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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


For the Fiscal Year Ended December 31,
2002

Commission File Number: 0-21924

METROCALL HOLDINGS, INC.

(Exact Name of Registrant as Specified in its
Charter)


|                                                                                         |  |                                                    
|---------------------------------------------------------------------------------------- |  | ---------------------------------------------------
|Delaware
    (State of incorporation)                                                    |  | 54-1215634
    (I.R.S. Employer Identification No.)
|                                                                                        
|6677 Richmond Highway, Alexandria, Virginia
    (Address of Principal Executive Offices) |  | 22306
    (Zip Code)                               

Registrants Telephone Number, including
area code: (703) 660-6677

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

Not applicable


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

Title of Class




Common Stock ($.01 par value)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.  Yes x  No o

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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange
Rule 12(b-2).  Yes o  No x

Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan
confirmed by a
court.  Yes x  No o

The aggregate market value of the common stock
held by non-affiliates of the Registrant was approximately
$2,000,000 based on the closing sales price on March 1,
2003.

Common Stock, par value $0.01 
991,398 shares outstanding on March 1, 2003

DOCUMENTS INCORPORATED BY REFERENCE:

Additional documents will be filed with the
Commission within 120 days after the close of the fiscal
year and are incorporated by reference into Part III.



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Table of Contents

|               |  |                                                                                           |    |      |    | 
|-------------- |  | ----------------------------------------------------------------------------------------- | -- | ---- | -- | 
|               |  |                                                                                           |    | Page
|               |  |                                                                                           |    |     
|Part I        
|Item 1         |  | Business                                                                                  |    |      | 3  | 
|Item 2         |  | Properties                                                                                |    |      | 14 | 
|Item 3         |  | Legal Proceedings                                                                         |    |      | 14 | 
|Item 4         |  | Submission of Matters to a Vote of Security
    Holders                                   |    |      | 14 | 
|Part II       
|Item 5         |  | Market for Metrocalls Common Stock and
    Related Security Holder Matters               |    |      | 14 | 
|Item 6         |  | Selected Financial Data                                                                   |    |      | 16 | 
|Item 7         |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |    |      | 18 | 
|Item 7A        |  | Quantitative and Qualitative Disclosures about
    Market Risk                            |    |      | 38 | 
|Item 8         |  | Financial Statements and Supplementary Data                                               |    |      | 38 | 
|Item 9         |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |    |      | 38 | 
|Part III      
|Item 10        |  | Directors and Executive Officers of the Company                                           |    |      | 39 | 
|Item 11        |  | Executive Compensation                                                                    |    |      | 39 | 
|Item 12        |  | Security Ownership of Certain Beneficial Owners
    and Management                        |    |      | 39 | 
|Item 13        |  | Certain Relationships and Related Transactions                                            |    |      | 39 | 
|Item 14        |  | Controls and Procedures                                                                   |    |      | 39 | 
|Item 15        |  | Principal Accountant Fees and Services                                                    |    |      | 39 | 
|Part IV       
|Item 16        |  | Exhibits and Reports on Form 8-K                                                          |    |      | 40 | 
|Signatures     |  |                                                                                           | 42 |     
|Certifications |  |                                                                                           | 43 |     

Forward-looking Statements

This Annual Report on Form 10-K includes or
incorporates forward-looking statements. Metrocall has based
these forward-looking statements on its current expectations and
projections about future events. These forward-looking
statements are subject to risks, uncertainties and assumptions
including, among other things those discussed under
Business and Managements Discussion and
Analysis of Financial Condition, and Results of
Operations, and as follows:



| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our ability to implement our business strategies;                                                                                                                                                                                         
|
| |  | the impact of competition from other narrow-band
    businesses and emerging competition from broadband messaging
    services as well as ongoing and future technological
    developments which may render our products less attractive;
|
| |  | our reliance on another messaging company, which
    recently reorganized under chapter 11 of the Bankruptcy Code, to
    provide access to a two-way messaging network;                                                                  
|
| |  | the reliance of our current business model on a
    continued revenue stream from advanced messaging which is
    otherwise subject to certain risks;                                                                                     
|
| |  | satellite transmission failures;                                                                                                                                                                                                          
|
| |  | loss of subscribers and subscriber turnover;                                                                                                                                                                                              
|
| |  | litigation;                                                                                                                                                                                                                               
|
| |  | regulatory changes; and                                                                                                                                                                                                                   
|
| |  | dependence on key management personnel.                                                                                                                                                                                                   

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Other matters set forth in this Annual Report on
Form 10-K may also cause actual results to differ
materially from those described in the forward-looking
statements. Metrocall undertakes no obligation to update or
revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these
risks, uncertainties and assumptions, the forward-looking events
discussed in this Annual Report on Form 10-K might not
occur.

ITEM
1.     Business

General

We are a leading provider of local, regional and
national one-way or traditional paging and two-way
or advanced wireless data and messaging services.
Through our one-way nationwide wireless network, we provide
messaging services to over 1,000 U.S. cities, including the top
100 Standard Metropolitan Statistical Areas (SMSAs). Presently
we provide messaging services to approximately 3.5 million
traditional paging and 200,000 advanced messaging subscribers.
As of December 31, 2002, Metrocall was the second largest
messaging company in the United States based on the number of
subscribers.

Traditional Paging and Wireless Messaging
Industry Overview

We believe that traditional paging is the most
cost-effective and reliable means of conveying a variety of
information rapidly over a wide geographic area either directly
to a person traveling or to various fixed locations. Traditional
paging, as a one-way communications tool, is a way to
communicate at a lower cost than current two-way communication
methods, such as cellular and personal communication services
(PCS) telephones. For example, the paging and messaging
equipment and airtime required to transmit an average message
cost less than the equipment and air time for cellular and PCS
telephones. Furthermore, pagers operate for longer periods due
to superior battery life, often exceeding one month on a single
battery. Numeric and alphanumeric subscribers generally pay a
flat monthly service fee, which covers a fixed number of
messages sent to the subscriber. In addition, these messaging
devices are unobtrusive and portable.

Although the U.S. traditional paging industry has
hundreds of licensed paging companies, the overall number of
paging carriers and traditional one-way and two-way subscribers
has been declining, as the industry continues to face intense
competition from broadband/ voice wireless services
and other forms of wireless data delivery. Metrocall continues
to compete against a variety of wireless data delivery
companies, including FCC-licensed, facilities-based Commercial
Mobile Radio Service (CMRS) providers, PCS carriers that
offer short text messaging services, and a handful of two-way
wireless data companies such as Cingular Wireless and Motient
Corporation. We continue to market advanced wireless data and
messaging services, which use narrowband PCS networks and
currently include two-way messaging and other short
messaging-based services and applications through our alliance
agreement with Weblink Wireless, Inc. (Weblink).

Reorganized Metrocall



| |                                                    
| | ---------------------------------------------------
| | Exit from Chapter 11 and Plan of
    Reorganization

On October 8, 2002 (the Effective
Date), Metrocall, Inc. together with its licensing and
operating subsidiaries Metrocall USA Inc. (Metrocall USA),
Advanced Nationwide Messaging Corporation Inc. (ANMC),
MSI Inc. (MSI), McCaw RCC Communications, Inc.
(McCaw), and Mobilfone Service, LP (Mobilfone),
(collectively, the Debtors) emerged from
chapter 11 of the U.S. Bankruptcy Code pursuant to a Joint
Plan of Reorganization (the Plan) that was confirmed
by an order of the U.S. Bankruptcy Court for the District of
Delaware, (the Bankruptcy Court) entered on
September 26, 2002.

Background

The Debtors filed voluntary petitions for relief
under chapter 11 on June 3, 2002 (the Petition
Date). The chapter 11 cases were jointly administered for
procedural purposes only before the Bankruptcy Court under the
docket of Metrocall, Inc. Case No. 02-11579. Metrocall
Ventures, Inc. (Ventures), one of our

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subsidiaries, did not file a voluntary petition
and was not a party to the chapter 11 cases. From
June 3, 2002 through October 7, 2002, the Debtors
operated their businesses as debtors-in-possession under the
Bankruptcy Code.


Summary
of the Plan

Upon the effectiveness of our Plan, we
implemented a series of operational consolidations and
restructurings pursuant to the Plan, which included the
following:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | Each of ANMC, MSI and Mobilfone was merged with
    and into McCaw and all assets and liabilities of these companies
    were conveyed to McCaw;                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (ii)  | Metrocall, Inc. contributed all right, title and
    interest in all of its assets to McCaw other than
    (a) certain intellectual property conveyed to the license
    subsidiary, Metrocall USA, (b) a sufficient amount of
    cash to pay claims and to administer the Metrocall, Inc. estate
    and (c) its ownership interest in Inciscent, Inc.,
    Metrocall USA and Ventures. These assets were contributed
    subject to all existing liens in place at that time. McCaw
    simultaneously assumed all of the underlying obligations
    directly attributable to these assets;
|
| | (iii) | Concurrently with the contributions by
    Metrocall, Inc. to McCaw, Metrocall, Inc. contributed
    certain intellectual property (including trademarks, trade
    names, and copyrights) to Metrocall USA. Immediately
    thereafter, Metrocall USA entered into a license agreement
    with McCaw for the use of the FCC licenses and other
    intellectual property; and                                                                                                                                                                                                               
|
| | (iv)  | Metrocall, Inc., McCaw and Metrocall USA each
    reorganized and continued in operations pursuant to the Plan.
    Following the mergers and capital contributions described above,
    McCaw and Metrocall USA each reincorporated under the laws of
    the State of Delaware with amended and restated certificates of
    incorporation and by-laws, McCaw was renamed
    Metrocall, Inc. and the registrant, as reorganized, was
    renamed Metrocall Holdings, Inc.                                                                                                                  

The reorganized and reincorporated entities are
as follows: Metrocall Holdings, Inc. (formerly,
Metrocall, Inc.), Metrocall, Inc. (formerly, McCaw)
and Metrocall USA, respectively.

Our Plan provided for separate classes of claims
and interests for creditors and equity holders of each of the
Debtors. Please refer to Managements Discussion and
Analysis  Emergence from Chapter 11 for
further description of our reorganization and distributions made
under the Plan.

Metrocalls Business Strategy

Our business objectives and operating strategy
for 2003 will focus on maximizing our operating and free cash
flows. Key elements of this strategy include:



| |   |                                    
| | - | -----------------------------------
| |  | Subscriber retention efforts;      
|
| |  | Cost containment and reduction; and
|
| |  | Advanced messaging.                

Subscriber retention efforts.We expect the demand for our
traditional paging services and the related revenues to continue
to decrease in 2003. Our retention efforts will focus our
selling and marketing resources on serving existing and
potential business and government subscribers through our field
and corporate sales force. We believe that these customers
provide a higher ARPU and lower deactivation percentages than
subscribers serviced through indirect distribution channels.

We believe that product and technology diversity
result in increased traditional paging deactivations. In 2003,
we will continue to offer advanced messaging services and sell
PCS phones to subscribers that require wireless messaging beyond
the capabilities of traditional paging. Metrocall currently
sells cellular and PCS phone services through alliance and
dealer agreements with several carriers including AT&T
Wireless, Inc. (AT&T Wireless) and Nextel, Inc.
(Nextel). We believe these offerings assist to
partially offset revenue

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losses associated with subscriber churn and
enable us to continue to satisfy customer demands for a broader
range of wireless products and services.


We also believe that maintaining sufficient
levels of customer service continues to be a key factor in
averting subscriber churn. Our customer service representatives
assist subscribers in managing their account activity including
the movement of paging devices between personnel within an
account. In addition, they address customer inquiries from
existing or potential customers. As such, we will continue to
provide customer service at both a field and national level to
address the demands and expectations of our direct subscriber
base.

Cost Containment and
Reduction Our Plan was
predicated on a refinement of our operating structure that would
reduce the amount of costs required to operate our business.
During 2002, we took several steps to reduce our operating and
capital expenditures. In 2003, we anticipate that we will
further decrease our operating expenses as we implement several
initiatives that will further reduce our management hierarchy
and realign our sales management and support functions to
address the continued declines in our subscriber base and
airtime service revenues.

In February 2003, our Board of Directors
approved a plan that would enable us to reorganize our corporate
management and sales distribution function and to further
centralize our national call center services and inventory
fulfillment processes. Management believes these measures are
necessary to maximize both operating and free cash flows. We
also believe these reductions are possible due to the
rationalization and integration efforts we performed in 2001 and
2002 and the reduction in the number of subscribers to which we
provide customer service or inventory fulfillment. As such, we
believe that we can further reduce our operating expenses and
corporate structure without affecting our airtime or customer
service capabilities.

Such containment and reduction initiatives are
expected to include:

Reorganization of corporate
management By
June 30, 2003, we expect to eliminate several senior or
corporate management positions representing 25% of all such
positions. Many of the reductions are being taken in connection
with the events described below. Such reductions are possible
because the size of our company in terms of employees,
subscribers and revenues no longer can support a management
structure that was designed to support a growth-oriented company
with subscriber levels of over 10.0 million.

Reorganization of sales
distribution In February
2003, we consolidated the number of field sales regions under
the leadership of a regional vice president from 6 to 3. The
consolidated regions include: the Eastern region, formerly
comprised of the Northeast, Mid-Atlantic and Southeast regions;
the Central region; and the Western region, formerly comprised
of the West and NorthWest regions. The reduction of operating
regions will enable us to further reduce general and
administrative expenses associated with our field operations as
each operating region had separate administrative support staff,
which now may be combined. In addition, we expect to consolidate
certain of our under-performing offices and markets into more
established markets to increase operating margins in those
markets.

In February 2003, we consolidated our corporate
sales initiatives under the leadership of one senior vice
president and eliminated the non-core database marketing sales
group. As a result of the reorganization, we expect to eliminate
several corporate sales and marketing positions. The database
marketing group primarily targeted consumer subscribers which
are outside of our core business focus.

Centralization of national call centers and
inventory fulfillment In
March 2003, we completed the consolidation of our national call
center and credit and collection efforts into one existing
location in Pensacola, Florida. Formerly, these functions were
performed in two locations including Alexandria, Virginia and
Pensacola, Florida. The consolidation has enabled us to reduce
the number of staff and management positions required from the
two separate locations and to achieve certain operating
efficiencies that were not possible earlier until the
integration of our final billing system platform which occurred
in December 2002. Presently, we now have one common
platform under which we manage our subscriber invoicing, order
fulfillment and customer service support.

In connection with the regional consolidation, we
will centralize our field customer service and inventory
distribution functions into a small number of primary locations
within each region. This process should enable

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us to more cost effectively provide customer
service, data entry and inventory fulfillment; and permit us to
reduce our operating expenses yet continue to maintain adequate
levels of customer service.


Other initiatives We expect to continue with several
other cost reduction initiatives. Similar to the above events
these will be undertaken because the size of our subscriber base
no longer warrants such expenditures. For instance, we intend to
deconstruct at least 250 transmitter sites supporting under
utilized frequencies in 2003. In addition, where appropriate, we
intend to further rationalize our general and administrative
support structure.

As a result of the aforementioned, we expect to
reduce our workforce by approximately 296 positions by
June 30, 2003. Estimated annualized compensation and
benefit expense savings of approximately $15.0 million are
expected. Severance and related expenses of approximately
$5.8 million are expected and will be paid out by
June 30, 2003. There can be no assurances that Metrocall
will achieve the desired savings as a result of these
initiatives.

Advanced
Messaging We offer
advanced messaging services using narrowband PCS primarily
through a strategic alliance agreement with Weblink. For the
twelve months ended December 31, 2002, we generated net
revenues of approximately $59.8 million from these
services. As of December 31, 2002, 205,167 subscribers
received these services. In 2003, we intend to continue this
service offering although we expect the demand for this service
to decline from 2002 levels. Similar to traditional paging, our
sales and marketing efforts for the advanced messaging products
will be targeted at business and government customers. In
addition, we will continue to focus on the sale of these units
into our subscriber base rather than the leasing the device to
the subscriber. We expect that this limitation will result in a
lower number of placements however it will minimize our capital
expenditures requirements. We intend to lease advanced messaging
devices only under limited circumstances that would meet certain
ARPU and retention targets.

Metrocalls Paging and Wireless Messaging
Operations

Services
and Subscribers

Metrocall currently provides several traditional
and advanced wireless data and messaging services, including:

 Traditional Paging
Services As of December 31, 2002, we
offered traditional paging services to approximately
3.5 million subscribers consisting primarily of numeric and
alphanumeric messaging services. Numeric messaging services
permit a subscriber to receive messages that are composed
entirely of numbers, such as a phone number while alphanumeric
messages may include numbers and letters which enable a
subscriber to receive text messages. As of December 31,
2002 approximately 77% of our customers subscribe to numeric
messaging services while 23% subscribe to alphanumeric services.

 Advanced Wireless Data and
Messaging Services  As of December 31, 2002,
we offered advanced two-way messaging services to
205,167 subscribers. Such services enable subscribers to send
and receive messages to other hand-held devices or to email
addresses. We provide these services primarily in conjunction
with our alliance agreement with Weblink.

We also provide enhancements and ancillary
services for our traditional and advanced messaging subscribers
including:



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | personalized automated answering services, which
    allow a subscriber to record a message that greets callers who
    reach the subscribers voice mailbox;                                 
|
| |  | message protection, which allows a traditional
    subscriber to retrieve any calls that come in during the period
    when the subscriber was beyond the reach of our radio
    transmitters;
|
| |  | annual loss protection, which allows subscribers
    of leased messaging devices to limit their cost of replacement
    upon loss or destruction of the device; and                           
|
| |  | maintenance services, which are offered to
    subscribers who own their pagers and advanced messaging devices.                                                                               

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Our subscribers either buy or lease their
messaging devices. Volume discounts on lease payments and
service fees have been offered to large volume subscribers. In
some instances, our subscribers are resellers that purchase
services at substantially discounted rates, but are responsible
for marketing, billing, collection and related costs with
respect to their customers.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Other Service
    Offerings We provide other
    wireless messaging and telecommunication services which include
    cellular and PCS phone distribution and System Applications. We
    distribute digital broadband and PCS phones and other products
    through distribution or dealer agreements with
    AT&T Wireless, Nextel and other carriers.
    Metrocalls Integrated Resource Management System
    Application Division manages in-house and wide area messaging
    systems while reducing telecommunications costs and provides
    solutions to communications challenges to an organizations
    overall efficiency. This division integrates multiple
    communications platforms into one universal system that also
    provides a conduit to the wireless world. By offering these
    products, we fulfill the communications demands of large
    workforces such as corporations, manufacturers, municipalities,
    and healthcare organizations, particularly in campus-like
    settings.

Sales and Marketing

Our sales and marketing efforts are focused on
maintaining and attracting business and government subscribers
throughout the United States. Through January 2003, we had
organized our field sales activity into six geographic regions.
In February 2003, we reduced the number of regions to
three. Each region is led by a regional vice president. Our
sales personnel are located in over 100 offices in
33 states throughout the United States. In addition, we
maintain several corporate sales groups focused on our larger
national accounts, PCS sales and other product offerings. Our
field regions either sell our messaging services and products
directly to end-users to whom we provide billing and
customer services or to distributors that provide our airtime
services to the ultimate end-user. Our corporate
sales groups are focused mainly on direct subscriber placements.
Set forth below is the number of messaging devices that we have
in service by geographic region:

Number of Devices in Service

|                                 |       |      |           |           |  |      |           |           |  |  |           |           | 
|-------------------------------- | ----- | ---- | --------- | --------- |  | ---- | --------- | --------- |  |  | --------- | --------- | 
|For the Years Ended December 31, |       | 2000 |           | 2001      |  | 2002
|                                 |       |      |           |           |  |     
|EASTERN REGION:                  |       |      |           |           |  |      |           |           |  |  |           |          
|Northeast                        |       |      | 843,617   |           |  |      | 640,918   |           |  |  | 374,473   |          
|Mid-Atlantic                     |       |      | 848,379   |           |  |      | 728,419   |           |  |  | 531,458   |          
|Southeast                        |       |      | 1,303,382 |           |  |      | 1,047,044 |           |  |  | 711,801   |          
|                                 |       |      |           |           |  |      |           |           |  |  |           |          
|                                 |       |      | 2,995,378 |           |  |      | 2,416,381 |           |  |  | 1,617,732 |          
|                                
|CENTRAL                          |       |      | 1,962,426 |           |  |      | 1,941,816 |           |  |  | 1,227,430 |          
|                                
|WESTERN REGION:                  |       |      |           |           |  |      |           |           |  |  |           |          
|West                             |       |      | 792,546   |           |  |      | 668,100   |           |  |  | 480,740   |          
|Northwest                        |       |      | 504,023   |           |  |      | 428,768   |           |  |  | 393,482   |          
|                                 |       |      |           |           |  |      |           |           |  |  |           |          
|                                 |       |      | 1,296,569 |           |  |      | 1,096,868 |           |  |  | 874,222   |          
|                                 |       |      |           |           |  |      |           |           |  |  |           |          
|                                 | Total |      |           | 6,254,373 |  |      |           | 5,455,065 |  |  |           | 3,719,384 | 
|                                 |       |      |           |           |  |      |           |           |  |  |           |          

Direct
Distribution Channels

 Direct Sales.Our direct sales
field and corporate personnel sell our messaging services and
products primarily to businesses, placing special emphasis on
key accounts of strategic importance. Our direct sales personnel
generally target businesses that have multiple work locations or
have highly mobile employees. Our sales compensation plans are
designed to motivate direct sales personnel to focus on selling
rather than leasing traditional pagers and advanced wireless
data and messaging devices, which reduces capital requirements,
and to increase sales of higher revenue product enhancements,
such as nationwide coverage, alphanumeric service and voice mail.

