GROUP INC
S-1, 2000-09-29
RADIOTELEPHONE COMMUNICATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 2000
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

AQUIS COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in its charter)

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<S> <C>
DELAWARE 22-3281446
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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1719 A ROUTE 10, SUITE 300
PARSIPPANY, NJ 07054
(973) 560-8006
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

Copy to:

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JOHN B. FRIELING JOSEPH P. GALDA, ESQ.
CHIEF EXECUTIVE OFFICER BUCHANAN INGERSOLL PROFESSIONAL
1719 A ROUTE 10, SUITE 300 CORPORATION
PARSIPPANY, NJ 07054 ELEVEN PENN CENTER, 14TH FLOOR
(973) 560-8001 1835 MARKET STREET
PHILADELPHIA, PA 19103
(215) 665-8700
</TABLE>

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

(Name, address, including zip code, and telephone number, including area
code, of agent for service)

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 2,514,044(2) (3) $20,000,000(4) $5,280.00
Common Stock, $.01 par value 5,079,366(5) $.8125(6) $4,126,985 $1,089.52
Common Stock, $.01 par value 900,000(7) $.8125(6) $794,520 $209.75
Common Stock, $.01 par value 357,942(8) $.8125(6) $290,828 $76.78
Total 8,851,352(1) $25,212,333 $6,656.05
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933.

(2) Represents shares issuable to Coxton, Limited under common stock purchase
agreement dated April 9, 2000.

(3) The price per common share will vary based on the volume-weighted average
daily price of Aquis' common stock during the drawdown periods provided for
in the common stock purchase agreement described in this registration
statement. The purchase price will be equal to 93% of the volume-weighted
average daily price for each trading day within such drawdown pricing
periods. The agreement allows for up to 12 draws over a period of 24 months
for amounts up to $7,000,000 per draw.

(4) This represents the maximum purchase price that Coxton, Limited is obligated
to pay Aquis under the common stock purchase agreement. The maximum net
proceeds Aquis can receive is $20,000,000 less a 6% cash placement fee
payable to our placement agent, Ladenburg Thalmann & Co. Inc. and $1,500 in
escrow fees and expenses per drawdown.

(5) Represents 200% of the number of shares issuable to AMRO International, S.A.
upon conversion of a $2,000,000 convertible debenture at a conversion price
of $0.7875 per share (the average of the 5 lowest closing bid prices during
the 22-day trading period prior to September 20, 2000). This registration
statement also registers an indeterminate number of securities to be offered
as a result of any adjustment from stock splits, stock dividends, exercise
price adjustments, or similar events.

(6) The proposed maximum aggregate offering price for these shares is based upon
the average of the high and low reported prices of the registrant's common
stock on September 19, 2000.

(7) These shares to be registered may be offered for sale and sold from time to
time during the period the registration statement remains effective, by or
for the account of Coxton or Ladenburg. These shares include 600,000 shares
issuable upon the exercise of a warrant issued to Coxton under the common
stock purchase agreement and 300,000 shares issuable upon exercise of a
warrant issued to Ladenburg as a placement fee. The exercise price of the
Coxton and Ladenburg warrants is $2.30 per share, and such warrant is
exercisable until May 3, 2003. The proposed maximum offering price per share
has been estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933. This registration
statement also registers an indeterminate number of securities to be offered
as a result of any adjustment from stock splits, stock dividends, exercise
price adjustments, or similar events.

(8) Represents common stock issuable upon exercise of a warrant issued to AMRO
International, S. A. in conjunction with the issuance of the convertible
debenture dated April 3, 2000. The exercise price of the AMRO warrant is
$2.30 per share and is exercisable until May 3, 2003. The proposed maximum
offering price per share has been estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(c) of the Securities
Act of 1933. This registration statement also registers an indeterminate
number of securities to be offered as a result of any adjustment from stock
splits, stock dividends, exercise price adjustments, or similar events.
--------------------------

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 SPECIFICALLY STATING THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 2000
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.
<PAGE>
8,851,352 SHARES OF COMMON STOCK

AQUIS COMMUNICATIONS GROUP, INC.

Of the shares of common stock being offered, 6,337,308 are being offered by
the selling stockholders identified on page 51 and are being registered for
resale. We will not receive any proceeds from the sale of the shares by the
selling stockholders. However, we will receive the proceeds upon the exercise
for cash of the stock purchase warrants held by the selling stockholders.

Up to 5,079,366 shares may be issued through the conversion of a convertible
debenture issued by us to AMRO International, S.A., as further described in this
prospectus. We will not receive any of the sale price of any common stock that
we issue upon conversion of the debenture by AMRO and AMRO may resell those
shares pursuant to this prospectus. However, the amount we owe AMRO under the
debenture will be reduced if AMRO converts some or all of the principal amount
of the debenture to our common stock.

Up to 2,514,044 shares of common stock may be issued by us through a common
stock purchase agreement with Coxton, Limited, as further described in this
prospectus. We will receive the sale price of any common stock that we sell
through the common stock purchase agreement and Coxton may resell those shares
pursuant to this prospectus. Coxton, Limited is an "underwriter" within the
meaning of the Securities Act of 1933 in connection with its sales.

Our common stock is listed on the NASDAQ SmallCap Market under the symbol
"AQIS." The last reported sales price for our common stock on the NASDAQ
SmallCap Market on September 19, 2000 was $0.875 per share.

INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
PAGE 3.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the common stock or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this Prospectus is , 2000.
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TABLE OF CONTENTS

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WHERE YOU CAN FIND MORE INFORMATION......................... i

SUMMARY..................................................... 1

RISK FACTORS................................................ 3

FORWARD-LOOKING STATEMENTS.................................. 10

DILUTION.................................................... 10

USE OF PROCEEDS............................................. 11

DIVIDEND POLICY............................................. 11

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.... 13

SELECTED CONSOLIDATED FINANCIAL DATA........................ 14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 15

BUSINESS.................................................... 26

MANAGEMENT.................................................. 32

CERTAIN TRANSACTIONS........................................ 37

PRINCIPAL STOCKHOLDERS...................................... 37

DESCRIPTION OF CAPITAL STOCK................................ 40

COMMON STOCK PURCHASE AGREEMENT............................. 43

SELLING STOCKHOLDERS........................................ 49

PLAN OF DISTRIBUTION........................................ 50

LEGAL MATTERS............................................... 55

EXPERTS..................................................... 55

INDEMNIFICATION OF OFFICERS AND DIRECTORS................... 55

INDEX TO FINANCIAL STATEMENTS............................... F-1

EXHIBIT INDEX............................................... E-1
</TABLE>
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WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any reports, statement or
other information that we file with the Commission at the Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. These Commission filings are also available to the
public from commercial document retrieval services and at the Internet World
Wide Web site maintained by the Commission at "http://www.sec.gov."

This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. The prospectus and any accompanying
prospectus supplement do not contain all of the information included in the
registration statement. We have omitted a few parts of the registration
statement according to the rules and regulations of the Securities and Exchange
Commission. For further information, we refer you to the registration statement,
including its exhibits and schedules. Statements contained in this prospectus
and any accompanying prospectus supplement about the provisions or contents of
any contract, agreement or any other document referred to are not necessarily
complete. For each of these contracts, agreements or documents filed as an
exhibit to the registration statement, we refer you to the actual exhibit for a
more complete description of the matters involved. You should not assume that
the information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.

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SUMMARY

THIS SUMMARY HIGHLIGHTS SOME INFORMATION FROM THIS PROSPECTUS. IT MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THIS
OFFERING FULLY, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE
RISK FACTORS AND FINANCIAL STATEMENTS.

THE BUSINESS

We are a leading regional provider of paging and other wireless messaging
services through our local and regional wireless networks. We offer messaging
services through a seven state regional network that provides coverage into New
York, New Jersey, Connecticut, Pennsylvania, Maryland, Virginia, Delaware and
Washington, D.C. as well as through a regional network providing coverage in six
states including Illinois, Indiana, Michigan, Wisconsin, Minnesota, and
Missouri. We also provide service to over 1,000 U.S. cities, including the top
100 metropolitan areas through an interconnect agreement with a nationwide
wireless messaging provider. Since beginning operations in 1994 our subscriber
base has increased to approximately 389,000 units in service as of June 30,
2000. We have achieved this through a combination of internal growth and a
program of mergers and acquisitions. As of December 31, 1999, we were the tenth
largest messaging company in the United States based on the number of
subscribers.

We have traditionally operated technologically advanced paging systems that
provide one-way wireless messaging services. We have recently decided to enter
the two-way or advanced wireless messaging space. With our move into advanced
wireless messaging, we envision ourselves as taking part in the convergence of
Internet and wireless data services. To that end, we have executed an
interconnect agreement with a nationwide advanced messaging provider. This
agreement allows us to pass advanced wireless messaging traffic from our
existing technical and engineering infrastructure to the nationwide advanced
wireless messaging company's transmission facilities on both a regional and
nationwide basis. We feel this agreement is important because it allows for a
seamless "switched" environment in which we can market advanced wireless
messaging services to our existing subscriber base as well as take part in the
potential high growth of new applications which will require advanced wireless
messaging capabilities.

We believe that the paging and wireless messaging industry is likely to
undergo additional consolidation and have announced that we intend to
participate in the consolidation process. Potential future consolidations would
be evaluated on several key operating and financial elements including
geographic presence, potential increase in both free and operating cash flow,
potential synergies and availability of financing. Any potential transaction may
result in substantial capital requirements for which additional financing may be
required. No assurance can be given that such additional financing would be
available on terms satisfactory to us.

We derive a majority of our revenues from fixed, periodic (usually monthly)
fees, generally not dependent on usage, charged to subscribers for paging and
wireless messaging services. While a subscriber continues to use our services,
operating results benefit from this recurring revenue with minimal requirements
for incremental selling expenses or fixed costs.

THE OFFERING

This prospectus covers up to 8,851,352 shares of Aquis Communications
Group, Inc. common stock to be sold by selling stockholders identified in this
prospectus. The number of shares subject to this prospectus represents 50.3% of
our issued and outstanding common stock as of June 30, 2000 and 33.4% after
issuance of all currently unissued shares included in this prospectus.

We signed a common stock purchase agreement with Coxton, Limited, a British
Virgin Islands corporation, on April 9, 2000, for the future issuance and
purchase of shares of our common stock. The

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stock purchase agreement establishes what is sometimes termed an equity line of
credit or an equity drawdown facility.

In general, the drawdown facility operates like this: the investor, Coxton,
has committed to provide us up to $20 million as we request it over a 12-month
period, in return for common stock we issue to Coxton. Once every 22 trading
days, we may request a draw of up to $7 million of that money, subject to a
maximum of 12 draws. The maximum amount we actually can draw down upon each
request will be determined by the volume-weighted average daily price of our
common stock for the 22 trading days prior to our request and the average
trading volume for the 45 trading days prior to our request. Each draw down must
be for at least $250,000. At the end of a 22-day trading period following the
drawdown request, the final drawdown amount is determined based on the
volume-weighted average stock price during that 22-day period. We then use the
formulas in the common stock purchase agreement to determine the number of
shares we will issue to Coxton in return for that money.

The formulas for determining the final drawdown amounts, the number of
shares we issue to Coxton and the price per share paid by Coxton are described
in detail beginning on page 45. We may make up to a maximum of 12 draws;
however, the aggregate total of all draws cannot exceed $20 million and no
single draw can exceed $7,000,000. We are under no obligation to request a draw
for any period.

The volume-weighted average market price for our common stock for the 22-day
trading period prior to September 20, 2000 was $1.0252 and the average daily
trading volume for the 45 trading days ended September 19, 2000 was 161,753
shares. If our 22-day volume-weighted average market price as of September 20,
2000 and the 45-day average trading volume preceding September 20, 2000 each
remained constant over the 12-month period of the common stock purchase
agreement and we requested the maximum amount available to us under the common
stock purchase agreement, each draw would be capped at $729,648 and we could
make 12 draws for a total amount drawn of $8,755,776. As the example shows, if
our stock price stays at current levels, we will not be able to draw down all
$20,000,000 under the common stock purchase agreement.

The formula would dictate that for this example, we would issue Coxton
9,183,504 shares at $0.9534 per share. However, we have registered only
2,514,044 shares for issuance under the common stock purchase agreement to
comply with a NASDAQ SmallCap Market listing requirement. That requirement
prevents us from issuing more than 19.9% of our outstanding common stock on the
closing date of the common stock purchase agreement without prior shareholder
approval. Accordingly, we would issue Coxton only 2,514,044 shares at $0.9534
per share for total gross proceeds to us of $2,396,890. The number of shares we
would issue and the proceeds we would receive could be further limited by a
provision of the common stock purchase agreement that prevents us from issuing
shares to Coxton to the extent Coxton would beneficially own more than 9.9% of
our then outstanding common stock. Any resales of shares by Coxton under this
prospectus would reduce the number of shares beneficially owned by Coxton, and
would enable us to issue additional shares to Coxton without violating this
condition.

The per share dollar amount Coxton pays for our common stock for each
drawdown includes a 7% discount to the average daily market price of our common
stock for the 22-day period after our drawdown request, weighted by trading
volume. We will receive the amount of the drawdown less an escrow agent fee of
$1,500 and a 6% placement fee payable to the placement agent, Ladenburg
Thalmann & Co. Inc., which introduced Coxton to us. Ladenburg Thalmann is a
registered broker dealer. It is not obligated to purchase any of our shares, but
as an additional placement fee, we have issued to Ladenburg Thalmann warrants to
purchase 300,000 shares of our common stock at an exercise price of $2.30. The
common stock issuable upon exercise of those warrants is included in the
registration statement of which this prospectus is a part.

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RISK FACTORS

YOU SHOULD BE AWARE THAT THERE ARE VARIOUS RISKS, INCLUDING THOSE DESCRIBED
BELOW, WHICH YOU SHOULD CONSIDER CAREFULLY TOGETHER WITH ALL OF THE OTHER
INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR COMMON
STOCK.

SOME OF THE INFORMATION IN THIS PROSPECTUS MAY CONTAIN FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE,"
"CONTINUE" OR OTHER SIMILAR WORDS. THESE STATEMENTS DISCUSS FUTURE EXPECTATIONS,
CONTAIN PROJECTIONS OF RESULTS OF OPERATIONS OR OF FINANCIAL CONDITION OR STATE
OTHER "FORWARD-LOOKING" INFORMATION. WHEN CONSIDERING SUCH FORWARD-LOOKING
STATEMENTS, YOU SHOULD KEEP IN MIND THE RISK FACTORS AND OTHER CAUTIONARY
STATEMENTS IN THIS PROSPECTUS. THE RISK FACTORS NOTED IN THIS SECTION AND OTHER
FACTORS NOTED THROUGHOUT THIS PROSPECTUS, INCLUDING CERTAIN RISKS AND
UNCERTAINTIES, COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED IN ANY FORWARD-LOOKING STATEMENT.

BUSINESS AND FINANCIAL RISKS

WE EXPECT TO REPORT OPERATING LOSSES FOR THE NEXT SEVERAL YEARS.

We purchased the paging operations of Bell Atlantic in December 1998. The
purchase price of approximately $29,200,000, including transaction costs, was
substantially above the asset value recorded on the books of the sellers.
Although the Bell Atlantic paging business showed an operating profit prior to
our purchase for the most recent three years of operation, incremental
depreciation and amortization on our higher asset values are expected to result
in operating losses.

Paging Partners Corporation also merged with Aquis Communications, Inc. at
the end of March 1999 to form Aquis Communications Group, Inc. We then purchased
SourceOne Wireless in January 2000 and purchased the paging assets of Suburban
Cable in May 2000. A significant effect of the purchase accounting for these
transactions was to record a substantial amount of intangible assets, which will
result in substantial amortization charges to our consolidated income over the
next ten years. As a result, we expect to incur operating losses for the next
several years.

We expect to continue to show earnings before interest, taxes, depreciation
and amortization ("EBITDA"), a financial measure commonly used in the
telecommunications industry in our future operations, just as Bell Atlantic and
Paging Partners did in their 1998 fiscal years. This is important, as it
represents a key financial test for us to preserve our credit with our major
lender, FINOVA Capital Corporation. Still, EBITDA is not derived from generally
accepted accounting principles ("GAAP") and therefore investors should not
consider it as indicative of operating income or cash flows from operating
activities, as determined in accordance with GAAP, or as a measure of liquidity.
Also, our calculation of EBITDA does not take into account our existing
commitments for capital expenditures or debt service requirements and should not
be seen as representative of the amount of funds generally available to us.

Although we anticipate that cost savings and operating efficiencies achieved
through the Aquis / Paging Partners merger and our SourceOne Wireless and
Suburban Paging acquisitions will improve our EBITDA and narrow our operating
losses, we cannot assure investors that our operations will become profitable or
that we will continue to generate sufficient EBITDA to cover our debt service
and capital expenditures requirements, provide us with sufficient amounts of
operating cash and enable us to meet our lender's minimum liquidity tests. If we
can not achieve operating profitability or adequate EBITDA, our liquidity will
be impaired and our common stock could have little or no value.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND ADDITIONAL FINANCING MAY
NOT BE AVAILABLE.

We currently anticipate that our available cash resources combined with the
maximum drawdown under the stock purchase agreement with Coxton, Limited will be
sufficient to meet our anticipated working capital and capital expenditure
requirements for at least the next 12 months. However, if our stock price and
trading volume stay at current levels, we will not be able to draw down all
$20 million

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under the common stock purchase agreement and our available cash resources will
meet our expected requirements for the coming year. In addition, business and
economic conditions may not make it feasible to draw down under the common stock
purchase agreement at every opportunity, and drawdowns are available only every
22 trading days. We may need to raise additional capital to fund more rapid
expansion, to develop new and to enhance existing services to respond to
competitive pressures, and to acquire complementary businesses or technologies.

Our placement agreement with Ladenburg Thalmann Co. Inc. restricts us from
raising investment capital during the term of the common stock purchase
agreement except through the common stock purchase agreement. If we need capital
but are unable to drawdown under the common stock purchase agreement for any
reason, we will need to separately negotiate with Ladenburg Thalmann and Coxton
to lift those restrictions so we can obtain the capital from other sources. Our
common stock purchase agreement with Coxton also limits our ability to sell our
securities for cash at a discount to the market price for 24 months from the
effective date of the registration statement of which this prospectus is a part.

We may not be able to obtain additional financing on terms favorable to us,
if at all. If adequate funds are not available or are not available on terms
favorable to us, we may not be able to effectively execute our business plan.

OUR REVENUES AND OPERATING RESULTS MAY FLUCTUATE, WHICH COULD RESULT IN
FLUCTUATIONS IN THE PRICE OF OUR COMMON STOCK OR OUR INABILITY TO MEET
COVENANTS IN OUR FINANCING AGREEMENTS.

We believe that future fluctuations in our revenues and operating results
may occur due to many factors, including competition, subscriber turnover, new
service developments and technological change. Our current and planned debt
repayment levels are, to a large extent, fixed in the short term, and are based
in part on our expectations as to future revenues and cash flow growth. We may
be unable to adjust spending in a timely manner to compensate for any revenue or
cash flow shortfall. It is possible that, due to future fluctuations, our
revenue, cash flow or operating results may not meet the expectations of
securities analysts or investors. This may have a material adverse effect on the
price of our common stock. If shortfalls were to cause us not to meet the
financial covenants contained in our debt agreements, our lender could declare a
default and seek immediate repayment.

THE RATE OF SUBSCRIBER DISCONNECTIONS COULD INCREASE IN THE FUTURE, WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATING RESULTS.

Our revenues are derived primarily from fixed periodic subscription fees for
services that are not generally dependent on level of usage. Consequently, our
ability to recoup initial selling and marketing costs, cover our operating
expenses and achieve profitability is dependent on the average length of each
customer's subscription period. Each month, some of our existing customers have
their service terminated for a variety of reasons, including failure to pay,
dissatisfaction with service and switching to a competing service provider. Loss
of those subscribers results in loss of the recurring stream of revenues
generated by payment of fixed fees without additional selling expenses and
adversely affects our operating results. Our average monthly disconnection rate
for the fiscal quarter ended June 30, 2000 was 3.9%. Our normalized
disconnection rate, which is the gross disconnection rate adjusted to exclude
units returned to Bell Atlantic Mobile that were unprofitable, was 2.8%. Were we
to experience an increase in our disconnection rate, our business and future
results of operations could be materially and adversely affected.

THE TELECOMMUNICATIONS INDUSTRY IS EXTREMELY COMPETITIVE AND IS UNDERGOING
CONSOLIDATION.

The paging and telecommunications services industry is extremely
competitive. Some of our competitors, which include local, regional and national
paging companies, possess greater financial, technical and other resources than
we do. Moreover, some of our competitors offer broader network

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coverage than that provided by our systems and some follow a low-price
discounting strategy to expand their market shares.

Furthermore, we believe that the paging industry has experienced, and will
continue to experience, consolidation due to factors that favor larger,
multi-market paging companies, including:

- the ability to obtain additional radio spectrum;

- greater access to capital markets and lower costs of capital;

- broader geographic coverage of paging systems;

- economies of scale in the purchase of capital equipment;

- operating efficiencies; and

- better access to executive personnel.

This consolidation trend may further intensify competition in our industry.
We cannot assure investors that we will be able to compete successfully.

A HIGH AMOUNT OF DEBT BURDENS OUR OPERATIONS.

We have borrowed a large amount of money from our lenders Finova Capital
Corporation and AMRO International, S.A., and we expect to continue to be highly
leveraged. The following table compares our total debt, total assets and
earnings before interest, taxes, depreciation and amortization ("EBITDA") as of
and for the years ended December 31, 1999, December 31, 1998 and December 31,
1997, and for the six months ended June 30, 2000 (amounts are in thousands).

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED
1997 1998 1999 JUNE 30, 2000
------------- ------------- ------------ -------------
(PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C> <C>
TOTAL LONG TERM DEBT (NET OF CURRENT
MATURITIES)............................... -- $18,535 $25,963 $28,145
TOTAL ASSETS................................ $13,547 $32,335 $39,324 $42,583
EBITDA...................................... $ 3,799 $ 5,068 $ 2,974 $ 1,444
CASH FLOWS FROM OPERATIONS.................. $ 3,377 $ 2,456 $ 4,643 $ (901)
NET CASH USED FOR INVESTING ACTIVITIES...... $ 4,730 $ 3,981 $23,300 $ 2,412
NET CASH PROVIDED BY FINANCING ACTIVITIES... $ 1,339 $ 1,564 $19,630 $ 2,813
</TABLE>

EBITDA is not a measure defined in GAAP and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with GAAP. EBITDA, as determined by us, may not necessarily be comparable to
similarly titled data of other paging companies. EBITDA for the year ended
December 31, 1999 was reduced by approximately $1,692,000 for costs incurred
with abandoned business acquisitions and by approximately $742,000 for costs
related to a settlement with our former president. Excluding these non-recurring
charges, EBITDA for 1999 would have been approximately $5,408,000.

Our high degree of debt may have adverse consequences for us. These include
the following:

- High amounts of debt may limit or eliminate our ability to obtain
additional financing necessary for acquisitions, working capital, capital
expenditures or other purposes on acceptable terms, if at all.

- A substantial portion of our cash flow will be required to pay interest
expense; this will reduce the funds which would otherwise be available to
us for operations and future business opportunities.

- Our credit agreement with our lender contains financial and restrictive
covenants; the failure to comply with these covenants may result in an
event of default which could have a material adverse effect on us if not
cured or waived.

5
<PAGE>
- We may be more highly leveraged than our competitors which may place us at
a competitive disadvantage.

- Our high degree of debt will make us more vulnerable to a downturn in our
business or the economy generally.

- Our high degree of debt may impair our ability to participate in the
future consolidation of the paging industry.

There can be no assurance that we will be able to reduce our level of debt
as we intend, nor that we will achieve an appropriate balance between growth
which we consider acceptable and future reductions in borrowings. If we are not
able to achieve continued growth in EBITDA, we may be precluded from incurring
additional indebtedness due to cash flow coverage requirements under our
existing credit agreement.

FUNDING FOR OUR FUTURE CAPITAL NEEDS IS NOT ASSURED.

Our business strategy requires substantial funds to be available to finance
the continued development and future growth and expansion of our operations,
including possible acquisitions. Future amounts of capital required by us will
depend upon a number of factors. These factors include subscriber growth, the
type of paging devices and services demanded by customers, service revenues,
technological developments, marketing and sales expenses, competitive conditions
and acquisition strategies and opportunities. We cannot assure investors that
additional equity or debt financing will be available to us when needed on
acceptable terms, if at all. If sufficient financing is unavailable when needed,
we may experience material adverse effects.

OUR CREDIT AGREEMENT WITH OUR LENDER RESTRICTS THE WAY WE OPERATE OUR
BUSINESS.

Our agreement with our lender imposes operating and financial restrictions
on us. Our credit agreement requires us to maintain specified financial ratios,
including a maximum leverage ratio and a minimum fixed charge coverage ratio. In
addition, the credit agreement limits or restricts, among other things, our and
the operating subsidiaries' ability to:

- declare dividends or redeem or repurchase capital stock;

- prepay or redeem debt;

- incur liens and engage in sale/leaseback transactions;

- make loans and investments;

- incur indebtedness and contingent obligations;

- amend or otherwise alter debt instruments and other material agreements;

- engage in mergers, consolidations, acquisitions and asset sales;

- engage in transactions with affiliates; and

- alter their lines of business or accounting methods.

Our ability to comply with such covenants may be affected by events beyond
our control, including prevailing economic and financial conditions. A breach of
any of these covenants could result in a default under the credit agreement.
Upon the occurrence of an event of default, the lender could elect to declare
all amounts outstanding to be immediately due and payable, together with accrued
and unpaid interest. If we were unable to repay any such amounts, the lender
could proceed against the collateral securing a portion of the indebtedness. If
the lender accelerated the payment of such indebtedness, there can be no
assurance that our assets would be sufficient to repay in full such indebtedness
and other indebtedness. In addition, because the credit agreement limits our
ability to engage in certain transactions except under certain circumstances, we
may be prohibited from entering into transactions that could be beneficial to
us. Further, our lender has agreed to modify certain financial covenant ratios
through the third quarter of 2001, but our internal projections indicate that
the unamended covenants for the fourth quarter of 2001 will not be met, which
could cause the lender

6
<PAGE>
to accelerate the maturity date of the loan. We cannot assure investors that our
lenders will waive any events of non-compliance or agree to any loan
modifications that might improve our ability to comply with our loan covenants
in the future. Please see the discussion of waivers which our primary lender has
granted to us previously under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations at
June 30, 2000 and June 30, 1999--Liquidity and Capital Resources" beginning on
page 15.

OUR BUSINESS MAY BE ADVERSELY AFFECTED BY RAPID TECHNOLOGICAL CHANGES.

The paging and telecommunications services industry is characterized by
rapid technological change and advancement which may produce new services or
products that are directly competitive with the paging and data transmission
services we provide. A variety of wireless one-way and two-way communication
technologies, including cellular telephone service, personal communications
services, enhanced specialized mobile radio, low-speed data networks, mobile
satellite services and advanced two-way paging services, are currently in use or
under development. Although those technologies are generally higher-priced than
one-way paging service or not yet commercially available, technological
improvements are creating increased capacity and demand for wireless two-way
communication. Increased availability of newer, more technologically advanced
products and services could result in decreased demand for certain of our
products and services. For this reason, a key element of our growth strategy is
to diversify our business and product lines through acquisitions of companies
with businesses that will complement and enhance our own. However, we cannot
assure investors that we will be able to successfully diversify our business or
incorporate new technologies so as to keep our product and service offerings
competitive.

IF WE DO NOT MAKE ACQUISITIONS ON ECONOMICALLY ACCEPTABLE TERMS AND
INTEGRATE ACQUIRED BUSINESSES SUCCESSFULLY, OUR FUTURE GROWTH AND FINANCIAL
PERFORMANCE WILL BE LIMITED.

We have pursued, and intend to continue to pursue, a growth strategy which
relies in part upon acquisitions of telecommunications and other data
transmission businesses. However, we may not be able to identify, finance and
complete suitable acquisitions on acceptable terms, and any future acquisitions
that we completes may not be successful. In addition, the process of integrating
acquired businesses may involve unforeseen difficulties and/or require a
disproportionate amount of our time, attention and resources from time to time.
Although our goal will be to achieve operating synergies and efficiencies and to
expand and diversify our business, we may not achieve some of the anticipated
benefits of such acquisitions if the existing operations of such companies are
not successfully integrated with our own in a timely manner. Any difficulties or
problems encountered in the integration process could have a material adverse
effect on us. Even if integrated in a timely manner, there can be no assurance
that our operating performance after acquisitions will be successful or will
fulfill management's objectives.

The integration of businesses we acquire will require, among other things,
coordination of administrative, sales and marketing, distribution and accounting
and finance functions and expansion of information and management systems. The
integration process could cause the interruption of the activities of the two
businesses or the diversion of attention and resources from the businesses'
primary operational goals. The difficulties of such integration may initially be
increased by the necessity of coordinating geographically separate organizations
and integrating personnel with disparate business backgrounds and corporate
cultures. We may not be able to retain key employees. The process of integrating
newly acquired businesses may require a disproportionate amount of time and
attention of our management and financial and other resources and may involve
other, unforeseen difficulties.

The success of our growth strategy will also depend on numerous other
contingencies beyond our control, including national and regional economic
conditions, interest rates, competition, changes in regulation or technology and
our ability to attract and retain skilled employees. As a result, we cannot

7
<PAGE>
assure investors that our growth and business strategies will prove effective or
that we will achieve our goals.

GOVERNMENT REGULATION MAY MAKE OUR OPERATIONS MORE DIFFICULT

OUR BUSINESS IS DEPENDENT ON FCC LICENSES THAT MAY NOT BE RENEWED.

Our FCC licenses have varying terms of up to 10 years, at the end of which
renewal applications must be approved by the FCC. In the past, paging license
renewal applications generally have been granted by the FCC upon a showing of
compliance with FCC regulations and of adequate service to the public. Although
we are unaware of any circumstances which would prevent the grant of any pending
or future renewal applications, we cannot assure investors that any of our
renewal applications will be free of challenge. There may be competition for the
radio spectrum associated with our FCC licenses at the time they expire, which
could increase the chances of third party interventions in the renewal
proceedings. We cannot assure investors that our applications for renewal of our
FCC licenses will be granted.

FUTURE CHANGES IN REGULATORY ENVIRONMENT MAY ADVERSELY AFFECT OUR BUSINESS.

We and the wireless communications industry are subject to regulation by the
FCC and various state regulatory agencies. From time to time, legislation and
regulations which could potentially adversely affect us are proposed by federal
and state legislators. We cannot assure investors that federal or state
legislation or regulations will not be adopted that would adversely affect our
business.

RISKS RELATED TO OUR COMMON STOCK

WE DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.

We currently intend to retain all of our earnings, if any, to finance the
growth of our business and therefore do not anticipate paying cash dividends on
our common stock at any time in the foreseeable future. Furthermore, the
Delaware General Corporation Law requires that dividends be paid only out of
capital and surplus or out of certain enumerated "retained earnings." Any future
payments of dividends would be subject to the availability of sufficient amounts
of such funds to cover such payments. We cannot assure investors that such funds
will be legally available or that our Board of Directors will authorize payment
of dividends if and when such funds become available.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND THE DELAWARE GENERAL
CORPORATION LAW CONTAIN PROVISIONS THAT MAY HAVE THE EFFECT OF DISCOURAGING
ATTEMPTS AT A CHANGE OF CONTROL OF OUR COMPANY, WHICH MAY ADVERSELY AFFECT
THE VALUE OF OUR COMMON STOCK.

We have an authorized class of 1,000,000 shares of "blank check" preferred
stock which may be issued by the Board of Directors on such terms and with such
rights, preferences and designations as the Board may determine. Issuance of
such preferred stock, depending upon the rights, preferences and designations
assigned to it, could delay, deter or prevent a change in control of our
company.

Certain "anti-takeover" provisions of the Delaware General Corporation Law
restrict the ability of certain "interested" stockholders to acquire control of
our company. These "anti-takeover" provisions might discourage prospective
acquirors from attempting to bid for our outstanding shares and therefore may be
considered disadvantageous by certain investors. We have no control over, and
therefore cannot predict, what effect these impediments to the ability of third
parties to acquire control of us might have on the market price of our common
stock.

THE PRICE AT WHICH OUR STOCK TRADES MAY BE VOLATILE.

The market price of our common stock has been experiencing significant
fluctuation since our merger with Aquis Communications, Inc. in March of 1999.
The value of our common stock will likely be affected by numerous factors. These
include the risk factors set forth in this prospectus, as well as prevailing
economic and financial trends and conditions in the public securities markets.
Share prices of

8
<PAGE>
paging companies such as ours have exhibited a high degree of volatility during
recent periods. Shortfalls in revenues or EBITDA from the levels anticipated by
the public markets could have an immediate and significant adverse effect on the
trading price of our common stock in any given period. Shortfalls may result
from events that are beyond our immediate control and can be unpredictable. The
trading price of our shares may also be affected by developments which may not
have any direct relationship with our business or long-term prospects. These
include reported financial results and fluctuations in trading prices of the
shares of other publicly held companies in the paging industry generally.

IF OUR COMMON STOCK PRICE CONTINUES TO DROP, WE MAY BE DELISTED FROM THE
NASDAQ SMALLCAP MARKET, WHICH COULD ELIMINATE THE TRADING MARKET FOR OUR
COMMON STOCK.