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 Company-Owned Retail Stores.Through mid-2002, we operated retail outlets designed to
sell higher ARPU services to the consumer market segment. These
retail outlets had taken a variety of forms, such as mall
stores, kiosks, mall carts, retail merchandising units and mall
center locations. Many of these locations functioned as customer
service and payment centers in addition to offices for direct
sales representatives. In mid-2002, we closed our remaining
retail outlets although we continue to maintain
store-fronts in a number of locations that also
serve as offices for direct sales representatives. We expect the
churn within this distribution channel to remain high in 2003 as
we are not focusing any significant resources on it.

Indirect
Distribution Channels

Our indirect channels provide for the
distribution of airtime services to end-subscribers using an
intermediary party to contract with the end-subscriber. We
contract directly with; and invoice, the intermediary for such
airtime services. There is no contractual relationship that
exists between Metrocall and the end-subscriber. Unless
otherwise described below, we do not normally provide customer
service or billing support to the end-subscriber. Subscriber
units placed in the indirect distribution channels typically
have ARPU statistics below units placed in the direct
distribution channels. In addition, operating costs per unit to
provide these services are significantly below that required in
the direct distribution channels. The subscriber churn in our
indirect distribution channel has been at a much higher rate
than experienced with our direct distribution customers.
Retention efforts in these channels are difficult because of the
lack of visibility to the end-subscriber. We expect that high
churn rates in the indirect distribution channels will continue
in 2003 as we continue to focus our selling and marketing
efforts on our direct distribution channels.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Resellers.We sell
    bulk-paging services to resellers for resale to their own
    business clients and individual customers. We issue one monthly
    bill to each reseller; who is responsible for marketing, billing
    and collection and equipment maintenance. Through this channel,
    we achieve high network utilization at low incremental cost, but
    realize much lower ARPU than through other distribution channels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Strategic Partners.We have entered into contractual
    agreements with several selected national distribution partners
    who market our paging services to their existing and future
    customers. We supply many of these partners with custom branded
    turnkey solutions for network services, which include: products,
    customer services, billing, collections and fulfillment. Our
    strategy is to provide these value-added services to enhance the
    business relationship and margin opportunities for both parties.
    We have entered into alliances with companies in the long
    distance, local exchange, cable, Internet and direct response
    businesses such as Alltel Inc., and Verizon, Inc. We
    believe that these programs will help deliver paging and
    advanced messaging services to market segments that our other
    distribution channels may not reach cost-effectively.                          
|
| |  | Retail Outlets.We
    sell pagers on a wholesale basis to retail outlets, such as
    office supply, electronics and general merchandise chains, for
    resale to their customers. We select these outlets based on
    factors such as the number of stores in a region and the extent
    of their advertising. These outlets then sell the pager itself
    and provide limited customer service to the consumer. We
    generally provide sales incentives and advertising support, and
    train sales personnel to enhance the retail outlets
    effectiveness and to ensure that the customer is well educated
    regarding the product.                                                                                                                                                                                                                                                                                                    
|
| |  | Dealer Network.Metrocall contracts with independent
    dealers, representatives and agents, including such outlets as
    small cellular phone dealers and independent specialty
    electronics stores. We typically use these dealers to reach
    specific consumer niches (e.g., ethnic or non-English speaking
    communities) and small businesses that are more efficiently
    accessed through this channel than through our other
    distribution channels. In addition to selling the paging
    devices, independent dealers assist the subscriber in choosing a
    service plan and collect the initial payments. We pay
    independent dealers commissions based on their sales of our
    services. It should be noted that these dealers are finding it
    more difficult to generate profitable business given the
    aggressive pricing by the large principals in the industry and
    accordingly this channel is shrinking.

8



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Affiliates.We
    operate a network of paging carriers or affiliates that resell
    services on the 152.480 MHz private carrier paging
    frequency. These affiliates are independent owners of paging
    systems in various markets throughout the nation who sell
    expanded coverage to their customers. Utilizing Metrocalls
    infrastructure, these independent networks provide wide area and
    nationwide paging on a single channel.

Set forth below are the respective numbers and
percentages of messaging devices that we service through our
distribution channels:

Ownership of Devices in Service

|                   |                                         |        |  |            |  |        |  |            |   |        |  |            |  |  |  |     |   |  |  |           |  |  |  |     |  
|------------------ | --------------------------------------- | ------ |  | ---------- |  | ------ |  | ---------- | - | ------ |  | ---------- |  |  |  | --- | - |  |  | --------- |  |  |  | --- | -
|                   |                                         |        |  |            |  |       
|                   |                                         | 2000   |  | 2001       |  | 2002  
|                   |                                         |        |  |            |  |       
|                   |                                         | Number |  | Percentage |  | Number |  | Percentage |   | Number |  | Percentage
|                   |                                         |        |  |            |  |        |  |            |   |        |  |           
|Direct channels:   |                                         |        |  |            |  |        |  |            |   |        |  |            |  |  |  |     |   |  |  |           |  |  |  |    
|                   | Company-owned and leased to subscribers |        |  | 1,967,613  |  |        |  | 32         | % |        |  | 1,899,381  |  |  |  | 35  | % |  |  | 1,710,967 |  |  |  | 46  | %
|                   | Customer-owned and maintained           |        |  | 667,962    |  |        |  | 11         | % |        |  | 758,505    |  |  |  | 14  | % |  |  | 571,804   |  |  |  | 15  | %
|                   | Company-owned retail stores (CORS)      |        |  | 145,022    |  |        |  | 2          | % |        |  | 117,973    |  |  |  | 2   | % |  |  | 50,281    |  |  |  | 2   | %
|Indirect channels: |                                         |        |  |            |  |        |  |            |   |        |  |            |  |  |  |     |   |  |  |           |  |  |  |    
|                   | Resellers                               |        |  | 2,771,394  |  |        |  | 44         | % |        |  | 2,102,855  |  |  |  | 39  | % |  |  | 990,421   |  |  |  | 27  | %
|                   | Strategic Partners and affiliates       |        |  | 585,777    |  |        |  | 9          | % |        |  | 470,450    |  |  |  | 8   | % |  |  | 345,451   |  |  |  | 9   | %
|                   | Retail                                  |        |  | 116,605    |  |        |  | 2          | % |        |  | 105,901    |  |  |  | 2   | % |  |  | 50,460    |  |  |  | 1   | %
|                   |                                         |        |  |            |  |        |  |            |   |        |  |            |  |  |  |     |   |  |  |           |  |  |  |    
|                   | Total                                   |        |  | 6,254,373  |  |        |  | 100        | % |        |  | 5,455,065  |  |  |  | 100 | % |  |  | 3,719,384 |  |  |  | 100 | %
|                   |                                         |        |  |            |  |        |  |            |   |        |  |            |  |  |  |     |   |  |  |           |  |  |  |    

Network and Equipment

We have developed a state-of-the-art paging and
messaging system utilizing current technology, which achieves
optimal building penetration, wide-area coverage and the ability
to deliver new and enhanced messaging services. This existing
paging transmission equipment has significant capacity to
support future growth or industry consolidation.

Our messaging services are initiated when
telephone calls or short message-based text services are placed
to our company-maintained paging terminals. These
state-of-the-art terminals have a modular design that allows
significant future expansion by adding or replacing modules
rather than replacing the entire terminal. Our paging terminals
direct pages from the Public Switched Telephone Network
(PSTN) or from the Internet to our Global Messaging
Gateway, our primary satellite transmission hub located in
Stockton, California, which signals terrestrial network
transmitters providing coverage throughout the service area. We
transmit a majority of our traffic through this facility. The
facility operates 24 hours per day, seven days per week.

We have three exclusive nationwide one-way
frequencies and a nationwide 50/50 KHz narrowband personal
communication (NPCS) license issued by the FCC and are
operating in each of the largest 100 SMSAs. We began
operating the nationwide network on one of the three one-way
channels in November 1993. We developed a special home
gateway switch that allows all of our existing regional based
paging terminals to route two-way messaging data to this
centralized gateway for delivery into the two-way ReFLEX 25
network owned by Weblink. We offer our two-way messaging
services using the Weblink network through an alliance
agreement, which expires in April 2006.

We are also capable of providing local paging in
many markets served by the nationwide network by using
nationwide transmitters to carry local messages. Services
provided through the nationwide network are marketed to
subscribers directly through our sales force and indirectly
through retailers and resellers. We also operate a series of
regional operating systems or networks consisting of primary
networks serving Arizona,

9



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California, Utah, Texas, Florida, Illinois,
Oregon, Washington, Colorado and Nevada, and the area from
Boston to the Virginia/ North Carolina border, and a ten
(10) state region in the Southeastern portion of the U.S.


Product
Sourcing and Key Suppliers

Metrocall does not manufacture any of the paging
or messaging devices, infrastructure and other equipment used in
its operations. While the equipment used in Metrocalls
operations is available for purchase from multiple sources,
Metrocall has historically limited the number of suppliers to
achieve volume cost savings and, therefore, depends on such
manufacturers to obtain sufficient inventory. Metrocall
purchases traditional messaging devices from several suppliers.
In November 2001, Motorola, Inc.
(Motorola) announced that it would no longer sell
the messaging equipment used by Metrocall for its traditional or
two-way messaging services. Through June 2002, we continued
to receive our advanced messaging devices from Motorola,
however, since that time, there has not been a device
manufacturer to bring a product to market to replace
Motorolas industry absence. Presently there are several
foreign manufacturers developing advanced messaging devices that
utilize the ReFLEX protocol, which may be available for market
in mid to late 2003. Although we believe that based on recent
demand we have sufficient supply of advanced messaging devices
until at least the fourth quarter of 2003, our advanced
messaging operations could be affected if there is delay in
bringing these products to market or if their cost is
prohibitive.

Metrocall currently receives maintenance and
support services for its network infrastructure components from
Glenayre Electronics, Inc. (Glenayre) through a
support services contract, which will expire May 2, 2003
subject to an option held by Metrocall to further extend this
contract until May 2004. Metrocall expects to maintain its
infrastructure through internal measures and the reliance on
other contractors once this contract expires. Metrocall expects
that infrastructure and equipment components will continue to be
available from other suppliers for the foreseeable future,
consistent with normal manufacturing and delivery lead times but
cannot provide any assurance that it will not experience
unexpected delays in obtaining equipment in the future.

Management Information Systems, Customer
Invoicing and Services

We have centralized certain operating functions
and utilize common and distributed billing and subscriber
management systems, which permit us to increase our operating
efficiencies and focus regional management on sales and
distribution. The functions we have centralized into our
national operations center in Alexandria, Virginia include
accounting, management information systems, and inventory and
order fulfillment.

As of December 31, 2002, we maintained two
national customer service call centers, which were critical
factors in marketing and servicing the nationwide network to all
markets in the United States. Our centers, which are located in
Alexandria, Virginia and Pensacola, Florida process customer
inquiries from existing and potential customers and support our
distribution channel initiatives. Our Florida call center is
open seven days per week, 24 hours per day. Metrocall
employs state-of-the-art call management technology (such as an
automated call distribution system and interactive voice
response capabilities) at both facilities to provide quality
customer service and to track both the productivity and the
quality of the performance of its customer service
representatives. In March 2003, we closed our Virginia national
call center facility and consolidated these operations into the
Florida facility.

Competition

The wireless communications industry is very
competitive. We compete with hundreds of companies that provide
only traditional paging services on a local, regional or
nationwide basis and several companies that provide advanced
wireless data and messaging services using narrowband and
broadband PCS services. Our traditional paging operations
compete by maintaining competitive pricing on products and
services, by providing a broad assortment of coverage options
using our own messaging network infrastructure and through
quality, reliable customer service.

10



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We also compete directly and indirectly with
providers of narrowband and broadband PCS services. Narrowband
PCS provides enhanced or advanced messaging capabilities, such
as confirmation or response paging and
two-way messaging, services which we provide in our advanced
messaging operations through our alliance with WebLink.
Broadband PCS provides new types of communications devices that
include multi-functional portable phones and imaging devices. In
addition, the pricing of flat rate digital broadband PCS service
is declining to a level that directly competes with the
traditional paging services offered by Metrocall. In addition,
new products and technologies being developed by and/or for
broadband PCS providers is resulting in increased competition
for market share of existing and prospective advanced messaging
subscribers. We have distribution agreements with AT&T
Wireless and Nextel which enable us to offer digital broadband
PCS telephones which may be bundled to subscribers along with
traditional paging or advanced wireless data and messaging
services.

Although some of our competitors are small,
privately owned companies that service one market, others are
large diversified telecommunications companies that serve
several markets. Some of these competitors possess financial,
technical and other resources greater than those of Metrocall.
Major wireless messaging providers that Metrocall competes with
in more than one market include Arch, Weblink, Skytel Inc.,
Cingular, Verizon, and Motient.

The intensity of competition for communication
service customers will continue to increase as wireless
communication products and technologies continue to be developed
and offer new and different services and applications. In
addition, FCC regulation concerning auctioning of new spectrum
for wireless communication services has created additional
potential sources of competition. Furthermore, entities offering
service on wireless two-way communications technology, including
cellular, digital broadband PCS and narrowband PCS, and
providers of specialized mobile radio and mobile satellite
services, also compete with the services that Metrocall
provides. There can be no assurances that existing competing
wireless communication technologies will not continue to
adversely impact our traditional operations or that the future
development of new generation technologies and products will not
adversely affect our traditional and advanced wireless messaging
operations.

Government Regulation

From time to time, federal and state legislators
propose and enact legislation that affects our business, either
beneficially or adversely, such as by increasing competition or
affecting the costs of operating our business. Additionally, the
FCC and, to a lesser extent, state regulatory bodies, may adopt
rules, regulations or policies that may affect our business. We
cannot predict the impact of such legislative actions on our
operations. The following description of certain regulatory
factors does not purport to be a complete summary of all present
and proposed legislation and regulations pertaining to our
operations.

Federal.Ouroperations are subject to extensive regulation by the FCC
under the Communications Act. Under the Communications Act, we
are required to obtain FCC licenses for the use of radio
frequencies to conduct our operations within specified
geographic areas. These licenses set forth the technical
parameters, such as maximum power and tower height, under which
we may use such frequencies. We are licensed by the FCC to
operate CMRS messaging services.

The FCC also requires messaging licensees to
construct their stations and begin service to the public within
a specified period of time, and failure to do so results in
termination of the authorization. Under the traditional
site-specific approach to messaging licensing, a licensee
received a construction permit for facilities at a specific
site, and that permit automatically terminated if the facilities
were not timely constructed and the licensee failed to request
an extension prior to the deadline. The failure to construct
some facilities did not, however, affect other facilities in a
licensees system that had been constructed and placed into
operation timely. However, certain services that we offer are
subject to harsher penalties for failure to construct. For
example, our narrowband PCS license is subject to the condition
that we build sufficient stations to cover 750,000 square
kilometers, or 37.5% of the U.S. population, by the fifth
anniversary of the initial license grant; by the tenth
anniversary of the grant, it must build sufficient stations to
cover 1,500,000 square kilometers, or

11



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75% of the U.S. population. We have met the first
construction benchmark for our two-way messaging license, and
expect to meet the FCCs 10-year build out requirements.


More recently, the FCC adopted rules to issue
most messaging licenses for large, FCC-defined service areas,
and to award those licenses by auction. Licenses for
929 MHZ and 931 MHZ messaging frequencies are issued
for Major Economic Area or MEA
geographic areas; licenses for exclusive messaging frequencies
in lower frequency bands are licensed in Basic Economic
Areas or BEAs; these wide-area
paging licenses are subject to population coverage benchmarks
(one-third of the service area population at three years and
two-thirds at five years from license grant, or
substantial service). Our licensing subsidiary has
participated in two FCC auctions for paging licenses, and has
been awarded a number of licenses covering areas in which we
already provided service under site-specific licenses. The
earliest of the coverage benchmark deadlines for these licenses
is June 12, 2003.

Since we already have extensive coverage in the
subject areas, we anticipate meeting the benchmarks for these
licenses; even if we failed to do so, we would retain the
site-specific authorizations that we had prior to the auctions.

Our shared messaging frequencies continued to be
allocated on a shared basis and licensed in accordance with
existing, site-specific procedures, and are unaffected by the
wide-area licensing and auction rules. In addition, our three
nationwide messaging frequencies are not subject to competitive
bidding.

The FCC has forbearance authority,
which means it need not enforce against all CMRS licensees the
following common carrier regulations under Title II of the
Communications Act: any interstate tariff requirements,
including regulation of CMRS rates and practices; the collection
of intercarrier contracts; certification concerning interlocking
directorates; and FCC approval relating to market entry and
exit. Additionally, the 1993 Budget Act preempted state
authority over CMRS entry and rate regulation. The
Telecommunications Act of 1996 (the 1996 Act)
provided the FCC with additional forbearance
authority with regard to all telecommunications services.
Pursuant to that authority, the FCC has forborne from requiring
wireless carriers to receive prior FCC approval for certain
non-substantial corporate stock transfers and reorganizations.

The FCC issues CMRS Messaging licenses for terms
of 10 years. Our current licenses have expiration dates
ranging from 2003 to 2013. The FCC must approve renewal
applications. In the past, the FCC has routinely granted our
renewal applications. We are required to obtain FCC approval
before we acquire radio licenses held by other companies, as
well as transfers of controlling interests of any entities that
hold radio licenses. Although there can be no assurance that any
future renewal or transfer applications we file will be approved
or acted upon in a timely manner by the FCC, we know of no
reason to believe such applications would not be approved or
granted, based upon our experience to date. The FCC has
authority to restrict the operation of licensed radio facilities
or to revoke or modify such licenses. The FCC may adopt changes
to its radio licensing rules at any time, and may impose fines
for violations of its rules.

The Communications Act also places limitations on
foreign ownership of CMRS licenses. These foreign ownership
restrictions limit the percentage of our stockholders
equity that may be owned or voted, directly or indirectly, by
aliens or their representatives, foreign governments or their
representatives, or foreign corporations. Metrocall
Holdings certificate of incorporation permits the
redemption of its equity from stockholders where necessary to
protect its compliance with these requirements.

The 1996 Act imposes a duty on all
telecommunications carriers to provide interconnection to other
carriers, and requires local exchange carriers (LECs; i.e.,
local telephone companies) to, among other things, establish
reciprocal compensation arrangements for the transport and
termination of calls and provide other telecommunications
carriers access to their network elements on an unbundled basis
on reasonable and non-discriminatory rates, terms and
conditions. The LECs are now prohibited from charging messaging
carriers for the transport and termination of
LEC-originated local calls. This prohibition has lead to certain
cost savings for Metrocall. Moreover, under the 1996 Act and the
FCCs rules, messaging carriers are entitled to
compensation from any LEC for local calls that terminate on a
messaging network. We have interconnection and reciprocal
compensation agreements with a number of LECs.

12



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The 1996 Act also requires the FCC to appoint an
impartial entity to administer telecommunications numbering and
to make numbers available on an equitable basis. In addition,
the 1996 Act requires that state and local zoning regulations
shall not unreasonably discriminate among providers of
functionally equivalent wireless services, and shall
not have the effect of prohibiting the provision of personal
wireless services. The 1996 Act provides for expedited judicial
review of state and local zoning decisions. Additionally, state
and local governments may not regulate the placement,
construction and modification of personal wireless service
facilities on the basis of the environmental effects of radio
frequency emissions, if the facilities comply with the
FCCs requirements. Other provisions of the 1996 Act and
various FCC proceedings, however, may impose additional
regulatory costs. For example, all interstate telecommunications
carriers, including Metrocall, are required to contribute to
universal service; the FCC is currently considering changes to
the contribution mechanism that may increase the amounts paid by
CMRS carriers. Additionally, the FCCs Spectrum Policy Task
Force has proposed regulatory changes that are intended to
provide more access to spectrum for unlicensed operations. The
proposed changes include recommendations of new frequency
allocation models that could result in incumbent licensees
sharing their frequencies with unlicensed operators. Metrocall
and many other wireless licensees have filed comments with the
FCC opposing any changes to its rules that could lead to
potential interference to licensed operators. Some FCC rules
affecting our business are subject to pending petitions for
reconsideration and Court appeals; rules that are currently
under consideration by the FCC may likewise be appealed. We
cannot predict the final outcome of any judicial or FCC
proceeding or the possible impact of future FCC proceedings on
our business.

State.The 1993
Budget Act and related FCC orders preempt all state and local
rate and entry regulation of all CMRS operators. Entry
regulations typically refer to the process whereby a CMRS
operator must apply to the state to obtain a certificate to
provide service in that state. Rate regulation typically refers
to the requirement that CMRS operators file a tariff describing
our billing rates, terms and conditions by which we provide
messaging services. Apart from rate and entry regulations, some
states may continue to regulate other aspects of our business in
the form of zoning regulations (subject to the 1996 Acts
prohibition on discrimination against or among wireless
telecommunications carriers), or health and safety
measures. The 1993 Budget Act does not preempt state authority
to regulate such matters. Although there can be no assurances
given with respect to future state regulatory approvals, based
on our experience, we know of no reason to believe such
approvals would not be granted.

In 1997, the FCC held that the Budget Act does
not prohibit states from imposing requirements of CMRS carriers
to contribute to funding universal telephone service
within the states. Approximately 25 states, in addition to the
FCC, now impose such universal service fund
obligations on messaging carriers. Although we incur additional
costs in contributing to state and federal universal service
funds, we typically pass through these costs/taxes to our
subscribers, as allowed by applicable regulations.

Regulatory
Litigation.

There are no significant litigation matters
pending before the FCC at this time in which we are involved
that would have any material impact on our business, except for
proceedings of general applicability affecting the industry.

Seasonality

Generally, our operating results are not
significantly affected by seasonal factors.

Trademarks and Service Marks

We use the following trademarks:



| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | Metrocall  a registered
    trademark with the U.S. Patent and Trademark Office;
|
| |  | Metrocall Wireless;                                                              
|
| |  | IRM*;                                                                            

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| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Metrofax;                                                                                                                                                                     
|
| |  | Metrotext  a computer
    program designed for use in transmitting alphanumeric messages
    from personal computers to pagers (copyright registration has
    been granted);
|
| |  | Swiftsend*                                                                                                                                                                    

Service Marks:

|                      |  |                                         |  |                                         
|--------------------- |  | --------------------------------------- |  | ----------------------------------------
|                     |  | Adding Mobility to Business*;         |  | Airware;                              
|                     |  | Americas Wireless Network;           |  | Communication for the Net Generation*;
|                     |  | Conveia*;                             |  | Datacall;                             
|                     |  | DirectView;                           |  | Helping America Communicate*;         
|                     |  | In Touch;                             |  | IRM*;                                 
|                     |  | Message Track*;                       |  | Metromessage;                         
|                     |  | Metrocall;                            |  | Metronet;                             
|                     |  | One Touch;                            |  | ProNet Communications;                
|                     |  | ProNet Communications to Go;          |  | The Business Communication Experts*;  
|                     |  | Your Business Communication Partner*; |  |                                         
|* Application pending

Employees

As of December 31, 2002, we employed 1,945
full and part-time employees none of whom is represented by a
labor union. We believe that our relationship with our employees
is good.

ITEM
2.     Properties

We do not hold title to any significant real
property although, Metrocall Ventures, Inc., a wholly-owned
subsidiary, owns interests in certain properties. At
December 31, 2002, we leased commercial office retail and
storage space, including our executive offices, at more than 185
locations used in our operations. These office leases provided
for monthly payments ranging from approximately $116 to $125,332
and expire, subject to renewal options, on various dates through
2010.

We also lease numerous sites under long-term
leases for our transmitters on commercial broadcast towers,
buildings and other fixed structures. At December 31, 2002,
we leased these transmitter sites for monthly rentals ranging
from approximately $100 to $7,300 that expire, subject to
renewal options, on various dates through January 2016.

ITEM 3.     Legal
Proceedings

Information regarding contingencies and legal
proceedings is included in Note 10 of the Notes to the
Consolidated Financial Statements, which is included under
Item 8 of this report.



|        |                                                        
|------- | -------------------------------------------------------
|ITEM 4. | Submission of Matters to a Vote of Security
    Holders

None.

PART II

ITEM 5.     Market
for The Registrants Common Equity and Related Stockholder
Matters

Under the terms of the Plan, all holders of our
prior outstanding equity securities, including preferred stock,
common stock and options/warrants to acquire such securities
received no distributions and all such equity interests were
cancelled as of the Effective Date. Our prior common stock had
traded on the Nasdaq

14



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##### 



Small Cap Market through April 12, 2001 and
on the OTC Bulletin Board from May 2001 to October 7, 2002
under the symbol MCLLQ. We are authorized to issue
up to 1,200,000 shares of new common stock and are required to
issue 1,000,000 shares of new common stock to holders of our
prior secured bank debt and to our former general unsecured
creditors. As of March 1, 2003 there were 126 specified
record holders of the new common stock, which holders have been
issued 991,398 shares of new common stock. The remaining shares
are being held to be issued to our former creditors to be
determined as the claims adjudication process is completed. We
anticipate that the shares of new common stock will continue to
be issued on an incremental basis as the Bankruptcy Court enters
orders allowing and disallowing claims until all remaining
unreconciled and/or disputed claims have either been reconciled
and allowed or disallowed.


All shares of our new common stock have sale and
transfer restrictions through December 31, 2005. Our common
stock is listed on the OTC Bulletin Board under the symbol,
MTOH. Trading in our common stock has been limited
and sporadic.

The following table indicates the range of high
and low closing prices of our common stock as reported on the
OTC Bulletin Board from October 8, 2002 through
December 31, 2002. The following table also indicates, for
each of the quarters in the fiscal year ended December 31,
2001, and the first three fiscal quarters of the fiscal year
2002 the range of high and low closing prices of our common
stock that was cancelled in connection with our reorganization
as reported on the Nasdaq National Market or the OTC Bulletin
Board.

|                   |  |      |      |     |  |   |      | 
|------------------ |  | ---- | ---- | --- |  | - | ---- | 
|Fiscal Year Ending |  | High |      | Low
|                   |  |      |      |    
|December 31, 2002  |  |      |      |     |  |   |      | 
|First Quarter      |  | $    | 0.11 |     |  | $ | 0.03 | 
|Second Quarter     |  | $    | 0.08 |     |  | $ | 0.01 | 
|Third Quarter      |  | $    | 0.03 |     |  | $ | 0.01 | 
|Fourth Quarter     |  | $    | 1.10 |     |  | $ | 0.01 | 
|December 31, 2001  |  |      |      |     |  |   |      | 
|First Quarter      |  | $    | 1.13 |     |  | $ | 0.12 | 
|Second Quarter     |  | $    | 0.11 |     |  | $ | 0.05 | 
|Third Quarter      |  | $    | 0.10 |     |  | $ | 0.05 | 
|Fourth Quarter     |  | $    | 0.09 |     |  | $ | 0.02 | 

We have never declared or paid cash dividends on
our common stock. Our ability to pay dividends on our common
stock is restricted by our new senior credit secured promissory
and senior subordinated PIK notes. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources. We
do not anticipate the payment of cash dividends on our common
stock in the foreseeable future.

See Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters  Equity Compensation Plans for
disclosure regarding our equity compensation plans.

On October 8, 2002, we consummated our Plan
that was confirmed by an order of the Bankruptcy Court entered
on September 26, 2002. In connection with our Plan, we
issued or will issue the following securities without
registration under the Securities Act of 1933 in reliance on one
or more exemptions set forth in Section 1145 of the
Bankruptcy Code and the Bankruptcy Court order confirming our
Plan:



| |   |                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 1,000,000 shares of our common stock to our
    creditors as identified in our Plan. We issued 991,398 of these
    shares on various dates from October 8, 2002 to
    March 1, 2003 and, as of March 1, 2003, 8,602 of these
    shares of common stock have not yet been issued and are reserved
    on account of unreconciled and or disputed claims;                       
|
| |  | 6,000,000 shares of our new Series A
    Preferred Stock (the Series A Preferred) to our
    creditors and certain members of senior management as identified
    in our Plan. We issued 5,992,572 of these shares on various
    dates from October 8, 2002 to March 1, 2003 and, as of
    March 1, 2003, 7,428 of these shares of common stock have
    not yet been issued.

15



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|        |                        
|------- | -----------------------
|ITEM 6. | Selected Financial Data

The following tables set forth selected financial
and other data of Metrocall. The historical financial data has
been derived from the audited consolidated financial statements
for the period October 8, 2002 to December 31, 2002,
the period January 1, 2002 to October 7, 2002 and each
of the years in the four-year period ended December 31,
2001. The selected data should be read in conjunction with,
Managements Discussion and Analysis of Financial
Condition and Results of Operations, Business
and Metrocalls consolidated financial statements, related
notes thereto and other financial information included in the
consolidated financial statements.

As a result of Metrocalls filing a
voluntary petition to reorganize under Chapter 11 of the
U.S. Bankruptcy Code on June 3, 2002 and operating as a
debtor-in-possession until October 8, 2002 the selected
financial data for periods prior to October 8th are not
comparable to periods subsequent to such date. The financial
statements of the Reorganized Company reflect the impact of
adjustments to reflect the fair value of assets and liabilities
under fresh start reporting. As a result, the financial
statements of the Reorganized Company are presented on a
different basis than those of the Predecessor Company and,
therefore, are not comparable in all respects. The results of
operations of the Predecessor Company for the period
January 1, 2002 to October 7, 2002 include several
items related to our emergence from the chapter 11
proceedings and the related cancellation or discharge of certain
of our debt obligations and equity securities. These items
include: a net gain of $749.8 million from the discharge and
termination of debt; a net gain of $575.5 million due to
fresh-start accounting adjustments; a gain of $80.3 million
from the cancellation of outstanding Preferred Stock; and the
cessation of recording contractual interest of
$24.1 million while we were operating in bankruptcy from
June 3, 2002 to the Effective Date.

16



---



##### 



|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |        | 
|---------------------------------------------------------------- | -------------- | --------------------------------------------------------------- | -------- | --------------- |  | ----------- | -------- | --------------- |  | --------------- | -------- | ------- |  | ---- | -------- | ------- |  | - | --------- | ------- |  | - | - | - | ------ | ------ | 
|                                                                 |                |                                                                 |          |                 |  | Reorganized
|                                                                 |                | Predecessor Company                                             |          |                 |  | Company    
|                                                                 |                |                                                                 |          |                 |  |            
|                                                                 |                |                                                                 |          |                 |  |             |          |                
|                                                                 |                | Year Ended December 31,                                         |          | January 1, 2002 |  | /           |          | October 8, 2002
|                                                                 |                |                                                                 |          | to              |  | /           |          | to December 31,
|                                                                 |                | 1998                                                            |          | 1999            |  | 2000        |          | 2001            |  | October 7, 2002 |          | /       |  | 2002
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |     
|                                                                 |                |                                                                
|                                                                 |                | Dollars in thousands, except per share, unit, and per unit data
|Consolidated Statements of Operations
    Data:                  |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|Service, rent and maintenance revenues                           |                | $                                                               | 416,352  |                 |  | $           | 548,700  |                 |  | $               | 504,800  |         |  | $    | 460,448  |         |  | $ | 296,813   |         |  | / |   | $ | 81,325 |       
|Product sales                                                    |                |                                                                 | 48,372   |                 |  |             | 61,487   |                 |  |                 | 57,183   |         |  |      | 43,225   |         |  |   | 24,056    |         |  | / |   |   | 4,078  |       
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|                                                                 | Total revenues |                                                                 |          | 464,724         |  |             |          | 610,187         |  |                 |          | 561,983 |  |      |          | 503,673 |  |   |           | 320,869 |  |   | / |   |        | 85,403 | 
|Net book value of products sold                                  |                |                                                                 | (31,791  | )               |  |             | (39,071  | )               |  |                 | (37,509  | )       |  |      | (26,176  | )       |  |   | (13,085   | )       |  | / |   |   | (1,081 | )     
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|                                                                 |                |                                                                 | 432,933  |                 |  |             | 571,116  |                 |  |                 | 524,474  |         |  |      | 477,497  |         |  |   | 307,784   |         |  | / |   |   | 84,322 |       
|Operating expenses:                                              |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|Service, rent and maintenance                                    |                |                                                                 | 120,600  |                 |  |             | 154,398  |                 |  |                 | 133,667  |         |  |      | 139,326  |         |  |   | 89,250    |         |  | / |   |   | 23,004 |       
|Selling and marketing                                            |                |                                                                 | 73,546   |                 |  |             | 97,051   |                 |  |                 | 103,413  |         |  |      | 92,481   |         |  |   | 50,952    |         |  | / |   |   | 11,359 |       
|General and administrative                                       |                |                                                                 | 121,644  |                 |  |             | 174,592  |                 |  |                 | 172,017  |         |  |      | 161,161  |         |  |   | 106,674   |         |  | / |   |   | 27,735 |       
|Reorganization expenses(a)                                       |                |                                                                 |         |                 |  |             |         |                 |  |                 |         |         |  |      | 15,017   |         |  |   | 19,007    |         |  | / |   |   |       |       
|Depreciation and amortization(b)                                 |                |                                                                 | 229,780  |                 |  |             | 295,906  |                 |  |                 | 286,963  |         |  |      | 573,827  |         |  |   | 50,386    |         |  | / |   |   | 12,875 |       
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|Income/(loss) from operations                                    |                |                                                                 | (112,637 | )               |  |             | (150,831 | )               |  |                 | (171,586 | )       |  |      | (504,315 | )       |  |   | (8,485    | )       |  | / |   |   | 9,349  |       
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|Interest and other income (expense)                              |                |                                                                 | 849      |                 |  |             | 407      |                 |  |                 | (2,450   | )       |  |      | (7,822   | )       |  |   | (822      | )       |  | / |   |   | 1,047  |       
|Interest expense                                                 |                |                                                                 | (64,448  | )               |  |             | (85,115  | )               |  |                 | (84,169  | )       |  |      | (100,672 | )       |  |   | (39,280   | )       |  | / |   |   | (2,580 | )     
|Gain on early extinguishment of debt                             |                |                                                                 |         |                 |  |             |         |                 |  |                 | 22,876   |         |  |      |         |         |  |   | 749,821   |         |  | / |   |   |       |       
|Fresh start accounting adjustments                               |                |                                                                 |         |                 |  |             |         |                 |  |                 |         |         |  |      |         |         |  |   | 575,491   |         |  | / |   |   |       |       
|Income/(loss) before income tax benefit                          |                |                                                                 | (176,236 | )               |  |             | (235,539 | )               |  |                 | (235,329 | )       |  |      | (612,809 | )       |  |   | 1,276,725 |         |  | / |   |   | 7,816  |       
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|Income tax benefit (provision)                                   |                |                                                                 | 47,094   |                 |  |             | 63,055   |                 |  |                 | 20,775   |         |  |      |         |         |  |   |          |         |  | / |   |   | (3,000 | )     
|Net income/(loss)                                                |                |                                                                 | (129,142 | )               |  |             | (172,484 | )               |  |                 | (214,554 | )       |  |      | (612,809 | )       |  |   | 1,276,725 |         |  | / |   |   | 4,816  |       
|Preferred dividends and accretion                                |                |                                                                 | (11,767  | )               |  |             | (16,462  | )               |  |                 | (9,816   | )       |  |      | (10,391  | )       |  |   | (4,855    | )       |  | / |   |   | (2,679 | )     
|Gain on extinguishment of preferred stock                        |                |                                                                 |         |                 |  |             |         |                 |  |                 |         |         |  |      |         |         |  |   | 80,346    |         |  | / |   |   |       |       
|Reorganization expense-accretion of liquidation
    preference   |                |                                                                 |         |                 |  |             |         |                 |  |                 |         |         |  |      |         |         |  |   | (4,715    | )       |  | / |   |   |       |       
|Series C preferred exchange inducement                           |                |                                                                 |         |                 |  |             |         |                 |  |                 | (6,308   | )       |  |      |         |         |  |   |          |         |  | / |   |   |       |       
|Gain on repurchase of preferred stock                            |                |                                                                 |         |                 |  |             | 2,208    |                 |  |                 |         |         |  |      |         |         |  |   |          |         |  | / |   |   |       |       
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|Income/(loss) attributable to common stockholders                |                | $                                                               | (140,909 | )               |  | $           | (186,738 | )               |  | $               | (230,678 | )       |  | $    | (623,200 | )       |  | $ | 1,347,501 |         |  | / |   | $ | 2,137  |       
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       
|Earning/(loss) per share attributable to common
    stockholders |                | $                                                               | (3.43    | )               |  | $           | (4.47    | )               |  | $               | (3.00    | )       |  | $    | (6.93    | )       |  | $ | 14.98     |         |  | / |   | $ | 2.16   |       
|                                                                 |                |                                                                 |          |                 |  |             |          |                 |  |                 |          |         |  |      |          |         |  |   |           |         |  |   |   |   |        |       



---



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) | Includes costs for legal, financial and
    investment banking services received in connection with
    Metrocalls merger agreement with Weblink, which was
    terminated on May 14, 2001 and other costs incurred by the
    Predecessor Company and its debt holders in connection with debt
    restructuring efforts in 2001 and 2002.
|  
|b) | In 2001, the Predecessor Company wrote down the
    carrying value of its long-lived assets by approximately
    $388.0 million to their estimated fair value as a result of
    their impairment.                                                                                                                                          

17



---



##### 



You should find the following definitions below
useful in understanding Metrocalls operating and other
data:



| |   |                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | ARPU is average monthly paging revenue per unit.
    ARPU is calculated by dividing (a) service, rent and
    maintenance revenues for the period by (b) the average
    number of units in service for the period. The ARPU calculation
    excludes revenues derived from non-paging services such long
    distance services.
|
| |  | Average monthly operating expense per unit is
    calculated by dividing (a) total recurring operating
    expenses before reorganization expenses and depreciation and
    amortization for the period by (b) the average number of
    units in service for the period.                                                       

|                                                        |  |                                                                 |           |            |  |             |           |                 |  |                 |           |   |  |                   |           |   |  |   |         |   |  |   |  |   |           |    
|------------------------------------------------------- |  | --------------------------------------------------------------- | --------- | ---------- |  | ----------- | --------- | --------------- |  | --------------- | --------- | - |  | ----------------- | --------- | - |  | - | ------- | - |  | - |  | - | --------- | ---
|                                                        |  |                                                                 |           |            |  | Reorganized
|                                                        |  | Predecessor Company                                             |           |            |  | Company    
|                                                        |  |                                                                 |           |            |  |            
|                                                        |  |                                                                 |           |            |  |             |           |                
|                                                        |  | Year Ended December 31,                                         |           | January 1, |  | /           |           | October 8, 2002
|                                                        |  |                                                                 |           | to         |  | /           |           | to             
|                                                        |  | 1998                                                            |           | 1999       |  | 2000        |           | 2001            |  | October 7, 2002 |           | / |  | December 31, 2002
|                                                        |  |                                                                 |           |            |  |             |           |                 |  |                 |           |   |  |                  
|                                                        |  |                                                                
|                                                        |  | Dollars in thousands, except per share, unit, and per unit data
|Operating and Other Data:                               |  |                                                                 |           |            |  |             |           |                 |  |                 |           |   |  |                   |           |   |  |   |         |   |  |   |  |   |           |    
|Net cash provided by operating activities               |  | $                                                               | 35,986    |            |  | $           | 53,097    |                 |  | $               | 26,409    |   |  | $                 | 39,541    |   |  | $ | 42,388  |   |  | / |  | $ | 8,696     |    
|Net cash used in investing activities                   |  | $                                                               | (186,579  | )          |  | $           | (76,791   | )               |  | $               | (109,979  | ) |  | $                 | (41,161   | ) |  | $ | (24,219 | ) |  | / |  | $ | (2,671    | )  
|Net cash provided by (used in) financing
    activities |  | $                                                               | 134,133   |            |  | $           | 18,045    |                 |  | $               | 107,380   |   |  | $                 | (844      | ) |  | $ | (633    | ) |  | / |  | $ | (166      | )  
|Capital expenditures                                    |  | $                                                               | 73,490    |            |  | $           | 81,890    |                 |  | $               | 95,268    |   |  | $                 | 41,961    |   |  | $ | 24,095  |   |  | / |  | $ | 2,626     |    
|ARPU                                                    |  | $                                                               | 7.57      |            |  | $           | 7.86      |                 |  | $               | 6.92      |   |  | $                 | 6.31      |   |  |   |         |   |  | / |  | $ | 6.91      | (b)
|Average monthly operating expense per unit              |  | $                                                               | 5.81      |            |  | $           | 6.11      |                 |  | $               | 5.61      |   |  | $                 | 5.39      |   |  |   |         |   |  |   |  | $ | 5.42      | (b)
|Units in service (end of period)                        |  |                                                                 | 5,659,550 |            |  |             | 5,927,939 |                 |  |                 | 6,254,373 |   |  |                   | 5,455,065 |   |  |   |         |   |  | / |  |   | 3,719,384 |    
|Units in service per employee (end of period)           |  |                                                                 | 1,512     |            |  |             | 1,660     |                 |  |                 | 1,751     |   |  |                   | 1,807     |   |  |   |         |   |  | / |  |   | 1,913     |    

|                                                 |  |                     |           |      |  |              |           |      |  |   |          |      |  |   |          |   |  |   |  |   |         |  
|------------------------------------------------ |  | ------------------- | --------- | ---- |  | ------------ | --------- | ---- |  | - | -------- | ---- |  | - | -------- | - |  | - |  | - | ------- | -
|                                                 |  |                     |           |      |  | Reorganized 
|                                                 |  | Predecessor Company |           |      |  | Company     
|                                                 |  |                     |           |      |  |             
|                                                 |  |                     |           |      |  |             
|                                                 |  | December 31,        |           |      |  |             
|                                                 |  |                     |           |      |  | December 31,
|                                                 |  | 1998                |           | 1999 |  | 2000         |           | 2001 |  |   |          | 2002
|                                                 |  |                     |           |      |  |              |           |      |  | / |          |     
|Consolidated Balance Sheet Data:                 |  |                     |           |      |  |              |           |      |  |   |          |      |  |   |          |   |  |   |  |   |         |  
|Working capital (deficit)(a)                     |  | $                   | (41,828   | )    |  | $            | (36,908   | )    |  | $ | (764,532 | )    |  | $ | (833,484 | ) |  | / |  | $ | (15,334 | )
|Cash and cash equivalents                        |  | $                   | 8,436     |      |  | $            | 2,787     |      |  | $ | 26,597   |      |  | $ | 24,135   |   |  | / |  | $ | 47,530  |  
|Total assets                                     |  | $                   | 1,251,038 |      |  | $            | 1,025,547 |      |  | $ | 757,145  |      |  | $ | 203,470  |   |  | / |  | $ | 189,747 |  
|Total long-term debt, net of current portion (a) |  | $                   | 742,563   |      |  | $            | 776,984   |      |  | $ | 301      |      |  | $ | 220      |   |  | / |  | $ | 20,762  |  
|Total stockholders equity/(deficit)             |  | $                   | 33,780    |      |  | $            | (152,134  | )    |  | $ | (166,352 | )    |  | $ | (789,237 | ) |  | / |  | $ | 715     |  



---



|    |                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | At December 31, 2000 and 2001 working
    capital deficit included current debt balance of approximately
    $760.0 million which largely constitute debt with scheduled
    non-current maturities; but which had been classified as current
    debt due to the default of certain debt covenants that
    accelerated the scheduled maturities of debt.
|   
|(b) | Amount based on the predecessor and reorganized
    companies for the periods January 1, 2002 to
    October 7, 2002 and October 8, 2002 to
    December 31, 2002 on a combined basis.                                                                                                                                                                    

ITEM
7.     Managements Discussion
and Analysis of Financial Condition and Results of
Operations

You should read the following discussion and
analysis of the financial condition and results of operations of
Metrocall together with the Consolidated Financial Statements
and the notes to the Consolidated Financial

18



---



##### 



Statements included elsewhere in this Annual
Report and the description of Metrocalls business in
Business.