On September 19, 2000, the closing price of our common stock was $0.875 per
share. Under the rules of the NASDAQ SmallCap Market, one of the listing
standards we need to maintain is a bid price for our common stock of at least
$1.00 per share. If our common stock begins trading below $1.00 per share, our
common stock may be delisted from the NASDAQ SmallCap Market, eliminating the
only established trading market for shares of our common stock. Coxton can also
terminate the common stock purchase agreement if we are delisted. Termination of
our agreement with Coxton would significantly reduce our access to capital
needed for our future operations. The issuance by us of shares of common stock
to Coxton, or the subsequent resale by Coxton of those shares, in either case at
a discount to the market price, may reduce the trading price of our common stock
to a level below the NASDAQ minimum bid price requirement.

OUR COMMON STOCK MAY BE DILUTED.

The issuance of further shares and the eligibility of issued shares for
resale will dilute our common stock and may lower the price of our common stock.
If you invest in our common stock, your interest will be diluted to the extent
of the differences between the price per share you pay for the common stock and
the pro forma as adjusted net tangible book value per share of our common stock
at the time of sale. We calculate net tangible book value per share by
calculating the total assets less intangible assets and total liabilities, and
dividing it by the number of outstanding shares of common stock. The shares
issued to Coxton under the Common Stock Purchase Agreement are an example of the
type of issuance that dilute our common stock.

Furthermore, we may issue additional shares, options and warrants and we may
grant additional stock options to our employees, officers, directors and
consultants under our stock option plan, all of which may further dilute our net
tangible book value.

OUR SALE OF SHARES UPON CONVERSION OF DEBENTURES AT A PRICE BELOW THE MARKET
PRICE OF OUR COMMON STOCK WILL HAVE A DILUTIVE IMPACT ON OUR STOCKHOLDERS.

We have issued debentures to certain investors that may convert into common
stock at a discount to the then-prevailing market price of our common stock.
Accordingly, the issuance of shares upon conversion of the principal and
interest under the debentures may have a dilutive impact on our stockholders.
Discounted sales resulting from the conversion of the debentures could have an
immediate adverse effect on the market price of the common stock. Also, to the
extent that debenture and warrant holders convert their securities and sell the
underlying shares into the market, the price of our shares may decrease due to
the additional shares in the market.

Based on the closing price for our common stock on September 19, 2000 of
$0.875 per share, we would issue to AMRO 2,539,683 shares of our common stock
upon conversion in full of the debenture. If our stock price was to increase by
50% (to $1.3125 per share), we would issue 1,693,122 shares to AMRO upon
conversion of the debenture. If our stock price decreased by 50% (to $0.4375 per
share), we would issue 5,079,365 shares of common stock to AMRO upon conversion
of the debenture.

9
<PAGE>
FORWARD-LOOKING STATEMENTS

In addition to historical information, we have made forward-looking
statements in this prospectus and in the documents incorporated by reference in
this prospectus, such as those pertaining to our capital resources, performance
of our paging business and results of operations. "Forward-looking statements"
are projections, plans, objectives or assumptions about Aquis. Forward-looking
statements involve numerous risks and uncertainties. There can be no assurance
that the events or circumstances reflected in these statements will actually
occur.

Our forward-looking statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "seeks," "approximately," "intends," "plans," "pro forma,"
"estimates," or "anticipates" or the negative of such terminology or other
variations of such terminology or comparable terminology, or by discussions of
strategy, plans or intentions. Such forward-looking statements are necessarily
dependent on assumptions, data or methods that may be incorrect or imprecise and
they may be incapable of being realized.

DILUTION

The issuance of further shares and the eligibility of issued shares for
resale will dilute our common stock and may lower the price of our common stock.
If you invest in our common stock, your interest will be diluted to the extent
of the difference between the price per share you pay for the common stock and
the pro forma as adjusted net tangible book value per share of our common stock
at the time of sale. We calculate net tangible book value per share by
calculating the total assets less goodwill and total liabilities, and dividing
it by the number of outstanding shares of common stock.

The net tangible book value of our common stock as of June 30, 2000 was
$(2,182,000), or approximately $(0.1239) per share. Assuming that--

- we issued on June 30, 2000 a total of 2,539,683 shares to AMRO upon
conversion of the full $2,000,000 principal amount of the convertible
debenture at $0.7875 per share, which is 90% of the market price (as
determined under the loan agreement with AMRO) for our common stock on
September 19, 2000;

- we issued on June 30, 2000 a total of 2,514,044 shares to Coxton under the
common stock purchase agreement at $0.9534 per share, which is 93% of the
volume-weighted average price for our common stock for the 22 trading days
before September 20, 2000 and reflects Coxton's 7% discount (representing
the maximum number of shares issuable under the agreement assuming no
change in our share price over the next 12 months); and

- on June 30, 2000, all vested options and warrants to purchase common stock
were exercised for cash at the exercise prices stated in the options and
warrants;

our pro forma net tangible book value as of June 30, 2000 would have been
$4,345,000, or $0.1752 per share. This would represent an immediate increase in
the pro forma net tangible book value of $0.2991 per share to existing
shareholders on June 30, 2000. If an investor purchased shares on June 30, 2000
at $0.875 per share (our closing price on September 19, 2000), the net tangible
book value per share for such shares would be $0.6998 less than the investor's
purchase price for such shares. The actual dilution to you may be greater or
less than in this example, depending on the actual price you pay for shares, the
actual prices at which we issue shares to Coxton under the common stock purchase
agreement and upon conversion of the AMRO debenture, and how many of the vested
options and warrants outstanding have been exercised at the time of your
investment.

Furthermore, approximately 913,000 stock options and warrants will vest
within the next three years, we may issue additional shares, options and
warrants and we may grant additional stock options

10
<PAGE>
to our employees, officers, directors and consultants under our stock option
plan, all of which may further dilute our net tangible book value.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of shares by Coxton,
Limited that it has obtained under the common stock purchase agreement. We also
will not receive any of the proceeds from the sale of shares by any other
selling stockholder. However, we will receive the sale price of any common stock
we sell to Coxton under the common stock purchase agreement described in this
prospectus and upon the exercise of warrants held by selling stockholders that
pay the exercise price in cash. We expect to use the proceeds of any such sales
for general working capital purposes.

DIVIDEND POLICY

The payment of dividends is contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition. The
payment of dividends is currently prohibited by the Company's Credit Agreement
with Finova Capital Corporation. It is the present intention of the Company's
Board of Directors to retain its earnings, if any, for use in the Company's
business.

LEGAL PROCEEDINGS

From time to time the Company may be involved in various legal actions
arising from the normal course of its business for which the Company maintains
insurance. Such claims are customarily handled by the Company's insurance
companies, and management believes the outcome will not have a material adverse
effect on the Company's financial position or results of operations.

In addition to such actions, the Company is currently involved in the
following legal proceedings:

FONE ZONE COMMUNICATION CORP. V. AQUIS COMMUNICATIONS, INC.--Supreme Court
of the State of New York, County of Queens, Index No. 3841/00. The Company was
sued by Fone Zone Communications Corp. in the Supreme Court of the State of New
York, Queens County, on February 18, 2000. The Company removed the action to the
U.S. District Court for the Eastern District of New York on March 23, 2000. The
suit seeks $1,000,000 in alleged damages as a result of the Company's alleged
conduct with respect to the Company's termination of services for plaintiff and
the Company's alleged solicitation of plaintiff's customers. The Company intends
to vigorously defend this action.

FRANCIS COMMUNICATIONS TEXAS, INC. ET AL. V. AQUIS COMMUNICATIONS, INC. ET
AL.--U. S. District Court for the Western District of Texas, El Paso Division,
Cause No. EP 99 CA 0388. On November 24, 1999, Francis Communication
Texas, Inc. and Francis Communications I, Ltd. (collectively, the "Francis
Parties") commenced an action arising out of a letter of intent between the
Francis Parties and the Company dated June 10, 1999. The letter of intent called
for the Company to acquire the Francis Parties' assets for a purchase price of
$4,000,000. The Company terminated the letter of intent as a result of the
failure of the Francis Parties to comply with certain conditions contained in
the letter of intent. The Francis Parties allege that the Company breached the
letter of the intent and the Company's duty of good faith and fair dealing in
failing to conclude the transaction described in the letter of intent. The suit
seeks economic and other damages as a result of the Company's alleged conduct.

On September 22, 2000, the Company and Aquis Communications, Inc. entered
into a settlement agreement with the Francis Parties, to settle the action.
Pursuant to the settlement agreement, in consideration of the termination of the
lawsuit and the mutual releases of the parties, the Company will receive a
payment of $200,000 from the Francis Parties and will receive $100,000 and
accrued interest from an escrow account established by the parties under the
Letter of Intent.

11
<PAGE>
IN THE MATTER OF ARBITRATION BETWEEN JOHN X. ADILETTA AND AQUIS
COMMUNICATIONS GROUP, INC.--On December 23, 1999, John X. Adiletta, a former
director and chief executive officer of the Company, commenced an arbitration
proceeding under the Rules of the American Arbitration Association by way of a
"Demand for Arbitration and Statement of Claim" (hereinafter the "Demand"). The
Demand set forth three claims for relief. The first claim alleged breach of an
employment agreement between the Company and Mr. Adiletta and sought damages in
"an amount to be proved at trial" but "in no event less than $762,500." The
second claim alleged wrongful discharge and sought damages in "an amount to be
proved at trial" but "in no event less than $1,000,000," plus unspecified
punitive damages. The third claim for relief sought monetary remedies, as well
as an equitable remedy by way of a request for a preliminary and permanent
injunction for the alleged wrongful termination of health and welfare benefits
including incentive stock options. The third claim also sought compensatory and
punitive damages in unspecified amounts. The parties had selected an arbitrator,
and a discovery and hearing schedule was entered. Thereafter, the parties
entered into a settlement agreement, the terms of which provide for a payment of
$25,000, a credit of $75,000 against existing indebtedness owed to the Company
by Mr. Adiletta, stock valued at $400,000, forgiveness of $115,000 of debt under
an existing promissory note secured by common stock owned by Mr. Adiletta, and
the reinstatement of 55,000 stock options with an exercise price of $1.12 each
under a previous Incentive Stock Option Agreement.

The Company received correspondence from legal counsel to Mr. Adiletta in
August, 2000 in which Mr. Adiletta claimed that the Company was in breach of its
obligation to register under the Securities Act of 1933 the shares underlying
certain options granted to him previously as contemplated by the terms of the
settlement agreement. Mr. Adiletta also requested that he be permitted to submit
a bid for the purchase of certain of the assets of the Company's internet
related business operations conducted by Aquis IP Communications, Inc., which
assets were at the time of the letter from Mr. Adiletta the subject of a signed
Asset Purchase Agreement with the investment group headed by Mr. John Hobko,
then President of Aquis IP Communications, Inc., and Mr. John B. Frieling, a
director of the Company. Subsequent communications between the parties directed
toward the negotiated resolution of Mr. Adiletta's claim indicate that such
matter is likely to be resolved without material exposure to the Company,
although as of this date no settlement agreement has been entered into between
the parties addressing Mr. Adiletta's August 2000 claim.

12
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded over the counter on the NASDAQ SmallCap
Market under the symbol "AQIS". Over the counter market quotations reflect
inter-dealer prices without mark-up, mark-down or commissions, and may not
represent actual transactions. The quarterly high and low closing bid prices for
the Company's Common Stock for the past two years as reported by the National
Association of Securities Dealers, Inc., are as follows:

<TABLE>
<CAPTION>
1998 1999
COMMON COMMON
STOCK STOCK
------------------- -------------------
QUARTER HIGH LOW QUARTER HIGH LOW
------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
First Quarter.................... 1.81 0.69 First Quarter.................... 1.63 1.06
Second Quarter................... 1.75 1.00 Second Quarter................... 1.56 0.81
Third Quarter.................... 1.50 0.88 Third Quarter.................... 1.88 1.25
Fourth Quarter................... 3.19 0.69 Fourth Quarter................... 1.91 0.47
</TABLE>

On September 19, 2000, the closing price of the Company's Common Stock was
$0.875. As of this date, there were approximately 125 record holders of the
Company's Common Stock. The number of record holders does not reflect the number
of beneficial owners of the Company's Common Stock for whom shares are held by
banks, brokerage firms and others. Based on information requests received from
representatives of such beneficial owners, management believes that there are at
least 1,000 beneficial holders of the Company's Common Stock.

13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following table, as it relates to the 1999 and 1998 consolidated balance
sheets and the statement of operations for 1999, has been derived from the
historical financial data of Aquis Communications Group, Inc. The statement of
operations data for 1998 through 1995 has been derived from the historical
financial statements of Bell Atlantic Paging, Inc. ("BAPCO" or the "Predecessor
Company"). Similarly, the balance sheet data for 1997 through 1995 has also been
derived from BAPCO's historical financial statements. The following information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and the notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------ -------------------
PREDECESSOR COMPANY
-------------------------------------------
1999 1998 1997 1996 1995 2000 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues..................... $ 31,159 $26,432 $20,689 $17,057 $15,821 $15,988 $14,478
Depreciation and amortization...... 10,878 4,323 3,378 2,066 1,253 4,936 4,870
Costs of abandoned business
combinations..................... 1,692 -- -- -- -- -- --
Operating expenses................. 26,493 21,364 16,890 13,065 13,380 14,544 11,166
Operating (loss) income............ (7,904) 745 421 1,926 1,188 (3,492) (1,558)
Other expenses, net................ (2,975) -- -- -- (858) (1,706) (1,574)
Provision for income taxes......... -- (296) (168) (770) (543) -- --
Extraordinary item, net of taxes... -- 682 -- -- -- -- --
Net (loss) income.................. (10,879) 1,131 253 1,156 (213) (5,198) (3,132)
Preferred stock dividends.......... (47) --
Loss attributable to common
stockholders..................... $(10,879) $ 1,131 $ 253 $ 1,156 $ (213) $(5,245) $(3,132)
======== ======= ======= ======= ======= ======= =======
Net loss per common share.......... (0.76) (0.31) (0.26)

BALANCE SHEET DATA
(period end)
Total assets....................... $ 39,324 $32,335(1) $13,547 $13,015 $ 9,345 $42,583 $44,338
Long-term debt, less current
maturities....................... $ 25,963 $18,535(1) $ -- $ 2 $ 887 $28,145 $25,895
7.5% Redeemable Preferred Stock.... -- -- -- -- -- 1,547 --
</TABLE>

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

(1) Derived from historical financial statements or Aquis Communicating Group,
Inc.

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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

ORGANIZATION AND BASIS OF PRESENTATION

Aquis Communications Group, Inc. ("Aquis" or the "Company") is a holding
company, incorporated in the State of Delaware. Through its operating companies,
it now operates three regional paging systems providing one-way wireless alpha
and numeric messaging services in portions of nineteen states principally in the
Northeast, the Midwest and the Mid-Atlantic regions of the United States, as
well as the District of Columbia. The Company recently entered the Midwestern
region through a purchase of certain assets from SourceOne Wireless, Inc.
("SourceOne") completed on January 31, 2000. Aquis also resells nationwide and
regional services, offers alpha dispatch, news and other messaging enhancements.
Customers include individuals, businesses, government agencies, hospitals and
resellers.

On March 31, 1999, a wholly owned subsidiary of Paging Partners Corporation
("Paging Partners"), merged with Aquis Communications, Inc. ("ACI") in a
transaction accounted for as a reverse acquisition with ACI as the accounting
acquirer. At that time, Paging Partners changed its name to Aquis Communications
Group, Inc. On June 30, 1999, a wholly owned subsidiary of the Company acquired
SunStar Communications, Inc. On January 31, 2000, the Company completed its
acquisition of certain assets of SourceOne. In May 2000 the Company acquired
certain paging assets of Suburban Paging, a regional paging services reseller
headquartered in Pennsylvania. Finally, management has recently agreed to sell
substantially all the net assets of its internet services operations in order to
refocus its resources on its paging operations. These matters are more fully
discussed in the condensed consolidated financial statements of the Company and
the notes thereto.

The results of operations of the Predecessor Company for the years ended
December 31, 1998 and 1997 include certain revenues and expenses allocated by
Bell Atlantic Corporation and its affiliates ("Bell Atlantic"). The provision
for income taxes was allocated to the Predecessor Company as if it were a
separate taxpayer. Also, certain employee benefit costs were allocated based on
staffing levels. Accordingly, the results of operations and financial position
of the Predecessor Company may not be the same as would have occurred had the
Predecessor Company been an independent entity. This discussion should be read
in conjunction with the consolidated financial statements of the Company and the
notes thereto.

On December 31, 1998, Aquis acquired the Bell Atlantic paging business for
approximately $29,200,200, including transaction costs. The Bell Atlantic paging
business acquired included BAPCO's (or the Predecessor Company's) sales and
marketing operation and the paging network operation infrastructure owned and
operated by the Bell Atlantic Operating Telephone Companies. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations." The acquisition was financed primarily
through a $20,000,000 loan from FINOVA Capital Corporation ("FINOVA"), a
$4,150,000 note retained by the seller (the "Seller Note"), and cash proceeds of
$5,661,000 from a sale of preferred stock. The Seller Note was paid in full on
June 30, 1999, net of a negotiated discount.

GENERAL

The Company is a leading provider of paging and other wireless messaging
services and markets one-way paging service and equipment to customers directly
and through resellers. The Company also offers its customers both customer owned
and maintained equipment or lease options for equipment.

The Company generates a substantial majority of its revenue from fixed
periodic fees for paging services that are not generally dependent on usage.
Usage sensitive charges consist primarily of

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overcalls and Telocator Networking Paging Protocol ("TNPP") fees charged to
resellers, and Calling Party Pays ("CPP") charges and overcalls charged to end
users.

The ability to recover initial operating, selling and marketing costs and to
achieve profitability is dependent on the average duration of each customer's
subscription period. For as long as a subscriber continues to utilize the
service, operating results benefit from the recurring fixed fee payments without
the requirement of any incremental selling expenses. Conversely, customer
disconnections adversely affect operating results. Each month a percentage of
existing customers have their service terminated for reasons including failure
to pay, dissatisfaction with service or coverage limitations, or switching to
competing service providers.

This discussion should be read in conjunction with the consolidated
financial statements as well as the audited financial statements of the Company
and the notes thereto.

RESULTS OF OPERATIONS AT JUNE 30, 2000 COMPARED TO JUNE 30, 1999

REVENUES

Paging services revenues for the six months ended June 30, 2000 increased by
$1,088,000, or nearly 8%, over those of the corresponding period of 1999. The
increase was primarily the results of the merger with Paging Partners on
March 31, 1999, the purchase of traditional paging and calling party pays
operations from SourceOne on January 31, 2000, the acquisition of paging assets
from Suburban Paging in May, 2000, and from internal growth. Aquis and Bell
Atlantic Mobile had entered into a reseller agreement for certain reseller units
in connection with the purchase of assets from Bell Atlantic Paging Company at
December 31, 1998. Aquis elected to cancel the reseller agreement for certain
units in December 1999, and for additional units in April 2000 because these
units were not profitable to the Company.

An increase in revenues from equipment sales of $87,000 was recognized
during the six month period. The increase resulted from certain sales to
resellers in June 2000, and to a lesser extent, more sales of higher priced
alpha pagers, partially offset by lower total unit volume during the current
year. Internet services revenues were realized as the base of subscribers
expanded during the periods in the current year. Since the internet business was
acquired at the close of the quarter ended June 30, 1999, no revenues were
realized by the Company during those earlier periods.

For the six month period ended June 30, 2000 fixed fee revenue provided
approximately 82% of total revenues, as compared to 94% for the six months ended
June 30, 1999. This change is primarily the result of the CPP services added
through the Company's January 31, 2000 acquisition of the operations of
SourceOne and the TNPP services provided through the Paging Partners merger
effected on March 31, 1999.

The average of the "normalized" (excluding the effects of the cancellation
of certain units of Bell Atlantic Mobile) monthly disconnection or "churn rates"
for the six-month periods ended June 30, 2000 and 1999, were 2.8% and 2.1%,
respectively. The churn rates for the years ended December 31, 1999 and
December 31, 1998 were 3.1% and 2.9%, respectively. The 1999 rate after
adjustment for the effects of the Paging Partners subscriber base was 2.7%.
Including the effects of the cancelled Bell Atlantic Mobile units, the current
period rate was 3.9% The higher churn rate for the current six-month period is
also attributed to units that were disconnected for non-payment by certain
midwest service resellers that were acquired in the SourceOne purchase.

COST OF PAGING SERVICES

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of such services declined to $3,238,000 during the six month period ended
June 30, 2000, from $3,541,000 during the corresponding period in 1999. The
decreases are primarily attributable to the cancellation of services to certain
Bell Atlantic Mobile reseller units in December 1999 and April 2000.

COST OF EQUIPMENT SALES

The cost decrease of $62,000 during the current six-month period was due to
a decrease in the number of units sold during the six months of the current year
and the Company's shift to lower cost equipment.

TECHNICAL OPERATIONS

Technical operating expenses include transmission site rentals, telephone
interconnect services and the costs of network maintenance and engineering.
These expenses totaled $3,809,000 in the six-month period ended June 30, 1999,
as compared to $1,975,000 in the year-earlier period. The increases resulted
from the additional costs required to operate the paging networks acquired from
Paging Partners in March 1999 and from SourceOne in January 2000.

SALES AND MARKETING

Selling and marketing expenses include the cost to acquire and retain
subscribers, operating costs associated with the sales and marketing
organizations, and other advertising and marketing expenses. These costs
increased to $1,790,000 during the six-month period ended June 30, 2000, or
approximately 9% higher than those of the corresponding period ended in 1999.
These increases resulted from increases in salary, benefits and commission
expenses in 2000 as a result of a larger sales force covering both the
Mid-Atlantic and Midwest market areas along with an increase in directory
advertising expenses. Partially offsetting these increases were lower commission
expenses associated with a revised commission plan implemented at the close of
1999.

GENERAL AND ADMINISTRATIVE

General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. These costs totaled
$3,803,000 and $3,066,000 for the six-month periods ended, June 30, 2000 and
1999, respectively. During the current year, $693,000 was incurred in connection
with the issuance of stock options in the hiring of the Company's former
President. Other than this, increased office rents, billing, data processing
costs and customer service center costs associated with the subscriber bases
acquired from Paging Partners, SourceOne and Suburban Paging were substantially
offset by staff reductions implemented in late 1999.

INTERNET OPERATIONS

Internet operating expenses include all costs associated with providing
internet services, such as communications and connectivity costs, sales and
marketing expenses, customer service and other general and administrative
support costs, and depreciation and amortization. No costs were incurred in the
periods ended in 1999 because the operations were acquired at the mid-point of
1999.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization for the six months ended June 30, 2000
increased over those expenses for the corresponding period in 1999 by $66,000,
primarily as the result of the assets acquired from Paging Partners, SourceOne
and Suburban Paging.

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INTEREST EXPENSE

Interest expense in the six month period ended June 30, 2000 of $1,725,000,
respectively, includes interest on the Company's five year term loan with FINOVA
Capital Corporation ("FINOVA"), its bridge loan and installment loan with
FINOVA, as well as interest on certain other obligations. Interest expenses have
increased over those of prior periods as the results of the borrowings incurred
in order to finance the Paging Partners merger and the purchases of SunStar and
SourceOne. Also contributing to the increases are higher interest rates in
effect for these floating rate loans. These increases have been partially offset
by the absence of letter of credit fees as incurred in the first quarter of 1999
in connection with the funding of the Bell Atlantic Paging acquisition.

PROVISION FOR INCOME TAXES

As of June 30, 2000 and December 31, 1999, the Company recorded no deferred
tax asset. The future benefit from the realization of the net operating losses
was fully offset by a related valuation allowance. A full valuation allowance
was recorded due to management's uncertainty about the realizability of the
related tax benefits. However, the amount of the deferred tax assets considered
realizable could be adjusted in the future if estimates of taxable income are
revised.

RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1999 AND 1998

Some of the following financial data is presented on a per subscriber unit
basis. Management believes that such a presentation is useful in understanding
year-to-year comparative results by providing a meaningful basis for comparison,
given the differences in business management and in the number of subscribers of
other paging companies.

UNITS IN SERVICE

Units in service totaled 415,000 and 257,000, a 61.5% increase, on a
comparative basis as of December 31, 1999 and 1998, respectively, before
adjustment for certain units (the "BAM Reseller Units") transferred to Bell
Atlantic Mobile ("BAM") effective December 1, 1999. Aquis and BAM entered into a
reseller agreement for these units in connection with the purchase of the assets
of BAPCO. Aquis had the option to cancel the reseller agreement for the BAM
Reseller Units and did so in December 1999 because these units were not
profitable to the Company. Net of the transfer, units in service totaled 375,000
and 226,000, respectively, and represent a net growth rate of nearly 66%. This
growth was achieved through the merger with Paging Partners Corporation on
March 31, 1999, and was partially offset by customer disconnections at a rate of
2.7% per month.

REVENUES

Paging service revenues for the years ended December 31, 1999 and 1998,
respectively, were $30,368,000 and $23,309,000, an increase of approximately
$7,059,000 or more than 30%. The increase in service revenues was attributable
to the increase in the number of subscribers resulting primarily from the
March 31, 1999 Paging Partners merger, and, to a smaller extent, to an increase
in demand for such value-added services as alpha dispatch, sports, news and
business data messaging. Average monthly revenue per unit was $6.84 during 1999,
compared to $7.18 during 1998. This change in average monthly revenue per unit
was primarily the result of the Company's addition of reseller units through the
Paging Partners merger and to a lesser extent was the result of pricing
pressures in a highly competitive marketplace. Resellers purchase the Company's
services in bulk and are therefore provided rates lower than those made
available to the Company's direct subscribers. The relative weight of reseller
revenues to total service revenues has increased from about 11% of service
revenues during the first quarter of 1999, to about 28% for subsequent quarters
as the result of the merger. Approximately

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97% of the total revenues recognized in 1999 were derived from fixed periodic
fees from paging services that are not dependent upon usage.

Revenues from sales of paging equipment declined from $3,123,000 in 1998 to
$791,000 in 1999. This was the result of two factors. First, sales to Bell
Atlantic Mobile and the OTC's, entities that were significant resellers of
paging equipment and services in years prior to 1999, were substantially
eliminated as a result of Aquis' purchase of the business at December 31, 1998.
Second, in response to consumer demand for less costly equipment, Aquis began
marketing lower-cost units at reduced sales prices in 1999, representing a
departure from the Predecessor Company's high-end, high-cost strategy.

During the year ended December 31, 1999, the Company generated approximately
97% of its total revenue from fixed periodic fees for paging services that are
not generally dependent on usage. The average of the monthly disconnection or
churn rates (not weighted and excluding the effects from the Paging Partners
subscriber base) for the years ended December 31, 1999 and 1998, were 3.1% and
2.9%, respectively. Including the stabilizing effects of the Paging Partners
reseller base added April 1, the churn rate was 2.7% for calendar year 1999.

COST OF PAGING SERVICES

Cost of service consists principally of fees paid to third party carriers,
and, to a lesser extent, to message dispatch companies. Third party carriers are
utilized when a customer requires service outside of the Company's service area,
and are most commonly used to provide nationwide coverage. The costs of such
services increased from $4,968,000 in 1998 to $7,753,000 in 1999. The increases
are attributable primarily to growth of the subscriber base, and to an increase
in customer demand for services such as wide-area, nationwide, alpha dispatch,
and other message dispatch services.

COST OF EQUIPMENT SALES

The cost of equipment sold during fiscal year 1999 was $947,000, a decline
of $1,762,000 from the prior year level of $2,709,000. The previously-described
reduction of sales to Bell Atlantic Mobile and the Operating telephone companies
contributed to the decrease, as did the Company's move toward lower-cost pagers
and an increase in demand for rental units. Declines in average pager costs also
contributed to the reduction.

TECHNICAL OPERATIONS

Technical operating expenses include transmission site rentals, telephone
interconnect services and the costs of network maintenance and engineering.
These expenses totaled $5,317,000 and $3,482,000 during the years ended
December 31, 1999 and 1998, respectively. Additional costs were incurred to
operate and maintain the Company's expanded network resulting from the merger
with Paging Partners on March 31, 1999. In addition, the elimination of certain
expenses allocated by BAPCO was offset by greater external unsubsidized third
party costs for transmitter and terminal site rents, telephone company access
charges, and personnel costs in the current year.

SALES AND MARKETING

Selling and marketing expenses include the cost to acquire and retain
subscribers, operating costs associated with the sales and marketing
organization, and other advertising and marketing expenses. These costs
increased from $3,394,000 in 1998 to $3,881,000 in 1999, or approximately 14.3%
from 1998 to 1999, resulting from the opening of additional sales offices and a
corresponding increase in sales and support staff and related administrative
operations and selling costs. These increases were partially offset by a
reduction of sales commissions resulting from a revised commission plan
implemented in 1999 and a decrease in print advertising expenses.

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GENERAL AND ADMINISTRATIVE

General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. These costs increased
as a percentage of service revenues from about 24.3% in 1998 to 25.3% in 1999.
The increase was largely attributable to a settlement of certain employment
claims made by the Company's former President, settled in the approximate amount
of $742,000 and charged against 1999 results of operations. The increase was
also attributable to higher office occupancy and customer service and call
center support costs that were partially offset by reductions in billing and
data processing expenses. Also contributing to the increase were costs
associated with the transition to a public reporting entity. However,
Predecessor Company amounts were lower due its existence as a subsidiary of Bell
Atlantic rather than operating as an independent entity.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased to $10,878,000 in 1999 from
$4,323,000 during the prior year. Bell Atlantic, the Predecessor Company,
recorded the cost of the use of the network and communications operating assets
through intercompany charges from the affiliated operating telephone companies
that owned the assets during 1998. In substance, the Predecessor Company leased
these assets while the Company, as owner and operator, allocates such costs to
operations. The increases in depreciation and amortization are also attributable
to the allocation of the purchase price of tangible and intangible assets, which
exceeded their historical costs, acquired from the Bell Atlantic companies and
through the merger with Paging Partners.

ABANDONED BUSINESS COMBINATIONS

On November 8, 1999, the Company announced the termination of discussions
concerning the June 21, 1999 Memorandum of Understanding to merge with
Intelispan, Inc. In addition, the Company also terminated its efforts to acquire
Francis Communications and certain additional telecommunications services
providers and resellers. Earnings for 1999 have been charged $1,692,000 for the
write off of related capitalized costs.

INTEREST EXPENSE

Net interest expense was $3,004,000 for the year ended December 31, 1999 and
none for 1998. The 1999 expenses include interest costs related to the senior
debt and the five year term loan due to FINOVA, and additional fees and
first-quarter charges of $299,000 related to letters of credit used in
connection with the Company's mergers and acquisitions. In years prior to 1999,
BAPCO carried no external debt.

INCOME TAXES

The provision for income taxes decreased in the current periods as a result
of the Company's operating loss for book and tax purposes. During the prior
period, the income and expenses of the Predecessor Company were included in the
consolidated Federal and certain combined state income tax returns of its parent
and the prior year provisions for income taxes have been calculated on a
separate return basis herein.

RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1998 AND 1997

UNITS IN SERVICE

Units in service totaled 257,000 and 218,000 as of December 31, 1998 and
1997. This increase represents an annual net growth rate of 18%. Unit growth
resulted primarily from the overall industry

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growth in numeric and alphanumeric wireless messaging and was partially offset
by monthly customer disconnection rates of 2.9% in 1998 and 2.4% in 1997.

REVENUES

Paging service revenues for the years ended December 31, 1998 and 1997,
respectively, were $23,309,000 and $17,894,000, an increase of approximately
$5,415,000 or more than 30%. The increase in service revenues was attributable
to the increase in the number of subscribers and, to a smaller extent, to an
increase in demand for such value-added services as alpha dispatch, sports, news
and business data messaging, which in turn produced an increase in average
monthly revenue per unit from year to year. Average revenue per unit was $7.18
during 1998, compared to $6.84 in 1997.

Revenues from sales of paging equipment increased from $2,795,000 in 1997 to
$3,123,000 in 1998. This was the result of several factors, including new
product introductions by the Company's major supplier, increased productivity
from its telemarketing channel, and higher sales to the Company's affiliates.

COST OF PAGING SERVICES

The costs of paging services were $4,968,000 and $4,401,000 in 1998 and
1997, respectively. The increase is attributable primarily to growth of the
subscriber base, and to an increase in customer demand for services such as,
nationwide, alpha dispatch, and other message dispatch services.

COST OF EQUIPMENT SALES

The cost of equipment sold during fiscal years 1998 and 1997 was $2,709,000
and $2,873,000, respectively, representing a decline of $164,000. Declines in
supply costs available from vendors were partially offset by an increase in the
number of units sold. In addition, the cost of sales for 1997 included higher
charges for obsolescence than required for 1998.

TECHNICAL OPERATIONS

These expenses totaled $3,482,000 and $2,023,000 during the years ended
December 31, 1998 and 1997, respectively. Additional trunking, labor and other
costs were incurred to operate and maintain the Company's growing communications
network.

SALES AND MARKETING

Costs incurred were $3,394,000 in 1998 and $2,844,000 in 1997. The increase
resulted from an increase in the size of the sales team and the change in the
commission structure to encourage revenue growth and sales of value-added,
higher-margined services. The previous commission plan was unit-volume oriented.
Print advertising remained consistent for both years.