Overview

We are a leading provider of local, regional and
national one-way or traditional paging and two-way
or advanced wireless data and messaging services.
Through our one-way nationwide wireless network, we provide
messaging services to over 1,000 U.S. cities, including the top
100 Standard Metropolitan Statistical Areas (SMSAs). We
presently provide messaging services to 3.7 million
subscribers, including 205,167 subscribers receiving advanced
data and messaging services. This growth was achieved through a
combination of internal growth and a program of mergers and
acquisitions. As of December 31, 2002, we were the second
largest messaging company in the United States based on the
number of subscribers.

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 data
services. While a subscriber continues to use its services,
operating results benefit from this recurring stream with
minimal requirements for incremental selling expenses or fixed
costs. Our business strategy continues to focus our sales and
marketing efforts on subscriber demographics that provide
greater revenue stability and higher margins. While we expect to
continue efforts to both maintain and add subscribers, we have
downsized our platform over the past twenty-four months mainly
through reduction-in-force initiatives and office
consolidations. We do not believe any of our cost reduction
efforts have diminished our ability to provide messaging
services or customer service.

Emergence from Chapter 11

On October 8, 2002, Metrocall, Inc. together
with its licensing and operating subsidiaries Metrocall USA,
ANMC, MSI, McCaw and Mobilfone, (collectively, the
Debtors) emerged from chapter 11 of the U.S.
Bankruptcy Code pursuant to the Plan that was confirmed by an
order of the Bankruptcy Court entered on September 26,
2002. Metrocall, Inc. and its subsidiaries are referred to
herein as the Predecessor Company for the periods prior to
October 8, 2002. The reorganized company, Metrocall
Holdings, Inc. and its subsidiairies is herein referred to as
the Reorganized Company for the period from October 8, 2002
to December 31, 2002.

Background

The Debtors filed voluntary petitions for relief
under chapter 11 on June 3, 2002. The chapter 11
cases were jointly administered for procedural purposes only
before the Bankruptcy Court under the docket of Metrocall, Inc.
Case No. 02-11579. Ventures, one of our subsidiaries, did
not file a voluntary petition and was not a party to the
chapter 11 cases. From June 3, 2002 through
October 7, 2002, the Debtors operated their businesses as
debtors-in-possession under the Bankruptcy Code.

Chapter 11 is the principal business
reorganization chapter of the Bankruptcy Code. Under
chapter 11, a debtor is authorized to continue to operate
its business in the ordinary course and to reorganize its
business for the benefit of its creditors. In addition to
permitting the rehabilitation of the debtor, section 362 of the
Bankruptcy Code generally provides for an automatic stay of
substantially all judicial, administrative and other actions or
proceedings against a debtor and its property, including all
attempts to collect claims or enforce liens that arose prior to
the commencement of the debtors case under
chapter 11. Also, the debtors may assume or reject
pre-petition executory contracts and unexpired leases pursuant
to section 365 of the Bankruptcy Code and other parties to
executory contracts or unexpired leases being rejected may
assert rejection damage claims as permitted thereunder.

Confirmation and consummation of a plan of
reorganization are the principal objectives of a chapter 11
reorganization case. A plan of reorganization sets forth the
means for satisfying claims against, and interests in, a debtor.
On June 3, 2002, we filed with the Bankruptcy Court our
proposed Plan, which was subsequently amended and supplemented
on several occasions.

19



---



##### 



Summary
of the Plan

Upon the effectiveness of our Plan, we
implemented a series of operational consolidations and
restructurings pursuant to the Plan, which included the
following:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | Each of ANMC, MSI and Mobilfone were consolidated
    with and into McCaw and all assets and liabilities of these
    companies were conveyed to McCaw;                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (ii)  | Metrocall, Inc. contributed all right, title and
    interest in all of its assets to McCaw other than
    (a) certain intellectual property conveyed to the license
    subsidiary, Metrocall USA, (b) a sufficient amount of cash
    to pay claims and to administer the Metrocall, Inc. estate and
    (c) its ownership interest in Inciscent, Inc., Metrocall
    USA or Ventures. These assets were contributed subject to all
    existing liens in place at that time. McCaw simultaneously
    assumed all of the underlying obligations directly attributable
    to these assets;
|
| | (iii) | Concurrently with the contributions by Metrocall,
    Inc. to McCaw, Metrocall, Inc. contributed certain intellectual
    property (including trademarks, trade names, and copyrights) to
    Metrocall USA. Immediately thereafter, Metrocall USA entered
    into a license agreement with McCaw for the use of the FCC
    licenses and other intellectual property; and                                                                                                                                                                                                                  
|
| | (iv)  | Metrocall, Inc., McCaw and Metrocall USA each
    reorganized and continued in operations pursuant to the Plan.
    Following the mergers and capital contributions described above,
    McCaw and Metrocall USA each reincorporated under the laws of
    the State of Delaware with amended and restated certificates of
    incorporation and by-laws, McCaw was renamed Metrocall, Inc. and
    the registrant, as reorganized, was renamed Metrocall Holdings,
    Inc.                                                                                                                 

The reorganized and reincorporated entities are
as follows: Metrocall Holdings, Inc. (HoldCo.,
formerly Metrocall, Inc.), Metrocall, Inc. (OpCo.,
formerly McCaw) and Metrocall USA, Inc.
(LicenseCo.), respectively.

Our Plan provided for separate classes of claims
and interests for creditors and equity holders of each of the
Debtors. Distributions to creditors of the Debtors have
commenced and will include, among other distributions:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | The execution by OpCo. of a $60.0 million
    senior secured promissory note and the related loan and security
    agreements in favor of the Debtors senior lenders under
    our former pre-petition $133.0 million senior secured
    credit facility. OpCo. is the direct borrower of the senior
    lenders as a result of the reorganization described above while
    LicenseCo. together with HoldCo. and Ventures each have
    guaranteed the senior secured note. The guaranty of HoldCo. is
    secured by a pledge of its stock and ownership interests in
    LicenseCo., as well as a pledge of its stock and ownership
    interests in OpCo., Ventures and Inciscent, Inc.
|
| | (ii)  | The execution by HoldCo. of $20.0 million
    secured PIK promissory notes and the related loan and security
    agreements in favor of the senior lenders. LicenseCo. and
    Ventures each have guaranteed the secured PIK notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (iii) | The payment by OpCo. to all holders of allowed
    general unsecured claims against any of the consolidated
    operating subsidiaries of 100% of such allowed claims in cash or
    pursuant to any other such arrangement that has been agreed to
    between the parties;                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (iv)  | Cash distributions to holders of allowed tax
    priority claims, administrative claims and convenience claims;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (v)   | The distribution by HoldCo. of 5,300,000 shares
    of new Series A Preferred, representing 88.3% of the
    preferred stock to be issued and $53.0 million of the total
    $60.0 million initial liquidation preference to holders of
    the allowed claims of the senior lenders;                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (vi)  | HoldCo. beginning on November 18, 2002, and
    through interim distributions thereafter (to give effect to
    resolutions of disputed claims through reserves to be
    established), will distribute to the                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

20



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| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |        | holders of allowed general unsecured claims
    against Metrocall, Inc. 500,000 shares of the new Series A
    Preferred, representing 8.3% of the preferred stock to be issued
    and $5.0 million of the $60.0 million initial
    liquidation preference;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (vii)  | The issuance by HoldCo. of the remaining 3.4% of
    new Series A Preferred, or 200,000 shares, representing
    $2.0 million of the $60.0 million initial liquidation
    preference for distribution to Metrocalls senior
    executives subject to and in connection with their respective
    new employment agreements with HoldCo. and OpCo.; and                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (viii) | The issuance by HoldCo. of 420,000 shares of its
    new common stock, representing 42% of the shares to be issued,
    to the allowed claims of the senior lenders (subject to ratable
    dilution for the issuance of restricted stock and options to
    employees of OpCo. not to exceed 7%) and, beginning on
    November 18, 2002 and thereafter (to give effect to
    resolutions of disputed claims through reserves to be
    established) 580,000 shares of its new common stock,
    representing 58% of the total shares to be issued, to the
    allowed holders of general unsecured claims against Metrocall,
    Inc. (subject to ratable dilution for the issuance of restricted
    stock and options to employees of OpCo. not to exceed 7%).

Holders of our preferred and common stock
outstanding prior to the confirmation date of our Plan received
no distributions under the Plan. Such shares of stock were
canceled pursuant to the Plan.

As of March 1, 2003, we had distributed
5,992,572 shares of Series A Preferred and 991,398 shares
of common stock under our Plan. We intend to issue the remaining
shares issuable under the Plan during 2003.

Metrocalls Business Strategy

Our business objectives and operating strategy
for 2003 will focus on maximizing our operating and free cash
flows. We define operating cash flows as the amount equaling net
revenues less operating expenses of service, rent and
maintenance; selling and marketing; and general and
administrative expenses. We define free cash flows as operating
cash flows less cash payments for interest expenses and capital
expenditures. Key elements of this strategy include:



| |   |                                    
| | - | -----------------------------------
| |  | Subscriber retention efforts;      
|
| |  | Cost containment and reduction; and
|
| |  | Advanced messaging.                

Subscriber retention efforts.We expect the demand for our
traditional paging services and the related revenues to continue
to decrease in 2003. Our retention efforts will focus our
selling and marketing resources on serving existing and
potential business and government subscribers through our field
and corporate sales force. We believe that these customers
directly provide a higher ARPU and lower deactivation
percentages than subscribers serviced through indirect
distribution channels.

We believe that product and technology diversity
result in increased traditional paging deactivations. In 2003,
we will continue to offer advanced messaging services and sell
PCS phones to subscribers that require wireless messaging beyond
the capabilities of traditional paging. Metrocall currently
sells cellular and PCS phone services through alliance and
dealer agreements with several carriers including AT&T
Wireless and Nextel. We believe these offerings assist to
partially offset revenue losses associated with subscriber churn
and enable us to continue to satisfy customer demands for a
broader range of wireless products and services.

We also believe that maintaining sufficient
levels of customer service continues to be a key factor in
averting subscriber churn. Our customer service representatives
assist subscribers in managing their account activity including
the movement of paging devices between personnel within an
account. In addition, they address customer inquiries from
existing or potential customers. As such, we will continue to
provide customer service at both a field and national level to
address the demands and expectations of our direct subscriber
base.

Cost Containment and
Reduction Our
reorganization plan was predicated on a refinement of our
operating structure that would reduce the amount of costs
required to operate our business. During 2002, we

21



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took several steps to reduce our operating and
capital expenditures. In 2003, we anticipate that we will
further decrease our operating expenses as we implement several
initiatives that will further reduce our management hierarchy
and realign our sales management and support functions to
address the continued declines in our subscriber base and
airtime service revenues.


In February 2003, our Board of Directors approved
a plan that would enable us to reorganize our corporate
management and sales distribution function and to further
centralize our national call center services and inventory
fulfillment processes. Management believes these measures are
necessary to maximize both operating and free cash flows. We
also believe these reductions are possible due to the
rationalization and integration efforts we performed in 2001 and
2002 and the reduction in the number of subscribers to which we
provide customer service or inventory fulfillment. As such, we
believe that we can further reduce our operating expenses and
corporate structure without affecting our airtime or customer
service capabilities.

Such containment and reduction initiatives are
expected to include:

Reorganization of corporate
management By
June 30, 2003, we expect to eliminate several senior or
corporate management positions representing 25% of all such
positions. Many of the reductions are being taken in connection
with the events described below. Such reductions are possible
because the size of our company in terms of employees,
subscribers and revenues no longer can support a management
structure that was designed to support a growth-oriented company
with subscriber levels of over 10.0 million.

Reorganization of sales
distribution In February
2003, we consolidated the number of field sales regions under
the leadership of a regional vice president from 6 to 3. The
consolidated regions include: the Eastern region, formerly
comprised of the Northeast, Mid-Atlantic and Southeast regions;
the Central region; and the Western region, formerly comprised
of the West and North West regions. The reduction of operating
regions will enable us to further reduce general and
administrative expenses associated with our field operations as
each operating region had separate administrative support staff,
which now may be combined. In addition, we expect to consolidate
certain of our under performing offices and markets into more
established markets to increase operating margins in those
markets.

In February 2003, we consolidated our corporate
sales initiatives under the leadership of one senior vice
president and eliminated the non-core database marketing sales
group. As a result of the reorganization, we expect to eliminate
several corporate sales and marketing positions. The database
marketing group primarily targeted consumer subscribers which
are outside of our core business focus.

Centralization of national call centers and
inventory fulfillment In
March 2003, we completed the consolidation of our national call
center and credit and collection efforts into one existing
location in Pensacola, Florida. Formerly, these functions were
performed in two locations including Alexandria, Virginia and
Pensacola, Florida. The consolidation has enabled us to reduce
the number of staff and management positions required from the
two separate locations and to achieve certain operating
efficiencies that were not possible earlier until the
integration of our final billing system platform, which occurred
in December 2002. Presently, we now have one common platform
under which we manage our subscriber invoicing, order
fulfillment and customer service support.

In connection with the regional consolidation, we
will centralize our field customer service and inventory
distribution functions into a small number of primary locations
within each region. This process should enable us to more cost
effectively provide customer service, data entry and inventory
fulfillment; and permit us to reduce our operating expenses yet
continue to maintain adequate levels of customer service.

Other
initiatives We expect to
continue with several other cost reduction initiatives. Similar
to the above events these are undertaken because the size of our
subscriber base no longer warrants such expenditures. For
instance, we intend to deconstruct at least 250 transmitter
sites supporting under utilized frequencies in 2003. In
addition, where appropriate, we intend to further rationalize
our general and administrative support structure.

As a result of the aforementioned, we expect to
reduce our workforce by approximately 296 positions by
June 30, 2003. Estimated annualized compensation and
benefit expense savings of approximately $15.0 mil-

22



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##### 



lion are expected. Severance and related expenses
of approximately $5.8 million are expected and will be paid
out by June 30, 2003. There can be no assurances that
Metrocall will achieve the desired savings as a result of these
initiatives.


Advanced
Messaging We offer
advanced messaging services using narrowband PCS primarily
through a strategic alliance agreement with Weblink. For the
twelve months ended December 31, 2002, we generated
approximately $59.7 million from these services. As of
December 31, 2002, 205,167 received these services. In
2003, we intend to continue this service offering although we
expect the demand for this service to decline from 2002 levels.
Similar to traditional paging, our sales and marketing efforts
for the advanced messaging products will be targeted at business
and government customers. In addition, we will continue to focus
on the sale of these units into our subscriber base rather than
the leasing the device to the subscriber. We expect that this
limitation will result in a lower number of placements however
it will minimize our capital expenditures requirements. We
intend to lease advanced messaging devices only under limited
circumstances that would meet certain ARPU and retention targets.

Critical Accounting Policies

Metrocall prepares its financial statements in
conformity with generally accepted accounting principles, which
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Metrocalls
management evaluates these estimates and assumptions on an
on-going basis. Actual results could differ from those estimates.

Revenue
Recognition

Metrocall recognizes revenue under service,
rental and maintenance agreements with customers as the related
services are performed. Metrocall leases (as lessor) pagers and
messaging devices under operating leases. Substantially all the
leases are on a month-to-month basis. Advance billings for
services are deferred and recognized as revenue when earned.
Sales of one-way and ancillary equipment are recognized upon
delivery. The company bundles the sale of two-way paging
equipment with the related service and recognizes the revenue
and related cost of sales over the expected customer
relationship which the company estimates is one year.

Impairment
or Disposal of Long-Lived Assets

We account for long-lived assets in accordance
with the provisions of SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. SFAS
No. 144 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of
assets is measured by comparing the carrying amount of an asset
to future undiscounted net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds their fair value.
Assets to be disposed of by sale are reflected at the lower of
their carrying amount or fair value less cost to sell.

Reserve
for Doubtful Accounts

Estimates are used in determining the reserve for
doubtful accounts and are based on historical collection
experience, current trends and a percentage of the accounts
receivable aging categories. In determining these percentages
Metrocall reviews historical write-offs, including comparisons
of write-offs to provisions for doubtful accounts as a
percentage of net revenues; Metrocall compares the ratio of the
reserve to gross receivables to historical levels and Metrocall
monitors collection amounts and statistics. While write-offs of
customer accounts have historically been within our expectations
and the provisions established, management cannot guarantee the
Metrocall will continue to experience the same write-off rates
that it has in the past which could result in material
differences in the reserve for doubtful accounts and related
provisions for write-offs.

23



---



##### 



Fresh
Start Accounting

The accompanying financial statements for the
period January 1 to October 7, 2002 have been prepared
in accordance with AICPA Statement of Position 90-7
Financial Reporting by Entities in Reorganization under
the Bankruptcy Code (SOP 90-7). Under SOP 90-7, the
Companys reorganization value was allocated to its
tangible and identifiable intangible assets, and liabilities,
including debt, were recorded at their net present values.

Results of Operations

The definitions below will be helpful in
understanding the discussion of our results of operations.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Service, rent and maintenance revenues:include primarily monthly, quarterly,
    semi-annually and annually billed recurring revenue, not
    generally dependent on usage, charged to subscribers for paging
    and related services such as voice mail and pager repair and
    replacement. Service, rent and maintenance revenues also include
    revenues derived from cellular and long-distance services.
|
| |  | Net revenues:include service, rent and maintenance
    revenues and sales of customer owned and maintained
    (COAM) pagers less net book value of products sold.                                                                                                                                                                                                                                                
|
| |  | Monthly average revenue per unit (ARPU): includes
    all monthly recurring revenues excluding the long distance
    revenue, divided by the average number of subscribers for the
    month, which is calculated by adding the beginning subscribers
    for the month to the number of subscribers at the end of the
    month and dividing that number by two.                                                 
|
| |  | Service, rent and maintenance expenses:include costs primarily related to the
    management, operation and maintenance of Metrocalls
    network systems and infrastructure; costs related to the
    refurbishment of paging devices used by our subscribers and
    inventory fulfillment costs.                                                                                                              
|
| |  | Selling and marketing expenses:include salaries, commissions and
    administrative costs of our sales force and related marketing
    and advertising expenses.                                                                                                                                                                                                                                                  
|
| |  | General and administrative expenses:include costs related to executive
    management, accounting, office telephone, management information
    systems, facilities and employee benefits.                                                                                                                                                                                                                        

For financial statement purposes, our results of
operations and cash flows for 2002 have been separated as
pre-and post October 8, 2002 due to a change in basis of
accounting in the underlying assets and liabilities. Please
refer to Notes 1 and 2 of the audited consolidated
financial statements. For purposes of this Managements
Discussion and Analysis, the Predecessor Company financial data
has been compared in the section Discussion of the
Predecessor Company Results of Operations for the period
January 1, 2002 to October 7, 2002 to the twelve
months ended December 31, 2001 and certain financial
data of the twelve months ended December 31, 2002 have been
combined and discussed in relation to the corresponding period
in 2001 in the section Discussion of Selected Results of
Operations Data for the twelve months ended December 31,
2002 and 2001. However for the reasons explained in
Notes 1 and 2 and due to other non-recurring adjustments,
our financial statements for the periods before emerging from
bankruptcy protection are not comparable to the Reorganized
Companys financial statements for the period
October 8, 2002 through December 31, 2002, and our
results of operations prior to our emergence from bankruptcy,
including the period of January 1, 2002 to October 7,
2002, are not indicative of future results. The following items
are particularly of interest:



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A net gain of $749.8 million recognized by
    the Predecessor Company in 2002 from the discharge and
    termination of debt upon our emergence from bankruptcy;    
|
| |  | A net gain of $575.5 million recognized by
    the Predecessor Company in 2002 due to fresh-start accounting
    adjustments;                                        
|
| |  | A gain of $80.3 million recognized by the
    Predecessor Company in 2002 from the cancellation of outstanding
    Preferred Stock upon our emergence from bankruptcy

24



---



##### 





| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Reorganization expenses of $19.0 million and
    $15.0 million recognized by the Predecessor Company in 2002
    and 2001, respectively;                                           
|
| |  | The cessation of recording contractual interest
    of $24.1 million by the Predecessor Company while we were
    operating in bankruptcy from June 3, 2002 to
    October 7, 2002.

The following table sets forth the amounts of
revenues, expenses and the percentage of net revenues
represented by certain items in our Consolidated Statements of
Operations and certain other information for the twelve months
ended December 31, 2001; the period January 1, 2002
through October 7, 2002; and, period October 8, 2002
to December 31, 2002 (all dollars in thousands):

|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |      |       |  
|------------------------------------------------------------- | ------------------------------------------------- | ------------------- | -------- | ------------------- | ------- | ------------- | ----- | -------- | ----- | --------------- | ------- | --------- | ------- |  | ----- | ----- | ----- | - | ------ | ------ | ------ |  | ----- | ---- | ----- | -
|                                                              |                                                   |                     |          |                    
|                                                              |                                                   | Predecessor Company |          | Reorganized Company
|                                                              |                                                   |                     |          |                    
|                                                              |                                                   |                     |          | % of                |         | Jan 1  Oct 7 |       | % of     |       | Oct 81  Dec 31 |         | % of     
|                                                              |                                                   | 2001                |          | Revenues            |         | 2002          |       | Revenues |       | 2002            |         | Revenues 
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |          
|REVENUES                                                      |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|Service, rent and maintenance                                 |                                                   | $                   | 460,448  |                     |         |               | 96.4  | %        |       | $               | 296,813 |           |         |  | 96.4  | %     |       | $ | 81,325 |        |        |  | 96.4  | %   
|Product sales                                                 |                                                   |                     | 43,225   |                     |         |               | 9.1   | %        |       |                 | 24,056  |           |         |  | 7.8   | %     |       |   | 4,078  |        |        |  | 4.8   | %   
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|                                                              |                                                   | Total revenues      |          |                     | 503,673 |               |       |          | 105.5 | %               |         |           | 320,869 |  |       |       | 104.3 | % |        |        | 85,403 |  |       |      | 101.3 | %
|Net book value of products sold                               |                                                   |                     | (26,176  | )                   |         |               | (5.5  | )%       |       |                 | (13,085 | )         |         |  | (4.3  | )%    |       |   | (1,081 | )      |        |  | (1.3  | )%  
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|                                                              |                                                   |                     | 477,497  |                     |         |               | 100.0 | %        |       |                 | 307,784 |           |         |  | 100.0 | %     |       |   | 84,322 |        |        |  | 100.0 | %   
|OPERATING EXPENSES                                            |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|Service, rent and maintenance                                 |                                                   |                     | 139,326  |                     |         |               | 29.2  | %        |       |                 | 89,250  |           |         |  | 29.0  | %     |       |   | 23,004 |        |        |  | 27.3  | %   
|Selling and marketing                                         |                                                   |                     | 92,481   |                     |         |               | 19.4  | %        |       |                 | 50,952  |           |         |  | 16.6  | %     |       |   | 11,359 |        |        |  | 13.5  | %   
|General and administrative                                    |                                                   |                     | 161,161  |                     |         |               | 33.8  | %        |       |                 | 106,674 |           |         |  | 34.7  | %     |       |   | 27,735 |        |        |  | 32.9  | %   
|Reorganization                                                |                                                   |                     | 15,017   |                     |         |               | 3.1   | %        |       |                 | 19,007  |           |         |  | 6.2   | %     |       |   |       |        |        |  |      |     
|Depreciation                                                  |                                                   |                     | 193,532  |                     |         |               | 40.5  | %        |       |                 | 50,386  |           |         |  | 16.4  | %     |       |   | 10,927 |        |        |  | 13.0  | %   
|Amortization                                                  |                                                   |                     | 380,295  |                     |         |               | 79.6  | %        |       |                 |        |           |         |  |      |       |       |   | 1,948  |        |        |  | 2.3   | %   
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|                                                              | Total operating expenses                          |                     |          | 981,812             |         |               |       | 205.6    | %     |                 |         | 316,269   |         |  |       | 102.9 | %     |   |        | 74,973 |        |  |       | 88.9 | %    
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|                                                              | Income/(loss) from operations                     |                     |          | (504,315            | )       |               |       | (105.6   | )%    |                 |         | (8,485    | )       |  |       | (2.8  | )%    |   |        | 9,349  |        |  |       | 11.1 | %    
|Interest and other income/(expense), net                      |                                                   |                     | (7,822   | )                   |         |               | (1.6  | )%       |       |                 | (821    | )         |         |  | 0.3   | %     |       |   | 1,047  |        |        |  | 1.2   | %   
|Interest expense                                              |                                                   |                     | (100,672 | )                   |         |               | (21.1 | )%       |       |                 | (39,280 | )         |         |  | (12.8 | )%    |       |   | (2,580 | )      |        |  | (3.1  | )%  
|Gain on early extinguishment of debt                          |                                                   |                     |         |                     |         |               |      |          |       |                 | 749,821 |           |         |  | 258.2 | %     |       |   |       |        |        |  |      |     
|Fresh start accounting adjustments                            |                                                   |                     |         |                     |         |               |      |          |       |                 | 575,491 |           |         |  | 187.5 | %     |       |   |       |        |        |  |      |     
|Income tax provision                                          |                                                   |                     |         |                     |         |               |      |          |       |                 |        |           |         |  |      |       |       |   | (3,000 | )      |        |  | 3.6   | %   
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|                                                              | Net income/(loss)                                 |                     |          | (612,809            | )       |               |       | (128.3   | )%    |                 |         | 1,276,725 |         |  |       | 429.9 | %     |   |        | 4,816  |        |  |       | 5.7  | %    
|Preferred dividends and accretion                             |                                                   |                     | (10,391  | )                   |         |               | (2.2  | )%       |       |                 | (4,855  | )         |         |  | (1.6  | )%    |       |   | (2,679 | )      |        |  | (3.2  | )%  
|Reorganization Item  accretion of
    liquidation preference |                                                   |                     |         |                     |         |               |      |          |       |                 | (4,715  | )         |         |  | (1.5  | )%    |       |   |       |        |        |  |      |     
|Gain on extinguishment of preferred stock                     |                                                   |                     |         |                     |         |               |      |          |       |                 | 80,346  |           |         |  | 11.0  | %     |       |   |       |        |        |  |      |     
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     
|                                                              | Income/(loss) attributable to common stockholders |                     | $        | (623,200            | )       |               |       | (130.5   | )%    |                 | $       | 1,347,501 |         |  |       | 437.8 | %     |   | $      | 2,137  |        |  |       | 2.5  | %    
|                                                              |                                                   |                     |          |                     |         |               |       |          |       |                 |         |           |         |  |       |       |       |   |        |        |        |  |       |     

Discussion of the Predecessor Company
Results of Operations for the period January 1, 2002 to
October 7, 2002 to the twelve months ended
December 31, 2001

The Predecessor Company had no results of
operations after the Effective Date of the Plan. As such, there
are 85 fewer days (two months and twenty four days) for each
item discussed which exacerbates the

25



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##### 



quantitative change from the twelve months ended
December 31, 2001 and prevents a meaningful comparison
between the 2002 and prior year period. Please refer to the
section, Discussion of the Selected Results of Operations
for the twelve months ended December 31, 2002 and
2001, below for additional information.


Service, rent and maintenance revenues decreased
to $296.8 million or 35.5% for the period January 1,
2002 to October 7, 2002 from $460.4 million for the
twelve months ended December 31, 2001, as the number of
units in service decreased from approximately 5.5 million
at December 31, 2001 to 4.0 million at October 7,
2002 and the period ended October 7, 2002 reflects an
85 day shorter operating period than the twelve months
ended December 31, 2001. Product sales revenues decreased
to $24.1 million or 44.3% for the period ended
October 7, 2002, from $43.2 million for the twelve
months ended December 31, 2001. The net book value of
products sold decreased to ($13.1) million or 50.0% for the
period ended October 7, 2002 from ($26.2) million for the
twelve months ended December 31, 2001. The decrease in
product sales for the period January 1, 2002 to
October 7, 2002 was the result of the decrease in the
number of units in service and the shorter operating period.

Service, rent and maintenance expenses decreased
to $89.3 million or 29.0% of revenues for the period
January 1, 2002 to October 7, 2002 from $139.3 million
or 29.2% of revenues for the twelve months ended
December 31, 2001. The decrease was primarily the result of
reductions in subscriber line costs, salaries and benefits due
to lower employee levels and the shorter operating period for
2002.

Selling and marketing expenses decreased to
$51.0 million or 16.6% of revenues for the period ended
October 7, 2002 from $92.5 million or 19.4% of
revenues for the twelve months ended December 31, 2001. The
decrease was due to the decline in number of sales
representatives required as there are fewer subscriber units in
service and the shorter operating period in 2002.

General and administrative expenses decreased to
$106.7 million or 34.7% of revenues for the period ended
October 7, 2002 from $161.2 million or 33.8% of
revenues for the twelve months ended December 31, 2001. The
decrease was primarily the result of lower salaries, facilities
costs, professional services and bad debt expenses and the
shorter operating period in 2002.

Reorganization expenses increased to
$19.0 million for the period ended October 7, 2002
from $15.0 million for the twelve months ended
December 31, 2001. Such costs include approximately
$10.6 million costs incurred for legal, financial and
investment banking services received in connection with our debt
restructuring efforts and chapter 11 proceedings described
herein, severance costs of approximately $3.2 million and
facility lease exit costs of approximately $4.7 million
related to a 2002 operational restructuring.

Depreciation expenses decreased to
$50.4 million for the period ended October 7, 2002
from $193.5 million for the twelve months ended
December 31, 2001. The decrease in depreciation expense
resulted mainly from a reduction in the basis of our assets, due
to the impairment charges taken during the second and fourth
quarters of 2001 and the shorter operating period in 2002.

Amortization expenses decreased to $0 for the
period ended October 7, 2002 from $380.2 million for
the twelve months ended December 31, 2001. The decrease was
primarily the result of impairment write-downs which occurred in
the three months ended June 30, 2001 and December 31,
2001, in which we fully wrote off our goodwill and intangible
assets.

Factors that indicated an impairment of
long-lived assets had occurred included a continued reduction in
revenues and operating cash flows, the termination of a merger
agreement with Weblink and continuing competitive industry and
economic conditions. The amount of write down in each period was
equal to the amount by which the carrying value of our
long-lived assets exceeded the estimated future discounted cash
flows of such assets over their estimated useful lives.

Interest expense decreased to $39.3 million
for the period ended October 7, 2002 from
$100.7 million for the twelve months ended
December 31, 2001. The decrease was the result of the
cessation of interest accruals on our senior subordinated notes
from June 3, 2002 through October 7, 2002, lower
average interest rates for the period and the shorter operating
period in 2002.

26



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##### 



In connection with our emergence from chapter 11,
we recognized a net gain of $749.8 million resulting from
the discharge and termination of debt incurred before the
bankruptcy filing and a net gain of $575.5 million
resulting from our fresh start accounting adjustments. See
Note 2 to the consolidated financial statements.

In connection with our emergence from chapter 11,
we recorded a gain of $80.3 million related to the
cancellation of the Predecessor Company Preferred stock. See
Note 2 to the consolidated financial statements.

Discussion of the Selected Results of
Operations Data for the Twelve Months Ended December 31,
2002 and 2001

For purposes of this Managements Discussion
and Analysis, certain financial data has been combined for the
Predecessor Company from January 1, 2002 through
October 7, 2002 and the Reorganized Company from
October 8, 2002 to December 31, 2002 and discussed in
relation to the year ended 2001. However, for reasons described
in Notes 1 and 2, the Companys financial statements
for the periods before Metrocall emerged from bankruptcy are not
comparable to the Reorganized Companys financial
statements for the period October 8, 2002 to
December 31, 2002.

Selected
Revenues Data

|                                       |                |      |           |          |  |  |       |          |   |   |           |         |  |  |       |       |  
|-------------------------------------- | -------------- | ---- | --------- | -------- |  |  | ----- | -------- | - | - | --------- | ------- |  |  | ----- | ----- | -
|                                       |                |      |           |         
|                                       |                | 2001 |           | 2002    
|                                       |                |      |           |         
|                                       |                |      |           | % of     |  |  |       | % of    
|                                       |                |      |           | Revenues |  |  |       | Revenues
|                                       |                |      |           |          |  |  |       |         
|Service, rent and maintenance revenues |                | $    | 460,448   |          |  |  | 96.4  | %        |   | $ | 378,138   |         |  |  | 96.4  | %    
|Product sales                          |                |      | 43,225    |          |  |  | 9.1   | %        |   |   | 28,134    |         |  |  | 7.2   | %    
|                                       |                |      |           |          |  |  |       |          |   |   |           |         |  |  |       |      
|                                       | Total revenues |      |           | 503,673  |  |  |       | 105.5    | % |   |           | 406,272 |  |  |       | 103.6 | %
|Net book value of products sold        |                |      | (26,176   | )        |  |  | (5.5  | )%       |   |   | (14,166   | )       |  |  | (3.6  | )%   
|                                       |                |      |           |          |  |  |       |          |   |   |           |         |  |  |       |      
|                                       |                | $    | 477,497   |          |  |  | 100.0 | %        |   | $ | 392,106   |         |  |  | 100.0 | %    
|                                       |                |      |           |          |  |  |       |          |   |   |           |         |  |  |       |      
|Average revenue per unit (ARPU)        |                | $    | 6.55      |          |  |  |       |          |   | $ | 6.84      |         |  |  |       |      
|Ending units in Service                |                |      | 5,455,065 |          |  |  |       |          |   |   | 3,719,384 |         |  |  |       |      

Selected
Operating Expenses

|                              |       |      |         |          |  |          |      |          |   |          |      |      |  |   |         |         |  |  |      |      |   |   |      |      | 
|----------------------------- | ----- | ---- | ------- | -------- |  | -------- | ---- | -------- | - | -------- | ---- | ---- |  | - | ------- | ------- |  |  | ---- | ---- | - | - | ---- | ---- | 
|                              |       |      |         | % of     |  | Expenses |      |          |   |          |      |     
|                              |       |      |         | Revenues |  | per Unit |      |          |   |          |      |     
|                              |       |      |         |          |  |          |      |          |   |          |      |     
|                              |       |      |         |          |  |          |      |         
|                              |       |      |         |          |  |          |      | 2002    
|                              |       |      |         |          |  |          |      |         
|                              |       |      |         |          |  |          |      | % of     |   |         
|                              |       |      |         |          |  |          |      | Revenues |   |          |      |     
|                              |       |      |         |          |  |          |      |          |   |          |      |     
|                              |       |      |         |          |  |          |      |          |   | Expenses |      |     
|                              |       |      |         |          |  | per      |      |         
|                              |       | 2001 |         |          |  | Unit     |      |         
|                              |       |      |         |          |  |          |      |         
|Service, rent and maintenance |       | $    | 139,326 |          |  |          | 29.2 | %        |   | $        | 1.91 |      |  | $ | 112,254 |         |  |  | 28.6 | %    |   | $ | 2.07 |     
|Selling and marketing         |       |      | 92,481  |          |  |          | 19.4 | %        |   |          | 1.27 |      |  |   | 62,311  |         |  |  | 15.9 | %    |   |   | 1.15 |     
|General and administrative    |       |      | 161,161 |          |  |          | 33.8 | %        |   |          | 2.21 |      |  |   | 134,409 |         |  |  | 34.3 | %    |   |   | 2.48 |     
|                              |       |      |         |          |  |          |      |          |   |          |      |      |  |   |         |         |  |  |      |      |   |   |      |     
|                              | Total |      | $       | 392,968  |  |          |      | 82.3     | % |          | $    | 5.39 |  |   | $       | 308,179 |  |  |      | 78.8 | % |   | $    | 5.70 | 
|                              |       |      |         |          |  |          |      |          |   |          |      |      |  |   |         |         |  |  |      |      |   |   |      |     

Combined Revenues

Service, rent and maintenance revenues decreased
to $378.1 million or 17.9% for the twelve months ended
December 31, 2002, from $460.4 million for the twelve
months ended December 31, 2001, as the number of units in
service decreased from approximately 5.5 million at
December 31, 2001 to 3.7 million at December 31,
2002. Product sales revenues decreased to $28.1 million or
34.9% for the twelve months ended December 31, 2002, from
$43.2 million for the twelve months ended December 31,
2001. The net book value of products sold decreased to ($14.2)
million or 45.9% for the twelve months ended December 31,
2002 from ($26.2) million for the twelve months ended
December 31, 2001. Please refer to the discussion below of
traditional paging revenues and advanced messaging revenues for
further details.

27



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##### 



The following provides discussion of fluctuations
in our net revenues based upon the underlying airtime service
provided (traditional or advanced messaging). The amounts for
2002 set forth in the tables below represent the Predecessor
Companys results of operations for the period
January 1, 2002 to October 7, 2002 combined with the
Reorganized Companys results of operations for the period
October 8, 2002 to December 31, 2002 (the
combined period.) (All dollars in thousands except
per unit information):

|                                |                |              |           |          |         |  |      |          |       |   |         |         |         |   |           |       |       |  
|------------------------------- | -------------- | ------------ | --------- | -------- | ------- |  | ---- | -------- | ----- | - | ------- | ------- | ------- | - | --------- | ----- | ----- | -
|                                |                |              |           |         
|                                |                | 2001         |           | 2002    
|                                |                |              |           |         
|                                |                |              |           | % of     |         |  |      | % of    
|                                |                |              |           | Revenues |         |  |      | Revenues
|                                |                |              |           |          |         |  |      |         
|TRADITIONAL PAGING REVENUES     |                |              |           |          |         |  |      |          |       |   |         |         |         |   |           |      
|Service, rent and maintenance   |                | $            | 414,521   |          |         |  | 95.5 | %        |       | $ | 319,454 |         |         |   | 96.1      | %    
|Product sales                   |                |              | 36,689    |          |         |  | 8.4  | %        |       |   | 18,926  |         |         |   | 5.7       | %    
|                                |                |              |           |          |         |  |      |          |       |   |         |         |         |   |           |      
|                                | Total revenues |              |           | 451,210  |         |  |      | 103.9    | %     |   |         | 338,380 |         |   |           | 101.8 | %    
|Net book value of products sold |                |              | (16,998   | )        |         |  | (3.9 | )%       |       |   | (6,072  | )       |         |   | (1.8      | )%   
|                                |                |              |           |          |         |  |      |          |       |   |         |         |         |   |           |      
|                                |                | Net revenues |           | $        | 434,212 |  |      |          | 100.0 | % |         | $       | 332,308 |   |           |       | 100.0 | %
|                                |                |              |           |          |         |  |      |          |       |   |         |         |         |   |           |      
|ARPU                            |                | $            | 6.08      |          |         |  |      |          |       |   |         |         |         | $ | 6.06      |      
|Ending units in service         |                |              | 5,223,621 |          |         |  |      |          |       |   |         |         |         |   | 3,514,217 |      

Traditional paging service, rent and maintenance
revenues decreased approximately $95.1 million from
$414.5 million in 2001 to $319.5 million in the 2002
combined period. In the 2002 combined period ended
December 31, 2002 the number of subscribers receiving
airtime services decreased approximately 1.7 million to
3.5 million subscribers. Of this decrease, approximately
25% occurred in our direct distribution channels and 75%
occurred in our indirect distribution channels. The decrease in
revenues and units in service in our direct distribution
channels was the result of a decrease in demand for traditional
paging services; rate compression caused by the decrease in
demand and competitive industry pricing; and the conversion of
subscribers to our advanced messaging services. The decrease in
our indirect distribution channels, primarily with resellers,
was the result of the decrease in demand for traditional paging
products and our desire to increase the ARPU in this relatively
low ARPU distribution channel. ARPU decreased $0.02 to $6.06
from 2001.

We expect that revenues generated from
traditional paging will continue to decrease in the foreseeable
future. Such decreases are expected due to the continued
pressures of competing technologies attracting existing
subscribers and industry compression on pricing. Although a
concerted customer retention program has been implemented, we
cannot guarantee that we will be able to slow the rate of
customer churn.

Product sales from traditional paging decreased
on a combined basis approximately $17.8 million from
$36.7 million in 2001 to $18.9 million in the 2002
combined period and decreased as a percentage of net revenues
from 8.4% in 2001 to 5.7% in the combined period ended
December 31, 2002. Net book value of products sold
decreased on a combined basis approximately $10.9 million
from $17.0 million in 2001 to $6.1 million in the 2002
combined period and decreased as a percentage of net revenues
from 3.9% in 2001 to 1.8% in 2002. Fluctuations in traditional
product sales and net book value of products sold were the
result of a reduction in the number of subscriber units sold
through direct distribution channels in the combined period
ended December 31, 2002.