GENERAL AND ADMINISTRATIVE

These costs totaled $5,657,000 and $4,211,000 in 1998 and 1997,
respectively. As a percentage of revenue, these costs were about 24% of service
revenues for both 1998 and 1997. Approximately $1,000,000 of the increase was
attributed to the expansion of the Company's customer service call centers,
information systems and administrative capabilities to support the growing
subscriber base.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization in 1998 and 1997 was $4,323,000 and
$3,378,000, respectively. The increase was primarily due to the growth of the
Company's rental pager pool.

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PROVISION FOR INCOME TAXES

The provision for income taxes was $296,000 and $168,000 in 1998 and 1997,
respectively. Excluding the interest and certain other minor administrative
expenses incurred by Aquis during its start-up activities in 1998, the effective
tax rates for 1998 and 1997 approximated 41%. During these two years, the income
and expenses of the Predecessor Company were included in the consolidated
Federal and certain combined state income tax returns of its parent and the
provisions for income taxes have been calculated on a separate return basis
herein. See the footnotes to the consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations require substantial funds to finance the growth of
its existing operations and customer base, expansion into new markets and
strategic acquisitions. Additional cash requirements include debt service,
working capital and general corporate requirements.

The Company's operations, excluding $337,000 used by internet operations,
used about $564,000 of net cash during the current year to date, while operating
activities provided net cash of $3,215,000 for the six months ended June 30,
1999. The primary use of cash during the six months ended June 30, 2000 and 1999
was the financing of paging subscriber receivables in the approximate net
amounts of $1,237,000 and $2,744,000, respectively. For the six months ended
June 30, 2000 and 1999, respectively, operating cash flows totaling $295,000 and
$2,361,000 were provided by the Company's growth of accounts payable as a result
of the increased paging infrastructure acquired from Paging Partners and
SourceOne, and of the deferral of payments to other vendors and suppliers. In
response to the results of its June 30, 2000 operating activities the Company is
continuing to pursue the strategies previously planned, and has sold its
internet operations.

Consolidation of the paging industry and continuing concerns about
profitability and liquidity with respect to many companies in the industry has
led the industry and the Company to a marketing strategy intended to focus on
operating margins rather than on subscriber growth. Implementation of
corresponding commission and other related plans has been substantially
completed to ensure alignment of sales objectives and corporate goals to focus
on higher-margin alphanumeric service, as well as value-added services.

- The Company has continued to focus on growth of its core business and
improvement in utilization of its paging system capacity. Through
alternative sales initiatives and additional strategic alliances combining
paging, email and the internet, along with the use of its paging network
to broadcast information for content providers on a metered basis, the
Company anticipates improvements in operating margins.

- Although revenues during the six-month periods ended June 30, 2000
exceeded those of 1999, the Company continues to face competitive pricing
pressures in its markets, resulting in decreasing average revenue per
unit, increased subscriber churn rates and lower operating margins. The
units in service decreased from approximately 455,000 at June 30, 1999 to
about 390,000 at June 30, 2000. This decrease is primarily attributable to
the cancellation of Bell Atlantic Mobile units in December, 1999 and
April, 2000. The Company is continuing marketing efforts to expand its
units in service and will continue to explore strategic acquisitions to
grow the customer base.

- The Company is continuing marketing efforts to regain some of the
resellers lost as a result of certain integration issues connected with
the Paging Partners merger.

- The Company continues to plan, explore and implement alternatives to
offset these trends by (i) negotiating more favorable terms from existing
and alternative paging equipment suppliers, and (ii) obtaining third party
financing to finance such purchases. The Company has also sold its

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non-core internet services assets. In addition, the Company believes that
cash from operations combined with current cash and cash equivalents will
satisfy the Company's capital requirements in 2000 and the first half of
2001.

During 2000, the Company used net cash of $3,050,000 in connection with the
acquisition of SourceOne and Suburban Paging and for the purchase of equipment,
excluding $252,000 of expenditures related primarily to certain licensing of its
internet activities. This represents a decline of $17,170,000 from 1999 net cash
used for the same activities and is primarily related to the $18,535,000 of cash
used in 1999 in connection with the paging assets purchased from BAPCO.

For the periods ended June 30, 2000 and 1999, net cash provided from
financing activities totaled $2,813,000 and $19,242,000, respectively. The
decrease is related to reduced borrowings during the current period under the
Company's senior credit facility. The Company borrowed $2,450,000 during the
current six-month period to complete the SourceOne transaction, and borrowed
$20,500,000 during the period ended March 31, 1999 to complete the asset
purchase from BAPCO. Concurrent with the loan of $2,450 in January 2000, the
Company agreed with its lender to forego any further borrowings under this
facility. In April 2000, the Company elected to make an additional payment of
$1,250,000 to reduce the current year loan of $2,450,000 in order to avoid the
increased interest rates that would have been assessed in the absence of such a
payment. This payment was made through use of the proceeds of an 11% bridge loan
extended to the Company in April 2000 in the amount of $2,000,000. The bridge
loan is convertible into common stock at the election of the lender at 90% of
the market price calculated in the loan agreement for the 22-day trading period
prior to conversion. The balance of the bridge loan was used to pay associated
fees and was used for the purchase of additional paging equipment and to meet
general working capital needs.

The Company was not in compliance with certain debt covenants at
December 31, 1999. Accordingly fees of $200,000 were paid in connection with
issuance of the amendment and waiver issued by the lender in April 2000. As
specified in this amendment, Aquis is also subject to certain quarterly
contingent fees if future covenants are not met. Scheduled quarterly principal
payments to the lender began on July 1, 2000, with principal payments totaling
$1,294,000 coming due during the twelve months ended June 30, 2001.

Company management periodically prepares internal projections of cash flows,
EBITDA, and other financial measures. These projections are based on the
Company's business plan, certain operating assumptions and general conditions in
the wireless industry. The assumptions made are believed to be reasonable, but
are subject to uncertainty. If the Company was unable to meet its projections,
it would be in default of certain covenants currently in effect. In the event of
default, the Company's lender could elect to demand payment of all amounts then
outstanding. It is unlikely that the Company's cash and other liquid resources
would be adequate to meet such a demand.

On September 27, 2000, the Company signed an amendment to modify certain
terms of its existing Senior Loan Agreement. These modifications would permit
the Company to retain all proceeds from the sale of its internet operations,
give Aquis an option to reduce the scheduled principal payment due on July 1,
2001 from $514,000 to $200,000, and relaxes certain financial ratio covenants
through the third quarter of 2001. However, the Company's projections indicate
that unamended financial covenants will not be met during the fourth quarter of
2001, which could cause the lender to accelerate the maturity date of the loan.
In exchange, the Company has agreed to pay a fee of $100,000 to FINOVA. Further,
additional contingent fees of up to $250,000 per quarter will be added to the
principal balance due at final maturity if the Company is unable to meet the
financial ratios as amended in April, 2000. Finally upon the sale of the
internet operations, a principal payment of $2,000,000 would be required on or
before December 31, 2000 in order to avoid the assessment of a $500,000 fee and
an interest rate increase of 2%. That fee would also be added to the principal
balance otherwise payable at the maturity of this loan.

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At June 30, 2000, the Company had a working capital deficit of $3,488,000,
which represents a decrease of $406,000 from the deficit at December 31, 1999.
The Company expects that its working capital will improve as a result of sale of
its internet operations. The Company does not anticipate that such working
capital deficit will continue in 2000 based on the funding it is seeking, cash
flows from the sale of its internet assets, and cash generated by its paging
operations.

The Company's principal source of liquidity at June 30, 2000 included cash
and cash equivalents of about $473,000 and the cash proceeds from the sale of
the Company's internet assets. The Company believes that these resources will be
sufficient to meet the covenants that are the subject of the amendment with
Finova dated September 27, 2000 as well as its anticipated working capital and
capital expenditure requirements through at least June 30, 2001. However, if
cash from operations is not sufficient to fund the planned growth of the core
business or if the Company experiences further average revenue per unit
deterioration or if certain contingencies are resolved unfavorably, the Company
is prepared to implement the balance of its alternative business plan. This
alternative plan in its entirety called for the sale of the Internet subsidiary
and other assets and for a reduction of planned marketing expenditures and
capital expenditures. Implementing one aspect of this plan, the Company has sold
the Internet subsidiary's net assets. It must also be noted that cash
requirements of the paging business may vary materially from those now planned
as a result of unforeseen changes that could consume a significant portion of
available resources or as a result of an increased rate of attrition of the
customer base.

SEASONALITY

Pager usage is slightly higher during the spring and summer months, which is
reflected in higher incremental usage fees. Retail sales were subject to
seasonal fluctuations that affect retail sales generally. Otherwise, the results
were generally not significantly affected by seasonal factors.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2000, the Company had approximately $27,550,000 of
floating-rate debt outstanding. As of December 31, 1999, total floating-rate
debt was $26,460,000. The Company's management believes the interest rate risk
represented by this debt is not material to its operating results or its
capitalization. The Company has not, and does not plan to, enter into any
derivative financial instruments for trading or speculative purposes. As of
June 30, 2000, the Company had no other significant material exposure to market
risk.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999 the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements, amended in March 2000, which provides guidance on the application of
generally accepted accounting principles to revenue recognition in financial
statements. The Company will adopt SAB 101 in the second quarter of 2000 and
believes that adoption will not have a significant effect on its consolidated
results of operations or its financial position.

In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No.. 25" ("FIN No. 44"). The
Interpretation provides guidance for certain issues relating to stock
compensation involving employees that arose in applying APB Opinion 25. The
provisions of FIN No. 44 are effectively July 1, 2000. The adoption of FIN 44
did not have an impact on the Company's financial statements.

24
<PAGE>
YEAR 2000

The Company's Year 2000 initiatives have been successful to date. Aquis'
approach to this issue was to subdivide its Year 2000 remediation program into
four distinct segments: 1) create a prioritized inventory of items to be
assessed, 2) assess their readiness through testing, 3) plan and implement
corrective actions, and 4) develop contingency plans. The Company has
transitioned all of its significant systems to the new millennium without
experiencing significant problems in any areas.

The Company's contingency planning has provided for plans to respond to any
known Year 2000 concerns that may affect its day-to-day operations or its
infrastructure. Aquis is not currently aware of any significant Year 2000 or
similar problems that have arisen for its customers or suppliers. Therefore,
management believes it has minimized its risk related to future exposure
concerning Year 2000 issues. The Company intends to continue to monitor Year
2000 issues and does not believe such future costs will be material to the
Company's results of operations, financial position or liquidity.

FORWARD-LOOKING STATEMENTS

Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors that are inherently uncertain and difficult to
predict. Therefore, no assurance can be given that financing for such
investments will be available. In addition, no assurance can be given that the
Company's operations will generate positive cash flows.

This Management's Discussion and Analysis of Financial Condition and Results
of Operations contain forward-looking statements made by the Company's
management that are based on current expectations, estimates and projections
about the industries in which the Company operates and management's beliefs and
assumptions. In addition, other written or oral statements that constitute
forward-looking statements may be made by or on behalf of the Company. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," or various of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.

25
<PAGE>
BUSINESS

DEVELOPMENT OF BUSINESS

Aquis was incorporated under the laws of Delaware on February 17, 1994 as
"Paging Partners Corporation." The Company commenced construction of its paging
system in November 1990 and initiated service in June 1991.

On March 31, 1999 the Company, through a wholly-owned subsidiary, merged
with Aquis Communications, Inc. ("ACI") in a transaction accounted for as a
reverse acquisition. In connection with the merger, the Company changed its name
to its present name. On December 31, 1998, ACI acquired licenses and other
assets relating to the paging business of the Bell Atlantic Corporation (the "BA
Paging Business"), subject to certain liabilities relating to the BA Paging
Business. The purchase price for the Paging Business was approximately
$29,200,000 which was financed by a blend of senior debt, seller financing and
equity. As of December 31, 1998, the BA Paging Business served approximately
257,000 users. Prior to December 31, 1998, ACI had conducted no business.

On June 15, 1999, a wholly-owned subsidiary of the Company entered into a
Stock Purchase Agreement with SunStar Communications, Inc., an Arizona
corporation ("SunStar"), and SunStar One, LLC, an Arizona limited liability
company. SunStar sells secure Internet services over an intelligent private
network, provides dial-up internet access services to corporate and individual
subscribers and can provide enhanced security standards for user authentication.
Pursuant to the agreement, SunStar became a wholly-owned subsidiary of the
Company and changed its name to "Aquis IP Communications, Inc." Total
consideration paid was $275,000 cash and 1,150,000 shares of the Company's
common stock. On August 31, 2000, the Company sold substantially all of the
assets of the Aquis IP to an investment group headed by Aquis IP's former
president and a current director of the Company for approximately $2,970,000 in
cash, a note and assumption of indebtedness.

On January 31, 2000, Aquis, through its wholly-owned subsidiary, ACI,
acquired substantially all of the assets of SourceOne Wireless, Inc. ("SOWI"),
SourceOne Wireless, L.L.C. ("LLC"), and SourceOne Wireless II, L.L.C. ("LLCII"
and collectively, with SOWI and LLC, "SourceOne"). SourceOne operated Commercial
Mobile Radio Service one-way paging systems on multiple frequencies in the
midwest and other geographical areas in the United States (the "SourceOne Paging
Systems"). The SourceOne Paging Systems provided service to subscribers pursuant
to licenses issued to LLC II by the Federal Communications Commission (the
"FCC"). On April 29, 1999, SOWI and, on July 2, 1999, LLC (together with SOWI,
"Debtors") filed voluntary petitions for relief in the Bankruptcy Court for the
Northern District of Illinois (Eastern District) (the "Bankruptcy Court") under
Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). ACI
and SourceOne entered into an Asset Purchase Agreement dated as of August 2,
1999, as amended by the Amendment to Asset Purchase Agreement dated as of
November 15, 1999 (the "SourceOne Purchase Agreement"). Due to the Debtors'
insufficient resources to continue operations of the SourceOne Paging Systems,
ACI and SourceOne entered into an Agreement Pending Purchase Closing dated as of
August 2, 1999 (the "Management Agreement"), pursuant to which ACI agreed to
manage the SourceOne Paging Systems located in the Midwest United States. On
November 18, 1999, the Bankruptcy Court entered an order (the "Order") approving
the SourceOne Purchase Agreement, as amended, authorizing the Debtors to execute
and deliver the SourceOne Purchase Agreement, as amended, to the Company,
authorizing and directing the Debtors to implement and satisfy the procedures
necessary to assume and assign certain executory contracts and unexpired leases
to the Company, and authorizing and directing the consummation by the Debtors of
the sale of substantially all of their assets to the Company under
Section 363(b) of the Bankruptcy Code as contemplated by the SourceOne Purchase
Agreement, which closed on January 31, 2000. As consideration for the purchase
of the assets acquired from SourceOne, the Company paid a purchase price
consisting of: (i) $2.25 million in cash; and (ii) $1.5 million of the

26
<PAGE>
Company's 7 1/2% Redeemable Preferred Stock. In addition, the Company assumed or
agreed to perform the following obligations and liabilities of SourceOne:

- all liabilities and obligations that accrue or are required to be
performed after the Closing Date pursuant to any unexpired leases or
executory contracts that were included in the assets acquired by the
Company and assumed and assigned under Bankruptcy Code Section 365
pursuant to the Order;

- all liabilities and obligations that accrue or are required to be
performed after the Closing Date to the extent related to the ownership or
operation of the Paging Systems acquired by the Company;

- all liabilities and obligations of SourceOne for revenues billed or
received by SourceOne for services not yet rendered as of the Closing
Date;

- all liabilities with respect to the return of or performance required as a
result of deposits made by subscribers of the Paging Systems with
SourceOne; and

- severance compensation for certain SourceOne employees.

The Company obtained the funds for the cash portion of the purchase price
through an extension of an existing credit facility it had with FINOVA.

On May 22, 2000, the Company acquired certain assets from Suburban
Connect, L.P., a regional paging services reseller headquartered in West
Chester, Pennsylvania. In connection with the acquisition, the Company issued to
Suburban Connect, L.P. 319,518 shares of its common stock. The acquisition
agreement between the Company and Suburban Connect, L.P. provides for an
additional payment, in cash or through the issuance to Suburban Connect, L.P. of
additional shares of common stock, in the event average closing price of the
Company's common stock for the ten trading days prior to April 16, 2001 does not
exceed $5.00. The adjustment amount per share of stock previously issued to
Suburban Connect, L.P., would be equal to the difference between $5.00 and the
average closing price per share for the Company's common stock during the
measuring period, and if the Company elects to make such payments in additional
shares of common stock, the stock will be valued at the average closing price
for ten trading day period prior to April 16, 2001.

On September 18, 2000, the Company sold substantially all of the internet
business assets of its subsidiary Aquis IP Communications, Inc. to an investor
group headed by John Hobko, the former president of Aquis IP, and John B.
Frieling, a current director of the Company.

In return for the assets sold, the buyers paid to the Company and directly
to a creditor of the Company on the Company's behalf, aggregate cash proceeds of
$987,000, and also issued to the Company a secured note in the amount of
approximately $1,329,000, which note is due on October 31, 2000 (unless
otherwise extended to not later than December 31, 2000, at the option of the
investor group upon payment of fees of up to $100,000 for such extension).

During 1999 the Company entered into several other acquisition agreements,
including ABC Paging, Inc., COMAV Corporation, Francis Communications, Inc. and
Intelispan, Inc. Although the Company incurred significant transaction fees and
paid deposits on account of these acquisitions, it determined not to proceed
with these transactions. The Company will continue to pursue opportunistic
acquisitions.

GENERAL

The Company is a leading provider of paging and other wireless messaging
services through its local and regional wireless networks. The Company offers
messaging services through a seven state regional network that provides coverage
into New York, New Jersey, Connecticut, Pennsylvania,

27
<PAGE>
Maryland, Virginia, Delaware and Washington, D.C. as well as through a regional
network providing coverage in six states including Illinois, Indiana, Michigan,
Wisconsin, Minnesota, and Missouri. The Company also provides service to over
1,000 U.S. cities, including the top 100 metropolitan areas through an
interconnect agreement with a nationwide wireless messaging provider. Since
beginning operations in 1994 the Company's subscriber base has increased to
approximately 389,000 units in service as of June 30, 2000. The Company has
achieved this through a combination of internal growth and a program of mergers
and acquisitions. As of December 31, 1999, the Company was the tenth largest
messaging company in the United States based on the number of subscribers.

The Company has traditionally operated technologically advanced paging
systems that provide one-way wireless messaging services. The Company has
recently decided to enter the two-way or advanced wireless messaging space. With
the Company's move into advanced wireless messaging the Company envisions itself
as taking part in the convergence of Internet and wireless data services. To
that end, the Company has executed an interconnect agreement with a nationwide
advanced messaging provider. This agreement allows the Company to pass advanced
wireless messaging traffic from its existing technical and engineering
infrastructure to the nationwide advanced wireless messaging company's
transmission facilities on both a regional and nationwide basis. The Company
feels this agreement is important because it allows for a seamless "switched'
environment in which the Company can market advanced wireless messaging services
to its existing subscriber base as well as take part in the potential high
growth of new applications which will require advanced wireless messaging
capabilities.

The Company believes that the paging and wireless messaging industry is
likely to undergo additional consolidation and has announced that it intends to
participate in the consolidation process. Potential future consolidations would
be evaluated on several key operating and financial elements including
geographic presence, potential increase in both free and operating cash flow,
potential synergies and availability of financing. Any potential transaction may
result in substantial capital requirements for which additional financing may be
required. No assurance can be given that such additional financing would be
available on terms satisfactory to the Company.

The Company derives a majority of its revenues from fixed, periodic (usually
monthly) fees, generally not dependent on usage, charged to subscribers for
paging and wireless messaging services. While a subscriber continues to use its
services, operating results benefit from this recurring revenue with minimal
requirements for incremental selling expenses or fixed costs.

MARKETING

The Company has grown internally by broadening its distribution network and
expanding its target market to capitalize on the growing appeal of messaging and
other wireless products and services. Over the past several years, the Company
has emphasized a distribution channel that is characterized by lower average
revenue per unit (average revenue per unit), such as resellers, and
correspondingly lower operating costs. To offset declines in average revenue per
unit and to capitalize on the growth of paging and other wireless advanced
messaging services, the Company has expanded its channels of distribution
through acquisition, strategic partnerships and alliances, and internal
initiatives. While the Company has expanded its distribution strategy beyond the
reseller model it still views the reseller distribution channel as an additional
revenue opportunity and a lower-cost avenue for growth.

The Company markets its wireless messaging products and services through its
Aquis Wireless subsidiary. Aquis Wireless employs a direct sales force that
targets commercial business accounts. It also markets services through its
indirect distribution channel. The indirect distribution channel consists of
both resellers and agents. Resellers purchase airtime and resell this airtime to
its subscriber base. Aquis Wireless provides one invoice to the reseller and the
reseller invoices its subscriber on an

28
<PAGE>
individual basis. Agents offer a branded Aquis Wireless product and receive a
commission or margin for doing so, and Aquis Wireless subsequently bills the
subscriber for services sold by its agent.

Additional marketing efforts include an inbound call center that accepts
orders for products and services. Calls may be generated by yellow page
advertisements or advertising campaigns. Aquis Wireless maintains field offices
in New York, New Jersey, Maryland, Virginia, and Illinois. These offices are
available for subscribers to walk in and purchase products and services. Aquis
Wireless also maintains an Internet site in which customers may purchase
products and services. The web site also allows Aquis Wireless resellers an
access point to maintain their accounts via web based technology.

SOURCES OF EQUIPMENT

The Company does not manufacture any of the equipment used in its
operations, all of which is available from a variety of sources. Due to the high
degree of compatibility among different models of transmitters, computers and
other paging and voice mail equipment, the Company has been able to design its
paging networks so as not to be dependent upon any single source for such
equipment. The Company periodically evaluates its purchasing arrangements for
pagers to be sure that the equipment it is offering is current and is available
at appropriate prices.

The Company currently purchases its transmitters and paging network
equipment from Motorola and Glenayre. The Company's terminal equipment has a
modular design, which will allow significant future expansion by adding or
replacing modules rather than replacing the entire system. The Company believes
that its investment in technologically advanced transmission equipment reduces
its cost of maintenance and system expansion over the long term. The Company
believes that its paging system equipment is among the most technologically
sophisticated in the paging industry.

COMPETITION

The Company faces intense competition from operators of other wireless
transmission systems. Such competition is based upon price, the quality and
variety of services offered, and the geographic area covered. Competitors of the
Company include local, regional and national messaging companies. Certain
competitors offer wider coverage than does the Company and certain competitors
follow a low-price discounting strategy to expand market share.

A number of technologies, including cellular telephone service, personal
communications service ("PCS"), enhanced specialized mobile radio, low-speed
data networks and mobile satellite services are competitive forms of technology
used in, or projected to be used for, wireless one and two-way communications.
The Company believes that paging will remain one of the lowest-cost forms of
wireless messaging due to the low-cost infrastructure associated with paging
systems.

Future technological developments in the wireless communications industry
and the enhancement of current technologies will likely create new products and
services competitive with the paging services currently offered by the Company.
There can be no assurance that the Company will not be adversely affected by
such technological changes.

REGULATION

The Company's paging operations are subject to regulation by the Federal
Communications Commission ("FCC") under the Communications Act of 1934, as
amended (the "Communications Act") and the Telecommunications Act of 1996 ("1996
Act"). The Company is required to obtain licenses from the FCC to use the radio
frequencies necessary for its paging operations. These authorizations specify
the particular locations and frequencies authorized for use by the Company and
set forth technical parameters such as power, tower height and antenna
specifications under which the Company is permitted to use its frequencies.

29
<PAGE>
The Company's current operations are governed under the Commission's Rules
covering commercial mobile radio services ("CMRS"). CMRS licensees must provide
interconnection upon reasonable request, must not engage in any unreasonably
discriminatory practices and are subject to complaints regarding any unlawful
practices. The Company is also subject to provisions that authorize the FCC to
provide remedial relief to an aggrieved party upon finding of a violation of the
Communications Act and related customer protection provisions.

The Company's FCC licenses are issued for ten years. At the end of the
ten-year term, the Company must file applications for renewal of its
authorizations. The Company can expect renewal if it has met minimum service
requirements. While there can be no assurance that any future renewal
applications filed by the Company will be approved, based upon its experience to
date, the Company knows of no reason to believe that such renewal applications
would not be routinely approved.

The Communications Act requires prior FCC approval for the transfer of
control of a Company that holds FCC radio licenses as well as prior consent to
the assignment of such licenses to another entity. Although there can be no
assurances that any such future applications filed by the Company will be
approved or acted upon in a timely manner by the FCC, the Company, based on its
past experience, knows of no reason to believe that any future transfer or
assignment applications would not be ultimately approved.

The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") imposed a
structure of regulatory fees, which the Company is required to pay with respect
to its licenses. These fees are revised on an annual basis. The Company believes
that these regulatory fees will not have a material adverse effect on the
Company's business.

The Communications Act also limits foreign ownership in FCC licensed CMRS
entities to no more than twenty percent (20%) direct ownership and, without
Commission consent, no more than twenty-five (25%) indirect ownership. However,
as the result of the World Trade Organization ("WTO") Agreement on Basic
Telecommunications Service entered into February 15, 1997 and effective
February 5, 1998, the Commission liberalized foreign participation in the U.S.
telecommunications market by action taken November 25, 1997. This action allows
for an expedited process of approving indirect ownership over the 25% level for
WTO signatories.

The FCC, under the Communications Act, has authority to revoke or modify
licenses issued by it. Any such revocation can only occur after notice and
opportunity for hearing based upon egregious misconduct by the licensee. No
license of the Company has ever been revoked or modified involuntarily.

Paging authorizations, such as those held by the Company, have traditionally
been issued on a site-specific basis. However, the FCC, on February 19, 1997,
adopted an Order looking to fundamental changes in its regulation of the paging
industry. Specifically, the FCC will, in the future, issue most paging licenses
on a geographic basis. The future licensees will be given operating authority on
particular frequencies within these geographic areas, subject only to protection
of incumbent operators from interference. The FCC proposes to award these future
paging licenses by competitive bidding (auctions). The Company, as an incumbent
licensee, will be entitled to interference protection from such auction winners
for its existing operations. However, the Company's ability to expand its
service territories will be affected by these new policies.

Because the auctions are new to paging, the Company cannot predict their
impact on its business, although at this time management believes that the
impact of such auctions on the Company will not be material. Initially, auctions
or competitive bidding may increase the Company's cost of obtaining
authorizations from the FCC. The FCC's new wide-area licensing and auction Rules
may also serve as a barrier to new participants to the paging industry. On the
other hand, the more flexible licensing requirements should save on application
costs associated with making changes to facilities within the

30
<PAGE>
wide area should the Company be successful and bid for wide areas or within its
incumbent geographic areas. On the other hand, if the Company is not a winner in
the auctions for broad geographic areas, its ability to expand its service
territories will be affected by these new policies.

In the future, the Congress may modify or amend the Communications Act and
the FCC may modify its Rules or Policies in ways that could have a material
adverse effect on the Company's business. Such actions may affect the scope and
manner of the Company's operations and delivery of its service. As a result of
the enactment of the 1996 Act, the Company has incurred additional financial
obligations. In November 1996, in response to a directive in the 1996 Act, the
FCC adopted new rules that govern compensation to be paid to pay phone
providers. After these rules were vacated by the U.S. Court of Appeals for the
D.C. Circuit, the FCC released an order mandating that long distance carriers
compensate pay phone providers 28.4 cents for each 800 Number call during a
two-year interim period. The long distance carriers have either passed this cost
through to the paging companies that provide toll-free service to their
subscribers or have blocked payphone calls to toll-free Numbers. This has
increased the cost of providing certain toll-free messaging services and limited
the utility of toll-free Number service. Petitions for review and stay of this
order have been filed with a federal appellate court. Also, in response to
changes made by the 1996 Act, the FCC has adopted new rules regarding payments
by telecommunications firms into a revamped fund that will provide for the
widespread availability of telecommunications services, including to low-income
consumers ("Universal Service"). Prior to the implementation of the 1996 Act,
local telephone companies largely met Universal Service obligations. Under the
new rules, all telecommunications carriers, including paging companies, are
required to contribute to the Universal Service Fund. Payments into the fund
have increased the cost of doing business and could make the Company's service
less competitive with the other services. However, under the 1996 Act, local
exchange carriers are prohibited from charging paging carriers for the
"transport and termination" of local exchange carrier originated traffic. This
has already led to substantial savings for the Company. In addition, paging
carriers may be entitled to compensation from other telecommunications carriers
that terminate a call on a paging network. This could lead to additional revenue
for the Company. Of course, the Company cannot predict the final outcome of any
FCC proceedings, any court challenges to any FCC Rules or Policies or predict
what Congress may, in the future, propose in the way of changes to the
telecommunications laws.

In connection with state regulations, under the amendments to the
Communications Act included in the Budget Act, the Congress preempted state and
local rate and entry regulation of all CMRS providers. Entry regulation
typically refers to the process whereby an entity's right to provide service in
a particular market is subject to the prior approval by a regulatory body such
as the state public service commission. Rate regulation traditionally concerns
the amount, terms and conditions that an operator may charge for its services.
These items were usually included in tariffs subject to approval by the state
regulatory body. While state and local regulatory bodies have been preempted
from rate and entry regulation, they may still regulate other aspects of the
Company's service offerings. This apparently has not created any burdensome
state or local regulation since the enactment of the 1993 Budget Act. However,
there can be no assurances that state and local governments will not attempt in
the future to expand their regulatory scope.

The Company is subject to the state and local laws applicable to any
business enterprise. The 1996 Amendments to the Communications Act, however,
have limited the application of state and local zoning regulations requiring
that they not be unreasonably discriminatory among providers of functionally
equivalent wireless services and shall not have the effect of prohibiting the
provision of wireless services.

The foregoing description of certain regulatory considerations does not
purport to be a complete summary of all present federal and state regulatory
requirements nor of all proposed legislation and regulations pertaining to the
Company's present operations.

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<PAGE>
MANAGEMENT

DIRECTORS

The following is a brief description of the business experience of each of
the members of the Board of Directors.

PATRICK M. EGAN has been the Chairman of the Board of the Company since
1999. Mr. Egan has also been the Chairman of the Board and Chief Executive
Officer of Select Security, an electronic security services company, since
November 1997. For approximately 27 years prior thereto, Mr. Egan acted as the
President of the Commonwealth Security Systems, Inc., a major provider of
electronic security services in the mid-Atlantic region.

MICHAEL SALERNO has been the Managing Director of Select Capital
Corporation, an investment management and private equity investment firm, since
July 1996. From June 1995 to July 1996, he was the Chief Financial Officer of
American Future Systems, a privately held publishing company. From
November 1989 to June 1995, Mr. Salerno was an officer and director of the
predecessor to Select Capital Corporation. Prior thereto, he was the President
of MT&T Capital, the venture capital and investment banking subsidiary of MT&T
Bank Corp., a large regional bank holding company.

ROBERT DAVIDOFF has served as a director of the Company since its
organization in February 1994. He is currently serving as Managing Director of
Carl Marks & Co., Inc., an investment banking firm, where he has been employed
since June 1950. He is also a general partner of CMNY Capital, L.P., an
investment company founded in March 1962, general partner of CMNY Capital II,
L.P., a small business investment company founded in June 1989, and chairman of
CM Capital Corporation, an investment vehicle which he founded in March 1982,
all of which are affiliated with Carl Marks & Co., Inc. Mr. Davidoff serves on
the Board of Directors of Hubco Exploration, Inc., Marisa Christina Corporation
and Rex Stores Corporation, all of which are publicly held corporations.

JOHN B. FRIELING is the co-founder and has been the Managing Director of
Deerfield Partners, LLC, an investment banking firm, since June 1997. From
June 1985 through June 1997, he was a founding member and Vice President of
Bariston Associates, Inc., a Boston-based merchant banking firm. Prior to
joining Bariston Associates, he was an associate in the acquisitions department
of Winthrop Financial Associates. Prior thereto, Mr. Frieling practiced
corporate law specializing in mergers, acquisitions and leveraged buyouts. He
currently serves on the Boards of Directors of Touch Technology
International, Inc., a Phoenix-based company that is a leader in transaction
processing for smart card applications, and DC Fabricators, LLC, a New
Jersey-based manufacturer of equipment for use in nuclear submarines.
Mr. Frieling was also named as the Company's Chief Executive Officer on
September 19, 2000.

EXECUTIVE OFFICERS OF THE COMPANY

The following is a brief description of the business experience of each of
the executive officers of the Company who does not serve as a director of the
Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------
<S> <C> <C>
John B. Frieling.......................... 45 Chief Executive Officer of the Company
D. Brian Plunkett......................... 43 Vice President and Chief Financial Officer
of the Company
Brian M. Bobeck........................... 32 Vice President--Engineering of the Company
David S. Laible........................... 34 Vice President--Sales of the Company
</TABLE>

D. BRIAN PLUNKETT served as the Chief Financial Officer, Vice President,
Treasurer and Assistant Secretary of Aquis Communications, Inc. from January 1,
1999 until its merger with the

32
<PAGE>
Company, and as Vice President and Chief Financial Officer of the Company since
that time. Prior thereto, he had been the Chief Financial Officer for
NationPage, Inc., from January 1995. For more than ten years prior thereto,
Mr. Plunkett was employed by PageAmerica Group, Inc., a publicly traded, FCC
licensed facilities-based wireless provider where he served as Vice President of
Finance and Principal Accounting Officer. Mr. Plunkett is a Certified Public
Accountant.

BRIAN M. BOBECK has been Vice President--Engineering, of the Company and its
predecessor since January 1999. During 1998, Mr. Bobeck was Director of
Technical Services for Vanguard Cellular. From 1996 to 1998, Mr. Bobeck was
Director of Engineering for NationPage Inc. Prior thereto, Mr. Bobeck was
Operations Manager for C-TEC Corporation, an independent local exchange carrier.

DAVID S. LAIBLE has been Vice President--Sales of the Company and its
predecessor since January 1999. From April 1996 to December 1998, Mr. Liable was
Director of Sales for Bell Atlantic Paging. Prior thereto, Mr. Laible was
Director--Indirect for Bell Atlantic Mobile.

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<PAGE>
EXECUTIVE COMPENSATION

The following tables sets forth a summary of the compensation paid or
accrued for the fiscal years ended December 31, 1999, 1998 and 1997 by the
Company to or for the benefit of each person who served as chief executive
officer during the fiscal year ended December 31, 1999 and the other executive
officers of the Company whose cash compensation exceeded $100,000 (the "Named
Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------
AWARDS PAYOUTS
---------------------- ---------------
ANNUAL COMPENSATION RESTRICTED
------------------------------ STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S)($) SARS(#) COMPENSATION(i)
--------------------------- -------- -------- -------- ----------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
JOHN X. ADILETTA(ii)...................... 1999 $222.922 -0- -0- 430,683 $4,949
Former Chief Executive Officer 1998 N/A N/A N/A N/A N/A
1997 N/A N/A N/A N/A N/A

D. BRIAN PLUNKETT......................... 1999 $141,667 -0- -0- 316,762 -0-
Chief Financial Officer 1998 N/A N/A N/A N/A N/A
1997 N/A N/A N/A N/A N/A

RICHARD J. GIACCHI(iii)................... 1999 $101,553 -0- -0- -0- -0-
President and Executive Officer 1998 $171,000 -0- -0- -0- -0-
1997 $143,000 -0- -0- -0- -0-

BRIAN M. BOBECK........................... 1999 $111,458 -0- -0- 53,500 $3,129
Vice President--Engineering 1998 N/A N/A N/A N/A N/A
1997 N/A N/A N/A N/A N/A

DAVID S. LAIBLE........................... 1999 $101,577 $31,000 -0- 53,500 $3,977
Vice President--Sales 1998 N/A N/A N/A N/A N/A
1997 N/A N/A N/A N/A -0-

LYNN SZAFRAN.............................. 1999 $ 92,500 $15,511 -0- 53,500 $2,551
Vice President--Operations 1998 N/A N/A N/A) N/A N/A
1997 N/A N/A N/A N/A N/A
</TABLE>

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

(i) Represents matching contributors to the Company's 401(k) plan.

(ii) Mr. Adiletta served as President and Chief Executive Officer from
March 31, 1999 until November, 1999. Mr. Adiletta brought an arbitration
proceeding against the Company seeking additional payments under his
employment agreement. The Company and Mr. Adiletta have resolved all issues
related to Mr. Adiletta's claim pursuant to a Settlement Agreement dated as
of April 4, 2000.

(iii) Mr. Giacchi served as President and Chief Executive Officer until
March 31, 1999. Does not include options to purchase 50,000 shares of Common
Stock granted to Mr. Giacchi in settlement of claims under his employment
agreement subsequent to his resignation as an officer of the Company.

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<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999

The following stock options were granted to the Named Executive Officers
during the year ended December 31, 1999.

<TABLE>
<CAPTION>
# OF
SECURITIES # OF TOTAL
UNDERLYING OPTIONS EXERCISE GRANT DATE
OPTIONS GRANTED TO PRICE PER PRESENT
GRANTED EMPLOYEES IN SHARE VALUE
NAME (#) FISCAL YEAR (%) ($/SH) EXPIRATION DATE ($)(4)
---- ---------- --------------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
John X. Adiletta(5)............. 355,683 33.6% 1.125 January 4, 2009 364,200
7.1% 1.375 August 31, 2009 93,375
D. Brian Plunkett............... 266,762 25.2% 1.125 January 4, 2009 273,150
50,000 4.7% 1.375 August 31, 2009 62,250
Richard J. Giacchi.............. -- -- -- -- --
Brian M. Bobeck................. 53,500 5% 1.00 May 4, 2009 48,850
David S. Laible................. 53,500 5% 1.00 May 4, 2009 48,850
Lynn Szafran.................... 53,500 5% 1.00 May 4, 2009 48,850
</TABLE>

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

(4) The valuation method used was the Black-Scholes option pricing model. The
calculations are based on the following factors as of the grant date:
(i) the expected exercise of the options within three years; (ii) the
risk-free interest rate using treasury note rate of 5.5% over the expected
term of the options; (iii) the current price of the stock was $1.125 with
its expected volatility at 20.54%; (iv) there was no risk of forfeiture; and
(v) dividend yield was not applicable as dividends are not expected.

(5) The Options granted to Mr. Adiletta terminated upon the end of his service
as President and Chief Executive Officer in November, 1999. Pursuant to a
Settlement Agreement between the Company and Mr. Adiletta dated April 4,
2000, 55,000 of those options were reinstated at an exercise price of $1.125
per share.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND 1999 FISCAL YEAR-END OPTION
VALUES

The table below sets forth information relating to the exercise of options
during the year ended December 31, 1999 by each Named Executive Officer and the
year-end value of unexercised options.

<TABLE>
<CAPTION>
# OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
SHARES ACQUIRED ON YEAR END YEAR END ($) EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED ($) (#) EXERCISABLE/ UNEXERCISABLE UNEXERCISABLE
---- ------------------ ------------------ ------------------------------ ----------------------------
<S> <C> <C> <C> <C>
John X. Adiletta..... None None 0 / 55,000 0 / 292,050
D. Brian Plunkett.... None None 0 / 316,762 0 / 1,669,256
Richard J. Giacchi... None None 0 / 0 0 / 0
Brian M. Bobeck...... None None 0 / 53,500 0 / 290,773
David S. Laible...... None None 0 / 53,500 0 / 290,773
Lynn Szafran......... None None 0 / 53,500 0 / 290,773
</TABLE>

EMPLOYMENT ARRANGEMENTS

Effective as of January 4, 2000, the Company entered into an employment
agreement with Nick T. Catania to employ him as President and Chief Executive
Officer of the Company, with annual base compensation of $200,000. In addition,
Mr. Catania was granted ten-year stock options to purchase 900,000 shares of the
Company's common stock, which vest over three years. Of the options, 300,000 are
exercisable at $0.75 per share, 300,000 will be exercisable at the closing price
on January 2, 2001,

35
<PAGE>
and the remainder will be exercisable at the closing price on January 2, 2002.
In the event of a change in control in the Company, all options will immediately
vest and will be exercisable at the average exercise prices of all previously
vested options at the time of the change in control. The employment agreement is
for a one-year term, with successive renewal periods of one-year unless
terminated by either the Company or Mr. Catania at least 60 days prior to the
scheduled expiration of the agreement. Mr. Catania resigned as the Company's
President and Chief Executive Officer on [September 21, 2000].

D. Brian Plunkett, the Company's Chief Financial Officer, entered into an
employment Agreement with BAP Acquisition Corp. in November 1998, pursuant to
which he currently receives a base salary of $175,000 (subject to a minimum
upward adjustment of 5% annually). Mr. Plunkett is also eligible for such bonus
compensation as may be determined by the Board of Directors from time to time.
The employment agreement terminates on December 31, 2001. In conjunction with
the execution of the Employment Agreement, Mr. Plunkett was awarded options to
purchase BAP Acquisition Corp. common stock, which options, following the merger
of BAP Acquisition Corp. into a subsidiary of Paging Partners Inc. in March
1998, now represent the right to purchase 266,762 shares of the Company's common
stock. The options vest over a three-year period from the date of the employment
agreement.

Effective as of June 15, 1999, Aquis Communications, Inc., a wholly-owned
subsidiary of the Company, entered into an employment agreement with John Hobko
to employ Mr. Hobko as Executive Vice President--Sales of Aquis
Communications, Inc. with an annual base salary of $150,000. In addition,
Mr. Hobko entered into a Stock Option and Restriction Agreement pursuant to
which he was granted ten-year options to purchase 53,500 shares of the Company's
common stock, which options vest over three years. The employment agreement is
for a three-year term. In conjuction with the Company's sale of the internet
related assets of Aquis IP Communications, Inc., in September 2000 to an
investment group headed by Mr. Hobko and John B. Frieling, a director of the
Company, Mr. Hobko resigned his position effective August 31, 2000, and the
Company's obligation to compensate Mr. Hobko ceased as of such time.

COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS

The Company's Compensation Committee consists of Messers. Frieling and
Salerno, each of which is an independent director of the Company. Except as set
forth below, neither of these individuals had an "interlock" relationship to
report during 1999. During 1999, the Company paid investment banking fees
totaling $316,061 to Deerfield Capital, L.P. and Deerfield Partners, LLC.
Mr. Frieling serves as managing director of Deerfield Partners, LLC, which in
turn serves as general partner of Deerfield Capital, L.P.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent (10%) of a class of the Company's equity securities
registered under the Exchange Act to file reports of ownership on Form 3 and
changes in ownership on Form 4 or 5 with the Securities and Exchange Commission
(the "SEC"). Such officers, directors and ten percent (10%) stockholders are
also required by SEC rules to furnish the Company with copies of all forms that
they file pursuant to Section 16(a). Based solely on its review of copies of
forms filed pursuant to Section 16(a) of the Exchange Act, and written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements during the fiscal year ended December 31, 1999
applicable to the Company's officers, directors and ten percent (10%)
stockholders were complied with in a timely fashion them, except for certain
reports, which include: Messrs. Egan, Frieling and Salerno failed to timely
file a Form 4 and a Form 5 in connection with the grant of stock and stock
options to them in December 1999.

36
<PAGE>
CERTAIN TRANSACTIONS

Deerfield Capital, LP, of which Mr. Frieling is a principal, and Deerfield
Partners, LLC, of which Mr. Frieling is Managing Director, provided investment
banking services to the Company in connection with certain of its completed and
proposed acquisitions. During 1999, Deerfield Capital and Deerfield Partners
were paid a total of $316,061 in fees for such services.

On August 31, 2000, the Company completed the sale of the internet business
assets of Aquis IP Communications, Inc. to a private investment group headed by
John V. Hobko, Aquis IP's former president, and John B. Frieling, who at the
time of the completion of the transaction was a director, and who was
subsequently named as President and Chief Executive Officer, of the Company. The
approximate purchase price for the assets, inclusive of cash purchase price and
assumption of Aquis IP indebtedness, was $2,970,000. Mr. Frieling owns or
controls an approximately 13% interest in the investment group.

On September 19, 2000, Mr. John B. Frieling, a director of the Company,
entered into an agreement establishing the economic terms of his employment as
the Company's President and Chief Executive Officer. Pursuant to the agreement,
the Company will pay Deerfield Partners a monthly amount of $17,500, issue to
Mr. Frieling upon execution of the agreement options to purchase 300,000 shares
of the Company's common stock at a price of $0.9625 per share (110% of the
closing price for the Company's common stock on September 19, 2000). Options
issued to Mr. Frieling for 150,000 shares vested immediately upon issuance, and
options to purchase 25,000 shares of the Company's common stock will vest on the
first day of each month, commencing October 1, 2000.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of September 25, 2000, information with
respect to the securities holdings of all persons which the Company, pursuant to
filings with the Securities and Exchange Commission, has reason to believe may
be deemed the beneficial owners of more than five percent (5%) of the Company's
outstanding Common Stock. Also set forth in the table is the beneficial
ownership of all shares of the Company's outstanding stock, as of such date, of
all officers and directors, individually and as a group.

<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OF
BENEFICIALLY AND OF OUTSTANDING
NAME AND ADDRESS RECORD(1) SHARES
---------------- ------------------- -------------
<S> <C> <C>
Patrick M. Egan............................................. 1,145,722(2) 6.5%
c/o Select Security, Inc.
1706 Hempstead Road
Lancaster, PA 17601

Select Paging Investors, L.P................................ 1,758,735 10.0%
4718 Old Gettysburg Road
Mechanicsburg, PA 17055

Michael Salerno............................................. 1,879,303(3) 10.7%
c/o Select Paging Investors, L.P.
4718 Old Gettysburg Road
Mechanicsburg, PA 17055

John B. Frieling(4)......................................... 1,450,427 8.2%
c/o Deerfield Capital, L.P.
20 North Main Street, Suite 120
Sherborn, MA 01770
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OF
BENEFICIALLY AND OF OUTSTANDING
NAME AND ADDRESS RECORD(1) SHARES
---------------- ------------------- -------------
<S> <C> <C>
Deerfield Partners, LLC.(5)................................. 1,425,427 8.1%
20 North Main Street, Suite 120
Sherborn, MA 01770

Deerfield Capital, LP.(6)................................... 1,143,124 6.5%
20 North Main Street, Suite 120
Sherborn, MA 01770

Robert Green................................................ 1,289,351 7.5%
c/o Robert Green Communications, Inc.
210 West Market Street
Pottsville, PA 17901

Robert Davidoff............................................. 217,672(7) 1.2%
Carl Marks & Co., Inc.
135 East 57th Street
New York, New York 10022

D. Brian Plunkett........................................... 105,589(8) *
c/o Aquis Communications Group, Inc.
1719A Route 10, Suite 300
Parsippany, NJ 07054

Brian M. Bobeck............................................. 53,500(9) *
c/o Aquis Communications Group, Inc.
1719A Route 10, Suite 300
Parsippany, NJ 07054

David S. Laible............................................. 53,500(9) *
c/o Aquis Communications Group, Inc.
1719A Route 10, Suite 300
Parsippany, NJ 07054

All Directors and Officers as a group (7 persons)........... 4,905,713 27.9%
</TABLE>

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

(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations promulgated under the Securities Exchange Act of 1934, and,
accordingly, may include securities owned by or for, among others, the
spouse and/or minor children of an individual and any other relative who has
the same home as such individual, as well as, other securities as to which
the individual has or shares voting or investment power or which each person
has the right to acquire within 60 days through the exercise of options or
otherwise. Beneficial ownership may be disclaimed as to certain of the
securities. This table has been prepared based on 17,611,030 shares of
Common Stock outstanding as of September 25, 2000.

(2) Includes 25,000 shares of Common Stock issuable upon the exercise of vested
options. Excludes the shares beneficially owned by Deerfield Partners LLC
("Deerfield Partners"), in which Mr. Egan has a 4% equity interest.

(3) Includes 95,568 shares held of record by Mr. Salerno and 25,000 shares of
Common Stock issuable upon exercise of vested options. Mr. Salerno is the
Managing Director of Select Capital, Inc., which is turn is the general
partner of Select Paging Investors, L.P. Mr. Salerno disclaims beneficial

38
<PAGE>
ownership of the 1,758,735 shares of Common Stock owned by Select Paging
Investors, L.P. and Select Capital, Inc.

(4) Includes 25,000 shares of Common Stock issuable upon exercise of vested
options. Mr. Frieling is the Managing Director of Deerfield Partners, which
in turn is the general partner of Deerfield Capital, L.P. ("Deerfield
Capital" and together with Deerfield Partners, the "Deerfield Entities").
Deerfield Partners is the record holder of shares and Deerfield Capital is
the record holder of 780,280 shares. Also includes 362,844 shares owned by
Sunstar One, L.L.C. which the Deerfield Entities have the right to acquire.
Mr. Frieling disclaims any beneficial ownership of the shares of Common
Stock owned by the Deerfield Entities.

(5) Includes 282,303 shares held of record by Deerfield Partners, LLC and
780,280 shares held of record by Deerfield Capital, L.P., of which Deerfield
Partners LLC is general partner. Also includes 362,844 shares owned by
Sunstar One, L.L.C. and which the Deerfield Entities have the right to
acquire.

(6) Includes 780,280 shares held of record by Deerfield Capital, L.P. and
362,844 shares held of record by Sunstar One, L.L.C. which Deerfield
Capital, L.P. has the right to acquire.

(7) Includes 75,088 shares held of record and 117,584 shares held of record by
CMNY Capital II, L.P., an entity in which Mr. Davidoff is a partner.
Mr. Davidoff disclaims beneficial ownership of the shares owned by CMNY
Capital II, L.P. Also includes 25,000 issuable pursuant to options.

(8) Includes options to purchase 105,589 shares of Common Stock. Does not
include options to purchase 211,173 shares of Common Stock which have not
vested.

(9) Includes options to purchase 53,500 shares of Common Stock.

(*) Less than 1%.

39
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following description summarizes material terms of our capital stock and
is qualified in its entirety by reference to the actual terms of the capital
stock contained in our amended and restated certificate of incorporation and
bylaws, which are filed as exhibits to the registration statement of which this
prospectus forms a part.

Our certificate of incorporation authorizes us to issue 75,000,000 shares of
common stock, par value $.01 per share, and 1,000,000 shares of preferred stock,
par value $.01 per share. We are currently authorized to issue 100,000 shares of
7 1/2% Redeemable preferred stock.

As of September 27, 2000: 17,611,030 shares of common stock were outstanding
and 15,000 shares of 7 1/2% Redeemable preferred stock were outstanding.

COMMON STOCK

The holders of common stock are entitled to one vote for each share held of
record at all meetings of the stockholders. The holders of common stock are not
entitled to cumulative voting rights with respect to the election of directors.
Subject to preferences that are applicable to outstanding shares of preferred
stock, the holders of common stock are entitled to receive ratably such
dividends as may be declared by the board of directors out of funds legally
available to be paid.

In the event of a liquidation, dissolution, or winding up, the holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preference of the outstanding preferred
stock. The holders of common stock have no preemptive rights and no right to
convert their common stock into any other securities. There are no redemption
provisions applicable to the common stock. The outstanding shares of common
stock are fully paid and nonassessable.

7 1/2% REDEEMABLE PREFERRED STOCK

The material rights and preferences of our 7 1/2% Redeemable preferred stock
are as follows:

DIVIDENDS. The holders of our 7 1/2% Redeemable preferred stock are entitled
to receive cumulative dividends, whether or not declared by our board of
directors, at an annual rate of $7.50 per share. We are prohibited from paying
dividends on any shares of stock having rights junior to the 7 1/2% Redeemable
preferred stock until all accumulated dividends have been paid on the 7 1/2%
Redeemable preferred stock.

LIQUIDATION PREFERENCE. Upon our liquidation, dissolution, or winding up,
the holders of Series A preferred stock and Series B preferred stock will be
entitled to receive out of the assets available for distribution prior to and in
preference to the holders of common stock, an amount equal to $100.00 per share,
plus all accrued and unpaid dividends, subject to adjustment.

REDEMPTION. We are required to redeem all of the 7 1/2% Redeemable preferred
stock outstanding on January 31, 2002 at a redemption price equal to 100% of the
then existing applicable liquidation preference, plus accrued and unpaid
dividends to the date of redemption, subject to the legal availability of funds.

Voting rights. Unless otherwise required by law, the holders of 7 1/2%
Redeemable preferred stock have no right to vote on matters coming before the
Company's common stockholders.

WARRANTS

As of September 22, 2000, there were outstanding warrants to purchase (i)
100,000 shares of common stock at an exercise price of $1.50 per share, (ii)
900,000 shares of common stock at an exercise price of $2.30 per share, and
(iii) 357,942 shares of common stock at an exercise price of

40
<PAGE>
$3.163 per share (subject to adjustment for certain anti-dilutive issuances).
The 900,000 shares of common stock issuable on exercise of the warrants at an
exercise price of $2.30 are being offered by this prospectus.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock and preferred stock is
Continental Stock Transfer & Trust Company.

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

Our certificate of incorporation does not provide for cumulative voting for
the election of directors. As a result, the holders of shares representing a
majority of the voting power of the shares present or represented at a meeting
in which directors are to be elected have the power to elect all the directors
to be elected at such meeting, and no person may be elected without the support
of holders of shares representing a majority of the voting power of the shares
present or represented at such meeting.

Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the certificate
of incorporation or the bylaws. Our bylaws authorize the Chairman of the Board,
the Chief Executive Officer, the President, the board of directors, or
stockholders holding in the aggregate not less than 10% of the voting power of
the company to call a special meeting of stockholders.

Under Delaware law and our bylaws, stockholders may execute an action by
written consent in lieu of a stockholder meeting. Delaware law permits a
corporation to eliminate such actions by written consent. Elimination of written
consents of stockholders may lengthen the amount of time required to take
stockholder actions since certain actions by written consent are not subject to
the minimum notice requirement of a stockholders' meeting. The elimination of
stockholders' written consents, however, deters hostile takeover attempts.
Without the availability of stockholders' actions by written consent, a holder
or group of holders controlling a majority in interest of our capital stock
would not be able to amend our bylaws or remove directors pursuant to a
stockholder's written consent. Any such holder or group of holders would have to
call a stockholders' meeting and wait until the notice periods determined by the
board of directors pursuant to our bylaws prior to taking any such action.

PROVISIONS OF DELAWARE LAW

Section 203 of the Delaware General Corporation Law generally prohibits a
publicly-held Delaware corporation such as the Company from engaging in various
"business combination" transactions with any "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless:

- prior to that date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder,

- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding, those shares owned by:

- persons who are directors and also officers and

41
<PAGE>
- employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or

- on or subsequent to such time the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.

SECTION 203 DEFINES "BUSINESS COMBINATION" TO INCLUDE:

- any merger or consolidation involving the corporation and the interested
stockholder;

- any sale, transfer, pledge, or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;

- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;

- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or

- the receipt of the interested stockholder of the benefit of any loans,
advances, guarantees, pledges, or other financial benefits provided by or
through the corporation.

In general, Section 203 defines an interested stockholder as an entity or
person who, together with affiliates and associates, beneficially owns (or
within three years did beneficially own) 15% or more of a corporation's voting
stock. The statute could prohibit or delay mergers or other takeover or change
in control attempts with respect to us and, accordingly, may discourage attempts
to acquire us.

42
<PAGE>
COMMON STOCK PURCHASE AGREEMENT

OVERVIEW

We signed a common stock purchase agreement with Coxton, Limited, a British
Virgin Islands corporation, on April 9, 2000, for the future issuance and
purchase of shares of our common stock. The stock purchase agreement establishes
what is sometimes termed an equity line of credit or an equity drawdown
facility.

In general, the drawdown facility operates like this: the investor, Coxton,
has committed to provide us up to $20 million as we request it over a 24 month
period, in return for common stock we issue to Coxton. Once every 22 trading
days, we may request a draw of up to $7,000,000 of that money, subject to a
maximum of 12 draws. The maximum amount we actually can draw down upon each
request will be determined by the volume-weighted average daily price of our
common stock for the 22 trading days prior to our request and the average
trading volume for the 45 trading days prior to our request. Each draw down must
be for at least $250,000.

At the end of a 22 day trading period following the drawdown request, the
actual drawdown amount is determined based on the volume-weighted average stock
price during that 22 day period. We then use the formulas in the common stock
purchase agreement to determine the number of shares we will issue to Coxton in
return for that money. The formulas for determining the actual drawdown amounts,
the number of shares we issue to Coxton and the price per share paid by Coxton
are described in detail beginning on page 46. We may make up to a maximum of 12
draws; however, the aggregate total of all draws cannot exceed $20 million and
no single draw can exceed $7 million. We are under no obligation to request a
draw for any period.

The per share dollar amount Coxton pays for our common stock for each
drawdown includes a 7% discount to the average daily market price of our common
stock for the 22-day period after our drawdown request, weighted by trading
volume. We will receive the amount of the drawdown less an escrow agent fee of
$1,500 and a 6% placement fee payable to the placement agent, Ladenburg
Thalmann & Co. Inc., which introduced Coxton to us. Ladenburg Thalmann is not
obligated to purchase any of our shares, but as an additional placement fee, we
have issued to Ladenburg Thalmann warrants to purchase 300,000 shares of our
common stock at an exercise price of $2.30 per share. The common stock issuable
upon exercise of those warrants is included in the registration statement of
which this prospectus is a part.

In lieu of providing Coxton with a minimum aggregate drawdown commitment, we
have issued to Coxton a stock purchase warrant to purchase 600,000 shares of our
common stock with an exercise price of $2.30 per share, which was the
volume-weighted average share price on April 8, 2000, the day prior to the
closing date. The warrant expires May 3, 2003.

Based on a review of our trading volume and stock price history and the
number of drawdowns we estimate making, we are registering 2,514,044 shares of
common stock for possible issuance under the stock purchase agreement and
900,000 shares underlying the warrants for common shares delivered to Coxton and
Ladenburg Thalmann & Co. Inc. The listing requirements of the NASDAQ SmallCap
Market prohibit us from issuing 20% or more of our issued and outstanding common
shares in a single transaction if the shares may be issued for less than the
greater of market value or book value, unless we get shareholder approval. Based
on shares of common stock issued and outstanding on April 9, 2000, the date of
closing of the common stock purchase agreement, we may not issue more than
3,414,044 shares under the common stock purchase agreement, the Coxton warrant
and the Ladenburg warrant, without the approval of our shareholders. Because
900,000 of these shares are committed to the Coxton warrant and the Ladenburg
warrant, if we wish to draw amounts under the common stock purchase agreement
which would cause an issuance of more than 2,514,044 shares under the common
stock purchase agreement, we must receive shareholder approval prior to any such
drawdown. At that

43
<PAGE>
time, our officers and directors as a group may own sufficient shares of our
common stock to approve such a drawdown.

In addition, the common stock purchase agreement does not permit us to draw
down funds if the issuance of shares of common stock to Coxton pursuant to the
drawdown would result in Coxton owning more than 9.9% of our outstanding common
stock on the drawdown exercise date.

THE DRAWDOWN PROCEDURE AND THE STOCK PURCHASES

We may request a drawdown by faxing a drawdown notice to Coxton, stating the
amount of the drawdown we wish to exercise and the minimum threshold price, if
any, at which we are willing to sell the shares. A pricing committee consisting
of two directors sets the threshold price by determining the price below which
we are unwilling to sell shares of our common stock. The pricing committee has
complete discretion when determining the threshold price.

AMOUNT OF THE DRAW

No draw can exceed the lesser of $7,000,000 and the capped amount that is
derived from the following formula:

- Average daily trading volume for the 45 trading days immediately prior to
the date we give notice of the drawdown;

multiplied by

- 22;

multiplied by

- The average of the volume-weighted average daily prices for the 22 trading
days immediately prior to the date we give notice of the drawdown;

multiplied by

- 20%.

The lesser of our draw request and the capped amount is reduced by 1/22 for
every day in the 22 trading days after our drawdown request that the
volume-weighted average daily price for a trading day is below the threshold
price set by us in the request. If the daily price for a day is below the
threshold price, we will not issue any shares and Coxton will not purchase any
shares for that day. Thus, if we set a threshold price too high and our stock
price does not consistently meet that level during the 22 trading days after our
drawdown request, the amount we can draw and the number of shares we issue to
Coxton will be reduced. On the other hand, if we set a threshold price too low
and our stock price falls significantly but stays above the threshold price, we
will be able to draw the lesser of our draw request and the capped amount, but
we will have to issue a greater number of shares to Coxton at the reduced price.
We cannot make another drawdown request until expiration of the 22 trading days
that follow a drawdown request we have already made.

NUMBER OF SHARES

The 22 trading days immediately following the drawdown notice are also used
to determine the number of shares we will issue in return for the money provided
by Coxton, and thus the price per share Coxton will pay for our shares.

To determine the number of shares of common stock we must issue in
connection with a drawdown, take 1/22 of the drawdown amount determined by the
formulas above, and for each of the 22 trading days immediately following the
date we give notice of the drawdown, divide it by 93% of the

44
<PAGE>
volume-weighted average daily trading price of our common stock for that day.
The 93% accounts for Coxton's 7% discount. The sum of these 22 daily
calculations produces the number of common shares we will issue, unless the
volume-weighted average daily price for any given trading day is below the
threshold amount, in which case that day is ignored in the calculation. The
price per share Coxton ultimately pays is determined by dividing the final
drawdown amount by the number of shares we issue Coxton.

SAMPLE CALCULATION OF STOCK PURCHASES

The following is an example of the calculation of the drawdown amount and
the number of shares we would issue to Coxton in connection with that drawdown
based on hypothetical assumptions.

Sample drawdown amount calculation.

We provide a drawdown notice to Coxton that we wish to make a drawdown.
Suppose that we have specified in the notice a threshold price of $1.75,
below which we will not sell any shares to Coxton during this drawdown
period.

Suppose the average daily trading volume for the 45 trading days prior
to our drawdown notice is 200,000 and that the average of the
volume-weighted average daily prices of our common stock for the 22 trading
days prior to the notice is $2.00. You can apply the formula to these
hypothetical numbers as follows:

- the average trading volume for the 45 trading days prior to our
drawdown notice (200,000) multiplied by 22, equals 4,400,000

multiplied by

- the average of the volume-weighted average daily prices of our common
stock for the 22 trading days prior to the notice ($2.00)

multiplied by

- 20%

The maximum amount we can draw down under the formula is therefore capped at
$1,760,000, subject to further adjustments if the volume-weighted average daily
price of our common stock for any of the 22 trading days following the drawdown
notice is below the threshold price we set of $1.75.

For example, if the volume-weighted average daily price of our common stock
is below $1.75 on two of those 22 days, the $1,760,000 would be reduced by 1/22
for each of those days and our draw down amount would be 20/22 of $1,760,000, or
$1,600,000.

SAMPLE CALCULATION OF NUMBER OF SHARES

Assume that we have made a drawdown request with a threshold price of $1.75.
Assume the maximum amount we can draw down is capped at $1,760,000 based on the
formula above. Also, assume that the volume-weighted average daily price for our
common stock is as set forth in the table on the next page.

The number of shares to be issued based on any trading day during the
drawdown period is calculated from the formula:

- 1/22 of the drawdown amount of $1,760,000

divided by

- 93% of the volume weighted average daily price.

45
<PAGE>
For example, for the first trading day in the example in the table below,
the calculation is as follows:

1/22 of $1,760,000 is $80,000.

Divide $80,000 by 93% of the volume-weighed average daily price for that day
of $2.00 per share, to get 43,011 shares. Perform this calculation for each of
the 22 measuring days, excluding any days on which the volume-weighted average
daily price is below the $1.75 threshold price, and add the results to determine
the number of shares to be issued. In the table below, there are two days which
must be excluded: days 16 and 17.

After excluding the days that are below the threshold price, the amount of
our drawdown in this example would be $1,600,000 and the total number of shares
we would issue to Coxton for this drawdown request would be 869,046, so long as
those shares would not cause Coxton to beneficially own more than 9.9% of our
then outstanding common stock. Coxton would pay $1.84 per share for these
shares.

<TABLE>
<CAPTION>
VOLUME-WEIGHTED 1/22 OF REQUESTED NUMBER OF SHARES OF COMMON
AVERAGE DAILY DRAW STOCK TO BE ISSUED FOR THE
TRADING DAY STOCK PRICE* DOWN AMOUNT TRADING DAY
----------- --------------- ------------------ --------------------------
<S> <C> <C> <C>
1.................................... $2.000 $ 80,000.00 43,011
2.................................... 2.125 80,000.00 40,481
3.................................... 2.000 80,000.00 43,011
4.................................... 1.875 80,000.00 45,878
5.................................... 1.875 80,000.00 45,878
6.................................... 1.750 80,000.00 49,155
7.................................... 1.875 80,000.00 45,878
8.................................... 2.000 80,000.00 43,011
9.................................... 2.125 80,000.00 40,481
10................................... 2.250 80,000.00 38,232
11................................... 2.375 80,000.00 36,220
12................................... 2.250 80,000.00 38,232
13................................... 2.000 80,000.00 43,011
14................................... 1.875 80,000.00 45,878
15................................... 1.750 80,000.00 49,155
16................................... 1.625 --** --
17................................... 1.625 --** --
18................................... 1.750 80,000.00 49,155
19................................... 1.875 80,000.00 45,878
20................................... 2.000 80,000.00 43,011
21................................... 2.125 80,000.00 40,481
22................................... 2.000 80,000.00 43,011
------------- -------
Total................................ $1,600,000.00 869,046
============= =======
</TABLE>

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

* The share prices are illustrative only and should not be interpreted as a
forecast of share prices or the expected or historical volatility of the
share prices of our common stock.

** Excluded because the volume-weighted average daily price is below the
threshold specified in our hypothetical draw down notice.

We would receive the amount of our drawdown ($1,600,000.00) less a 6% cash
fee paid to the placement agent of $96,000.00, less a $1,500.00 escrow fee, for
net proceeds to us of $1,502,500.00. The delivery of the requisite number of
shares and payment of the draw will take place through an escrow

46
<PAGE>
agent, Epstein, Becker & Green, P.C. of New York. The escrow agent pays 94% of
the draw to us--after subtracting its escrow fee--and 6% to Ladenburg
Thalmann & Co. Inc., our placement agent, in satisfaction of placement agent
fees.