28



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##### 



|                                |                |              |         |          |        |  |       |          |       |   |         |        |        |  |       |       |       |  
|------------------------------- | -------------- | ------------ | ------- | -------- | ------ |  | ----- | -------- | ----- | - | ------- | ------ | ------ |  | ----- | ----- | ----- | -
|                                |                |              |         |         
|                                |                | 2001         |         | 2002    
|                                |                |              |         |         
|                                |                |              |         | % of     |        |  |       | % of    
|                                |                |              |         | Revenues |        |  |       | Revenues
|                                |                |              |         |          |        |  |       |         
|ADVANCED MESSAGING REVENUES     |                |              |         |          |        |  |       |          |       |   |         |        |        |  |       |      
|Service, rent and maintenance   |                | $            | 45,927  |          |        |  | 106.1 | %        |       | $ | 58,684  |        |        |  | 98.1  | %    
|Product sales                   |                |              | 6,536   |          |        |  | 15.1  | %        |       |   | 9,208   |        |        |  | 15.4  | %    
|                                |                |              |         |          |        |  |       |          |       |   |         |        |        |  |       |      
|                                | Total revenues |              |         | 52,463   |        |  |       | 121.2    | %     |   |         | 67,892 |        |  |       | 113.5 | %    
|Net book value of products sold |                |              | (9,178  | )        |        |  | (21.2 | )%       |       |   | (8,095  | )      |        |  | (13.5 | )%   
|                                |                |              |         |          |        |  |       |          |       |   |         |        |        |  |       |      
|                                |                | Net revenues |         | $        | 43,285 |  |       |          | 100.0 | % |         | $      | 59,797 |  |       |       | 100.0 | %
|                                |                |              |         |          |        |  |       |          |       |   |         |        |        |  |       |      
|ARPU                            |                | $            | 22.25   |          |        |  |       |          |       | $ | 22.40   |        |        |  |       |      
|Ending subscribers in service   |                |              | 231,444 |          |        |  |       |          |       |   | 205,167 |        |        |  |       |      

Advanced messaging service, rent and maintenance
revenues increased by $12.8 million from 2001 to
approximately $58.7 million in the 2002 combined period.
The increase in service, rent and maintenance revenues was the
result of a greater average number of subscribers in service in
2002 than in 2001; and a more weighted shift in product
placements into our direct distribution channels in 2002. ARPU
for the combined period ended December 31, 2002 increased
by $0.15 to $22.40 from $22.25 in December 31, 2001.

Product sales from advanced messaging operations
increased approximately $2.8 million from 2001 to
$9.2 million in the 2002 combined period. Net book value of
products sold decreased $1.1 million to approximately
$8.1 million in the 2002 combined period. We bundle the
sale of two-way messaging equipment with the related service and
recognize revenue and related cost of sales over the expected
life of the customer relationship. Accordingly, product sales
revenues and related costs are deferred and recognized over the
expected customer life.

Combined Operating Expenses

Overall, we experienced an increase in the
average monthly operating costs per unit in service (operating
expenses per unit before depreciation and amortization) from
2001 to the 2002 combined period. Average monthly operating cost
per unit increased $0.31 from $5.39 per unit for 2001 to $5.70
per unit for the 2002 combined period. Each operating expense is
discussed separately below.

Service, rent and maintenance
expenses.Service, rent and
maintenance expenses decreased by approximately
$27.0 million from $139.3 million in 2001 to
$112.3 million in the 2002 combined period and decreased as
a percentage of net revenues from 29.2% in 2001 to 28.6% in the
2002 combined period. Monthly service, rent and maintenance
expense per unit increased from $1.91 per unit in 2001 to $2.07
per unit in the 2002 combined period. Service, rent, and
maintenance expenses have decreased primarily as a result of a
decrease in subscriber line costs, rent, salaries and
dispatching costs. Such decreases were the result of
rationalization and re-negotiation of dispatching and subscriber
lines costs; lower compensation expenses from a smaller
workforce and other cost cutting initiatives undertaken in
connection with the preparation for or implementation of our
Plan. The increase in monthly average service, rent and
maintenance expenses per unit was the result of the above events
and the impact of a lower average number of units in service for
the 2002 combined period. We expect that service, rent and
maintenance expenses on a full-year basis in 2003 will continue
to decrease as a result of the planned cost reductions described
under Business Strategy.

Selling and Marketing.Selling and marketing expenses
decreased by approximately $30.2 million from
$92.5 million in 2001 to $62.3 million in the 2002
combined period and decreased as a percentage of net revenues
from 19.4% in 2001 to 15.9% in 2002. The overall expense
decrease was primarily the result of reductions in salaries and
commissions and other related expenses as a result of a smaller
sales and marketing force, and a reduction in print and media
advertising. Monthly selling and marketing expense unit
decreased from $1.27 per unit in 2001 to $1.15 per unit in the
2002 combined period as a result of the above described events
and the impact of a lower average number of units in service for
the 2002 combined period. We expect

29



---



##### 



that selling and marketing expenses on a
full-year basis in 2003 will continue to decrease as a result of
the planned cost reductions described under Business
Strategy.


General and administrative expenses.General and administrative expenses
decreased approximately $26.8 million from
$161.2 million in 2001 to $134.4 million in the 2002
combined period and decreased as a percentage of net revenues
from 33.8% in 2001 to 34.3% in the 2002 combined period. The
decrease in general and administrative expenses was primarily
the result of a reduction in bad debts, rents, salaries, taxes,
and other related expenses, due to several cost containment
initiatives that focused on the back office centralization and
rationalization related to the preparation for or implementation
of our Plan. Monthly general and administrative expenses per
unit increased $0.27 from $2.21 in 2001 to $2.48 per unit in the
2002 combined period as a result of these events and the impact
of a lower average number of units in service for the 2002
combined period. We expect that general and administrative
expenses on a full-year basis in 2003 will continue to decrease
as a result of the planned cost reductions described under
Business Strategy.

Discussion of Predecessor Companys
Results of Operations for the Year Ended December 31, 2001
Compared With December 31, 2000

|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |        |       |  
|---------------------------------------- | ---------------------------------------- | ------------------- | ------- | -------- | ------- |  | ----- | -------- | ----- | - | -------- | -------- | ------- |  | ----- | ------ | ----- | -
|                                         |                                          |                    
|                                         |                                          | Predecessor Company
|                                         |                                          |                    
|                                         |                                          |                     |         |         
|                                         |                                          | 2000                |         | 2001    
|                                         |                                          |                     |         |         
|                                         |                                          |                     |         | % of     |         |  |       | % of    
|                                         |                                          |                     |         | Revenues |         |  |       | Revenues
|                                         |                                          |                     |         |          |         |  |       |         
|REVENUES                                 |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|Service, rent and maintenance            |                                          | $                   | 504,800 |          |         |  | 96.2  | %        |       | $ | 460,448  |          |         |  | 96.4  | %     
|Product sales                            |                                          |                     | 57,183  |          |         |  | 10.9  | %        |       |   | 43,225   |          |         |  | 9.1   | %     
|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|                                         |                                          | Total revenues      |         |          | 561,983 |  |       |          | 107.2 | % |          |          | 503,673 |  |       |        | 105.5 | %
|Net book value of products sold          |                                          |                     | (37,509 | )        |         |  | (7.2  | )%       |       |   | (26,176  | )        |         |  | (5.5  | )%    
|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|                                         |                                          |                     | 524,474 |          |         |  | 100.0 | %        |       |   | 477,497  |          |         |  | 100.0 | %     
|OPERATING EXPENSES                       |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|Service, rent and maintenance            |                                          |                     | 133,667 |          |         |  | 25.5  | %        |       |   | 139,326  |          |         |  | 29.2  | %     
|Selling and marketing                    |                                          |                     | 103,413 |          |         |  | 19.7  | %        |       |   | 92,481   |          |         |  | 19.4  | %     
|General and administrative               |                                          |                     | 172,017 |          |         |  | 32.8  | %        |       |   | 161,161  |          |         |  | 33.8  | %     
|Reorganization                           |                                          |                     |        |          |         |  |      |          |       |   | 15,017   |          |         |  | 3.1   | %     
|Depreciation                             |                                          |                     | 111,160 |          |         |  | 21.2  | %        |       |   | 193,532  |          |         |  | 40.5  | %     
|Amortization                             |                                          |                     | 175,803 |          |         |  | 33.5  | %        |       |   | 380,295  |          |         |  | 79.6  | %     
|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|                                         | Total operating expenses                 |                     |         | 696,060  |         |  |       | 132.7    | %     |   |          | 981,812  |         |  |       | 205.6  | %    
|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|                                         | Loss from operations                     |                     |         | (171,586 | )       |  |       | (32.7    | )%    |   |          | (504,315 | )       |  |       | (105.6 | )%   
|Interest and other income/(expense), net |                                          |                     | (2,450  | )        |         |  | (0.5  | )%       |       |   | (7,822   | )        |         |  | (1.6  | )%    
|Interest expense                         |                                          |                     | (84,169 | )        |         |  | (16.0 | )%       |       |   | (100,672 | )        |         |  | (21.1 | )%    
|Gain on early extinguishment of debt     |                                          |                     | 22,876  |          |         |  | 4.4   | %        |       |   |         |          |         |  |      |       
|Income tax benefit                       |                                          |                     | 20,775  |          |         |  | 4.0   | %        |       |   |         |          |         |  |      |       
|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|                                         | Net loss                                 |                     |         | (214,554 | )       |  |       | (40.9    | )%    |   |          | (612,809 | )       |  |       | (128.3 | )%   
|Preferred dividends and accretion        |                                          |                     | (9,816  | )        |         |  | (1.9  | )%       |       |   | (10,391  | )        |         |  | (2.2  | )%    
|Series C Preferred exchange inducement   |                                          |                     | (6,308  | )        |         |  | (1.2  | )%       |       |   |         |          |         |  |      |       
|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       
|                                         | Loss attributable to common stockholders |                     | ($      | 230,678  | )       |  |       | (44.0    | )%    |   | ($       | 623,200  | )       |  |       | (130.5 | )%   
|                                         |                                          |                     |         |          |         |  |       |          |       |   |          |          |         |  |       |       

30



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##### 



|                                |  |      |           |      |  |   |           | 
|------------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|Other Selected Data             |  | 2000 |           | 2001
|                                |  |      |           |     
|Average revenue per unit (ARPU) |  | $    | 6.92      |      |  | $ | 6.55      | 
|Ending subscribers in service   |  |      | 6,254,373 |      |  |   | 5,455,065 | 
|Operating Expenses per Unit     |  |      |           |      |  |   |           | 
|Service, rent and maintenance   |  | $    | 1.83      |      |  | $ | 1.91      | 
|Selling and marketing           |  |      | 1.42      |      |  |   | 1.27      | 
|General and administrative      |  |      | 2.36      |      |  |   | 2.21      | 
|                                |  |      |           |      |  |   |           | 
|                                |  | $    | 5.61      |      |  | $ | 5.39      | 
|                                |  |      |           |      |  |   |           | 

Revenues

The following discusses revenues based on
traditional paging and advanced messaging results of operations
for fiscal years 2000 and 2001(all dollars in thousands except
per unit information):

|                                |                |              |           |               |         |  |      |               |       |   |           |         |         |  |      |       |       |  
|------------------------------- | -------------- | ------------ | --------- | ------------- | ------- |  | ---- | ------------- | ----- | - | --------- | ------- | ------- |  | ---- | ----- | ----- | -
|                                |                |              |           |              
|                                |                | 2000         |           | 2001         
|                                |                |              |           |              
|                                |                |              |           | % of Revenues |         |  |      | % of Revenues
|                                |                |              |           |               |         |  |      |              
|Traditional Paging Revenues     |                |              |           |               |         |  |      |               |       |   |           |         |         |  |      |      
|Service, rent and maintenance   |                | $            | 495,747   |               |         |  | 96.0 | %             |       | $ | 414,521   |         |         |  | 95.5 | %    
|Product sales                   |                |              | 53,426    |               |         |  | 10.4 | %             |       |   | 36,689    |         |         |  | 8.4  | %    
|                                |                |              |           |               |         |  |      |               |       |   |           |         |         |  |      |      
|                                | Total revenues |              |           | 549,173       |         |  |      | 106.4         | %     |   |           | 451,210 |         |  |      | 103.9 | %    
|Net book value of products sold |                |              | (32,999   | )             |         |  | (6.4 | )%            |       |   | (16,998   | )       |         |  | (3.9 | )%   
|                                |                |              |           |               |         |  |      |               |       |   |           |         |         |  |      |      
|                                |                | Net revenues |           | $             | 516,174 |  |      |               | 100.0 | % |           | $       | 434,212 |  |      |       | 100.0 | %
|                                |                |              |           |               |         |  |      |               |       |   |           |         |         |  |      |      
|ARPU                            |                | $            | 6.84      |               |         |  |      |               |       | $ | 6.08      |         |         |  |      |      
|Number of subscribers           |                |              | 6,141,847 |               |         |  |      |               |       |   | 5,223,621 |         |         |  |      |      

Traditional paging service, rent and maintenance
revenues decreased approximately $81.2 million from
$495.7 million in 2000 to $414.5 million in 2001.
During 2001, traditional paging revenues decreased as a result
of declines in the number of subscribers receiving airtime
services and a lower average monthly revenue per unit
statistics. In 2001, the number of direct distribution
subscribers decreased 89,518, which includes the impact of the
units secured through acquisitions of other paging entities of
232,529. Absent the acquisition of Southeast Paging, Inc. in
June 2001, the total direct subscriber decrease would have been
322,047. This decrease was the result of placements of new
subscribers and cancellation of subscriber accounts as the
result of a lessened demand for paging services and conversion
of certain existing customers to our advanced messaging services.

Our indirect distribution channels decreased
828,708 units in 2001. This decrease occurred mainly in the
reseller and strategic alliance channels. The decrease was the
result of a reduced demand for paging services; economic
conditions which caused many resellers to withdraw from selling
paging services; and competing technologies.

Product sales from traditional operations
decreased approximately $16.7 million from $53.4 million in
2000 to $36.7 million in 2001 and decreased as a percentage
of net revenues from 10.4% in 2000 to 8.4% in 2001. Net book
value of products sold decreased approximately
$16.0 million from $33.0 million in 2000 to
$17.0 million in 2001 and decreased as a percentage of net
revenues from 6.4% in 2000 to 3.9% in 2001. Fluctuations in
traditional product sales and net book value of products sold
were the result of a reduction in the number of subscriber units
sold through direct distribution channels in the twelve months
ended December 30, 2001.

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|                                |                |              |         |               |       |  |       |               |       |   |         |        |        |  |       |       |       |  
|------------------------------- | -------------- | ------------ | ------- | ------------- | ----- |  | ----- | ------------- | ----- | - | ------- | ------ | ------ |  | ----- | ----- | ----- | -
|                                |                |              |         |              
|                                |                | 2000         |         | 2001         
|                                |                |              |         |              
|                                |                |              |         | % of Revenues |       |  |       | % of Revenues
|                                |                |              |         |               |       |  |       |              
|Advanced Messaging Revenues     |                |              |         |               |       |  |       |               |       |   |         |        |        |  |       |      
|Service, rent and maintenance   |                | $            | 9,053   |               |       |  | 109.1 | %             |       | $ | 45,927  |        |        |  | 106.1 | %    
|Product sales                   |                |              | 3,757   |               |       |  | 45.3  | %             |       |   | 6,536   |        |        |  | 15.1  | %    
|                                |                |              |         |               |       |  |       |               |       |   |         |        |        |  |       |      
|                                | Total revenues |              |         | 12,810        |       |  |       | 154.4         | %     |   |         | 52,463 |        |  |       | 121.2 | %    
|Net book value of products sold |                |              | (4,510  | )             |       |  | (54.4 | )%            |       |   | (9,178  | )      |        |  | (21.2 | )%   
|                                |                |              |         |               |       |  |       |               |       |   |         |        |        |  |       |      
|                                |                | Net revenues |         | $             | 8,300 |  |       |               | 100.0 | % |         | $      | 43,285 |  |       |       | 100.0 | %
|                                |                |              |         |               |       |  |       |               |       |   |         |        |        |  |       |      
|ARPU                            |                | $            | 13.41   |               |       |  |       |               |       | $ | 22.25   |        |        |  |       |      
|Number of Subscribers           |                |              | 112,526 |               |       |  |       |               |       |   | 231,444 |        |        |  |       |      

Advanced messaging service, rent and maintenance
revenues increased $36.9 million to approximately
$45.9 million in 2001. The increase in service, rent and
maintenance revenues was the result of the placement of 118,918
additional units since December 31, 2000, primarily two-way
messaging devices. ARPU for the twelve months ended
December 31, 2001 increased by $8.84 to $22.25 from
December 31, 2000. Metrocall launched its two-way messaging
services in late March 2000 and service, rent and maintenance
revenues were generated primarily from the placement of 1.5-way
and 1.75-way messaging devices through this time.

Product sales from advanced messaging operations
increased approximately $2.8 million to $6.5 million
in 2001. Net book value of products sold increased
$4.7 million to approximately $9.2 million in 2001. We
bundle the sale of two-way messaging equipment with the related
service and recognizes revenue and related cost of sales over
the expected life of the customer relationship. Accordingly,
product sales revenues and related costs are deferred and
recognized over the expected customer life.

Operating Expenses

Overall in 2001, we experienced a decrease in
average monthly operating costs per unit in service (operating
expenses per unit before depreciation and amortization) of $0.22
per unit. Each operating expense is discussed separately below.

Service, rent and maintenance
expenses.Service, rent and
maintenance expenses increased approximately $5.6 million
from $133.7 million in 2000 to $139.3 million in 2001
and increased as a percentage of net revenues from 25.5% in 2000
to 29.2% in 2001. Monthly service, rent and maintenance expense
per unit increased from $1.83 per unit in 2000 to $1.91 per unit
in 2001. Service, rent and maintenance expenses increased
$16.4 million as a result of provisioning costs incurred in
providing advanced messaging services to 118,918 additional
subscribers in 2001 mainly through our alliance agreement with
Weblink. This expense increase was almost fully offset by
decreases in traditional messaging costs such as reductions from
the use of third-party paging and dispatch providers and
subscriber line costs; and reductions in salary and benefit
costs associated with reduced staffing levels in inventory,
engineering and technical functions in 2001.

Selling and marketing expenses.Selling and marketing expenses
decreased approximately $10.9 million from
$103.4 million in 2000 to $92.5 million in 2001 and
decreased as a percentage of net revenues from 19.7% in 2000 to
19.4% in 2001. The overall expense decrease was primarily the
result of reductions in print and media advertising of
$5.1 million and salaries and commissions expenses of $4.4
as a result of a slightly smaller sales and marketing force.
Monthly selling and marketing expense per unit decreased from
$1.42 per unit in 2000 to $1.27 per unit in 2001.

General and administrative expenses.General and administrative expenses
decreased approximately $10.8 million from
$172.0 million in 2000 to $161.2 million in 2001 and
increased as a percentage of net revenues from 32.8% in 2000 to
33.8% in 2001. The decreases in general and administrative
expenses were primarily the result of reductions in salary
expenses of $5.2 million, telephone administrative expenses
of $2.8 million and contract services of approximately
$1.9 million. Monthly general and administrative expenses
per unit decreased by $0.15 from $2.36 in 2000 to $2.21 per unit
in 2001 as a result of these events.

32



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Reorganization
expense.Reorganization expenses of
$15.0 million consist of costs incurred related to the
Weblink merger which we terminated in May 2001, and legal,
investment banking, and other costs incurred to stabilize the
company and to evaluate our restructuring options.

Depreciation expense.Depreciation expense increased
approximately $82.3 million from $111.2 million in 2000 to
$193.5 million in 2001. Approximately $82.1 million
was the result of a write-down to paging and plant equipment and
building and leasehold improvements for impairment in the three
months ended December 31, 2001. The remaining net increase
was primarily the result of the depreciation expense on 2000 and
2001 additions to infrastructure and subscriber equipment.
Please refer to amortization below for further description of
the impairment write-down.

Amortization expense.Amortization expense related to the
amortization of identified intangible assets of companies we
acquired increased approximately $204.5 million from
$175.8 million in 2000 to $380.3 million in 2001,
primarily as a result of impairment write-downs which occurred
in the three months ended June 30, 2001 and
December 31, 2001. We wrote down the carrying value of our
goodwill and FCC licenses $107.0 million and
$172.7 million respectively in the three months ended
June 30, 2001. Factors that indicated impairment had
occurred included a continued reduction in revenues and
operating cash flows, the termination of a merger agreement with
Weblink and continuing competitive industry and economic
conditions.

We wrote down the carrying value of certain of
our long-lived assets including the remaining carrying value of
our intangible assets of $26.2 million in the three months ended
December 31, 2001. Factors that indicated an impairment had
occurred in this period included a greater than expected
decrease in actual and future expected recurring traditional
revenues and subscribers, and a slower than expected growth rate
in revenues of our advanced messaging business.