NECESSARY CONDITIONS BEFORE COXTON IS OBLIGATED TO PURCHASE OUR SHARES

The following conditions must be satisfied before Coxton is obligated to
purchase the common shares that we wish to sell from time to time:

- A registration statement for the shares must be declared effective by the
Securities and Exchange Commission and must remain effective and available
as of the draw down settlement date for making resales of the common
shares purchased by Coxton;

- There can be no material adverse change in our business, operations,
properties, prospects or financial condition;

- We must not have merged or consolidated with or into another company or
transferred all or substantially all of our assets to another company,
unless the acquiring company has agreed to honor the common stock purchase
agreement;

- No statute, rule, regulation, executive order, decree, ruling or
injunction may be in effect which prohibits consummation of the
transactions contemplated by the stock purchase agreement;

- No litigation or proceeding nor any investigation by any governmental
authority can be pending or threatened against us or Coxton seeking to
restrain, prevent or change the transactions contemplated by the stock
purchase agreement or seeking damages in connection with such
transactions; and

- Trading in our common shares must not have been suspended by the
Securities and Exchange Commission or the NASDAQ SmallCap Market, nor
shall minimum prices have been established on securities whose trades are
reported by the NASDAQ SmallCap Market.

On each drawdown settlement date for the sale of common shares, we must
deliver an opinion from our counsel about these matters.

A further condition is that Coxton may not purchase more than 19.9% of our
common shares issued and outstanding on May 3, 2000, the closing date under the
stock purchase agreement, without us first obtaining approval from our
shareholders for such excess issuance.

RESTRICTIONS ON FUTURE FINANCINGS

The common stock purchase agreement limits our ability to raise money by
selling our securities for cash at a discount to the market price until the
earlier of 24 months from the effective date of the registration statement of
which this prospectus is a part or the date which is 60 days after Coxton has
purchased the maximum of $20,000,000 worth of common stock from us under the
common stock purchase agreement.

There are exceptions to this limitation for securities sold in the following
situations:

- in a registered public offering which is underwritten by one or more
established investment banks;

- in one or more private placements where the purchasers do not have
registration rights;

- pursuant to any presently existing or future employee benefit plan which
plan has been or is approved by the our stockholders;

- pursuant to any compensatory plan for a full-time employee or key
consultant;

47
<PAGE>
- in connection with a strategic partnership or other business transaction,
the principal purpose of which is not simply to raise money; and

- a transaction to which Coxton gives its written approval.

COSTS OF CLOSING THE TRANSACTION

At the closing of the transaction on May 3, 2000, we delivered the requisite
opinion of counsel to Coxton and paid the escrow agent, Epstein Becker & Green
P.C., $20,000 for Coxton's legal, administrative and escrow costs. We paid
Ladenburg Thalmann & Co. Inc. an additional $35,000 for its expenses. Ladenburg
Thalmann also received warrants for a total of 300,000 shares of our common
stock with an exercise price equal to 115% of the closing bid price of our
common stock as reported on the NASDAQ SmallCap Market on May 2, 2000 or $2.30.
Ladenburg Thalmann is not obligated to purchase any of our shares pursuant to
the warrant.

TERMINATION OF THE STOCK PURCHASE AGREEMENT

Coxton may terminate the equity draw down facility under the stock purchase
agreement if any of the following events occur:

- We suffer a material adverse change in our business, operations,
properties or financial condition;

- Our common shares are delisted from the NASDAQ SmallCap Market unless such
delisting is in connection with the listing of such shares on a comparable
stock exchange in the United States;

- We file for protection from creditors.

INDEMNIFICATION OF COXTON

Coxton is entitled to customary indemnification from us for any losses or
liabilities suffered by it based upon material misstatements or omissions from
the registration statement and the prospectus, except as they relate to
information supplied by Coxton to us for inclusion in the registration statement
and prospectus.

48
<PAGE>
SELLING STOCKHOLDERS

OVERVIEW

Common shares registered for resale under this prospectus constitute % of
our issued and outstanding common shares as of June 30, 2000. The number of
shares we are registering is based in part on our good faith estimate of the
maximum number of shares we will issue to Coxton under the common stock purchase
agreement. Accordingly, the number of shares we are registering for issuance
under the common stock purchase agreement may be higher than the number we
actually issue under the common stock purchase agreement.

AMRO International, S.A.

AMRO International, S.A. is engaged in the business of investing in publicly
traded equity securities for its own account. AMRO's principal offices are
located at Grossmuenster Platz 6, Zurich Switzerland. Investment decisions for
Coxton are made by its board of directors. Other than the convertible debenture
and warrants we issued to AMRO in connection with closing the loan agreement,
AMRO does not currently own any of our securities as of the date of this
prospectus. There are no business relationships between AMRO and us other than
the loan agreement.

Coxton, Limited

Coxton, Limited is engaged in the business of investing in publicly traded
equity securities for its own account. Coxton's principal offices are located at
Aeulestrasse 74, FL-9490 Vaduz, Liechtenstein. Investment decisions for Coxton
are made by its board of directors. Other than the warrants we issued to Coxton
in connection with closing the common stock purchase agreement, Coxton does not
currently own any of our securities as of the date of this prospectus. Other
than its obligation to purchase common shares under the common stock purchase
agreement, it has no other commitments or arrangements to purchase or sell any
of our securities. There are no business relationships between Coxton and us
other than the common stock purchase agreement.

Ladenburg Thalmann & Co. Inc.

Ladenburg Thalmann & Co. Inc. has acted as placement agent in connection
with the common stock purchase agreement. Ladenburg Thalmann introduced us to
Coxton and assisted us with structuring the equity line of credit with Coxton.
Ladenburg Thalmann's duties as placement agent were undertaken on a reasonable
best efforts basis only. It made no commitment to purchase shares from us and
did not ensure us of the successful placement of any securities.

This prospectus covers 300,000 shares of common stock issuable upon exercise
of warrants we have issued to Ladenburg Thalmann as a placement fee for
introducing us to Coxton. Those warrants are exercisable at $2.30 per share and
expire May 3, 2003. The decision to exercise any warrants issued, and the
decision to sell the common stock issued pursuant to the warrants, will be made
by Ladenburg Thalmann's officers and board of directors. Other than the
warrants, Ladenburg Thalmann does not currently own any of our securities as of
the date of this prospectus. Our agreement with Ladenburg Thalmann provides
Ladenburg Thalmann with a right of first refusal for one year after completion
of the offering under the common stock purchase agreement, as underwriter or
placement agent, all of our financing arrangements at terms no less favorable
than we could obtain in the market.

49
<PAGE>
PLAN OF DISTRIBUTION

GENERAL

Coxton, Limited is offering the common shares for its account as statutory
underwriter, and not for our account. We will not receive any proceeds from the
sale of common shares by Coxton. Coxton may be offering for sale up to 2,541,044
common shares acquired by it pursuant to the terms of the stock purchase
agreement more fully described under the section above entitled "The Common
Stock Purchase Agreement" and the warrants we issued to it in connection with
the transaction. Coxton has agreed to be named as a statutory underwriter within
the meaning of the Securities Act of 1933 in connection with such sales of
common shares and will be acting as an underwriter in its resales of the common
shares under this prospectus. Coxton has, prior to any sales, agreed not to
effect any offers or sales of the common shares in any manner other than as
specified in the prospectus and not to purchase or induce others to purchase
common shares in violation of any applicable state and federal securities laws,
rules and regulations and the rules and regulations of the NASDAQ SmallCap
Market.

On June 30, 2000, we had 17,611,030 shares of common stock outstanding. The
following table shows the number of shares we would issue to Coxton and the
price it would pay for those shares given the hypothetical variables shown in
the table, if

- we requested drawdowns of the maximum amounts under the common stock
purchase agreement;

- we set a threshold price of $1.00;

- the volume-weighted average daily price in the table is the
volume-weighted average daily price of our common stock for the 22 trading
days before each drawdown request under the common stock purchase
agreement and the 22 trading days after each drawdown request;

- the average trading volume in the table is the average trading volume for
the 45 trading days before each drawdown request; and

- we do not issue more shares to Coxton under the common stock purchase
agreement than we are currently registering for resale of the shares
issued under the common stock purchase agreement.

<TABLE>
<CAPTION>
NUMBER OF SHARES ISSUABLE TO Price per share
VOLUME-WEIGHTED AVERAGE AVERAGE TRADING COXTON UNDER COMMON STOCK paid
DAILY PRICE VOLUME PURCHASE AGREEMENT(g) by Coxton
----------------------- --------------- ---------------------------- ---------------
<S> <C> <C> <C>
$1.0000(a) 80,876(d) 2,514,044(h) $0.9300
1.0252(b) 161,753(e) 2,514,044 $0.9534
1.5378(c) 242,629(f) 2,514,044 $1.4302
</TABLE>

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

(a) Represents the lowest price at which our shares can remain listed on the
NASDAQ SmallCap Market.

(b) Represents the volume weighted average closing price of our common stock for
the 22 trading days prior to September 20, 2000.

(c) Represents 150% of the volume-weighted average closing price of our common
stock for the 22 trading days before September 20, 2000.

(d) Represents 50% of the average trading volume of our common stock for the 45
trading days preceding September 20, 2000.
(e) Represents the average trading volume of our common stock for the 45 trading
days preceding September 20, 2000.

50
<PAGE>
(f) Represents 150% of the average trading volume of our common stock for the 45
trading days preceding September 20, 2000.

(g) The number of shares we would issue could be limited by a provision of the
common stock purchase agreement that prevents us from issuing shares to
Coxton to the extent Coxton would beneficially own more than 9.9% of our
then outstanding common stock.

(h) Represents all 2,514,044 shares we are registering under the common stock
purchase agreement.

To permit Coxton to resell the common shares issued to it under the common
stock purchase agreement, we agreed to register those shares and to maintain
that registration. To that end, we have agreed with Coxton that we will prepare
and file such amendments and supplements to the registration statement and the
prospectus as may be necessary in accordance with the Securities Act and the
rules and regulations promulgated thereunder, to keep it effective until the
earliest of any of the following dates:

- the date after which all of the common shares held by Coxton or its
transferees that are covered by the registration statement of which this
prospectus is a part have been sold under the provisions of Rule 144 under
the Securities Act of 1933;

- the date after which all of the common shares held by Coxton or its
transferees that are covered by the registration statement have been
transferred to persons who may trade such shares without restriction under
the Securities Act of 1933 and we have delivered new certificates or other
evidences of ownership of such common shares without any restrictive
legend;

- the date after which all of the common shares held by Coxton or its
transferees that are covered by the registration statement have been sold
by Coxton or its transferees pursuant to such registration statement;

- the date after which all of the common shares held by Coxton or its
transferees that are covered by the registration statement may be sold, in
the opinion of our counsel, under Rule 144 under the Securities Act of
1933 irrespective of any applicable volume limitations;

- the date after which all of the common shares held by Coxton or its
transferees that are covered by the registration statement may be sold, in
the opinion of our counsel, without any time, volume or manner limitations
under

- Rule 144(k) or similar provision then in effect under the Securities Act
of 1933; or

- the date after which none of the common shares held by Coxton that are
covered by the registration statement are or may become issued and
outstanding.

Shares of common stock offered through this prospectus may be sold from time
to time by AMRO, Coxton, Ladenburg Thalmann or by pledgees, donees, transferees
or other successors in interest to the other selling stockholders. We will
supplement this prospectus to disclose the names of any pledgees, donees,
transferees or other successors in interest that intend to offer common stock
through this prospectus.

Sales may be made on the NASDAQ Small Cap Market, on the over-the-counter
market or otherwise at prices and at terms then prevailing or at prices related
to the then current market price, or in negotiated private transactions, or in a
combination of these methods. The selling stockholders will act independently of
us in making decisions with respect to the form, timing, manner and size of each
sale. We have been informed by the selling stockholders that there are no
existing arrangements between any selling stockholder and any other stockholder,
broker, dealer, underwriter or agent relating to the sale or distribution of
shares of common stock which may be sold by selling stockholders through this
prospectus. Coxton is an underwriter and Ladenburg Thalmann may be deemed to be
an underwriter in connection with resales of their shares.

51
<PAGE>
The common shares may be sold in one or more of the following manners:

- a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;

- purchases by a broker or dealer for its account under this prospectus; or

- ordinary brokerage transactions and transactions in which the broker
solicits purchases.

In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Except as disclosed in
a supplement to this prospectus, no broker-dealer will be paid more than a
customary brokerage commission in connection with any sale of the common shares
by the selling stockholders. Brokers or dealers may receive commissions,
discounts or other concessions from the selling stockholders in amounts to be
negotiated immediately prior to the sale. The compensation to a particular
broker-dealer may be in excess of customary commissions. Profits on any resale
of the common shares as a principal by such broker-dealers and any commissions
received by such broker-dealers may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. Any broker-dealer participating in
such transactions as agent may receive commissions from the selling stockholders
(and, if they act as agent for the purchaser of such common shares, from such
purchaser).

Broker-dealers may agree with the selling stockholders to sell a specified
number of common shares at a stipulated price per share, and, to the extent a
broker dealer is unable to do so acting as agent for the selling stockholders,
to purchase as principal any unsold common shares at a price required to fulfill
the broker-dealer commitment to the selling stockholders. Broker-dealers who
acquire common shares as principal may thereafter resell such common shares from
time to time in transactions (which may involve crosses and block transactions
and which may involve sales to and through other broker-dealers, including
transactions of the nature described above) in the over-the-counter market, in
negotiated transactions or otherwise at market prices prevailing at the time of
sale or at negotiated prices, and in connection with such resales may pay to or
receive from the purchasers of such common shares commissions computed as
described above. Brokers or dealers who acquire common shares as principal and
any other participating brokers or dealers may be deemed to be underwriters in
connection with resales of the common shares.

In addition, any common shares covered by this prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this prospectus. We will not receive any of the proceeds from the sale of these
common shares, although we have paid the expenses of preparing this prospectus
and the related registration statement of which it is a part, and have
reimbursed Coxton $20,000 for its legal, administrative and escrow costs.

Coxton is subject to the applicable provisions of the Exchange Act,
including without limitation, Rule 10b-5 thereunder. Under applicable rules and
regulations under the Exchange Act, any person engaged in a distribution of the
common shares may not simultaneously engage in market making activities with
respect to such securities for a period beginning when such person becomes a
distribution participant and ending upon such person's completion of
participation in a distribution, including stabilization activities in the
common shares to effect covering transactions, to impose penalty bids or to
effect passive market making bids. In addition, in connection with the
transactions in the common shares, Coxton and we will be subject to applicable
provisions of the Exchange Act and the rules and regulations under that Act,
including, without limitation, the rules set forth above. These restrictions may
affect the marketability of the common shares.

The selling stockholders will pay all commissions and their own expenses, if
any, associated with the sale of the common shares, other than the expenses
associated with preparing this prospectus and the registration statement of
which it is a part.

52
<PAGE>
The price at which we will issue the common shares to Coxton under the stock
purchase agreement will be 93% of the volume-weighted average daily price traded
on the NASDAQ SmallCap Market, for each day in the pricing period with respect
to each drawdown request. Assuming we use the entire $20 million of financing
available under the stock purchase agreement using 12 drawdowns, and assuming we
issue all 2,514,044 shares registered for issuance under the common stock
purchase agreement, we will pay underwriting compensation to and expenses for
Coxton, and other offering expenses, as follows:

UNDERWRITING COMPENSATION AND EXPENSES

<TABLE>
<CAPTION>
PER SHARE TOTAL
------------- -------------
<S> <C> <C>
Discount to Coxton (7%)(a)...................... $ 0.56 $1,400,000.00
Expenses payable on behalf of Coxton:
Escrow Fees................................... 0.00 18,000.00
Legal fees of Coxton.......................... 0.00 20,000.00
Estimated offering expenses:
Placement agent fees(b)....................... 0.48 1,200,000.00
SEC filing fee................................ 0.00 6,656.05
Accountants' fees and expenses................ 0.02 50,000.00
Legal fees and expenses....................... 0.04 100,000.00
------------- -------------
Total........................................... $ 1.11 $2,794,656.05
============= =============
</TABLE>

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

(a) We also issued to Coxton a warrant to purchase 600,000 shares of our common
stock at $2.30 per share as consideration for providing the common stock
purchase agreement. Our common stock price on September 19, 2000 was $0.875.
The warrant expires May 3, 2003.

(b) We also issued to the placement agent a warrant to purchase 300,000 shares
of our common stock at $2.30 per share as consideration for placement
services. Our common stock price on September 19, 2000 was $0.875. The
warrant expires May 3, 2003.

LIMITED GRANT OF REGISTRATION RIGHTS

We granted registration rights to Coxton to enable it to sell the common
stock it purchases under the common stock purchase agreement. In connection with
any such registration, we will have no obligation--

- to assist or cooperate with Coxton in the offering or disposition of such
shares;

- to indemnify or hold harmless the holders of any such shares (other than
Coxton) or any underwriter designated by such holders;

- to obtain a commitment from an underwriter relative to the sale of any
such shares; or

- to include such shares within any underwritten offering we do.

We will assume no obligation or responsibility whatsoever to determine a
method of disposition for such shares or to otherwise include such shares within
the confines of any registered offering other than the registration statement of
which this prospectus is a part.

We will use our best efforts to file, during any period during which we are
required to do so under our registration rights agreement with Coxton, one or
more post-effective amendments to the registration statement of which this
prospectus is a part to describe any material information with respect to the
plan of distribution not previously disclosed in this prospectus or any material
change to

53
<PAGE>
such information in this prospectus. This obligation may include, to the extent
required under the Securities Act of 1933, that a supplemental prospectus be
filed, disclosing

- the name of any broker-dealers;

- the number of common shares involved;

- the price at which the common shares are to be sold;

- the commissions paid or discounts or concessions allowed to
broker-dealers, where applicable;

- that broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, as
supplemented; and

- any other facts material to the transaction.

Our registration rights agreement with Coxton permits us to restrict the
resale of the shares Coxton has purchased from us under the common stock
purchase agreement for a period of time sufficient to permit us to amend or
supplement this prospectus to include material information. If we restrict
Coxton for more than 20 consecutive days and our stock price declines during the
restriction period, we are required to pay to Coxton cash to compensate Coxton
for its inability to sell shares during the restriction period. The amount we
would be required to pay would be the difference between our stock price on the
first day of the restriction period and the last day of the restriction period,
for each share held by Coxton during the restriction period that has been
purchased under the common stock purchase agreement.

54
<PAGE>
LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for us by Buchanan Ingersoll Professional Corporation, Philadelphia,
Pennsylvania.

EXPERTS

The financial statements of Aquis Communications Group, Inc. and its
predecessor as of December 31, 1999 and 1998 and the statements of operations
and of cash flows for the three years in the period ended December 31, 1999 and
the statement of changes in stockholders' equity for the years ended
December 31, 1999 and 1998 included in this prospectus have been so included in
reliance upon the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of such firm as experts in auditing and
accounting.

The financial statements of SourceOne Wireless, Inc. for the years ended
December 31, 1999 and 1998 included in this prospectus have been audited by
Arthur Andersen, LLP, independent auditors, as stated in their report, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

We have included in our Certificate of Incorporation provisions to limit the
personal liability of our officers and directors for monetary damages for breach
of their fiduciary duty as directors, except for liability that cannot be
eliminated under the Delaware General Corporation Law. Our Certificate of
Incorporation provides that Directors of our company will not be personally
liable for monetary damages for breach of their fiduciary duty of directors,
except for liability (i) for any breach of their duty of loyalty to our company
or our stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for any
unlawful payment of a dividend or unlawful stock repurchase or redemption, as
provided in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. Our
Bylaws also provide that we shall indemnify our directors and officers to the
fullest extent permitted by Section 145 of the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise discretionary.

The indemnification provided by our Bylaws would provide coverage for claims
arising under the Securities Act and the Exchange Act. Insofar as
indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons of the company pursuant our
Certification of Incorporation or Bylaws, or the Delaware General Corporation
Law, or otherwise, we have 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.

55
<PAGE>
INDEX TO FINANCIAL STATEMENTS

AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
INDEX

<TABLE>
<S> <C>
Reports of Independent Accountants.......................... F-2

Consolidated Balance Sheets at December 31, 1999 and 1998... F-3

Consolidated Statements of Operations for the three years
ended December 31, 1999, 1998 and 1997.................... F-4

Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1999 and 1998............ F-5

Consolidated Statements of Cash Flows for the three years
ended December 31, 1999, 1998 and 1997.................... F-6

Notes to Consolidated Financial Statements.................. F-7

Condensed Consolidated Balance Sheets (Unaudited) at June
30, 2000 and December 31, 1999............................ F-26

Condensed Consolidated Statements of Operations (Unaudited)
for the six-month period ended June 30, 2000 and 1999..... F-27

Condensed Consolidated Statements of Cash Flows (Unaudited)
for the six months ended June 30, 2000 and 1999........... F-28

Notes to Condensed Consolidated Financial Statements........ F-29
</TABLE>

SOURCEONE WIRELESS, INC. AND SUBSIDIARIES
INDEX

<TABLE>
<S> <C>
Reports of Independent Certified Public Accountants......... F-35

Consolidated Balance Sheets at December 31, 1998 and 1999... F-36

Consolidated Income Statements for the three years ended
December 31, 1997, 1998 and 1999.......................... F-37

Consolidated Statements of Capitalization for the three
years ended December 31, 1997, 1998 and 1999.............. F-38

Consolidated Statements of Cash Flows for the three years
ended December 31, 1997, 1998 and 1999.................... F-39

Notes to Consolidated Financial Statements.................. F-40
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of Aquis Communications Group, Inc:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity, and cash flows of
Aquis Communications Group, Inc. and Subsidiaries ("Company") present fairly, in
all material respects, the financial position of the Company at December 31,
1999 and December 31, 1998, and the results of its operations and cash flows for
the year ended December 31, 1999 and the changes in stockholders' equity for the
years ended December 31, 1999 and 1998 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

New York, New York
March 28, 2000, except for
Note 22 for which the date is
September 27, 2000

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of Aquis Communications Group, Inc:

In our opinion, the accompanying statements of operations and cash flows of
Bell Atlantic Paging, Inc. (the "Predecessor Company") present fairly, in all
material respects, the results of its operations and cash flows for the two
years in the period ended December 31, 1998 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

New York, New York
February 12, 1999

F-2
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 973 $ --
Accounts receivable (net of allowances of $939 and $490,
respectively)........................................... 4,933 2,061
Inventory, net............................................ 228 2,076
Acquisition escrow deposits............................... 200 --
Prepaid expenses and other current assets................. 1,072 1,012
-------- -------
Total current assets.................................... 7,406 5,149
Property and equipment, net................................. 10,461 10,107
Intangible assets, net...................................... 20,092 16,749
Deferred charges and other assets........................... 1,365 330
-------- -------
Total assets............................................ $ 39,324 $32,335
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt...................... $ 508 $ --
Accounts payable.......................................... 6,750 1,769
Accrued expenses.......................................... 2,535 236
Deferred revenue.......................................... 930 1,033
Customer deposits......................................... 577 577
Notes payable to stockholders............................. -- 520
-------- -------
Total current liabilities............................... 11,300 4,135
Long term debt.............................................. 25,963 --
Note payable................................................ -- 4,150
Payable to Bell Atlantic Corp. and affiliates............... -- 18,535
-------- -------
Total liabilities....................................... 37,263 26,820
-------- -------
Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 and 80,000
shares authorized in 1999 and 1998, respectively; none
issued 1999, 78,000 issued and outstanding at December
31, 1998................................................ -- 5,830
Common stock, $0.01 par value, 75,000,000 shares
authorized, 16,551,000 and 22,000 issued and outstanding
at December 31, 1999 and 1998, respectively............. 166 --
Additional paid-in capital................................ 13,195 221
Accumulated deficit....................................... (11,175) (296)
Note receivable from stockholder.......................... (125) (240)
-------- -------
Total stockholders' equity.............................. 2,061 5,515
-------- -------
Total liabilities and stockholders' equity.............. $ 39,324 $32,335
======== =======
</TABLE>

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

F-3
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ----------- -----------
PREDECESSOR PREDECESSOR
<S> <C> <C> <C>
Revenues:
Paging services.......................................... $ 30,368 $23,309 $17,894
Equipment sales.......................................... 791 3,123 2,795
---------- ------- -------
Total revenues......................................... 31,159 26,432 20,689
---------- ------- -------
Operating expenses:
Paging services.......................................... 7,753 4,968 4,401
Technical................................................ 5,317 3,482 2,023
Cost of equipment sold................................... 947 2,709 2,873
Selling and marketing.................................... 3,881 3,394 2,844
General and administrative............................... 7,676 5,657 4,211
Depreciation and amortization............................ 10,878 4,323 3,378
Provision for doubtful accounts.......................... 919 1,154 538
Costs of abandoned acquisitions.......................... 1,692 -- --
---------- ------- -------
Total operating expenses............................... 39,063 25,687 20,268
---------- ------- -------
Operating (loss) income.................................... (7,904) 745 421
Interest expense, net...................................... (3,004) -- --
Gain on sale of equipment.................................. 29 -- --
---------- ------- -------
(Loss) Income before income taxes and
extraordinary item....................................... (10,879) 745 421
Provision for income taxes................................. -- (296) (168)
---------- ------- -------
Income before extraordinary item........................... (10,879) 449 253
Extraordinary item, net of income taxes of $454............ -- 682 --
---------- ------- -------
NET (LOSS) INCOME.......................................... $ (10,879) $ 1,131 $ 253
========== ======= =======
NET LOSS PER COMMON SHARE:
Basic and diluted........................................ $ (.76)
==========
<CAPTION>
Weighted average common shares outstanding. 14,233,000
----------
<S> <C> <C> <C>
</TABLE>

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

F-4
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL NOTES TOTAL
---------------------- ------------------- PAID-IN ACCUMULATED RECEIVABLE- STOCKHOLDERS'
SHARES AMOUNTS SHARES AMOUNTS CAPITAL DEFICIT STOCKHOLDER EQUITY
----------- -------- -------- -------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1,
1998 (date
capitalized)............ 99 $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of shares to the
Founders of Aquis in
connection with their
individual stock
subscriptions in January
1998.................... 7,991 -- -- -- -- -- -- --
Value ascribed to the
issuance of shares to
the Founders of Aquis In
July 1998............... 2,910 -- -- -- 39 -- -- 39
Value ascribed to the
issuance of shares in
connection with the
issuance of promissory
notes in July 1998...... 7,500 -- -- -- 108 -- -- 108
Value ascribed to the
issuance of shares to
one of the purchasers of
preferred stock in
November 1998........... 2,000 -- -- (54) 54 -- -- --
Value ascribed to the
issuance of shares to
one of the note holders
in July 1998............ 1,500 -- -- -- 20 -- -- 20
Issuance of preferred
stock................... -- -- 78,000 5,884 -- -- -- 5,884
Net loss.................. -- -- -- -- -- (296) -- (296)
Notes received from
stockholder in
connection with the
purchase of preferred
stock................... -- -- -- -- -- -- (240) (240)
----------- ---- -------- ------- ------- -------- ----- --------
Balance as of December 31,
1998.................... 22,000 -- 78,000 5,830 221 (296) (240) 5,515
Recapitalization completed
in connection with the
merger with Paging
Partners March 31,
1999.................... 15,199,000 152 (78,000) (5,830) 11,313 -- -- 5,635
Shares issued in SunStar
acquisition............. 1,150,000 12 -- -- 1,550 -- -- 1,562
Reduction of note due from
stockholder in
connection with
settlement of claim..... -- -- -- -- -- -- 115 115
Shares issued to Directors
on December 15, 1999.... 180,000 2 -- -- 111 -- -- 113
Net loss.................. -- -- -- -- -- (10,879) -- (10,879)
----------- ---- -------- ------- ------- -------- ----- --------
Balance as of December 31,
1999.................... $16,551,000 $166 $ -- $ -- $13,195 $(11,175) $(125) $ 2,061
=========== ==== ======== ======= ======= ======== ===== ========
</TABLE>

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

F-5
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
-------- ----------- -----------
PREDECESSOR PREDECESSOR
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income......................................... $(10,879) $ 1,131 $ 253
Adjustments to reconcile net loss to net cash provided by
operating activities:
Gain on sale of business................................ -- (1,136) --
Depreciation and amortization........................... 10,878 4,323 3,378
Costs of abandoned business combinations................ 1,692 -- --
Amortization of deferred financing costs................ 141 -- --
Stock-based compensation................................ 113 -- --
Reduction of note due from stockholder.................. 115 -- --
Deferred income taxes................................... -- (590) (552)
Provision for doubtful accounts......................... 919 1,154 538
Provision for inventory obsolescence.................... -- (136) 316
(Gain) loss on sale of property and equipment........... (29) 232 49
Changes in operating assets and liabilities, before
effects of business acquisitions:
Accounts receivable................................... (3,479) (1,238) (699)
Due from affiliates for trade......................... -- (1,821) (793)
Inventory............................................. (135) (394) 1,416
Prepaid expenses and other current assets............. 15 (543) (5)
Other assets.......................................... -- -- 7
Accounts payable and accrued expenses................. 5,579 1,160 (11)
Income taxes payable.................................. -- 848 247
Intercompany payable.................................. -- (569) (581)
Deferred revenues and customer deposits............... (287) 35 (186)
-------- ------- -------
Net cash provided by operating activities........... 4,643 2,456 3,377
-------- ------- -------
Cash flows from investing activities:
Business acquisitions..................................... (18,940) -- --
Acquisition of property, equipment and licenses........... (2,275) (4,217) (4,930)
Deferred business acquisition costs....................... (2,230) -- --
Acquisition escrow deposits............................... (200) -- --
Sale of property and equipment............................ 345 236 200
-------- ------- -------
Net cash used by investing activities............... (23,300) (3,981) (4,730)
-------- ------- -------
Cash flows from financing activities:
Issuance of long term debt................................ 26,615 -- --
Repayment of notes payable to stockholders................ (520) -- --
Repayment of notes payable................................ (4,150) -- --
Repayment of long term debt............................... (144) -- --
Repayment of capital lease obligation..................... (1,506) -- --
Deferred financing costs.................................. (665) -- --
Due to affiliates......................................... -- 1,564 1,339
-------- ------- -------
Net cash provided by financing activities........... 19,630 1,564 1,339
-------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 973 39 (14)
Cash and cash equivalents--beginning of year................ -- 31 45
-------- ------- -------
Cash and cash equivalents--end of year...................... $ 973 $ 70 $ 31
======== ======= =======
</TABLE>

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

F-6
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS:

Aquis Communications Group, Inc. (the "Company") is a holding company,
incorporated in the State of Delaware. Through its operating companies, it
operates two regional paging systems providing one-way wireless alpha and
numeric messaging services in portions of thirteen states principally in the
Northeast and Mid-Atlantic regions of the United States, as well as the District
of Columbia. The Company has recently entered the Midwestern region through a
purchase of certain assets completed on January 31, 2000, the Company has
expanded its geographical reach to six additional states in the mid-west. The
Company, resells nationwide and regional services, offers alpha dispatch, news
and other messaging enhancements, and sells internet access services through a
wholly-owned subsidiary. Its customers include individuals, businesses,
government agencies, hospitals and resellers.

On March 31, 1999, a wholly owned subsidiary of Paging Partners Corporation
("Paging Partners"), merged with Aquis Communications, Inc. ("ACI") in a
transaction accounted for as a reverse acquisition with ACI as the accounting
acquirer. At that time, Paging Partners changed its name to Aquis Communications
Group, Inc. (the "Company"). The historical financial statements prior to March
31, 1999, are those of ACI. ACI had no operating activities prior to the
acquisition of BAPCO on December 31, 1998. The statements of operations and of
cash flows for the years ended December 31, 1998 and 1997 represent the
financial statements of the Predecessor Company for such periods. The
Predecessor Company financial statements include allocations of certain Bell
Atlantic Corporation ("Bell Atlantic") revenues and expenses. Management
believes that these allocations are reasonable. However, the revenues and
expenses allocated are not necessarily indicative of the revenues and expenses
that would have been earned or incurred if the Predecessor Company had performed
or procured these functions as a separate entity.

On June 15, 1999, a wholly-owned subsidiary of the Company entered into a
stock purchase agreement with SunStar Communications, Inc. in a transaction that
was accounted for as a purchase.

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, and reflect the merger with Paging Partners,
as well as the acquisition of SunStar Communications, Inc., and the acquisition
of the net assets of Bell Atlantic Paging, Inc. ("BAPCO" or the "Predecessor
Company") on December 31, 1998. All material intercompany accounts and
transactions have been eliminated in consolidation.

The Company's principal source of liquidity at December 31, 1999 included
cash and cash equivalents of about $1,000 and its ability to generate cash from
operations, which totaled $4,643 during 1999. The Company believes that its
current cash and equivalents and the cash it expects to generate from operations
will be sufficient to meet its anticipated working capital and capital
expenditure requirements through at least the end of 2000. However, if cash from
operations is not sufficient to fund the planned growth of the core business and
the internet business or if the Company experiences further deterioration of its
average revenue per unit ("ARPU") or if certain contingencies are resolved
unfavorably, the Company is prepared to implement an alternative business plan
(the "Alternative Plan"). The Alternative Plan calls for the sale of the
internet subsidiary and other assets and for a reduction of planned marketing
expenditures and capital expenditures. Cash requirements of the paging business
may vary materially from those now planned as a result of unforeseen changes
that

F-7
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS: (CONTINUED)
could consume a significant portion of available resources or as a result of an
increased rate of attrition of the customer base.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

REVENUE RECOGNITION

Paging service revenues include airtime for paging services, rental fees for
leased paging equipment, and various other fees for such enhanced features as
alpha dispatch services, loss protection and maintenance, and voice mail. These
revenues are recognized as the services are performed or ratably over time in
the case of rental fees. Revenues related to pre-billed services are deferred
until earned. Equipment revenue is recognized when the equipment is delivered to
the customer.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities. These
estimates and assumptions also affect the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Estimates are used for such
reported amounts as the allowance for doubtful accounts, allowances for asset
obsolescence or impairment, the tax benefit valuation allowance, and useful
lives of fixed assets or amortization periods for intangible assets. Actual
results could differ from those estimates.