The amount of write down in each period was equal
to the amount by which the carrying value of our long-lived
assets exceeded the estimated future discounted cash flows of
such assets over their estimated useful lives. Amortization
expense was comprised of the following elements in 2000 and 2001
(all dollars in thousands):

|                      |  |              |          |                   |  |                   |         |             |  |   |         |  |  |    |         |  
|--------------------- |  | ------------ | -------- | ----------------- |  | ----------------- | ------- | ----------- |  | - | ------- |  |  | -- | ------- | -
|                      |  | Amortization |          |                   |  |                   |         | Increase or
|Amortization Expenses |  | Period       |          | December 31, 2000 |  | December 31, 2001 |         | (Decrease) 
|                      |  |              |          |                   |  |                   |         |            
|Subscriber lists      |  |              | 3 years  |                   |  | $                 | 123,442 |             |  | $ | 52,686  |  |  | ($ | 70,756  | )
|FCC licenses          |  |              | 10 years |                   |  |                   | 28,899  |             |  |   | 206,493 |  |  |    | 177,594 |  
|Goodwill              |  |              | 10 years |                   |  |                   | 17,247  |             |  |   | 115,436 |  |  |    | 98,189  |  
|Other                 |  |              | Various  |                   |  |                   | 6,215   |             |  |   | 5,680   |  |  |    | (535    | )
|                      |  |              |          |                   |  |                   |         |             |  |   |         |  |  |    |         |  
|                      |  |              |          |                   |  | $                 | 175,803 |             |  | $ | 380,295 |  |  | $  | 204,492 |  
|                      |  |              |          |                   |  |                   |         |             |  |   |         |  |  |    |         |  

Interest expense.Interest expense increased approximately $16.5 million,
from $84.2 million in 2000 to $100.7 million in 2001.
Approximately $15.0 million of the increase represented the
write-off of deferred financing costs on long-term debt balances
classified as current liabilities at December 31, 2001.
Average debt balances were also approximately $8.8 million
higher in 2001 than 2000. The average principal balances
outstanding under our credit facility and senior subordinated
notes during 2001 was $133.0 million and $626.8 million,
respectively. Total debt decreased $0.6 million from
$761.9 million at December 31, 2000 to
$761.3 million at December 31, 2001.

Income tax benefit.Income tax benefit decreased
approximately $20.8 million from $20.8 million in 2000 to
$0 in 2001 as no tax benefit was generated in 2001.

Net loss.Our net
loss increased approximately $398.2 million from $214.6
million in 2000 to $612.8 million in 2001 mainly as a
result of the above-mentioned events.

Preferred dividends.Preferred dividends increased approximately $0.6 million in 2001
from $9.8 million in 2000 to $10.4 million in 2001.
The increase was the result of higher dividends paid to the
holders of the Series A Preferred due to the compounding
nature of the preferred stock series.

33



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Financial Condition, Liquidity and Capital
Resources

Our ability to continue as a going concern is
dependent upon several factors, including but not limited to our
ability to (i) generate sufficient cash flows to meet our
obligations, on a timely basis, (ii) continue to obtain
uninterrupted supplies and services from our vendors;
(iii) retain employees, and (iv) reduce capital
expenditures and operating expenses.

Our liquidity position is also influenced by the
timing of our accounts receivable collections and disbursements
to vendors and employees. We invoice approximately 85% of our
customers monthly in advance of providing our services and our
days receivables outstanding average approximately 47 days.
Employee salaries are paid on a bi-weekly basis and commission
payments are paid monthly in arrears. Payments to
telecommunication providers and facility and site landlords are
made on a monthly basis. We have customary trade terms with most
of our vendors.

In connection with the implementation of our
Plan, we discharged indebtedness under the old credit facility
and senior subordinated notes of $758.7 million and unpaid
accrued interest in exchange for the debt and equity securities
issued under the Plan. At December 31, 2002, debt balances
at their face value consisted of (dollars in thousands):

|                               |       |                   |        |        | 
|------------------------------ | ----- | ----------------- | ------ | ------ | 
|                               |       | December 31, 2002
|                               |       |                  
|Opco. senior secured note      |       | $                 | 60,000 |       
|Holdco subordinated PIK note   |       |                   | 20,559 |       
|Other, including capital lease |       |                   | 2,328  |       
|                               |       |                   |        |       
|                               | Total |                   | $      | 82,887 | 
|                               |       |                   |        |       

The following describes the debt issued under the
Plan:

Senior Secured Promissory Note (the
Senior Note).The
$60.0 million Senior Note issued by Opco and guaranteed by
Holdco and its subsidiaries accrues interest at the prime
lending rate plus a margin of 2.875%. Interest payments are made
on the last business day of each month. The maturity date of the
note is March 31, 2004. The note is secured by substantially all
of our assets. Scheduled repayments of the note will begin in
March 2003, according to the following schedule (dollars in
thousands):

|                   |       |                  |        |        | 
|------------------ | ----- | ---------------- | ------ | ------ | 
|Payment Dates      |       | Quarterly Amount
|                   |       |                 
|March 31, 2003     |       | $                | 10,000 |       
|June 30, 2003      |       |                  | 7,000  |       
|September 30, 2003 |       |                  | 4,000  |       
|December 31, 2003  |       |                  | 2,000  |       
|March 31, 2004     |       |                  | 37,000 |       
|                   |       |                  |        |       
|                   | Total |                  | $      | 60,000 | 
|                   |       |                  |        |       

Within five business days of December 31,
2002 and thereafter within five business days after the end of
each fiscal quarter, we are required to make a mandatory
repayment of 100% of our Unrestricted Cash in excess of $10.0
million. To the extent that such mandatory prepayments are made,
the payments will be applied to the scheduled payments described
in the table above in inverse order of maturity. Unrestricted
Cash means cash on hand with Holdco, Opco and LicenseCo
excluding (i) cash necessary to make distributions pursuant
to our Plan or to establish reserves as may be required or
permitted under the Plan or otherwise appropriate or
(ii) cash encumbered by Permitted Liens.

On January 7, 2003, we made a mandatory
prepayment of $35.0 million and on March 31, 2003, we
repaid an additional $15.0 million of principal outstanding
on the Senior Note. As of March 31, 2003, our outstanding
obligation on the Senior Note was $10.0 million. We expect
to retire this obligation by July 1, 2003 approximately
nine months prior to its March 2004 maturity date.

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Senior Subordinated PIK Note.The $20.0 million senior
subordinated PIK note issued by Holdco and guaranteed by
LicenseCo and Ventures accrues interest at a rate of 12% per
annum due quarterly in arrears by issuance of additional senior
secured notes until the senior secured note is fully repaid.
Thereafter, interest shall be due and payable monthly in arrears
in cash. The maturity date of the note is December 31,
2004. As of December 31, 2002, we issued PIK notes of
$559,000 reflecting interest that had accrued on the note from
October 8, 2002 to December 31, 2002. Scheduled
repayments of the note begin in June 2004 according to the
following schedule (dollars in thousands):

|                   |       |                  |        |        | 
|------------------ | ----- | ---------------- | ------ | ------ | 
|Payment Dates      |       | Quarterly Amount
|                   |       |                 
|June 30, 2004      |       | $                | 3,000  |       
|September 30, 2004 |       |                  | 2,000  |       
|December 31, 2004  |       |                  | 15,559 |       
|                   |       |                  |        |       
|                   | Total |                  | $      | 20,559 | 
|                   |       |                  |        |       

Upon payment in full for the Senior Note and the
end of each quarter thereafter, we are required to reduce the
PIK Note by an amount equal to 100% of our Unrestricted Cash (as
defined with respect to the senior secured note) in excess of
$10.0 million. This prepayment shall be payable within five
business days after the end of each such quarter.

Under both notes, we are required to remain in
compliance with certain financial covenants including (i) a
ratio of total net debt to annualized operating cash flow not to
exceed the ratio of 1.0:1.0. and, (ii) a ratio of operating
cash flow to cash interest expense that must exceed the ratio of
2.0:1.0 at all times. In addition there are limitations on the
amount of system and pager device capital expenditures that we
may incur. As of December 31, 2002, we were in compliance
will all covenants under both notes.

Cash
Flows

|                                          |  |                     |         |      |  |   |         |  
|----------------------------------------- |  | ------------------- | ------- | ---- |  | - | ------- | -
|                                          |  |                    
|                                          |  | Twelve months ended
|                                          |  | December 31,       
|($s in thousands)                        |  |                    
|                                          |  | 2001                |         | 2002
|                                          |  |                     |         |     
|Net cash provided by operating activities |  | $                   | 39,541  |      |  | $ | 51,084  |  
|Net cash used in investing activities     |  | $                   | (41,161 | )    |  | $ | (26,890 | )
|Net cash used in financing activities     |  | $                   | (844    | )    |  | $ | (799    | )

Net cash provided by operating activities
increased $11.6 million for the 2002 combined period from
$39.5 million for the twelve months ended December 31,
2001 to $51.1 million for the twelve months ended
December 31, 2002. The increase was the result of decreases
in net revenues for the 2002 combined period almost full offset
by decreases in service, rent and maintenance, selling and
marketing and general and administrative expenses; and changes
in working capital including a decrease in accounts receivable
of $18.4 million and accounts payable and accrued expenses
of $11.9 million from 2001 year-end balances.

Net cash used in investing activities decreased
$14.3 million for the 2002 combined period from
$41.2 million for the twelve months ended December 31,
2001 to $26.9 million for the 2002 combined period. The decrease
was primarily the result of lower capital expenditures in 2002,
which included expenditures of approximately $21.3 million
for pager devices and $5.4 million for paging
infrastructure and computer related equipment. Total capital
expenditures for 2003 are expected to range from
$10.0 million to $15.0 million.

Net cash used in financing activities decreased
$45,000 for the 2002 combined period from $844,000 for the
twelve months ended December 31, 2001 to $799 for the 2002
combined period. In 2003, we expect that net cash used in
financing activities will increase as we make repayments on both
the Senior and PIK notes. During 2003, we expect to fully
repay both notes with cash generated from operations. Through
March 31, 2003, we have repaid approximately
$50.0 million of the $60.0 million Senior Note.

Cash and cash equivalents.At December 31, 2002, cash and
cash equivalents balances were $47.5 million on the Senior
Note and as of March 31, 2003, this balance had decreased
to approximately $14.0 million primarily as a result of the
$50.0 million aggregate payments on the Senior Note discussed
above partially offset by cash generated from operations.

35



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In accordance with our Plan, we had approximately
$8.5 million of cash balances restricted for payment of
administrative and tax claims and disputed subsidiary general
unsecured claims related to the chapter 11 proceedings at
December 31, 2002. These amounts are included in restricted
cash on the accompanying balance sheet. As of March 1,
2003, these balances remained unchanged.

Inflation

Inflation is presently not a material factor
affecting our business. Traditional one-way paging system
equipment and operating costs have not increased and one-way
pager costs have declined significantly in recent years. This
reduction in costs has been reflected in lower prices charged to
our subscribers. General operating expenses such as salaries,
employee benefits and occupancy costs are, however, subject to
inflationary pressures.

Commitments

Metrocall has operating leases for offices,
retail stores and transmitting sites with lease terms ranging
from 1 to 15 years. Minimum annual lease payments on
operating leases having initial or remaining noncancelable lease
terms in excess of one year during the years 2003 through 2007
are $27.7 million, $21.2 million, $15.1 million,
$5.4 million and $2.5 million, respectively.

Factors Affecting Future Operating
Results

There are various factors that could adversely
affect our business, financial condition, prospects and results
of operations. The principal factors that have not been
described elsewhere in this Report, are described below.

Traditional Paging Services In 2002, we experienced a decrease in
traditional paging subscribers of approximately 1.7 million
units. We believe that the demand for traditional paging
services has decreased industry-wide over the past two years and
will continue to decline for the foreseeable future. Because of
our high fixed costs, subscription cancellations cannot be fully
offset by expense reductions and therefore would adversely
impact our cash flows. While we will make efforts to replace
lost subscribers, the marketing and other expenses associated
with adding subscriptions is high and could adversely affect our
cash flow in the short-term if the replacement efforts are
successful and in the longer term if they are not successful.

Advanced Messaging Services In 2002, we also experienced a
decrease in the number of subscribers receiving advanced
messaging services. We believe that the demand for such services
will continue to be challenged by our continued focus of our
financial resources away from the leasing of advanced messaging
products and due to technological developments of competitive
wireless messaging products using communication protocols not
presently accessible or available to Metrocall. Our ability to
provide advanced messaging services is also dependent on the
ability of our alliance partner, Weblink, to continue as a going
concern and on our success in replacing Motorola, Inc. as the
device manufacturer of the Reflex25 device.

The strategic alliance agreement between
Metrocall and Weblink requires, among other things, Weblink to
provide certain service levels in exchange for Metrocall paying
for use on a per unit in service basis. This agreement also
requires, that beginning in October 2004, Metrocall make certain
Engineering payments to Weblink, as defined in the strategic
alliance agreement, totaling approximately $15.0 million
payable ratably in installments over four quarters.

Additional Competition due to Technological
Developments  Technological developments could lead
to increased competition to Metrocall.

Future technological developments in the wireless
communications industry, such as narrowband PCS and broadband
PCS, could create new services or products that compete with
Metrocalls paging and wireless messaging services. See
page 10 for a discussion of these developments. That increased
competition might result in loss of existing or future
subscribers, loss of revenues and increase in expenses to stay
competitive.

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##### 



Further developments of broadband PCS could also
lead to increased competition. Many companies now provide
wireless telephone service using broadband PCS technology and
either have begun or will begin providing paging service. As
result, we might experience losses in subscribers and recurring
revenues and cost increases to stay competitive.

Other changes in technology could lower the cost
of competing services and products to a level at which
Metrocalls pricing for its services and products would
cease to be competitive. We cannot assure you that we will be
able to develop or introduce new services and products on a
timely basis and at competitive prices, if at all, nor can we
assure you that our profit margins, inventory costs and cash
flows will not be adversely affected by technological
developments.

Satellite Failures 
Metrocalls ability to deliver paging and messaging
services could be interrupted if satellite failures
occur.

Metrocall transmits a majority of its paging
traffic through its satellite facility in Stockton, California.
However, we also rely on satellite facilities operated by other
companies to control many of the transmitters on our nationwide
and wide-area networks. We also use land-based communications
facilities such as microwave stations and landline telephone
facilities to connect and control the paging base station
transmitters in our networks. The failure or disruption of
transmissions by these satellites and other facilities could
disrupt our paging and messaging services and impair our results
of operations and adversely affect our ability to gain more
subscribers and increase revenues.

Regulatory Changes and Compliance 
Changes in the regulations that govern Metrocalls business
might make it more difficult or costly to operate its business
or comply with its changes.

The FCC and to a lesser extent state regulatory
agencies regulate our paging and messaging operations. Those
agencies might take actions, such as changing licensing
requirements or the allocation of radio spectrum that would make
it more difficult or costly for us to operate our business. For
example, the FCC has adopted rules under which it will issue
licenses that would permit companies to offer paging services on
a wide-area basis through competitive bidding. We believe these
rules may simplify our regulatory compliance burdens,
particularly regarding adding or relocating transmitter sites;
however, those rules may also increase our costs of obtaining
paging licenses in the future. In addition, we cannot assure you
that we will be able to comply with all changes implemented by
the agencies regulating its business, such as changes in
licensing or build-out requirements.

Future Industry Consolidation

Since 2001, the company, from time to time, has
received expressions of interest and/or engaged in negotiations
with other parties with a view toward further consolidation of
the paging industry. In accordance with our Certificate of
Incorporation, the Board of Directors has formed the required
committee to consider any such matters as they may arise.

Dependence on Key Management
Personnel  If Metrocall is unable to retain key
management personnel, it might not be able to find suitable
replacements on a timely basis and its business operations might
be adversely affected.

Our existing operations and our ability to
achieve our goals to maximize free cash flows are dependent to a
significant extent upon the efforts and abilities of certain key
individuals, including our President and Chief Executive
Officer, Vincent D. Kelly. Mr. Kelly has substantial
expertise and experience in the paging and messaging industry,
knows the intricacies of our business operations and is
responsible for the development and implementation of our
current business strategy. We have an employment contract with
Mr. Kelly which includes a two year non-compete for a
termination of employment for any reason. We do not have
key man life insurance for him. If we are unable to
retain Mr. Kelly, it is unlikely we could find someone to
replace him that would have the same degree of expertise,
experience, knowledge and insight into the industry and the

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##### 



business operations. Even if we could find a
replacement, our business would be impaired from the disruption
associated with changes in management.




|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | Quantitative and Qualitative Disclosures
    about Market Risk

We do not believe that our debt securities or
preferred stock are subject to significant market risk.



|        |                                               
|------- | ----------------------------------------------
|ITEM 8. | Financial Statements and Supplemental
    Data

|                      |                                                                                                                                                                                                                                            |      |  |      | 
|--------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---- |  | ---- | 
|Description           |                                                                                                                                                                                                                                            | Page
|                      |                                                                                                                                                                                                                                            |     
|Financial Statements: |                                                                                                                                                                                                                                            |      |  |     
|                      | Report of Ernst & Young LLP, Independent
    Auditors                                                                                                                                                                                      |      |  | F-2  | 
|                      | Report of Arthur Andersen LLP, Independent Public
    Accountants                                                                                                                                                                          |      |  | F-4  | 
|                      | Consolidated Balance Sheets, as of
    December 31, 2001 and 2002                                                                                                                                                                          |      |  | F-5  | 
|                      | Consolidated Statements of Operations for each of
    the two years in the period ended December 31, 2001, the
    period from January 1 to October 7, 2002 and the
    period from October 8 to December 31, 2002                         |      |  | F-6  | 
|                      | Consolidated Statements of Stockholders
    Equity/(Deficit) for each of the two years in the period ended
    December 31, 2001, the period from January 1 to
    October 7, 2002 and the period from October 8 to
    December 31, 2002 |      |  | F-7  | 
|                      | Consolidated Statements of Cash Flows for each of
    the two years in the period ended December 31, 2001, the
    period from January 1 to October 7, 2002 and the
    period from October 8 to December 31, 2002                         |      |  | F-8  | 
|                      | Notes to Consolidated Financial Statements                                                                                                                                                                                                 |      |  | F-9  | 
|                      | Schedule II: Valuation and Qualifying
    Accounts for each of the two years in the period ended
    December 31, 2001, the period from January 1 to
    October 7, 2002 and the period from October 8 to
    December 31, 2002            |      |  | F-26 | 



|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | Changes In and Disagreements with
    Accountants on Accounting and Financial Disclosure

On May 23, 2002, we dismissed our
independent auditors, Arthur Andersen LLP (Arthur Andersen), and
engaged Ernst & Young LLP (Ernst & Young) to serve
as our new independent auditors for the fiscal year ended
December 31, 2002. This decision was recommended by our
Audit Committee and approved by the Board of Directors.

Arthur Andersens reports on our
consolidated financial statements for each of the years ended
December 31, 2001 and December 31, 2000 did not
contain an adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to audit scope or accounting
principles. However, they did issue a modified audit report for
these time periods to reflect their concern that Metrocall may
not be able to continue as a going concern in the future.

During the years ended December 31, 2001 and
2000 and the interim period between December 31, 2001 and
the date of this effective date of Arthur Andersens
dismissal, there were no disagreements between us and Arthur
Andersen on any matter of accounting principle, financial
statement disclosure or auditing scope or procedure which, if
not resolved to Arthur Andersens satisfaction, would have
caused them to make reference to the subject matter of the
disagreement in connection with their report for such years.

During the years ended December 31, 2001 and
2000 and through the date of their appointment as our
independent auditors, neither us nor anyone acting on our behalf
consulted Ernst & Young with respect to the application
of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might
be rendered on our consolidated financial statements, or any
other matters or reportable events listed in
Items 304(a)(2)(i) and (ii) of Regulation S-K.

38



---



##### 



PART III



|         |                                                       
|-------- | ------------------------------------------------------
|ITEM 10. | Directors and Executive Officers of the
    Registrant

Additional documents will be filed with the
Commission within 120 days after the close of the fiscal
year and are incorporated by reference into Part III.



|         |                       
|-------- | ----------------------
|ITEM 11. | Executive Compensation

Additional documents will be filed with the
Commission within 120 days after the close of the fiscal
year and are incorporated by reference into Part III.



|         |                                                                   
|-------- | ------------------------------------------------------------------
|ITEM 12. | Security Ownership of Certain Beneficial
    Owners and Management

Additional documents will be filed with the
Commission within 120 days after the close of the fiscal
year and are incorporated by reference into Part III.



|         |                                                   
|-------- | --------------------------------------------------
|ITEM 13. | Certain Relationships and Related
    Transactions

Additional documents will be filed with the
Commission within 120 days after the close of the fiscal
year and are incorporated by reference into Part III.



|         |                        
|-------- | -----------------------
|ITEM 14. | Controls and Procedures

Within 90 days prior to the filing date of
this report and under the supervision and with the participation
of our Chief Executive Officer and Chief Financial Officer,
management evaluated the effectiveness of the design and
operation of our disclosure controls and procedures. Based on
this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures
are effective in timely accumulating and communicating to
management information required to be disclosed in reports that
we file with the SEC. There have been no significant changes in
our internal controls or in other factors that could
significantly affect those controls subject to the date of our
last evaluation.



|         |                                            
|-------- | -------------------------------------------
|ITEM 15. | Principal Accountants Fees and
    Services

Additional documents will be filed with the
Commission within 120 days after the close of the fiscal
year and are incorporated by reference into Part III.