CASH AND CASH EQUIVALENTS

All highly liquid investments with an original maturity of 90 days or less
are considered to be cash equivalents.

INVENTORY

Inventory consists primarily of new pagers held for sale or lease.
Inventories are stated at the lower of cost or market, with cost determined on a
first-in, first-out basis.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost, net of depreciation and
amortization. The property and equipment acquired through merger or business
combination is recorded at estimated fair value. Included are the Company's
rental pagers, paging network assets, data processing equipment, office
furniture and equipment, and leasehold improvements. These assets are
depreciated over their estimated useful lives using the straight-line method.
Leasehold improvements are amortized over the shorter of their estimated useful
lives or the term of the related lease. Costs to repair or maintain assets
without adding to their lives or improving their value are expensed as incurred.
Upon the sale or other disposal of property or equipment, the cost and related
accumulated depreciation or amortization

F-8
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
is eliminated from the accounts and any related gain or loss is reflected in the
Company's results of operations.

DEFERRED CHARGES

Certain costs directly related to pending business acquisitions are deferred
until the acquisition is completed or abandoned. If completed, such costs are
considered part of the cost to acquire the business. Costs associated with
abandoned acquisition efforts are written off. Costs and fees related to
financing activities are amortized over the term of the related loan.

CAPITALIZED SOFTWARE

The cost to acquire computer software used in the Company's operations is
capitalized and amortized over three years. Accumulated amortization totaled $45
at December 31, 1999.

INCOME TAXES

Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes". Accordingly, the balance sheet will reflect
anticipated tax impacts of future taxable income or deductions implicit in the
balance sheet in the form of temporary differences. These temporary differences
will reflect the difference between the basis in assets and liabilities as
measured in the financial statements and as measured by tax laws using enacted
tax rates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Aquis' financial instruments include cash and cash equivalents, accounts and
notes receivable. The fair value of these instruments approximate their carrying
values due to their short-term nature. Because the Company has floating rate
debt, the carrying amount of long-term borrowings also approximates fair value.

CONCENTRATION OF RISK

The Company utilizes one provider of nationwide paging services to fulfill
the majority of its requirements for this service. Although there are a limited
number of other nationwide carriers, Management believes that other carriers
could provide similar services under comparable terms. However, a change in
vendor or carrier could cause a delay in service provisioning or a possible loss
of revenue, which could adversely effect operating results. The Company
maintains its cash and cash equivalents in one commercial bank and one money
market fund that invests primarily in high quality money market instruments,
including securities issued by the US government. No single customer is large
enough to present a significant financial risk to Aquis.

F-9
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ADVERTISING COSTS

Costs associated with advertising in Yellow Pages or similar directories are
amortized ratably over the periods during which the directories are in current
circulation. Other costs for such items as direct mail ads or promotional items
are expensed as incurred. Total advertising expenses totaled $118, $71, and $82
in 1999, 1998 and 1997, respectively.

LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the
estimated fair value and the carrying value of the asset.

STOCK-BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its stock plans. Accordingly, no compensation expense has been recognized for
its stock-based compensation plans other than for performance-based awards
issued to non-employees. Compensation costs charged against earnings totaled
$127 in 1999. Further, Aquis has adopted the disclosure-only provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation."

RECENT ACCOUNTING PRONOUNCEMENT

In December, 1999 the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "REVENUE RECOGNITION IN FINANCIAL
STATEMENTS", amended in March, 2000, which provides guidance on the application
of generally accepted accounting principles to revenue recognition in financial
statements. The Company will adopt SAB 101 in the second quarter of 2000 and
believes that adoption will not have a significant effect on its consolidated
results of operations or its financial position.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
year presentation.

3. MERGER AND RECAPITALIZATION:

On November 6, 1998, ACI entered into a merger agreement with Paging
Partners and its wholly-owned subsidiary whereby each share of ACI common stock
was exchanged for 88.92076 shares of Paging Partners' common stock (the
"Merger"). The Merger was consummated on March 31, 1999, and has been accounted
for as a recapitalization of Paging Partners with ACI as the acquirer (reverse
acquisition) under the purchase method of accounting in accordance with
Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations."

F-10
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

3. MERGER AND RECAPITALIZATION: (CONTINUED)
The aggregate purchase price of $6,124, which includes transaction costs,
has been allocated to the net assets acquired based upon their estimated fair
market values. The purchase price was determined by using the average quoted
stock price of Paging Partners a few days before and after the date of the
Merger. The assets and liabilities recorded in connection with the purchase
price allocation are based on estimated fair value. Intangible assets of
approximately $5,038 (principally customer lists and FCC licenses are being
amortized over three to ten years on a straight-line basis.

The following unaudited pro forma information presents a summary of the
results of operations as if the Paging Partners merger occurred on January 1,
1998.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------
1999 1998
-------- -----------
PREDECESSOR
<S> <C> <C>
Revenue................................................ $ 33,433 $36,334
Net loss............................................... $(11,309) $(7,427)

Net loss per common share.............................. $ (0.72)
</TABLE>

The pro forma results are based on various assumptions and are not
necessarily indicative of what would have occurred had these transactions been
consummated on January 1, 1998.

4. PREDECESSOR COMPANY ACQUISITION:

On December 31, 1998, ACI acquired the net assets of BAPCO and the paging
frequencies and the paging network infrastructure owned by various Bell Atlantic
operating telephone companies for approximately $29,200, including transaction
costs. The acquisition was accounted for as a purchase in accordance with APB
Opinion No. 16. The aggregate purchase price was allocated to the net assets
acquired based on their estimated fair market values.

Subsequent to the acquisition and during the quarter ended June 30, 1999,
Bell Atlantic and ACI completed negotiations and settled certain post-closing
disputes. These negotiations pertained to the reimbursement to BAPCO and
assumption by ACI of certain liabilities in excess of amounts originally
acknowledged by ACI, and resulted in ACI's assumption of certain additional
current liabilities. On June 30, 1999, the Company paid the settlement amount in
full and, in addition, exercised its negotiated right to prepay the outstanding
balance of the purchase price at a significantly discounted amount. Funding for
retirement of this debt was provided through the credit facility described in
note 11. This settlement did not have a material effect on the Company's
financial position or the results of its operations or cash flows.

5. MERGERS AND ACQUISITIONS:

SUNSTAR COMMUNICATIONS, INC.:

On June 15, 1999, a wholly-owned subsidiary of the Company, entered into a
Stock Purchase Agreement (the "Agreement") with SunStar Communications, Inc.
("SunStar"), an Arizona corporation

F-11
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

5. MERGERS AND ACQUISITIONS: (CONTINUED)
and SunStar One, LLC., an Arizona limited liability company. SunStar sells
secure internet services over an intelligent private network, provides dial-up
internet access services to corporate and individual subscribers and can provide
enhanced security standards for user authentication. Total consideration paid
for all of the outstanding stock of SunStar was $275 cash and 1,150,000 shares
of the Company's common stock. The aggregate purchase price, including
transaction costs, has been allocated to the net assets acquired based on their
estimated fair market values. Intangible assets of approximately $2,066 are
being amortized on a straight-line basis over three to 10 years.

6. BUSINESS DEVELOPMENTS:

SOURCEONE WIRELESS:

On January 31, 2000, the Company completed the acquisition of certain assets
of SouceOne Wireless, a facilities-based provider of one-way paging services to
subscribers in certain Midwestern states. Previously, on August 2, 1999, the
Company entered into an Asset Purchase Agreement (the "Purchase Agreement") and
Agreement Pending Purchase Closing (the "Agreement") with SourceOne Wireless,
Inc. and two of its affiliates ("SOWI"). SOWI and its affiliates filed voluntary
petitions for relief under Chapter 11 with the United States Bankruptcy Court in
the Northern District of Illinois between April 29 and July 2, 1999. Pursuant to
the Agreement, the Company managed the day-to-day operations of certain SOWI
businesses pending the closing of the associated Purchase Agreement. This
closing was subject to various approvals, including that of the Bankruptcy Court
and the FCC. During the management period, a reduction of the purchase price was
negotiated, and resulted in a reduced price of $2,250 in cash and 15,000 shares
of the Company's 7.5% cumulative preferred stock valued at $1,500. Acquisition
costs totaling about $502 were deferred at December 31, 1999, and will be
treated as a cost of the assets acquired on January 31, 2000. Costs to acquire
the assets of SourceOne Wireless were capitalized at December 31, 1999,
including an escrow deposit of $200, since this transaction was closed on
January 31, 2000.

The Company had entered into various negotiations and agreements related to
potential value-driven acquisitions or mergers in 1999 with candidates including
ABC Paging, Inc, Francis Communications Texas, Inc. Intelispan, Inc., COMAV
Corporation, SourceOne Wireless, Inc. and related entities holding economic
interests in these entities. Several of these negotiations were terminated as
the business development requirements or the underlying businesses of the
potential acquiree and the Company changed during the course of the discussions.
Acquisition costs and deposits totaling $1,692 related to uncompleted
transactions were charged against earnings in 1999.

F-12
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

7. PROPERTY AND EQUIPMENT:

As of December 31, 1999 and 1998, property and equipment consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Rental pagers (3 years)................................... $ 7,605 $ 4,847
Paging network equipment (7 years)........................ 8,082 4,441
Data processing equipment (2-5 years)..................... 1,096 508
Furniture, fixtures and office equipment (5 years)........ 326 --
Leasehold improvements (various).......................... 435 311
Other..................................................... 17 --
------- -------
17,561 10,107
Less accumulated depreciation............................. 7,100 --
------- -------
$10,461 $10,107
======= =======
</TABLE>

8. INTANGIBLE ASSETS:

Intangible assets consist of the following as of December 31, 1999 and 1998:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
FCC licenses and State certificates (10 years)............ $15,854 $12,238
Customer lists (3 years).................................. 5,681 4,511
Goodwill (10 years)....................................... 1,996 --
------- -------
23,531 16,749
Less accumulated amortization............................. 3,439 --
------- -------
$20,092 $16,749
======= =======
</TABLE>

9. DEFERRED CHARGES:

At December 31, 1999 and 1998, deferred charges consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred financing costs.................................... $ 633 $110
Deferred acquisition costs.................................. 502 220
Unamortized software and other costs........................ 230 --
------ ----
$1,365 $330
====== ====
</TABLE>

F-13
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

10. COMMITMENTS AND CONTINGENCIES:

The Company leases facilities and equipment used in its operations. Many
lease agreements include renewal options with Consumer Price Index related rent
escalations. At December 31, 1999, the aggregate future minimum rental
commitments under non-cancelable operating leases were as follows:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
2000........................................................ $2,013
2001........................................................ 1,137
2002........................................................ 780
2003........................................................ 352
2004........................................................ 152
Thereafter.................................................. 97
------
$4,531
======
</TABLE>

Rent expense was $2,874, $551 and $515 for 1999, 1998, and 1997,
respectively.

Pursuant to a certain obligation assumed through the Paging Partners merger,
the Company is committed to a significant supplier of telephony services for a
minimum annual usage and services volume valued at $240. Thereunder, and subject
to attainment of the minimum volume, the Company receives certain significant
discount pricing from this provider. The Company has historically exceeded, and
is currently exceeding, that minimum commitment level. Commitments under this
contract expire during the third quarter of 2000.

The Company has also provisioned some of its communications circuits and
other facilities from another provider. Under terms of this agreement, the
Company has obtained certain volume pricing discounts in exchange for an
agreement to utilize these facilities for a minimum period of three years
beginning on December 31, 1998. Monthly fees incurred under this agreement
totaled about $48 as of December 31, 1999.

Various legal proceedings, claims and investigations related to services,
contracts and other matters are pending against the Company. The most
significant of these are discussed below:

FRANCIS COMMUNICATIONS

The Company has retained local counsel in Texas to represent it in a suit
brought by Francis Communications Texas, Inc. and related interests ("Francis")
in the U.S. District Court for the Western District of Texas. Francis alleges a
breach of agreement to purchase its radio paging business and is seeking the
original purchase price of $4,000 and additional monetary relief. Aquis
terminated this agreement due to the failure of Francis to comply with certain
conditions precedent to closing. Discovery is proceeding at this time. The
Company believes that its termination of this agreement was within the terms of
the purchase agreement and that the allegations made by Francis are without
merit. Management does not expect the outcome of this lawsuit to have a material
effect on its results of operations, cash flows or financial position.

F-14
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

10. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
FONE ZONE COMMUNICATION CORP

On February 18, 2000, Fone Zone Communication Corp. ("Fone") filed a lawsuit
in the Supreme Court of the State of New York in Queens County. Aquis, on
March 23, 2000, had the venue of this action moved to the U.S. District Court
for the Eastern District of New York. Fone, a former reseller of Aquis paging
services and of the service of Paging Partners before its merger with Aquis, is
seeking $1,000 in alleged damages as a result of the termination of its service
and solicitation of its customers by Aquis. The Company discontinued service to
Fone as the result of Fone's severe delinquency and ultimate failure to pay for
such services. Management believes it will be able to recover the fully-
reserved unpaid charges from Fone through its counterclaim and that the claims
initiated by Fone are without sufficient grounds to support its claims.
Management does not expect the outcome of this lawsuit to have a material effect
on its results of operations, cash flows or financial position.

ARBITRATION OF EMPLOYMENT AND OTHER CLAIMS

On December 23, 1999, the Company's former President, who was also a
Director and a Founder of the Company, filed for arbitration under the Rules of
the American Arbitration Association. This former officer's claims were related
to an alleged breach of an employment agreement, to wrongful discharge and to
wrongful termination of health and welfare benefits including incentive stock
options. A claim was filed for an amount to be proven at trial but in no event
less than $1,762 plus compensatory and punitive damages. On April 4, 2000, the
parties settled these claims before this matter proceeded to arbitration.
Accordingly, Aquis has agreed provide this individual a payment of $25, a credit
of $75 against his existing indebtedness to the Company, shares of the Company's
common stock valued at $400, forgiveness of $115 of a note receivable from him,
and agreed to replace 55,000 of the 485,000 options previously held by him,
valued at $127. The Company continues to hold the balance of the note receivable
in the reduced amount of $125, which is expected to be paid in full , net of
applicable credits, during 2000. Accordingly, $742 has been charges against
earning in the accompanying financial statements the period ended December 31,
1999.

11. LONG-TERM DEBT:

On October 23, 1998, ACI entered into a five-year term loan agreement (the
"Senior Loan Agreement") with FINOVA Capital Corporation ("FINOVA") which
provides a $30,000 credit facility. The FINOVA loan has a term of five years,
and requires graduated increasing quarterly principal repayments ranging from
.5% to 3.5% of outstanding principal beginning on July 1, 2000, with the balance
due on December 31, 2003. The loan bears interest at a rate based on Citibank,
N.A.'s corporate base rate plus 175 basis points. The Company may also elect to
have interest on a part of the FINOVA loan based on a London Inter-Bank Official
Overnight Rate plus 450 basis points. This term loan is collateralized by all of
the Company's assets, presently owned and acquired subsequently, and all issued
and outstanding equity interests in the Company's operating subsidiaries. The
loan agreement also contains various covenants, including restrictions on
capital expenditures and compliance with certain financial ratios. At December
31, 1999, the Company was not in compliance with certain ratios under this loan
agreement.

F-15
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

11. LONG-TERM DEBT: (CONTINUED)
In November 1999, in connection with the termination of negotiations related
to various potential mergers, costs that were previously capitalized have been
written off in 1999. During the third quarter of 1999, FINOVA modified certain
financial covenants contained in the loan agreement to exclude the costs written
off in connection with these abandoned business acquisitions and other specified
charges when computing "Net Income" as defined in the amended loan agreement.

On January 26, 2000, the FINOVA loan was amended in connection with the
SourceOne Wireless acquisition. The Company borrowed an additional $2,450 from
FINOVA on January 31, 2000 to consummate the acquisition (the "SourceOne
Portion"). The effect of the amendment was to limit the facility to the amount
outstanding after the SourceOne transaction, or a total of $27,765, to modify
certain financial ratios and to set the interest rate on the SourceOne Portion
to Citibank, N.A.'s corporate base rate plus 400 basis points. Additionally, a
prepayment of principal of $1,250 (the "Special Prepayment") was defined that is
to be applied to the SourceOne Portion. If the Special Prepayment is not made by
June 8, 2000, the interest rate on the balance of the loan, excluding the
SourceOne Portion, increases to Citibank, N.A.'s corporate base rate plus 225
basis points. Similar increases are scheduled for July 8 and August 8, with a
final increase to 375 basis points over that base rate if the payment is not
made by September 8, 2000.

During the second quarter of 1999, the Company refinanced the capital lease
obligations that were assumed as a result of the merger with Paging Partners.
Terms of the new obligation (the "Installment Loan") include a principal amount
of $1,300, a 60-month repayment schedule, an interest rate indexed to the yield
for five year Treasury Notes, and is collateralized by the underlying equipment.

The balance outstanding at December 31, 1999 under borrowings of the Senior
Debt Agreement was $25,315. The remaining balance of long term debt outstanding
consisted principally of borrowings made pursuant to the Installment Loan.
Principal maturities of the senior debt and the Installment Loan are as follows:

The Seller Note in the amount of $4,150 due as a result of the acquisition
of the paging assets from BAPCO was settled and paid in full on June 30, 1999.

12. RELATED PARTY TRANSACTIONS:

The Company was provided with various investment banking services by a firm
with which a certain member of the Board of Directors was affiliated. During
1999, fees incurred under this arrangement totaled approximately $411, of which
$45 was payable at December 31, 1999.

F-16
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

12. RELATED PARTY TRANSACTIONS: (CONTINUED)
The Company was also provided with legal services by a firm in which a
member of the Board of Directors was a partner. During 1999, fees incurred under
this arrangement totaled approximately $1,935, of which $1,052 was payable at
December 31, 1999. In January, 2000, this outstanding amount was settled through
cash payments totaling $205, the issuance of a note payable in the face amount
of $350 payable in 20 equal monthly installments bearing interest at the rate of
8.5%, and the issuance of 275,000 shares of the Company's common stock valued at
$380.

During 1999, Aquis received $500 from a limited liability company in which a
minority member is a partnership whose managing partner is also a member of the
Company's Board of Directors. These funds represent earnest money for a
potential sale of one of the Company's subsidiaries. This advance has been
included as a current liability in the accompanying balance sheet at December
31, 1999.

Three stockholders and members of the Board of Directors were each granted
60,000 shares of the Company's common stock on December 15, 1999 as compensation
for interim management services rendered during the Company's search for a
President and CEO in the later part of 1999. Based on the fair value of the
Company's common stock on the date of grant, current year earnings were charged
$112,500 for these services.

In 1998 and 1997, BAPCO was allocated certain costs from its parent
organization for certain administrative, management and other services. These
allocated costs were based on relative staff size or on relative revenues, and
totaled $215 and $161, respectively. The management of BAPCO believes that these
allocated costs were reasonable. However, the costs for the services provided
are not necessarily indicative of the costs that would have been incurred if the
services had been provided by unaffiliated entities.

Significant transactions with affiliates in 1998 and 1997 are summarized as
follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenues from affiliates.................................... $3,622 $2,406
Revenues from BAM, a reseller of BAPCO services............. 2,724 2,114
Network charges............................................. 3,933 3,750
Telecommunications expenses................................. 194 247
Data processing charges..................................... 216 181
</TABLE>

13. NOTES PAYABLE TO STOCKHOLDERS:

On July 7, 1998, Aquis completed an offering in which it issued $750 face
amount, 15% promissory notes due on December 31, 1998, and 7,500 shares of
common stock at $1 per share to the note holders. Further, one of the note
holders purchased 1,500 shares of common stock at par value ($.001). In addition
to the $7 of cash proceeds received, a value of $121 was ascribed to the
issuance of these shares and was recorded as an original issue discount on the
notes payable, and amortized over the life of the notes. The proceeds from the
offering were used for working capital , acquisitions, and general corporate
purposes. In connection with the acquisition of BAPCO, these notes and related
interest were paid on December 31, 1998 concurrent with the closing of the
acquisition of BAPCO. Pursuant to

F-17
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

13. NOTES PAYABLE TO STOCKHOLDERS: (CONTINUED)
the note agreements, as amended, a 10% premium on the promissory notes was also
paid upon maturity and was recorded as additional interest over the life of the
notes.

Concurrent with the repayment of these notes, Aquis issued an additional
$520 of notes to stockholders for working capital purposes. Those notes provided
interest at 15%, and were paid at the time of closing of the Paging Partners
merger.

14. INCOME TAXES:

At December 31, 1999, the Company had Federal net operating loss
carryforwards for tax purposes of approximately $13,000 that expire between 2009
and 2014. Approximately $8,550 of this total consists of pre-acquisition losses
that are subject to restrictions imposed by Section 382 of the Internal Revenue
Code that limit utilization of such carryforwards to about $300 annually. During
the prior period, the income and expenses of the Predecessor Company were
included in the consolidated Federal and certain combined state income tax
returns of its parent and the prior year provisions for income taxes have been
calculated on a separate return basis herein.

The provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current........................................... $ -- $1,235 $ 564
Deferred (benefit), net........................... (3,756) (647) (433)
Valuation allowance............................... 3,756 -- --
------- ------ -----
Total Federal................................... -- 588 131
------- ------ -----

State:
Current........................................... $ -- $ 337 $ 157
Deferred (benefit), net........................... (898) (179) (120)
Valuation allowance............................... 898 -- --
------- ------ -----
Total State..................................... -- 158 37
------- ------ -----
Total provision for income taxes.................... $ -- $ 746 $ 168
======= ====== =====
</TABLE>

F-18
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

14. INCOME TAXES: (CONTINUED)
Significant components of deferred tax assets and liabilities as of
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts.......................... $ 396 $ --
Seller note.............................................. -- 1,646
Depreciation............................................. 815 --
Net operating loss carryforwards......................... 5,487 --
Settlement reserve....................................... 264 --
Other--net............................................... 33 --
------- ------
Total deferred tax assets.............................. 6,995 1,646
Deferred tax liabilities--amortization of intangibles.... (1,029) --
------- ------
Net deferred tax assets before valuation allowance....... 5,966 1,646
Valuation allowance...................................... (5,966) --
------- ------
Net deferred tax asset..................................... $ -- $1,646
======= ======
</TABLE>

A reconciliation from the Federal income tax provision at the statutory rate
to the effective rate is as follows:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Tax (benefit) at Federal statutory rate................ (34.0)% 34.0% 34.0%
State income taxes, net of Federal tax benefit......... -- 6.0% 6.0%
Permanent differences.................................. 0.4% -- --
Valuation allowance.................................... 33.6% -- --
----- ---- ----
Effective tax rate..................................... -- 40.0% 40.0%
===== ==== ====
</TABLE>

As of December 31, 1999, the Company recorded no deferred tax asset. The
future expected benefit from the realization of the net operating losses was
fully offset by a related valuation allowance. A full valuation allowance was
recorded due to management's uncertainty about the realizability of the related
tax benefits as of December 31, 1999. However, the amount of the deferred tax
assets considered realizable could be adjusted in the future if estimates of
taxable income are revised.

15. STOCK SUBSCRIPTIONS:

On January 30, 1998, Aquis entered into three stock subscription agreements
with the Founders and issued 7,991 shares of common stock at par value. On
July 7, 1998, the Founders purchased 2,910 additional shares at par value. Aquis
recognized a compensation charge of $22 for 1,635 of the shares that were issued
to an officer of Aquis. In addition, a value of $17 was ascribed to the 1,275
shares issued to the other two Founders and was netted against the proceeds from
the issuance of the Series A Convertible Preferred Stock.

F-19
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

16. PREFERRED STOCK:

On October 16, 1998, the Board of Directors authorized up to 80,000 shares
of preferred stock to be designated as Series A Convertible Preferred Stock
("Series A Preferred Stock") at $80 per share ("Original Issue Price"). Each
holder of these shares shall be entitled to the number of votes equal to the
number of whole shares of common stock into which the shares of Series A
Preferred Stock held by each holder are convertible. Each share of Series A
Preferred Stock may be converted at the election of the holder at any time into
a number of shares of common stock determined by dividing the Original Issue
Price by the Applicable Conversion Price ("Applicable Conversion Price"). The
initial Applicable Conversion Price is $80 per share. Adjustments to the
Applicable Conversion Price are based upon a formula noted in the Preferred
Stock Purchase Agreement. A mandatory conversion of the Series A Preferred Stock
into common stock may occur in the event of any one of the following
circumstances: (1) the request of at least two-thirds of the holders of the
outstanding Series A Preferred Stock, (2) the consummation of the Paging
Partners transaction, or (3) the closing of the sale of shares of common stock
in a public offering pursuant to the Securities Act of 1933, at a price in
excess of 200% of the Applicable Conversion Price then in effect and resulting
in at least $20,000 of gross proceeds to Aquis.

In the event of any voluntary or involuntary liquidation of Aquis, the
holders of shares of Series A Preferred Stock shall be entitled to be paid out
of the assets of Aquis available for distribution to its stockholders before any
payment shall be made to the holders of common stock or any other series of
stock. The holders of Series A Preferred Stock are entitled to receive, when and
if declared by the Board of Directors of Aquis, a dividend (the "Accruing
Dividend") at the annual rate of 8% of the Original Issue Price (appropriately
adjusted in the event of any stock dividend, stock split or combination or
similar recapitalization). The Accruing Dividend will accrue, whether or not
earned or declared, on each issued and outstanding share of Series A Preferred
Stock and shall be cumulative.

On November 6, 1998, Aquis approved the sale and issuance of 78,000 shares
of its series A Preferred Stock at a purchase price of $80 per share. An
individual who purchased shares of the Series A Preferred Stock also was issued
2,000 shares of common stock, and a value of $54 was ascribed to these shares
and was netted against the proceeds from the issuance of the Series A Preferred
Stock. As part of a purchase of a portion of the Series A Preferred Stock, an
officer of the Company signed a note for $240 that was to be repaid in four
equal annual installments commencing on May 15, 2000. The note provided interest
at a rate of 8%, and all interest was due with the final payment on May 15,
2003. On April 4, 2000, in connection with the settlement of certain claims made
by this officer in relation to the end of his relationship with the Company, an
agreement was reached under which the face amount of this $240 note was reduced
to $125.

17. STOCK OPTIONS:

Through the merger with Paging Partners, the Company has a stock option plan
(the "Plan") as amended, pursuant to which options to purchase shares of the
Company's common stock, intended to qualify as "incentive stock options". These
options may be granted to employees, directors of the Company and independent
contractors providing services to the Company. A total of 1,500,000 shares of
common stock had been reserved for issuance under the amended Plan. Options are
exercisable for

F-20
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

17. STOCK OPTIONS: (CONTINUED)
terms of six months to ten years from the date granted. Details are as follows
(shares and prices are stated at original amounts before effect of the share
conversion effected through the merger):

<TABLE>
<CAPTION>
NUMBER OPTION
OF SHARES PRICE RANGE
--------- ------------------
<S> <C> <C>
1997
Outstanding, January 1................................ 260,600 $ 1.38-6.25
Granted............................................... 128,500 $ 0.88-1.38
Exercised............................................. (10,000) $ 0.88
Cancelled............................................. (37,150) $ 1.38-6.25
--------- ------------------
Outstanding, December 31.............................. 341,950 $ 0.88-6.25
--------- ------------------
Exercisable, December 31.............................. 254,050 $ 0.88-6.25
--------- ------------------

1998
Outstanding, January 1................................ 341,950 $ 0.88-6.25
Granted............................................... 216,100 $ 1.38-4.38
Exercised............................................. (25,750) $ 0.88-1.00
Cancelled............................................. (180,150) $ 0.88-6.25
--------- ------------------
Outstanding, December 31.............................. 352,150 $ 0.88-4.19
--------- ------------------
Exercisable, December 31.............................. 342,150 $ 0.88-4.19
--------- ------------------

1999
Outstanding, January 1................................ 352,150 $ 0.88-4.19
Granted............................................... 1,209,946 $ 1.00-1.38
Exercised............................................. (2,500) $ 0.88
Cancelled............................................. (523,683) $ 0.88-1.38
--------- ------------------
Outstanding, December 31.............................. 1,035,913 $ 0.88-4.19
--------- ------------------
Exercisable, December 31.............................. 460,150 $ 0.88-4.19
--------- ------------------
</TABLE>

In consideration of the merger, exercisable options as of December 31, 1998
include options that actually become exercisable on February 13, 1999 and
options that become exercisable upon a change in control.

As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation,"
Aquis has elected to apply APB No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for options granted.
Accordingly, no compensation cost has been recognized for the grant of these
options in the accompanying financial statements.

The weighted average fair value of options granted in 1998 was $0 per share.
The fair value is based on the minimum value method with the following
assumptions: the price of the stock at the time of grant, risk free interest
rates ranging from 4.57% to 5.81%, no dividend yield, and a weighted

F-21
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

17. STOCK OPTIONS: (CONTINUED)
average expected life of the options of nine to ten years. Had compensation cost
been determined on the basis of FASB Statement No. 123, net loss and loss per
share would have been reduced as follows:

<TABLE>
<CAPTION>
1999
--------
<S> <C>
Net Loss:
As reported............................................... $(10,879)
Pro forma................................................. $(11,679)
Net Loss per Common Share:
As reported............................................... $ (0.76)
Pro Forma................................................. $ (0.82)
</TABLE>

In connection with the employment of its President and CEO, and pursuant to
his employment agreement dated January 4, 2000, the Company issued an option to
purchase 900,000 shares of the Company's common stock. The option vests ratably
on, or around, June 30, 2000, January 2, 2002 and January 2, 2003. The exercise
price of the options is $0.75 for the shares initially vested, and is set at the
closing price of the common stock on January 2, 2001 and January 2, 2002 for the
two subsequently vested entitlements. As of December 31, 1999, none of the
options were vested.

18. NET LOSS PER COMMON SHARE:

The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share", which requires a dual presentation of basic and diluted
earnings per share ("EPS"). Basic EPS is based on the weighted average number of
shares outstanding during the periods presented. Diluted EPS reflects the
potential dilution that could occur if options, warrants, convertible securities
or other contracts requiring the issuance of common stock were converted into
common stock during the periods presented. The Company has not presented diluted
EPS because the effect would be anti-dilutive.

19. SUPPLEMENTAL CASH FLOW DATA:

The tables below provides supplemental information to the consolidated
statements of cash flows:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash paid for interest............................... $2,586 $ -- $ --
Cash paid for taxes.................................. $ -- $ 570 $492
Note receivable accepted as partial consideration.... $4,150
Receivable from affiliate............................ $4,835
Receivable from Aquis................................ $4,565
</TABLE>

F-22
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

19. SUPPLEMENTAL CASH FLOW DATA: (CONTINUED)
BUSINESS ACQUISITIONS

In 1999, the Company used cash of $18,940 for business acquisitions in
connection with the final cash payment made for the December 31,1998 BAPCO
assets purchase and for Paging Partners and SunStar transactions:

<TABLE>
<CAPTION>
PAGING PARTNERS
BAPCO AND SUNSTAR
ACQUISITION TRANSACTIONS
----------- ---------------
<S> <C> <C>
BAPCO purchase price, fair values for
Paging Partners and SunStar assets.................. $29,200 $11,420
Note issued to Bell Atlantic Mobile................. (4,150) --
Liabilities assumed................................. -- (3,262)
Exchange of common stock............................ -- (7,197)
Transaction costs paid or accrued................... (1,149) (386)
Cash paid at closing................................ (5,366) --
Cash acquired....................................... -- (170)
------- -------
Net cash paid during 1999........................... $18,535 $ 405
======= =======
</TABLE>

Excluding cash acquired in the Paging Partners and SunStar transactions,
cash paid in conjunction with those two transactions in 1999 totaled $575.

20. QUARTERLY FINANCIAL RESULTS (UNAUDITED):

Quarterly financial information for the years ended December 31, 1999 and
1998 is summarized below:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Total revenues......................... $ 6,294 $ 8,056 $ 8,717 $ 8,092
Operating loss......................... (413) (1,145) (1,970) (4,376)(a)
Net loss............................... (1,342) (1,790) (2,702) (5,045)
Net loss per share (basic and
diluted)............................. (0.15) (0.12) (0.17) (0.31)
Year ended December 31, 1998, Predecessor
Company:
Total revenues......................... $ 6,143 $ 6,636 $ 6,925 $ 6,728
Operating income (loss)................ 207 254 364 (80)
Net income (loss)...................... 125 87 137 782
</TABLE>

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

(a) Operating loss for the fourth quarter of 1999 includes a non-recurring
charge of $1,692 for costs incurred in connection with certain abandoned
business acquisitions. The loss also includes the costs incurred to settle a
dispute with a former officer of the Company in the amount of $742.

F-23
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

21. VALUATION AND QUALIFYING ACCOUNTS:

All information for 1999 is that of the Company, as is the balance at the
end of 1998. All other information is that of the Predecessor Company.

<TABLE>
<CAPTION>
BALANCE AT CHARGES TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND AND OTHER END
OF YEAR EXPENSES ADJUSTMENTS OF YEAR
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
1997............................. $386 $ 538 $620 $304
1998............................. 304 1,154 968 490
1999............................. 490 919 470 939

Allowance for inventory
obsolescence:
1997............................. $ 5 $ 316 $ -- $321
1998............................. 321 (136) -- 185
1999............................. 185 -- 185 --
</TABLE>

22. SUBSEQUENT EVENTS:

At December 31, 1999, the Company was not in compliance with a covenant in
the FINOVA Senior Loan. On April 12, 2000, FINOVA waived the non-compliance and
amended the loan agreement to redefine certain financial ratios specified in the
loan covenants for future periods and to ensure that the Special Payment of
$1.250 was paid to FINOVA in April, 2000 as agreed.

On April 10, 2000, Aquis entered into an agreement to obtain a $2 million
bridge loan as interim funding pending completion of additional prospective
financing. The debt is subordinate to the Company's senior debt and is
unsecured. This agreement provides for an interest rate of 11%, a scheduled
maturity date in September, 2001 and also provides for interest to accrue until
the earlier of its maturity date or conversion. At the lender's election not
earlier than 120 days from the date of funding, this loan is convertible into
the Company's common stock at 90% of the then-current market value. At the
Company's election, the loan is redeemable at 105% of face value if such
election is made within the initial 90 days subsequent to funding, or at 110% of
face value if redemption is elected within 91 to 118 days, or, if elected
thereafter, at 115% of face value. Proceeds from this loan will be used to make
the Special Prepayment of $1,250 to FINOVA. The proceeds were used to pay
certain fees incurred in connection with the FINOVA loan modifications arranged
during 2000, to pay certain costs incurred in connection with this bridge loan,
and the balance will provide about $400 to be used for general corporate
purposes.

On August 31, 2000, the Company completed the sale of the assets of its
internet operations for cash totaling $987 and a 10% note in the amount of
$1,330 due on October 31, 2000. The maturity date of the note may be extended at
the purchaser's option for up to two months with the payment of certain fees. In
addition, the purchaser has assumed certain liabilities totaling approximately
$650. These assets were sold to a private investor group led by John V. Hobko,
former President of Aquis IP Communications, and John B. Frieling, a current
director and the CEO of Aquis.

F-24
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999, 1998 AND 1997

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

22. SUBSEQUENT EVENTS: (CONTINUED)
On September 21, 2000, an agreement was executed to settle the dispute
between Aquis and Francis (see note 10, above). The settlement provides that the
escrow deposit of $100 plus accrued interest is to be returned to Aquis and
requires Francis to pay to Aquis the sum of $200 no later than September 29,
2000. The escrow deposit was fully reserved as of December 31, 1999.

On September 27, 2000, the Company and its lender executed an agreement to
modify the terms of its Senior Loan Agreement, as amended. These modifications
permit the Company to retain all proceeds from the sale of its internet
operations, give the Company an option to reduce the scheduled principal payment
due on July 1, 2001 from $514 to $200, and relaxes certain financial ratio
covenants through the third quarter of 2001. However, the Company's projections
indicate that unamended financial covenants will not be met during the fourth
quarter of 2001, which could cause the lender to accelerate the maturity date of
the loan. In exchange, the Company has agreed to pay a certain fixed fee.
Further, additional contingent fees of up to $250 per quarter are to be added to
the principal balance due at final maturity if the Company is unable to meet the
financial ratios as amended in April, 2000. Finally, based upon the sale of the
internet operations, a principal payment of $2,000 is required on or before
December 31, 2000 in order to avoid the assessment of a $500 fee and an interest
rate increase of 2%. That fee would also be added to the principal balance
otherwise payable at the maturity date of this loan.

F-25
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 473 $ 973
Accounts receivable, net of allowance for doubtful
accounts of $1,775 at June 30, 2000 and $939 at
December 31, 1999....................................... 6,117 4,933
Inventory................................................. 688 228
Acquisition escrow deposits............................... -- 200
Assets held for sale, net................................. 1,509 --
Prepaid expenses and other current assets................. 1,001 1,072
-------- --------
Total current assets.................................... 9,788 7,406

Fixed assets, net........................................... 12,815 10,461
Intangible assets, net...................................... 18,614 20,092
Deferred charges and other assets........................... 1,366 1,365
-------- --------
Total assets............................................ $ 42,583 $ 39,324
======== ========

LIABILITIES
Current liabilities:
Current maturities of long term debt...................... $ 1,747 $ 508
Accounts payable.......................................... 7,450 6,750
Accrued expenses.......................................... 2,317 2,535
Deferred revenue.......................................... 1,247 930
Customer deposits......................................... 515 577
-------- --------
Total current liabilities............................... 13,276 11,300
Long term debt.............................................. 28,145 25,963
-------- --------
Total liabilities....................................... 41,421 37,263
-------- --------

Commitments and contingencies

7.5% Redeemable Preferred stock, $0.01 par value, 100,000
shares authorized, 15,000 issued at June 30, 2000, none
issued 1999............................................... 1,547 --
-------- --------

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.01 par value, 75,000,000 shares authorized,
17,611,000 and 16,551,000 shares issued and outstanding at
June 30, 2000 and December 31, 1999, respectively......... 176 166
Additional paid in capital.................................. 15,862 13,195
Accumulated deficit......................................... (16,373) (11,175)
Note receivable from stockholder............................ (50) (125)
-------- --------
Total stockholders' equity (deficit).................... (385) 2,061
-------- --------
Total liabilities and stockholders' equity (deficit).... $ 42,583 $ 39,324
======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-26
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Paging services........................................... $15,199 $14,111
Internet services......................................... 335 --
Equipment sales........................................... 454 367
----------- -----------
Total revenues.......................................... 15,988 14,478
----------- -----------

Operating expenses:
Paging services........................................... 3,238 3,541
Cost of equipment sales................................... 416 478
Technical operations...................................... 3,809 1,975
Sales and marketing....................................... 1,790 1,637
General and administrative................................ 3,803 3,066
Internet operations....................................... 884 --
Depreciation and amortization............................. 4,936 4,870
Provision for doubtful accounts........................... 604 469
----------- -----------
Total operating expenses................................ 19,480 16,036
----------- -----------
Operating loss.............................................. (3,492) (1,558)
Gain on disposal of assets.................................. (19) --
Interest expense, net....................................... 1,725 1,574
----------- -----------
Net loss.................................................... (5,198) (3,132)
Preferred stock dividends................................... (47) --
----------- -----------
Loss attributable to common stockholders.................... $ (5,245) $ (3,132)
=========== ===========
Net loss per common share:
Basic and diluted......................................... $ (0.31) $ (0.26)
=========== ===========
Weighted average common shares outstanding................ 17,103,000 12,087,000
=========== ===========
</TABLE>

See notes to condensed consolidated financial statements.

F-27
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(5,198) $(3,132)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization........................... 5,074 4,805
Amortization of deferred financing costs................ 160 65
Gain on sale of equipment............................... (19) --
Provision for doubtful accounts......................... 604 469
Compensation paid with stock options.................... 693 --
Changes in assets and liabilities, net of businesses
acquired:
Accounts receivable................................... (1,841) (3,213)
Inventory............................................. (693) 659
Prepaid expenses and other current assets............. 159 285
Accounts payable and accrued expenses................. 295 2,361
Deferred revenues and customer deposits............... (135) 916
------- -------
Net cash (used in) provided by operating
activities........................................ (901) 3,215
------- -------
Cash flows from investing activities:
Business acquisitions..................................... (2,396) (18,940)
Capital expenditures...................................... (906) (1,294)
Acquisition deposits...................................... 200 (1,275)
Deferred business acquisition costs....................... (8) (554)
Sale of fixed assets...................................... 698 263
------- -------
Net cash used in investing activities............... (2,412) (21,800)
------- -------
Cash flows from financing activities:
Proceeds from stock options exercised..................... 348 --
Issuance of long term debt................................ 4,450 24,860
Repayment of long term debt............................... (1,250) --
Repayment of notes payable to stockholders................ -- (520)
Repayment of notes payable................................ -- (4,150)
Repayment of capital lease obligations.................... (179) (1,556)
Refinancing of capital lease obligation................... -- 1,300
Deferred financing and other costs........................ (556) (692)
------- -------
Net cash provided by financing activities........... 2,813 19,242
------- -------
(Decrease) increase in cash................................. (500) 657
Cash, beginning of period................................... 973 --
------- -------
Cash, end of period......................................... $ 473 $ 657
======= =======
</TABLE>

See notes to condensed consolidated financial statements.

F-28
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

1. BASIS OF PRESENTATION:

Aquis Communications Group, Inc. ("Aquis" or the "Company") is a holding
company, incorporated in the State of Delaware. Through its operating companies,
it now operates three regional paging systems providing one-way wireless alpha
and numeric messaging services in portions of nineteen states principally in the
Northeast, the Midwest and the Mid-Atlantic regions of the United States, as
well as the District of Columbia. The Company recently entered the Midwest
through a purchase of certain assets from SourceOne Wireless, Inc. ("SourceOne"
or "SOWI") completed on January 31, 2000. Aquis also resells nationwide and
regional services, offers alpha dispatch, news and other messaging enhancements.
Customers include individuals, businesses, government agencies, hospitals and
resellers.

On March 31, 1999, a wholly owned subsidiary of Paging Partners Corporation
("Paging Partners"), merged with Aquis Communications, Inc. ("ACI") in a
transaction accounted for as a reverse acquisition with ACI as the accounting
acquirer. At that time, Paging Partners changed its name to Aquis Communications
Group, Inc. On June 30, 1999, a wholly owned subsidiary of the Company acquired
SunStar Communications, Inc. ("SunStar") pursuant to the terms of a stock
purchase agreement. Management committed to a plan to dispose of this internet
services provider during the quarter ended June 30, 2000. On January 31, 2000,
the Company completed its acquisition of certain assets of SourceOne Wireless.
On May 22, 2000, Aquis acquired certain paging assets of Suburban Paging, a
regional paging services reseller headquartered in Pennsylvania. These
transactions have been accounted for under the purchase method of accounting.

The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its subsidiaries, and reflect the merger
with Paging Partners. These statements also include the acquisitions of SunStar,
the net assets of SourceOne and the net assets of Suburban Paging from their
dates of acquisition. The revenues and operating expenses of the Company's
internet operations are presented separately in the Statement of Operations and
the related net assets are presented as assets held for sale as the assets and
operations of this business are subject to an asset purchase agreement. The
accompanying statements reflect all adjustments considered necessary by
management to present fairly the consolidated financial position as of June 30,
2000 and December 31, 1999, the consolidated results of operations for the three
and six month periods ended June 30, 2000 and 1999, and the related consolidated
cash flows for the six month periods ended June 30, 2000 and 1999. All
adjustments reflected in the accompanying unaudited condensed consolidated
financial statements are of a normal recurring nature. All material intercompany
accounts and transactions have been eliminated in consolidation.

The results of operations for the respective interim periods are not
necessarily indicative of the results to be expected for the full year.

Certain prior period amounts have been reclassified to conform to the
current period presentation.

2. MERGER AND ACQUISITION TRANSACTIONS:

On January 31, 2000, the Company completed the acquisition (the
"Acquisition") of certain assets of SourceOne, a facilities-based provider of
one-way paging services to subscribers in certain Midwestern states. Previously,
on August 2, 1999, the Company entered into an Asset Purchase Agreement (the
"Purchase Agreement") and Agreement Pending Purchase Closing (the "Agreement")

F-29
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

2. MERGER AND ACQUISITION TRANSACTIONS: (CONTINUED)
with SourceOne Wireless, Inc. and two of its affiliates. SOWI and its affiliates
filed voluntary petitions for relief under Chapter 11 with the United States
Bankruptcy Court in the Northern District of Illinois between April 29 and July
2, 1999. Pursuant to the Agreement, the Company managed the day-to-day
operations of certain SOWI businesses pending the closing of the Purchase
Agreement. This closing was subject to various approvals, including that of the
Bankruptcy Court and the FCC. During the management period, a reduction of the
purchase price was negotiated, and resulted in a reduced price of $2,250 in cash
and 15,000 shares of the Company's 7.5% cumulative redeemable preferred stock
valued at $1,500. Related acquisition costs totaling about $502 were deferred at
December 31, 1999, and have been treated as a cost of the assets acquired on
January 31, 2000. Costs to acquire the assets of SourceOne were capitalized at
December 31, 1999, including an escrow deposit of $200, since this transaction
was closed after that date. The recorded amounts of the assets acquired and
liabilities assumed are based on their historical fair values; actual
adjustments will be based on final analyses and are not expected to be material.

The following unaudited pro forma information presents a summary of the
combined results of operations of the Company as if the Acquisition and the
Merger occurred on January 1, 1999.

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
2000 1999
-------- --------
<S> <C> <C>
Revenue................................................... $16,071 $22,221
======= =======
Net loss.................................................. $(5,273) $(7,071)
Preferred stock dividends................................. (57) (57)
------- -------
Net loss attributable to common stockholders.............. $(5,330) $(7,128)
======= =======
Net loss per common share--basic and diluted.............. $ (0.31) $ (0.47)
======= =======
</TABLE>

The pro forma results are based on various assumptions and are not
necessarily indicative of what would have occurred had these transactions been
consummated on January 1, 1999.

On November 6, 1998, ACI entered into a merger agreement with Paging
Partners whereby each share of ACI common stock was to be exchanged for 88.92076
shares of Paging Partners' common stock (the "Merger"). The Merger was
consummated on March 31, 1999, and has been accounted for as a recapitalization
of the Company with ACI as the acquirer (reverse acquisition) under the purchase
method of accounting in accordance with Accounting Principles Board ("APB")
Opinion No. 16, "Business Combinations." The aggregate purchase price of $6,071,
which includes transaction costs, has been allocated to the net assets acquired
based upon their estimated fair market values. The purchase price was determined
by using the average quoted stock price of Paging Partners a few days before and
after the date of the Merger agreement. Intangible assets of approximately
$4,400 (principally FCC licenses and customer lists) are being amortized over
three to ten years on a straight-line basis.

F-30
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

3. SALE OF INTERNET SERVICES BUSINESS

On July 13, 2000, the Company entered into an agreement to sell the net
assets of the Company's internet services business. The net assets held for sale
totaling $1,509 consist primarily of licenses, other intangibles and
receivables, and were net of current liabilities at June 30, 2000 totaling
approximately $735. The net assets have been presented as assets held for sale,
and the revenues and expenses realized from its operations have been presented
separately in the Statements of Operations to more clearly illustrate its net
losses of $302 and $549 for the three and six month periods ended June 30, 2000.
Cash flows of $589 consumed by these operations during the six months ended
June 30, 2000 were funded by the Company. The agreement specifies a cash
purchase price of $2,025 as adjusted for liabilities assumed by the purchaser
and certain other adjustments, and sets a closing date of September 30, 2000 or
earlier, with the possibility of one extension of up to 30 days.

4. LONG-TERM DEBT:

On October 23, 1998, ACI entered into a five-year term loan agreement (the
"Senior Loan Agreement") with FINOVA Capital Corporation ("FINOVA") which
provided a $30,000 credit facility. The FINOVA loan has a term of five years,
and requires graduated increasing quarterly principal repayments ranging from.5%
to 3.5% of outstanding principal beginning on July 1, 2000, with the balance due
on December 31, 2003. The loan bears interest at a rate based on Citibank,
N.A.'s corporate base rate plus 175 basis points. The Company may also elect to
have interest on a part of the FINOVA loan based on a London Inter-Bank Official
Overnight Rate plus 450 basis points. This loan is collateralized by all of the
Company's assets, presently owned and acquired subsequently, and all issued and
outstanding equity interests in the Company's operating subsidiaries. The loan
agreement contains various covenants, including restrictions on capital
expenditures and compliance with certain financial ratios. At December 31, 1999,
the Company was not in compliance with certain ratio covenants under this loan
agreement.

On January 26, 2000, the FINOVA loan was amended in connection with the
SourceOne acquisition. The Company borrowed an additional $2,450 from FINOVA on
January 31, 2000 to consummate the acquisition (the "SourceOne Portion"). The
effect of the amendment was to limit the facility to the amount outstanding
after this transaction, or a total of $27,765, to modify certain financial
ratios and to set the interest rate on the SourceOne Portion to Citibank, N.A.'s
corporate base rate plus 400 basis points. Additionally, a prepayment of
principal of $1,250 (the "Special Prepayment") was defined and was required to
be applied to the outstanding balance of the SourceOne Portion. The Company and
FINOVA further amended the loan agreement on April 12, 2000. The effects of this
amendment were to waive the Company's non-compliance at December 31, 1999, to
redefine certain financial ratios specified in the loan covenants, and to
encourage Aquis to make the Special Prepayment of principal of $1,250 before
April 15, 2000. The Company satisfied all conditions, the Special Prepayment was
paid, and the Company thereby reduced its cost of borrowings through avoidance
of the higher rates imposed by this amendment and reduction of the outstanding
loan balance due to FINOVA.

F-31
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

4. LONG-TERM DEBT: (CONTINUED)
scheduled maturity date in September, 2001 and also provides for interest to
accrue until the earlier of its maturity date or conversion. At the lender's
election not earlier than 120 days from the date of funding, this loan is
convertible into the Company's common stock at 90% of the then-current market
value. At the Company's election, the loan is redeemable at 105% of face value
if such election is made within the initial 90 days subsequent to funding or at
110% of face value if redemption is elected within 91 to 118 days, or, if
elected thereafter, at 115% of face value. Loan proceeds were used during
April 2000 to make the Special Prepayment of $1,250 to FINOVA. The balance of
the proceeds were used to pay certain fees incurred in connection with the
FINOVA loan modifications arranged during 2000, to pay certain costs incurred in
connection with this bridge loan, and for general corporate purposes.

At June 30, 2000, the balance of the Senior Loan outstanding was $26,515.
The remaining balance of long term debt outstanding consisted principally of
borrowings made pursuant to the bridge loan of April 2000 and to the Installment
Loan, discussed below.

5. COMMON STOCK ISSUED:

During the six months ended June 30, 2000, proceeds from the exercise of
stock options in the amount of $348 were received, net of related transaction
costs. In connection with these transactions, 331,000 shares of the Company's
common stock were issued. In addition, in connection with the purchase of assets
from Suburban Paging in May 2000, the Company issued 319,500 shares as
consideration for the paging assets purchased. Finally, in April 2000, the
Company issued 133,000 shares, valued at $400, to its former President which was
expensed as part of its settlement of a certain employment-related dispute.

In January, 2000, Aquis made cash payments totaling $205, issued a note
payable in the face amount of $350, and issued 275,000 shares of the Company's
common stock valued at $380 to a law firm in exchange for services provided. A
former member of the Board of Directors was a partner in this firm. The note
issued in connection with this transaction is payable in 20 equal monthly
installments bearing interest at the rate of 8.5%.

6. NET LOSS PER COMMON SHARE:

F-32
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

7. SUPPLEMENTAL CASH FLOW DATA:

During the six months ended June 30, 2000, the Company purchased certain
assets of SourceOne and Suburban Paging. During the six months ended June 30,
1999, the Company merged with Paging Partners Corporation and acquired SunStar
Communications, Inc. as more fully discussed in Note 1. Cash paid in connection
with these acquisitions is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Supplemental information about businesses acquired:
Fair value of assets acquired........................... $ 8,116 $11,217
Liabilities assumed..................................... (1,807) (3,262)
Exchange of common stock................................ (1,598) (7,197)
Exchange of preferred stock............................. (1,500) --
Accrued or deferred transaction costs................... (575) (183)
------- -------
Cash paid............................................... 2,636 575
Less: cash acquired..................................... (240) (170)
------- -------
Net cash paid......................................... 2,396 405
Cash paid in connection with BAPCO acquisition.......... -- 18,535
------- -------
Total................................................. $ 2,396 $18,940
======= =======
</TABLE>

The Company paid cash for interest during the respective six-month periods
ended June 30, 2000 and 1999 in the amounts of $1,511 and $1,153. In 1999,
additional fees to obtain funding and for letter of credit in the amount of $298
were also paid.

8. SUBSEQUENT EVENTS:

On September 27, 2000, the Company and its lender agreed to modify the terms
of its Senior Loan Agreement, as amended. These modifications would permit the
Company to retain all proceeds from the sale of its internet operations, give
the Company an option to reduce the scheduled principal payment due on July 1,
2001 from $514 to $200, and relaxes certain financial ratio covenants through
the third quarter of 2001. However, the Company's projections indicate that
unamended financial covenants will not be met during the fourth quarter of 2001,
which could cause the lender to accelerate the maturity date of the loan. In
exchange, the Company has agreed to pay a certain fixed fee. Further, additional
contingent fees of up to $250 per quarter are to be added to the principal
balance due at final maturity if the Company is unable to meet the financial
ratios as amended in April, 2000. Finally, and also contingent upon the
anticipated sale of the internet operations, a principal payment of $2,000 would
be required on or before December 31, 2000 in order to avoid the assessment of a
$500 fee and an interest rate increase of 2%. That fee would also be added to
the principal balance otherwise payable at the maturity date of this loan.

F-33
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

8. SUBSEQUENT EVENTS: (CONTINUED)
certain fees. In addition, the purchaser has assumed certain liabilities
totaling approximately $650. These assets were sold to a private investor group
led by John V. Hobko, former President of Aquis IP Communications, and John B.
Frieling, a current director and the CEO of Aquis.

On September 21, 2000, an agreement was executed to settle the dispute
between Aquis and Francis (see note 10, above). The settlement provides that the
escrow deposit of $100 plus accrued interest is to be returned to Aquis and
requires Francis to pay to Aquis the sum of $200 no later than September 29,
2000. The escrow deposit was fully reserved as of December 31, 1999.

F-34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SourceOne Wireless, Inc.:

We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of SOURCEONE WIRELESS, INC. (an
Illinois corporation) and subsidiaries, as of December 31, 1999 and 1998, and
the related consolidated statements of income and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the management of the company. Our responsibility is
to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of SourceOne
Wireless, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

On April 29, 1999, the Company filed for reorganization under Chapter 11 of
the Bankruptcy Code. On September 16, 1999, an auction was held to sell any and
all of the Company's assets. As a result of the Chapter 11 filing, the Company's
assets as of December 31, 1998 were reduced to estimated realizable value at
that time. While the majority of its liabilities were subject to compromise
under the bankruptcy proceeding, all obligations were presented on a going
concern basis, as there was significant uncertainty in the settlement amounts.
In February, 2000 the Company's case was converted to a Chapter 7 case under the
Bankruptcy Code, subject to liquidation of the remaining assets of the business.
As a result of the Chapter 7 conversion, the Company's assets as of
December 31, 1999 have been further reduced to the revised estimated realizable
value, the majority of its liabilities are subject to compromise under the
bankruptcy proceeding and have been reflected at their estimated settlement
amounts, with the exception of those liabilities presented as current
liabilities on the balance sheet, which management expects to settle at the
amounts incurred. See notes 1, 3(f) and 3(m) for additional information.

Arthur Andersen LLP

Chicago, Illinois
March 31, 2000

F-35
<PAGE>
SOURCEONE WIRELESS, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1998 AND 1999

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 260,967 $ 119,065
Accounts Receivable, less allowance of $1,323,321 for 1998
and $453,000 for 1999................................... 1,145,514 757,692
Inventory, less allowance of $300,000 for 1998............ 758,987 35,500
Prepaid expenses and other current assets................. 21,539 205,472
------------ ------------
Total current assets.................................... 2,187,007 1,117,729
------------ ------------
Property and equipment...................................... 17,290,854 17,259,109
Less accumulated depreciation and amortization.............. (13,615,102) (13,657,098)
------------ ------------
Net property and equipment.................................. 3,675,752 3,602,011
Intangible assets, net...................................... 468,700 459,297
Other assets................................................ 29,990 --
------------ ------------
Total assets............................................ $ 6,361,449 $ 5,179,037
============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable to bank..................................... $ 23,126,659 $ --
Promissory notes payable.................................. 19,749,087 --
Notes payable to stockholder and related parties.......... 9,257,561 --
Accounts payable.......................................... 6,906,753 1,228,371
Accrued expenses.......................................... 761,573 231,346
Accrued taxes............................................. 818,986 17,473
Accrued interest.......................................... 6,333,694 --
Deferred revenue.......................................... 1,068,037 720,958
Capital lease obligations................................. 2,787,314 --
------------ ------------
Total current liabilities............................... 70,809,664 2,198,148
------------ ------------
Liabilities subject to compromise....................... -- 2,980,889
------------ ------------
Stockholders' equity/deficit:
SourceOne Wireless, Inc. common stock of no par value: 80
voting and 9,920 nonvoting shares authorized; 80 voting
and 1,024.52 nonvoting shares issued and outstanding 5,330,000 5,330,000
Accumulated deficit....................................... (69,778,215) (5,330,000)
------------ ------------
Total Liabilities and Stockholders' deficit................. $ 6,361,449 $ 5,179,037
============ ============
</TABLE>

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

F-36
<PAGE>
SOURCEONE WIRELESS, INC.

CONSOLIDATED INCOME STATEMENTS

THREE YEARS ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1997 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Service revenue............................ $ 16,887,953 $ 10,463,269 $ 7,203,803
Product sales.............................. 2,012,755 1,704,656 1,181,519
------------ ------------ ------------
Total revenues............................... 18,900,708 12,167,925 8,385,322
Cost of products sold........................ 2,639,673 1,652,856 1,311,727
------------ ------------ ------------
Net revenues................................. 16,261,035 10,515,069 7,073,595
Operating expenses:
Service, rent and maintenance.............. 5,266,749 6,885,602 4,716,769
Selling and marketing...................... 3,437,495 3,131,438 1,155,583
General and administrative................. 10,220,399 9,306,342 6,817,491
------------ ------------ ------------
Loss before interest, depreciation
amortization, and other.................... (2,663,608) (8,808,313) (5,616,248)
Depreciation and amortization................ (3,448,326) (14,411,754) (83,144)
Interest expense............................. (4,357,402) (6,237,053) (7,567,278)
Other income / (expense)..................... -- 95,515 (897,028)
------------ ------------ ------------
Net loss from continuing operations.......... (10,469,336) (29,361,605) (14,163,698)
Net income from discontinued operations...... 154,559 1,598,530 --
Adjustment to Present Liabilities at
Estimated Settlement Amounts............... -- -- 78,611,913
------------ ------------ ------------
Net Income / (Loss).......................... $(10,314,777) $(27,763,075) $ 64,448,215
============ ============ ============
</TABLE>

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

F-37
<PAGE>
SOURCEONE WIRELESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CAPITALIZATION

THREE YEARS ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
SOURCEONE
WIRELESS, INC.
COMMON ACCUMULATED
DESCRIPTION STOCK DEFICIT
----------- -------------- ------------
<S> <C> <C>
Balance at December 31, 1996................................ $5,330,000 $(31,700,363)
Net loss.................................................... -- (10,314,777)
---------- ------------
Balance at December 31, 1997................................ 5,330,000 (42,015,140)
Net loss.................................................... -- (27,763,075)
---------- ------------
Balance at December 31, 1998................................ 5,330,000 (69,778,215)
Net income.................................................. -- 64,448,215
---------- ------------
Balance at December 31, 1999................................ $5,330,000 $ (5,330,000)
========== ============
</TABLE>

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

F-38
<PAGE>
SOURCEONE WIRELESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE YEARS ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income / (loss)............................... $(10,314,777) $(27,763,075) $ 64,448,215
Adjustments to reconcile net cash used in
operating activities:
Depreciation and amortization................... 3,448,326 14,411,754 83,144
Changes in assets and liabilities:
Accounts receivable, net...................... 898,462 707,946 387,822
Inventory..................................... (498,654) 1,878,853 723,487
Prepaid expenses and other current assets..... (103,943) 126,239 (183,933)
Other assets and liabilities.................. (237,230) (515,011) 29,990
Accounts payable and other payables........... (636,583) 1,733,146 1,228,371
Accrued expenses.............................. (878,447) 270,390 231,346
Accrued taxes................................. (293,454) 56,962 17,473
Accrued interest.............................. 1,408,824 2,509,889 --
Deferred revenue.............................. (955,044) (640,723) (347,079)
Other non-cash--liabilities subject to
compromise.................................. -- -- (69,251,413)
------------ ------------ ------------
Net cash used in operating activities....... (8,162,520) (7,223,630) (2,632,577)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment............... (1,742,069) (369,104) (20,626)
Purchases of intangible assets.................... (3,578,255) (511,571) --
Purchase / sale of discontinued operations........ (11,575,000) 800,000 --
------------ ------------ ------------
Net cash used in investing activities....... (16,895,324) (80,675) (20,626)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of notes payable to
banks........................................... 29,306,175 6,221,674 3,278,028
Repayment of notes payable to bank................ (16,498,351) -- --
Proceeds from issuance of promissory notes
payable......................................... 17,922,897 2,000,000 --
Repayment of promissory notes payable............. (1,294,730) (1,000,000) (262,057)
Deposit for potential merger...................... 1,200,000 --
Proceeds from notes payable to stockholder and
related party................................... 294,000 850,000 --
Payment of capital lease obligations.............. (5,663,739) (775,715) (504,670)
------------ ------------ ------------
Net cash provided in financing activities... 25,266,252 7,295,959 2,511,301
------------ ------------ ------------
Net increase / (decrease) in cash................... 208,408 (8,346) (141,902)
Cash at beginning of period......................... 60,905 269,313 260,967
------------ ------------ ------------
Cash at end of period............................... $ 269,313 $ 260,967 $ 119,065
============ ============ ============
</TABLE>

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

F-39
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

On April 29, 1999, the Company filed in the United States Bankruptcy Court
(the "Court") in the Northern District of Illinois for reorganization under
Chapter 11 of the United States Code ("Bankruptcy Code"), case number
99-B-13841. The Company continued in possession of its properties and operated
and managed its business as debtor-in-possession subject to Court approval for
certain actions until February 1, 2000. On February 1, 2000 the Company's case
was converted to a Chapter 7 case under the Bankruptcy Code, subject to
liquidation of the remaining assets of the business.

SourceOne Wireless, Inc. ("Inc." or the "Company") was formed and commenced
operations in 1993. Inc. provided paging services in a number of states,
primarily in the Midwest. The Company operated as a FCC licensed radio common
carrier providing regional paging services. The Company's geographic coverage
included thirty-five states; however, its active markets included nine
midwestern states and two states in other U.S. regions.

Subsequent to April 29, 1999, the Company marketed itself to be acquired in
a business combination transaction. On September 16, 1999, an auction was held
to sell any or all of the Company's assets. Related to the auction, the Company
entered into a sale agreement for its Midwest assets, which was a significant
portion of its total operations. Consideration received for the Midwest assets,
which consisted of the subscriber base, towers site leases, transmitters and
related equipment, of $2.25 million in cash and 15,000 shares ($1.5 million
stated value per the purchase agreement) of Aquis Communications, Inc. (Aquis)
7.5% preferred stock, will be used to pay outstanding creditors, with Foothill
being the senior secured creditor. Aquis also assumed certain post-petition
liabilities totaling approximately $1.4 million related to the transaction.
Various transmitters and other equipment outside of the Midwest were sold to
another third party for approximately $20,000.

A number of costs of administration of the estate, including repayment of
the debtor-in-possession loan extended by Foothill, will be paid out of the cash
proceeds of the sale. Out of the remaining proceeds, certain other creditors
will receive approximately $350,000 in cash and approximately 15,000 shares of
Aquis 7.5% preferred stock. Foothill will receive the remainder of the purchase
price consideration.

As a result of the Chapter 11 filing and the subsequent auction of its
assets, the Company's assets as of December 31, 1998 were reduced to their
estimated realizable value at that time. Significant uncertainty existed
surrounding the settlement amount of the outstanding liabilities at that time,
thus the liabilities were presented on a going concern basis as opposed to
estimated settlement value.

As a result of the Company entering Chapter 7 bankruptcy in February, 2000,
the Company's assets at December 31, 1999 are presented as their estimated net
realizable value of approximately $5.2 million, which is primarily the
consideration paid by Aquis, including liabilities assumed as noted below. The
preferred stock was valued using the $1.5 million value stated in the purchase
agreement between the Company and Aquis. Total liabilities outstanding
significantly exceed proceeds received for the business. Those liabilities
presented as current liabilities in the Balance Sheet, which were incurred
post-petition and approximately $1.4 million of which will be assumed by Aquis,
are presented on a going concern basis, as management expects to settle those at
the amounts incurred. Other liabilities, primarily incurred pre-petition, are
subject to compromise and are presented at their estimated settlement amounts.
Actual settlement amounts may vary from the estimated amounts presented.

F-40
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. AREAWIDE DISCONTINUED OPERATION

On March 4, 1998, Areawide Cellular, Inc. ("Areawide") acquired all of the
membership interests of Areawide LLC from Inc. in exchange for 80% of Areawide's
stock, 14,794,188 common shares, $800,000 of cash and forgiveness of a $1.2
million note payable related to this transaction. Areawide is a Florida
corporation, which was incorporated in September 1972 under the name Mandor,
Inc. and changed its name to Community Redevelopment Corporation ("CRC") in
August 1990. It was a home improvement contractor until March 1998 when it
disposed of the assets and liabilities of its home improvement operations. The
March 4, 1998 transaction was accounted for as a reverse acquisition whereby
Areawide LLC was treated as the acquiror and Areawide the acquiree. Subsequent
to the transaction Areawide LLC was the operating unit and Areawide only a
holding entity. Upon such acquisition, the then officers and directors resigned
and new directors and officers were selected and the corporate name of CRC was
changed to Areawide Cellular, Inc.

On October 22, 1998, Harris Family Areawide, LLC ("Harris") acquired all of
the common shares of Areawide held by Inc. (approximately 82.5%). As
consideration, Harris assumed approximately $11.5 million of Inc.'s total
obligation.

Inc.'s portion of Areawide's net income for the year ended December 31, 1997
and the period from January 1998 through October 1998 and the net gain on the
transactions described above are recorded as Net Gain from Discontinued
Operations in the financial statements in the respective years. In total, Inc.
recorded income from Areawide and a net gain of approximately $1.6 million from
these transactions. As the Company sold the remaining 80% of its ownership in
Areawide in October 1998, there are no assets or liabilities recorded on the
Balance Sheet as of December 31, 1998.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF PRESENTATION

These financial statements present the consolidated results of SourceOne
Wireless, Inc. for the three years ended December 31, 1999. The consolidated
group for the year ended December 31, 1999 includes SourceOne Wireless, Inc. and
its wholly owned subsidiary SourceOne Wireless II, LLC. The consolidated group
for the years ended December 31, 1998 and 1997 includes SourceOne Wireless,
Inc., its wholly owned subsidiary, SourceOne Wireless, LLC, and its wholly owned
subsidiary SourceOne Wireless II, LLC. The only asset held by SourceOne
Wireless, LLC is its investment in SourceOne Wireless II, LLC, which only has
assets of the remaining FCC licenses. The results of its Areawide Cellular, Inc.
subsidiary have been shown as discontinued operations for the years ended
December 31, 1998 and 1997, since it was sold on October 22, 1998.

(B) ACCOUNTS RECEIVABLE

Accounts receivable includes amounts owed by customers for airtime services
and equipment. A related provision for uncollectible amounts is calculated based
on management's estimates of amounts which, based upon the credit risk
associated with the various classifications of customer accounts, are subject to
substantial collection risk.

F-41
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) INVENTORY

Inventory consists primarily of pagers and related accessories held for
resale. Inventory is stated at the lower of cost or market. Cost is determined
on a specific identification basis. The Company recorded a valuation reserve of
$300,000 at December 31, 1998.

(D) PROPERTY AND EQUIPMENT

Property and equipment was recorded at historical cost, however at
December 31, 1999 management determined that amount exceeded fair value and thus
balances have been adjusted for impairment and are recorded in the financial
statements at their estimated fair values. See note 3(f). Depreciation and
amortization is provided using the straight-line method over the following
estimated useful lives:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
------------------
<S> <C>
Tower and ground equipment.................................. 5-10 years
Technical testing equipment................................. 5-10 years
Office and computer equipment............................... 5-10 years
</TABLE>

During 1999, the Company's property and equipment was held for disposal, and
in accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company has not recorded depreciation expense during this
period.

(E) INTANGIBLE ASSETS

Intangible assets are stated at cost. Licenses represent costs incurred for
FCC-issued licenses ("FCC licenses") and are amortized on a straight-line basis
over an estimated useful life of 20 years. Charges were recorded in 1999 and
1998 to reduce the carrying value of intangible assets, which consisted
primarily of goodwill, FCC licenses and loan fees, to estimated fair value. See
note 3(f).

(F) REALIZATION OF LONG-LIVED ASSETS

Long-lived assets and identifiable intangible assets to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amounts should be evaluated. Impairment is measured by
comparing the carrying value to the estimated undiscounted future cash flows
expected to result from the use of the assets and their eventual disposition.
During each of the years ended December 31, 1999 and 1998, the Company
determined an impairment in long lived assets had occurred. This decision was a
result of continued operating losses, the inability to obtain additional
financing or refinance existing obligations to continue operations and the
inability of the Calling Party Pays ("CPP") platform for cellular service to
produce the projected improvements in operating results management expected in
prior periods.

In 1999 and 1998, the Company reviewed its property and equipment carrying
values and determined the carrying value of these assets has been impaired and
accordingly recorded charges of approximately $75,000 and $4.4 million in 1999
and 1998, respectively, to reduce the carrying value to estimated fair value.
The Company continued to incur significant negative cash flow and operating

F-42
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
losses during 1999 and the future undiscounted cash inflows are significantly
less than the outflows necessary to operate the business. Therefore, the fair
values of property and equipment and intangible assets are based on management's
estimates of the likely sales proceeds if the entire property and equipment base
and intangible assets were sold to third parties.

The Company also reviewed the carrying value of its intangible assets as of
December 31, 1999 and 1998 and determined it was probable the Company would not
derive future value associated any of the intangible assets, with the exception
of FCC licenses. Additionally, the carrying value of the FCC licenses has been
reduced to fair value. Therefore, the Company recorded charges of approximately
$10,000 and $4.0 million in 1999 and 1998, respectively, to write-down the
carrying amount of intangible assets to estimated fair value.

The impairment adjustments to property and equipment and intangible assets
has been recorded as depreciation and amortization expense in the Income
Statement.

(G) DEFERRED REVENUE

Deferred revenue consists of billings to customers in advance of airtime
usage and is recorded as a liability until airtime usage occurs.

(H) REVENUE RECOGNITION

Airtime services are provided to customers through reseller arrangements,
dealer agreements, and direct sales channels. Customers in certain midwestern
states can receive service through traditional service plans or through a
calling-party-pays plan. Under the calling-party-pays plan, the party
transmitting the message is responsible for the related charges, with billing
and collection activities provided through a service agreement with the local
telecommunications carrier. Equipment is provided to customers through dealers,
resellers, and direct channels.

Revenues are recognized under service agreements with customers over the
period in which related services are provided. Sales of equipment are recognized
upon delivery. An allowance for doubtful accounts is established at the balance
sheet date representing the estimated amount of accounts receivable that will be
written off as uncollectible. The related provision for doubtful accounts is
recognized as a general and administrative expense.

Revenues recognized under calling-party-pays agreements are reported at the
gross amount of airtime charges earned. Charges incurred for the provision of
services by the local telecommunications carrier and in administering the
related billing and collections process are reflected as operating expenses.

(I) ADVERTISING

The Company recognizes the production costs of advertising activities as an
operating expense the first time the advertising takes place. Advertising
expenses for continuing operations amounted to $114,628, $798,731 and $1,411,489
for the years ended December 31, 1999, 1998 and 1997, respectively.

F-43
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(J) INCOME TAXES

Inc. has elected to be treated under Subchapter S of the Internal Revenue
Code. Therefore, federal and certain state income tax liabilities are the
responsibility of the individual stockholders.

(K) USE OF ESTIMATES

Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities in connection with the preparation of these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(L) CREDIT CONCENTRATIONS AND FINANCIAL INSTRUMENTS

The Company's customers are comprised of subscribers that utilize airtime
services and purchase related equipment. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
accounts receivable. As of December 31, 1999 or 1998, no account receivable from
any customer exceeded 5% of total assets. Accounts receivable from the Company's
telecommunications providers under the calling-party-pays program amounts to 16%
and 21%of gross accounts receivable at December 31, 1999 and 1998, respectively.

Accounts receivable are generally unsecured; management believes the
allowance for doubtful accounts is adequate to cover any exposure to loss. Other
financial instruments include notes payable to bank, promissory notes payable,
notes payable to stockholder and related party, accounts payable, accrued
expenses, accrued taxes, payable to affiliate, accrued interest, and lease
obligations. The fair values of all financial instruments were not materially
different from their carrying or contract values.

The Company maintains a significant portion of its total borrowings with
banks, under agreements, described in note 6. This concentration encompasses 44%
of total borrowings at December 31, 1998. The equivalent of this amount is
subject to compromise in the 1999 financial statements and has been included in
the "liabilities subject to compromise" amount on the balance sheet. Related
parties and equipment vendors have historically provided other sources of
credit.

(M) LIABILITIES SUBJECT TO COMPROMISE

There were approximately $78.0 million of liabilities outstanding at
December 31, 1999 that were incurred pre-petition, the majority of which were
subject to compromise. From the total proceeds, certain senior creditors will
receive approximately $2.98 million of the total $3.77 million consideration,
which consisted of $2.27 million in cash and $1.5 million in Aquis 7.5%
preferred stock. Therefore, the estimated settlement amount of all liabilities
subject to compromise is $2.98 million, primarily based on the total
consideration paid by Aquis for the Company's Midwest assets less other
obligations disbursed from the total proceeds. Approximately a $78.6 million
gain was recorded in the consolidated income statement to reflect these certain
liabilities at their estimated settlement amounts. Actual settlement amounts may
vary from estimates.

F-44
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. BUSINESS CONCENTRATION

Revenues are significantly impacted by sales through the Company's
telecommunications providers under the CPP program. Such revenues accounted for
56%, 44% and 40% of the Company's total service revenues for the years ended
December 31, 1999, 1998 and 1997, respectively. An alteration of the present
relationship could significantly affect management's estimates and the Company's
performance.

5. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and equipment, revalued at estimated fair value, as of
December 31, 1999 and 1998, consists of the following:

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Tower and ground equipment......................... $11,751,886 $11,787,756
Technical testing equipment........................ 364,319 364,319
Leasehold Improvements............................. 388,161 384,036
Office and computer equipment...................... 4,754,743 4,754,743
----------- -----------
17,259,109 17,290,854
Less accumulated depreciation...................... (13,657,098) (13,615,102)
----------- -----------
$ 3,602,011 $ 3,675,752
=========== ===========
</TABLE>

Intangible assets, at estimated fair value, as of December 31, 1999 and 1998
consist of the following:

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
FCC licenses......................................... $2,375,168 $2,375,168
Less accumulated amortization........................ (1,915,871) (1,906,468)
---------- ----------
$ 459,297 $ 468,700
========== ==========
</TABLE>

As of December 31, 1999 and 1998, the fair value of property and equipment
and intangible assets was determined to approximate $4.1 million, respectively.
The amounts relate to tower and ground assets, technical testing equipment,
office and computer equipment and FCC licenses.

In 1998, management determined that any leasehold improvements recorded
through that time would likely not provide future value to the Company and also
would likely not be able to be sold to a third party. The Company also reviewed
the carrying value of its intangible assets as of December 31, 1998 and
determined it was probable the Company would not derive future value associated
any of the intangible assets, with the exception of FCC licenses. The Company
recorded a charge of $8.4 million in 1998 to depreciation and amortization
expense as a result of impairment of property and equipment and intangible
assets.

In 1999, management reassessed the carrying value of its property and
equipment and intangible assets. The Company recorded an additional $83,144
charge to depreciation and amortization expense in 1999 as a result of further
impairment of property and equipment and intangible assets. See note 3(f).

F-45
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. NOTES PAYABLE AND CREDIT AGREEMENTS

1997 ACQUISITION LOANS

In November 1997, Inc. purchased Areawide Cellular LLC, a chain of retail
cellular stores, for $11,575,000.

In November 1997, Inc. raised approximately $13.5 million pursuant to a
private placement of promissory notes. The notes bear interest at 10.5% in the
first two years, 12% in year three, 14% in year four, and 16% in year five,
after which the notes will mature. Noteholders also received certain detachable
warrants with antidilution rights. The notes all contain various covenants,
including restrictions on distributions.

In December 1997, Inc. issued promissory notes in the amount of $1.0 million
via a private placement. These notes bear interest at 10.5% and were to mature
on March 16, 1998. The notes were repaid in January 1998 including accrued
interest.

1997 CREDIT FACILITY

Inc. secured a revolving credit facility in September 1997, from Foothill in
the amount of $25.0 million. The revolving credit facility was increased to
$27.7 million in January 1998. Borrowings are secured by substantially all owned
assets of Inc., bear interest at prime plus 1.5% (11.75% at December 31, 1998),
and will mature at the end of three years. Revolving availability was to be
reduced by $300,000 each month and advance criteria are defined for term
availability, beginning in April 1998. The loan agreement contains various
covenants that, among others things, require Inc. to maintain certain financial
ratios, prohibit the incurrence of certain additional debt, restrict dividends,
required additional subordinated debt in an amount not less than $10.0 million
to be raised within 90 days of closing, and require operation in conformity with
a business plan. As of December 31, 1999 and 1998, Inc. was not in compliance
with one or more of the covenants of the agreement. As of December 31, 1999, the
obligations under these agreements were subject to compromise and have been
reported as such in the financial statements at their estimated settlement
values and at December 31, 1998 the Company has classified the outstanding
borrowings of $18,568,327 as a current liability. The Company's outstanding
liability to Foothill was reduced by the assumption of approximately $9.5
million of the total balance by Harris, upon the sale of Areawide LLC.

1998 HARRIS FINANCING

In connection with the October 22, 1998 transaction, Harris loaned $2.0
million to Areawide, which in turn was paid to Inc. in repayment of a portion of
the approximate intercompany loan balance of $11,575,000 between Areawide LLC
and Inc. The loan from Harris bears interest at a rate of 12% per annum. In
addition, Areawide assumed $9.5 million of Inc.'s existing senior indebtedness.
Such $9.5 million indebtedness ("Foothill Debt") bears interest at an annual
rate equal to the sum of its reference rate plus 4%. All remaining intercompany
liabilities were forgiven. Prior to that date, all of the Company's assets were
pledged to secure the Foothill Debt and the Company guaranteed repayment of the
Foothill Debt. The $2.0 million was also used to reduce the outstanding Foothill
Debt. In addition to the $11.5 million consideration for Areawide, Harris loaned
Inc. an additional $2.0 million in October 1998. The obligation matures in
October 2000 and bears interest at 12% per annum. As of December 31, 1999, the
obligation under this agreement was subject to compromise and has been

F-46
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. NOTES PAYABLE AND CREDIT AGREEMENTS (CONTINUED)
reported as such in the financial statements at its estimated settlement value
and at December 31, 1998 the Company classified the outstanding borrowing as a
current liability.

7. NOTES PAYABLE TO STOCKHOLDER AND RELATED PARTIES

In 1993, Inc. entered into a loan agreement with a stockholder which
provided for stated borrowings under the agreement of up to $5,674,590 or such
greater amount as may be advanced at the stockholder's discretion. Borrowings
are secured by substantially all of the owned assets of Inc., and the
stockholder's interest in this collateral is subordinate to the interests of the
bank and the investment group under the credit agreements described in note 6.
Borrowings under the agreement bear interest at 10% and mature on July 30, 2003.
Inc. had $8,247,561 principal outstanding under this agreement at December 31,
1999 and 1998.

The agreement contains various covenants that, among other things, require
Inc. to maintain its corporate standing, maintain title to related collateral,
maintain its capital structure, restrict dividend payments and other
distributions, limit certain executive salaries and not be in default with
respect to other borrowings. As of December 31, 1999 and 1998, Inc. was not in
compliance with one or more of the covenants stipulated in the loan agreement.
The Company has classified the borrowing as a current liability in the
accompanying financial statements for 1998. As of December 31, 1999, the
obligation under this agreement was subject to compromise and have been reported
as such in the financial statements at its estimated settlement value.

From 1996 through 1998, the Company obtained various loans totaling
$1,010,000 from other related parties. These borrowings bear interest rates from
10-12% and are due on demand. As of December 31, 1999, the obligations under
these agreements were subject to compromise and have been reported as such in
the financial statements at their estimated settlement values. As of
December 31, 1998, the Company had the outstanding borrowings of $1,010,0000
classified as a current liability.

8. RELATED-PARTY TRANSACTIONS

Inc. leased its principal operating facility from a stockholder under a
noncancellable operating lease which had an original expiration date of
June 30, 2004, and which contained rent escalations commencing on January 1,
1997. In May 1996, the lease term was amended to expire on December 31, 1996.
The Company continued to lease the facility under month-to-month terms through
1997, 1998 and 1999. Related rent expense is described in note 9.

Inc. maintains significant borrowings from a stockholder under a loan
agreement which matures on July 30, 2003. Inc. also maintains several additional
smaller loans other related parties. Related terms and outstanding amounts are
described in note 7.

9. COMMITMENTS AND CONTINGENCIES/VIOLATIONS OF REGULATIONS AND
LAWS

CAPITAL LEASES

The Company is obligated under various capital leases for equipment and
inventories that expire at various dates in the future. The amounts of property
and equipment under capital leases, adjusted for impairment, are included in the
amounts presented in note 5.

F-47
<PAGE>
SOURCEONE WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES/VIOLATIONS OF REGULATIONS AND
LAWS (CONTINUED)
Amortization and the impairment charge for assets held under capital leases
are included in depreciation and amortization expense. The carrying values of
the capital leases have been reduced to reflect management's estimate of fair
value at December 31, 1999 and 1998. See note 3(f).

As of December 31, 1999 and 1998, the Company was not in compliance with the
payment terms in certain lease agreements, and therefore was subject to
acceleration of these obligations. Accordingly, such amounts have been reflected
as liabilities subject to compromise in the accompanying balance sheet as of
December 31, 1999 and as current liabilities as of December 31, 1998.

OPERATING LEASES

The Company leases one of its facilities from a stockholder under a
noncancellable lease agreement which expired on December 31, 1996, and continues
on a month-to-month basis subsequent to that date. Under the lease agreement,
the Company is required to pay for utilities, taxes, insurance, and maintenance
expenses. Related rental expenses were $139,000, $377,678 and $216,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.

Rent expense under all lease agreements classified as operating leases
amounted to $883,620, $2,114,469 and $1,776,687 for the years ended
December 31, 1999, 1998 and 1997, respectively.

ALL CAPITAL AND OPERATING LEASES

The Company leases office space, certain vehicles, and antenna sites under
noncancellable lease agreements that expire at various dates in the future. The
Company filed under the Bankruptcy Code on April 29, 1999. Under the Bankruptcy
Code, the Company had the ability to accept, reject or assign leases. Management
has rejected the majority of the Company's outstanding leases. Of the remaining
leases management has not made a final determination as to which will be
permanently accepted.

SALES AND USE TAXES

During portions of 1996 and 1995, the Company did not remit to the
applicable taxing authorities all or a portion of the taxes collected under the
sales and use tax regulations of certain of the states in which the Company
conducts business. The ramifications of the situation regarding sales taxes may
include, but are not limited to, penalties for failure to remit amounts
collected and interest applied to the unremitted principal amounts at the
then-current interest rate on all unpaid amounts through the date of payment.

As of December 31, 1999 and 1998, the Company had accrued sales and use tax
liabilities to taxing authorities, which represented principal, interest and
penalties. Accrued sales tax liabilities amounted to $707,521 at December 31,
1998. The equivalent of this amount is subject to compromise in the 1999
financial statements and has been included in the "liabilities subject to
compromise" amount on the balance sheet.

LITIGATION

The Company is party to various legal proceedings in the ordinary course of
its business which management does not expect to have a material adverse impact
on its financial position.

F-48
<PAGE>
PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses in connection with this offering are:

<TABLE>
<S> <C>
SEC registration fee........................................ $ 6,656
Legal fees and expenses..................................... 100,000
Blue Sky fees and expenses.................................. 10,000
Accounting.................................................. 50,000
Miscellaneous............................................... 25,000
--------
Total....................................................... $191,656
========
</TABLE>

We have agreed to bear all expenses, other than selling commissions and
fees, in connection with the registration and sale of the shares of Common Stock
being offered by the selling stockholders in this offering.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Consideration is paid in June 1999 for the acquisition of SunStar
Communications, Inc. included 1,150,000 shares of common stock issued to certain
stockholders of SunStar. This issuance was made pursuant to the exemption from
registration under Section 4(2) of the Securities Act on the basis that it did
not involve an offering to the public.

On December 15, 1999, the Company issued to each of Patrick M. Egan,
Michael E. Salerno and John B. Frieling, directors of the Company, 60,000 shares
of the Company's common stock in consideration of those directors' expanded
scope of service to the Company during the interim period following the
departure of John X. Adiletta as Chief Executive Officer in November 1999. The
shares of the Company's stock issued to Messers. Egan, Salerno and Frieling were
issued without registration under the Securities Act of 1933, pursuant to the
exemption therefrom provided by Section 4(2) of the Securities Act on the basis
that such issuances did not involve a public offering.

II-1
<PAGE>
On January 31, 2000, the Company issued $1,500,000 of its 7 1/2% Redeemable
Preferred Stock in conjunction with its acquisition of the assets of Source One
Wireless. The shares of the Company's 7 1/2% Redeemable Preferred Stock issued
in the transaction were issued without registration under the Securities Act of
1933 pursuant to the exemption therefrom provided by Section 4(2) of the
Securities Act on the basis that such issuances did not involve a public
offering.

The Company issued securities during the quarter ended March 31, 2000 as
follows:

- 133,334 shares of Common Stock and the reinstatement of 55,000 stock
options to John X. Adiletta in settlement of an arbitration.

- An indeterminate number of shares of Common Stock which may be issued
pursuant to a convertible note issued to an offshore investor.

- An indeterminate number of shares of Common Stock which may be issued
pursuant to an equity line of credit with an offshore investor.

- 900,000 stock options issued to Nick T. Catania, President and Chief
Executive Officer of The Issuer.

All of such issuances were exempt from registration under the Securities Act
by virtue of Section 4(2) thereof. Landenburg Thallman & Co. acted as investment
banker in connection with the convertible note and the equity line of credit.

In May 2000, the Company issued 319,518 shares of its common stock to
Suburban Connect L.P. as consideration for the Company's purchase of the assets
of Suburban Paging. This issuance was exempt from registration under the
Securities Act by virtue of Section 4(2) thereof on the basis that such issuance
did not involve a public offering.

II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A. EXHIBITS

The following documents are filed as part of this report:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
2.1 Agreement and Plan of Merger with BAP Acquisition Corp. (1)

2.2 Asset Purchase Agreement dated as of August 2, 1999 by and
among Aquis Communications, Inc., SourceOne Wireless, Inc.,
SourceOne Wireless, L.L.C. and SourceOne Wireless II,
L.L.C. (2)

2.2 Amendment to Asset Purchase Agreement dated as of
November 15, 1999. (2)

2.3 Agreement Pending Purchase Closing dated as of August 2,
1999 by and among Aquis Communications, Inc., SourceOne
Wireless, Inc., SourceOne Wireless, L.L.C. and SourceOne
Wireless II, L.L.C. (2)

2.4 Order of the United States Bankruptcy Court of the Northern
District of Illinois (Eastern District) (A) Authorizing and
Approving the Sale of Certain of the Debtors' Assets
Pursuant to the Asset Purchase Agreement with Aquis
Communications, Inc., (B) Authorizing and Approving
Procedures for Assumption and Assignment or Rejection of
Unexpired Leases and Executory Contracts and (C) Granting
Related Relief dated as of November 18, 1999. (2)

2.5 Stock Purchase Agreement dated June 15, 1999, by and among
Aquis Communications, Inc., SunStar Communications, Inc.,
SunStar Communications, Inc. and SunStar One, LLC. (3)

2.6 Asset Purchase Agreement, dated as of July 2, 1998, by and
among Bell Atlantic-Delaware, Inc., Bell Atlantic-Maryland,
Inc., Bell Atlantic-New Jersey, Inc., Bell
Atlantic-Pennsylvania, Inc., Bell Atlantic-Virginia, Inc.,
Bell Atlantic-Washington, D.C., Inc., Bell Atlantic-West
Virginia, Inc., Bell Atlantic Paging, Inc. and BAP
Acquisition Corp. (4)

2.7 Consent and Amendment No. 1 to Asset Purchase Agreement,
dated as of November 3, 1998 by and among Bell
Atlantic-Delaware, Inc., Bell Atlantic-Maryland, Inc., Bell
Atlantic New Jersey, Inc., Bell Atlantic-Pennsylvania, Inc.,
Bell Atlantic-Virginia, Inc., Bell Atlantic-Washington,
D.C., Inc., Bell Atlantic-West Virginia. (4)

3.1 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant (5)

3.2 Bylaws of the Registrant. (6)

4.1 Form of Common Stock Certificate. (6)

4.2 Form of Warrant Certificate. (6)

4.3 Certificate of Designation, Preferences and Rights of 7 1/2%
Redeemable Preferred Stock of Aquis Communications Group,
Inc. (2)

5 Opinion of Buchanan Ingersoll Professional
Corporation. (11)

10.1 Amended and Restated 1994 Incentive Stock Option Plan, as
amended. (9)

10.2 Settlement Agreement, dated as of June 9, 1999 by and among
Bell Atlantic-Delaware, Inc., Bell Atlantic-Maryland, Inc.,
Bell Atlantic-New Jersey, Inc., Bell Atlantic-Pennsylvania,
Inc., Bell Atlantic-Virginia, Inc., Bell
Atlantic-Washington, D.C., Inc., Bell Atlantic-West
Virginia, Inc., Bell Atlantic Paging, Inc. and Aquis
Communications, Inc. (3)
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.3 Indemnity Escrow Agreement dated June 30, 1999 by and among
SunStar One, LLC, Aquis Communications, Inc. and Phillips
Nizer Benjamin Krim and Ballon, LLC. (3)

10.4 Registration Rights Agreement dated June 15, 1999 by and
between Aquis Communications, Inc. and SunStar One,
LLC. (3)

10.5 Asset Purchase Agreement dated June 10, 1999 by and among
Aquis Communications Group, Inc., Aquis Communications,
Inc., Francis Communications Texas, Inc. and Francis
Communications I, LTD. (3)

10.6 Pre-Closing Escrow Agreement dated June 10, 1999 by and
between Francis Communications I, LTD, Aquis Communications,
Inc. and Chase Bank of Texas, NA. (3)

10.7 Asset Purchase Agreement dated September 28, 1999 by and
among Aquis Wireless Communications, Inc., Aquis
Communications Group, Inc., ABC Cellular Corporation and ABC
Paging, Inc. (7)

10.8 Loan Agreement, dated as of December 31, 1998, by and
between Aquis Communications, Inc. and FINOVA Capital
Corporation as Agent. (8)

10.9 Note, dated December 31, 1998, of Aquis Communications, Inc.
in the original principal amount of $30,000,000. (8)

10.10 First Amendment to Loan Instruments, dated as of March 31,
1999, by and between Aquis Communications, Inc. and FINOVA
Capital Corporation. (8)

10.11 Guaranty (Equipment Lease), dated as of March 31, 1999, of
Aquis Communications Group, Inc. (8)

10.12 Guaranty, dated as of March 31, 1999, of Aquis
Communications Group, Inc. (8)

10.13 Security Agreement, dated as of March 31, 1999, executed by
Aquis Communications Group, Inc. (8)

10.13 Pledge Agreement, dated as of March 31, 1999, executed by
Aquis Communications Group, Inc. (8)

10.15 Equipment Lease, dated as of March 31, 1999, between Aquis
Communications, Inc. and FINOVA Capital Corporation. (8)

10.16 Employment Agreement dated as of July 7, 1998 between BAP
Acquisition Corp and John X. Adiletta. (9)

10.17 Letter Agreement amending Employment Agreement dated
July 7, 1998 between BAP Acquisition Corp and John X.
Adiletta. (9)

10.18 Employment Agreement between D. Brian Plunkett and BAP
Acquisition Corp. (9)

10.19 Letter Agreement amending Employment Agreement dated
July 7, 1998, as amended, between John X. Adiletta and BAP
Acquisition Corp. and Employment Agreement between D. Brian
Plunkett and BAP Acquisition Corp. (9)

10.20 Employment Agreement dated as of January 4, 2000 between the
Company and Nick T. Catania (9)

10.21 Amendment dated April 7, 2000 to Employment Agreement dated
January 4, 2000 between the Company and Nick T. Catania (9)
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.22 Option Agreement dated as of January 4, 2000 between the
Company and Nick T. Catania (9)

10.23 Amended and Restated Loan Agreement dated as of January 31,
2000 between the Company and Finova Capital
Corporation. (9)

10.24 First Amendment to Loan Instruments dated as of April 10,
2000 between the Company and Finova, Capital
Corporation. (9)

10.25 Loan Agreement dated as of March 31, 2000 between the
Company and AMRO International, S.A. (9)

10.26 Common Stock Purchase Agreement dated as of April 9, 2000
between the Company and Coxton, Limited. (9)

10.27 Settlement Agreement and Release and Waiver of Claims
between the Company and John X. Adiletta. (9)

10.28 Asset Purchase Agreement dated July 13, 2000 by and among
Aquis IP Communications, Inc., the Company and Sunstar IP
Communications, L.L.C. (10)

10.29 Amendment No. 1 dated August 31, 2000 to Asset Purchase
Agreement dated July 13, 2000 by and among Aquis IP
Communications, Inc., the Company, and Sunstar IP
Communications, L.L.C. (10)

10.30 10% Note due October 31, 2000 from Sunstar IP
Communications, L.L.C. to Aquis IP
Communications, Inc. (10)

10.31 Second Amendment to Loan Instruments Dated September 27,
2000 between Aquis Wireless Communications, Inc. and Finova
Capital Corporation. (10)

10.32 Separation Agreement and Waiver of Claims between the
Company and Nick Catania. (10)

10.33 Executive Services Agreement dated September 19, 2000 by and
among the Company, Deerfield Partners, LLC and John B.
Frieling. (10)

23.1 Consent of Buchanan Ingersoll Professional Corporation
(included in Exhibit 5).

23.2 Consent of PricewaterhouseCoopers LLP. (10)

23.3 Consent of Arthur Andersen LLP. (10)
</TABLE>

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

(1) Incorporated by reference to the Company's Current Report on Form 8-K dated
November 6, 1998

(2) Incorporated by reference to the Company's Current Report on Form 8-K dated
February 15, 2000

(3) Incorporated by reference to the Company's Current Report on Form 10-Q for
the quarter ended June 30, 1999

(4) Incorporated by reference to the Company's Quarterly Report Form 10-Q for
the quarter ended March 31, 1999.

(5) Incorporated by reference to the Company's Proxy Statement, dated March 11,
1999, filed with the Commission.

(6) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (Registration No. 33-76744).

(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999.

II-5
<PAGE>
(8) Incorporated by reference to the Company's Current Report on Form 8-K dated
April 15, 1999.

(9) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, as amended.

(10) Filed herewith.

(11) To be filed by amendment.

B. FINANCIAL STATEMENT SCHEDULES

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment of 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 the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement; notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement of
any material change to such information in the registration statement;

Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and 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 Exchange Act that are incorporated by reference in the
registration statement.

(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in the registration statement 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.

(c) The Registrant hereby undertakes that, insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant 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 Registrant will, unless in the opinion of our 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 Securities Act and will be governed by the final
adjudication of such issue.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Parsippany, State of New Jersey, on the 28th day of
September, 2000.

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints John B. Frieling and Patrick M. Egan, and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

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

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ JOHN B. FRIELING
------------------------------------------- Chief Executive Officer and September 28, 2000
John B. Frieling Director

/s/ D. BRIAN PLUNKETT
------------------------------------------- Chief Financial Officer September 28, 2000
D. Brian Plunkett

/s/ PATRICK M. EGAN
------------------------------------------- Director September 28, 2000
Patrick M. Egan

/s/ MICHAEL SALERNO
------------------------------------------- Director September 28, 2000
Michael Salerno

/s/ ROBERT DAVIDOFF
------------------------------------------- Director September 28, 2000
Robert Davidoff
</TABLE>

II-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
2.1 Agreement and Plan of Merger with BAP Acquisition Corp. (1)

2.2 Asset Purchase Agreement dated as of August 2, 1999 by and
among Aquis Communications, Inc., SourceOne Wireless, Inc.,
SourceOne Wireless, L.L.C. and SourceOne Wireless II,
L.L.C. (2)

2.2 Amendment to Asset Purchase Agreement dated as of
November 15, 1999. (2)

2.3 Agreement Pending Purchase Closing dated as of August 2,
1999 by and among Aquis Communications, Inc., SourceOne
Wireless, Inc., SourceOne Wireless, L.L.C. and SourceOne
Wireless II, L.L.C. (2)

2.5 Stock Purchase Agreement dated June 15, 1999, by and among
Aquis Communications, Inc., SunStar Communications, Inc.,
SunStar Communications, Inc. and SunStar One, LLC. (3)

3.1 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant (5)

3.2 Bylaws of the Registrant. (6)

4.1 Form of Common Stock Certificate. (6)

4.2 Form of Warrant Certificate. (6)

4.3 Certificate of Designation, Preferences and Rights of 7 1/2%
Redeemable Preferred Stock of Aquis Communications Group,
Inc. (2)

5 Opinion of Buchanan Ingersoll Professional
Corporation. (10)

10.1 Amended and Restated 1994 Incentive Stock Option Plan, as
amended. (9)

10.3 Indemnity Escrow Agreement dated June 30, 1999 by and among
SunStar One, LLC, Aquis Communications, Inc. and Phillips
Nizer Benjamin Krim and Ballon, LLC. (3)

10.4 Registration Rights Agreement dated June 15, 1999 by and
between Aquis Communications, Inc. and SunStar One,
LLC. (3)
</TABLE>

E-1
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.5 Asset Purchase Agreement dated June 10, 1999 by and among
Aquis Communications Group, Inc., Aquis Communications,
Inc., Francis Communications Texas, Inc. and Francis
Communications I, LTD. (3)