39



---



##### 



PART IV



|         |                                                                    
|-------- | -------------------------------------------------------------------
|ITEM 16. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K

(a)(1) Financial
Statements

The following financial statements are included
in Part II Item 8

|                      |                                                                                                                                                                                                                                             |      |  |      | 
|--------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- |  | ---- | 
|Description           |                                                                                                                                                                                                                                             | Page
|                      |                                                                                                                                                                                                                                             |     
|Financial Statements: |                                                                                                                                                                                                                                             |      |  |     
|                      | Report of Ernst & Young LLP, Independent
    Auditors                                                                                                                                                                                       |      |  | F-2  | 
|                      | Report of Arthur Andersen LLP, Independent Public
    Accountants                                                                                                                                                                           |      |  | F-4  | 
|                      | Consolidated Balance Sheets, as of
    December 31, 2001 and 2002                                                                                                                                                                           |      |  | F-5  | 
|                      | Consolidated Statements of Operations for each of
    the two years in the period ended December 31, 2001, the
    period from January 1 to October 7, 2002 and the
    period from October 8 to December 31, 2002.                         |      |  | F-6  | 
|                      | Consolidated Statements of Stockholders
    Equity/ (Deficit) for each of the two years in the period ended
    December 31, 2001, the period from January 1 to
    October 7, 2002 and the period from October 8 to
    December 31, 2002 |      |  | F-7  | 
|                      | Consolidated Statements of Cash Flows for each of
    the two years in the period ended December 31, 2001, the
    period from January 1 to October 7, 2002 and the
    period from October 8 to December 31, 2002                          |      |  | F-8  | 
|                      | Notes to Consolidated Financial Statements                                                                                                                                                                                                  |      |  | F-9  | 
|                      | Schedule II: Valuation and Qualifying
    Accounts for each of the two years in the period ended
    December 31, 2001, the period from January 1 to
    October 7, 2002 and the period from October 8 to
    December 31, 2002             |      |  | F-26 | 

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

(b) Reports
on Form 8-K

Form 8-K dated October 11, 2002
disclosing information regarding confirmation and effectiveness
of Metrocalls Seconded Amended Joint Plan of
Reorganization and filing the Orders Confirming Joint Plan of
Reorganization and a press release regarding confirmation of the
Plan and a press release regarding the effective date of the
Plan.

40



---



##### 



(c) Exhibits

EXHIBIT INDEX

|        |      |                     |  |                                                                                                                                                                                                                                               
|------- | ---- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                    
|Number  |      | Exhibit Description
|        |      |                    
|        | 2.1  |                     |  | Debtors Second Amended Joint Plan of
    Reorganization under Chapter 11 of the Bankruptcy Code, dated
    June 18, 2002.(a)                                                                                                                  
|        | 2.2  |                     |  | Second Amended Disclosure Statement Pursuant to
    Section 1125 of the Bankruptcy Code with respect to Joint
    Plan of Reorganization for the Debtors under Chapter 11 of
    the Bankruptcy Code, dated July 18, 2002.(a)                 
|        | 2.3  |                     |  | Order Confirming Metrocall, Inc. Joint Plan of
    Reorganization, excluding exhibits other than the Plan.(b)                                                                                                                                 
|        | 3.1  |                     |  | Amended and Restated Certificate of Incorporation
    of Metrocall.(b)                                                                                                                                                                        
|        | 3.2  |                     |  | Amended and Restated Bylaws of Metrocall.(b)                                                                                                                                                                                                  
|        | 4.1  |                     |  | Certificate of Designation, Number, Powers,
    Preferences and Relative, Participating, Optional and Other
    Rights of Series A Preferred Stock of Metrocall.(b)                                                                           
|        | 10.1 |                     |  | $60,000,000 Credit Agreement by and among
    Metrocall, Inc. (f/k/a McCaw RCC Communications, Inc.), certain
    lenders and Toronto Dominion (Texas), Inc. as administrative
    agent, dated as of October 8, 2002 (Loan
    Agreement).
|        | 10.2 |                     |  | First Amendment to Loan Agreement, dated
    February 19, 2003.                                                                                                                                                                              
|        | 10.3 |                     |  | $20,000,000 Credit Agreement by and among
    Metrocall Holdings, Inc. (f/k/a Metrocall, Inc.), certain
    lenders and Toronto Dominion (Texas), Inc. as administrative
    agent, dated as of October 8, 2002 (PIK Loan
    Agreement).  
|        | 10.4 |                     |  | First Amendment to PIK Loan Agreement, dated
    February 19, 2003.                                                                                                                                                                          
|        | 10.5 |                     |  | Employment Agreement between Metrocall and
    William L. Collins, III.                                                                                                                                                                      
|        | 10.6 |                     |  | Employment Agreement between Metrocall and
    Vincent D. Kelly.                                                                                                                                                                             
|        | 11.1 |                     |  | Statement re computation of per share
    earnings.                                                                                                                                                                                          
|        | 21.1 |                     |  | Subsidiaries of Metrocall.                                                                                                                                                                                                                   
|        | 99.1 |                     |  | Certification pursuant to 18 U.S.C.
    Section 1350 (Section 906 of the Sarbanes-Oxley Act of
    2002).                                                                                                                                    




|    |  |                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------
|   |  | Filed herewith.                                                                                                                  
|(a) |  | Incorporated by reference to Metrocalls
    Quarterly Report on Form 10-Q filed with the Commission on
    August 19, 2002.     
|(b) |  | Incorporated by reference to Metrocalls
    Registration Statement on Form 8-A filed with the
    Commission on October 9, 2002.

41



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15 (d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this
31st day of March, 2003



| |                         
| | ------------------------
| | METROCALL HOLDINGS, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ VINCENT D. KELLY

| |                                          
| | -----------------------------------------
| |                                          
| | Vincent D. Kelly                         
| | President and Chief Executive
    Officer



| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuant to the requirements of the Securities
    and Exchange Act of 1934, this report has been signed by the
    following persons in the capacities and on the dates indicated:

|                                           |  |                                                                                        |  |               
|------------------------------------------ |  | -------------------------------------------------------------------------------------- |  | --------------
|Signature                                  |  | Title                                                                                  |  | Date          
|                                           |  |                                                                                        |  |               
|/s/ VINCENT D. KELLYVincent D. Kelly       |  | President and Chief Executive Officer                                                  |  | March 31, 2003
|/s/ GEORGE Z. MORATISGeorge Z. Moratis     |  | Chief Financial Officer and Treasurer (Principal
    Financial and Accounting Officer) |  | March 31, 2003
|/s/ ROYCE YUDKOFFRoyce Yudkoff             |  | Chairman of the Board                                                                  |  | March 31, 2003
|William L. Collins III                     |  | Director                                                                               |  |               
|/s/ EUGENE I. DAVISEugene I. Davis         |  | Director                                                                               |  | March 31, 2003
|/s/ NICHOLAS A. GALLOPONicholas A. Gallopo |  | Director                                                                               |  | March 31, 2003
|/s/ DAVID J. LEONARDDavid J. Leonard       |  | Director                                                                               |  | March 31, 2003
|/s/ BRIAN OREILLYBrian OReilly           |  | Director                                                                               |  | March 31, 2003
|/s/ STEVEN D. SCHEIWESteven D. Scheiwe     |  | Director                                                                               |  | March 31, 2003

42



---



##### 



CERTIFICATION

I, Vincent D. Kelly, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of Metrocall Holdings, Inc.                                                                                                                                                                                                                                                             
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                          



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.



| |                                      
| | -------------------------------------
| | Date: March 31, 2003                 
|
| | /s/ VINCENT D. KELLY                 
| | Vincent D. Kelly                     
| | President and Chief Executive Officer

43



---



##### 



CERTIFICATION

I, George Z. Moratis, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of Metrocall Holdings, Inc.                                                                                                                                                                                                                                                             
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                          



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.



| |                        
| | -----------------------
| | Date: March 31, 2003   
|
| | /s/ GEORGE Z. MORATIS  
| | George Z. Moratis      
| | Chief Financial Officer

44



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                                                                                                                                           |  |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------
|                                                                                                                                                                                                                                           |  | Page  
|Description                                                                                                                                                                                                                                |  | Number
|                                                                                                                                                                                                                                           |  |       
|Financial
    Statements:                                                                                                                                                                                                                  |  |       
|Report of Ernst & Young LLP, Independent
    Auditors                                                                                                                                                                                      |  | F-2   
|Report of Arthur Andersen LLP, Independent Public
    Accountants                                                                                                                                                                          |  | F-4   
|Consolidated Balance Sheets, as of
    December 31, 2001 and 2002                                                                                                                                                                          |  | F-5   
|Consolidated Statements of Operations for each of
    the two years in the period ended December 31, 2001, the
    period from January 1 to October 7, 2002 and the period
    from October 8 to December 31, 2002                         |  | F-6   
|Consolidated Statements of Stockholders
    Equity/(Deficit) for each of the two years in the period ended
    December 31, 2001, the period from January 1 to
    October 7, 2002 and the period from October 8 to
    December 31, 2002 |  | F-7   
|Consolidated Statements of Cash Flows for each of
    the two years in the period ended December 31, 2001, the
    period from January 1 to October 7, 2002 and the period
    from October 8 to December 31, 2002                         |  | F-8   
|Notes to Consolidated Financial Statements                                                                                                                                                                                                 |  | F-9   
|Schedule II: Valuation and Qualifying
    Accounts for each of the two years in the period ended
    December 31, 2001, the period from January 1 to
    October 7, 2002 and the period from October 8 to
    December 31, 2002            |  | S-1   

F-1



---



##### 



Report of Independent Auditors

Board of Directors and Shareholders 
 Metrocall Holdings, Inc.:

We have audited the accompanying consolidated
balance sheet of Metrocall Holdings, Inc. and subsidiaries as of
December 31, 2002, and the related consolidated statements
of operations, stockholders equity/(deficit) and cash
flows for the period from October 8, 2002 to
December 31, 2002 (Reorganized Company) and the period from
January 1, 2002 to October 7, 2002 (Predecessor
Company-Metrocall, Inc. and subsidiaries). Our audits also
included the financial statement schedule for the periods from
January 1, 2002 to October 7, 2002 and October 8,
2002 to December 31, 2002, listed in the Index at
Item 16. These financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits. The consolidated
financial statements and schedule of Metrocall Inc. and
subsidiaries (the Predecessor Company) as of December 31,
2001 and for each of the two years in the period then ended were
audited by other auditors who have ceased operations and whose
report dated February 15, 2002, expressed an unqualified
opinion on those statements and schedule before the restatement
disclosures described in Note 5 and reclassifications
discussed in Note 4, and included an explanatory paragraph
that disclosed substantial doubt about the Companys
ability to continue as a going concern as described in
Note 1.

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 2002 financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Metrocall Holdings, Inc. and
subsidiaries at December 31, 2002, and the consolidated
results of their operations and their cash flows for the period
from October 8, 2002 to December 31, 2002 (Reorganized
Company) and the period from January 1, 2002 to
October 7, 2002 (Predecessor Company), in conformity with
accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule
for the periods from January 1, 2002 to October 7,
2002 and October 8, 2002 to December 31, 2002 when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material aspects the
information set forth therein.

As described in Note 1 to the consolidated
financial statements, effective October 8, 2002, the
Company was reorganized under a plan of reorganization confirmed
by the United States Bankruptcy Court for the District of
Delaware. In connection with its reorganization, the Company
applied fresh start accounting on October 7, 2002 as
discussed in Notes 2 and 3.

As discussed in Notes 4 and 5 to the
consolidated financial statements, the Company changed its
methods of accounting for asset retirement obligations and gains
and losses from extinguishment of debt effective October 7,
2002 and for goodwill and intangible assets, effective
January 1, 2002.

As discussed above, the financial statements of
Metrocall, Inc. and subsidiaries as of December 31, 2001
and for each of the two years in the period then ended were
audited by other auditors who have ceased operations. As
described in Note 5, these financial statements have been
revised to include the transitional disclosures required by
Statement of Financial Accounting Standards (Statement)
No. 142, Goodwill and Other Intangible Assets, which
was adopted by the Company as of January 1, 2002. Our audit
procedures with respect to the disclosures in Note 5 with
respect to 2001 and 2000 included (a) agreeing the previously
reported net loss to the previously issued financial statements
and the adjustments to reported net loss representing
amortization expense recognized in those periods related to
goodwill and intangible assets that are no longer being
amortized to the Companys underlying records obtained from
management, and (b) testing the mathematical accuracy of
the reconciliation of adjusted net loss to reported net loss,
and the related loss-per-share amounts. In our opinion, the
disclosures for 2001 and 2000 in Note 5 are appropriate. Also, as

F-2



---



##### 



discussed in Note 4, the Company changed the
classification of costs to refurbish pagers in 2002 and the
amounts in the 2001 and 2000 financial statements have been
reclassified to conform to the 2002 presentation. We audited the
adjustments that were applied to reclassify such costs reflected
in the 2001 and 2000 financial statements. Our procedures
included (a) agreeing the reclassified amounts to the
Companys underlying records obtained from management, and
(b) testing the mathematical accuracy of affected amounts
within the financial statements. In our opinion, such
reclassifications are appropriate and have been properly
applied. However, we were not engaged to audit, review, or apply
any procedures to the 2001 or 2000 financial statements of the
Company other than with respect to the disclosures and
reclassifications discussed above and, accordingly, we do not
express an opinion or any form of assurance on the 2001 or 2000
financial statements taken as a whole.




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

McLean, Virginia

February 28, 2003


F-3



---



##### 



This is a copy of the audit report previously
issued by Arthur Andersen LLP in connection with the
companys filing of its Annual Report of Form 10-K for
the year ended December 31, 2001. This audit report has not
been reissued by Arthur Andersen LLP in connection with this
Annual Report on Form 10-K, nor has Arthur Andersen LLP
provided a consent to include its report in this Annual Report
on Form 10-K. The registrant hereby discloses that the lack
of a consent by Arthur Andersen LLP may impose limitations on
recovery in investors.

REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

To Metrocall, Inc.:

We have audited the accompanying consolidated
balance sheets of Metrocall, Inc. and subsidiaries ( a Delaware
Corporation) as of December 31, 2001 and 2000, and the
related consolidated statements of operations,
stockholders equity/(deficit) and cash flows for each of
the three years in the period ended December 31, 2001.
These financial statements and the schedule referred to below
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule 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 an 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 financial
position of Metrocall, Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the financial statements, the
Company has suffered recurring losses from operations and has
net capital and working capital deficiencies that raise
substantial doubt about its ability to continue as a going
concern. Managements plans in regard to these matters are
also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might result should the
Company be unable to continue as a going concern.

Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The
schedule listed in the index of financial statements is
presented for the purpose of complying with the Securities and
Exchange Commissions rules and is not part of the basic
financial statements. This schedule has been subjected to the
auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Vienna, Virginia

February 15, 2002


F-4



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share
information)


|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |         |   |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ---------- | --- | ----------- | - | - | ------ | ------- | - | ------- | 
|                                                                                                                                                                                                                |                                                                                                                                       | Predecessor                                                                                                                                         |                                                          |            |     | Reorganized
|                                                                                                                                                                                                                |                                                                                                                                       | Company                                                                                                                                             |                                                          |            |     | Company    
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |            
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                    
|                                                                                                                                                                                                                |                                                                                                                                       | December 31,                                                                                                                                       
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                    
|                                                                                                                                                                                                                |                                                                                                                                       | 2001                                                                                                                                                |                                                          |            |     | 2002       
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          | /          |     |            
|ASSETS                                                                                                                                                                                                          |                                                                                                                                       |                                                                                                                                                     |                                                          |           
|CURRENT ASSETS:                                                                                                                                                                                                 |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                | Cash and cash equivalents                                                                                                             |                                                                                                                                                     | $                                                        | 24,135     |     |             | / |   | $      | 47,530  |  
|                                                                                                                                                                                                                | Restricted cash                                                                                                                       |                                                                                                                                                     |                                                          |           |     |             | / |   |        | 8,516   |  
|                                                                                                                                                                                                                | Accounts receivable, less allowance for doubtful
    accounts of $7,536 and $6,513 as of December 31, 2001 and
    2002, respectively |                                                                                                                                                     |                                                          | 42,648     |     |             | / |   |        | 24,280  |  
|                                                                                                                                                                                                                | Prepaid expenses and other current assets                                                                                             |                                                                                                                                                     |                                                          | 11,149     |     |             | / |   |        | 9,795   |  
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     | Total current assets                                     |            |     | 77,932      |   |   | /      |         |   | 90,121  | 
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|PROPERTY AND EQUIPMENT:                                                                                                                                                                                         |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                | Land, buildings and leasehold improvements                                                                                            |                                                                                                                                                     |                                                          | 6,661      |     |             | / |   |        | 3,197   |  
|                                                                                                                                                                                                                | Furniture, office equipment and vehicles                                                                                              |                                                                                                                                                     |                                                          | 59,886     |     |             | / |   |        | 21,297  |  
|                                                                                                                                                                                                                | Paging and plant equipment                                                                                                            |                                                                                                                                                     |                                                          | 160,310    |     |             | / |   |        | 58,650  |  
|                                                                                                                                                                                                                | Less  Accumulated depreciation and
    amortization                                                                                  |                                                                                                                                                     |                                                          | (108,007   | )   |             | / |   |        | (10,927 | )
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     | 118,850                                                  |            |     | /           |   |   | 72,217 |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|INTANGIBLE ASSETS, net of accumulated
    amortization of approximately $0 and $1,948 at December 31,
    2001 and 2002, respectively                                                                           |                                                                                                                                       |                                                                                                                                                     |                                                         |            |     | /           |   |   | 21,756 |        
|OTHER ASSETS                                                                                                                                                                                                    |                                                                                                                                       |                                                                                                                                                     | 6,688                                                    |            |     | /           |   |   | 5,653  |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     | TOTAL ASSETS                                             |            | $   | 203,470     |   |   | /      |         | $ | 189,747 | 
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|LIABILITIES AND STOCKHOLDERS
    EQUITY/(DEFICIT)                                                                                                                                                             
|CURRENT LIABILITIES:                                                                                                                                                                                            |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                | Current maturities of long-term debt                                                                                                  |                                                                                                                                                     | $                                                        | 759,544    |     |             | / |   | $      | 58,949  |  
|                                                                                                                                                                                                                | Accounts payable                                                                                                                      |                                                                                                                                                     |                                                          | 18,984     |     |             | / |   |        | 8,429   |  
|                                                                                                                                                                                                                | Accrued interest                                                                                                                      |                                                                                                                                                     |                                                          | 81,197     |     |             | / |   |        |        |  
|                                                                                                                                                                                                                | Accrued expenses and other current liabilities                                                                                        |                                                                                                                                                     |                                                          | 23,945     |     |             | / |   |        | 22,560  |  
|                                                                                                                                                                                                                | Deferred revenue and subscriber deposits                                                                                              |                                                                                                                                                     |                                                          | 27,746     |     |             | / |   |        | 15,517  |  
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     | Total current liabilities                                |            |     | 911,416     |   |   | /      |         |   | 105,455 | 
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|CAPITAL LEASE AND OTHER LONG-TERM DEBT, less
    current maturities                                                                                                                                             |                                                                                                                                       |                                                                                                                                                     | 1,805                                                    |            |     | /           |   |   | 20,762 |        
|LONG TERM DEFERRED REVENUE AND OTHER                                                                                                                                                                            |                                                                                                                                       |                                                                                                                                                     | 8,710                                                    |            |     | /           |   |   | 13,693 |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     | Total liabilities                                        |            |     | 921,931     |   |   | /      |         |   | 139,910 | 
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                   |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|SERIES A REDEEMABLE PREFERRED STOCK                                                                                                                                                                             |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|Predecessor Company: 14% cumulative; par value
    $.01 per share; 6,207,123 shares issued and outstanding as of
    December 31, 2001 and a liquidation preference of $75,884                                  |                                                                                                                                       |                                                                                                                                                     | 70,776                                                   |            |     | /           |   |   |       |        
|Reorganized Company: 15% cumulative; par value
    $.01 per share; 8,500,000 shares authorized; 5,992,572 shares
    issued and outstanding as of December 31, 2002 and a
    liquidation preference of $62,071 |                                                                                                                                       |                                                                                                                                                     |                                                         |            |     | /           |   |   | 49,122 |        
|STOCKHOLDERS EQUITY/(DEFICIT)                                                                                                                                                                                  |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|Common stock                                                                                                                                                                                                    |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       | Predecessor Company: par value $.01 per share;
    200,000,000 shares authorized; 89,214,532 shares issued and
    outstanding at December 31, 2001 |                                                          |            | 900 |             |   | / |        |         |  |        
|                                                                                                                                                                                                                |                                                                                                                                       | Reorganized Company: par value $.01 per share;
    1,200,000 shares authorized; 991,398 shares issued and
    outstanding at December 31, 2002      |                                                          |            |     |             |   | / |        |         | 9 |        
|                                                                                                                                                                                                                | Additional paid-in capital                                                                                                            |                                                                                                                                                     |                                                          | 557,364    |     |             | / |   |        |        |  
|                                                                                                                                                                                                                | Unearned compensation                                                                                                                 |                                                                                                                                                     |                                                          |           |     |             | / |   |        | (1,431  | )
|                                                                                                                                                                                                                | Retained earnings/(deficit)                                                                                                           |                                                                                                                                                     |                                                          | (1,347,501 | )   |             | / |   |        | 2,137   |  
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     | (789,237                                                 | )          |     | /           |   |   | 715    |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     | TOTAL LIABILITIES AND STOCKHOLDERS
    EQUITY/(DEFICIT) |            | $   | 203,470     |   |   | /      |         | $ | 189,747 | 
|                                                                                                                                                                                                                |                                                                                                                                       |                                                                                                                                                     |                                                          |            |     |             |   |   |        |        

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

F-5



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

(In thousands, except share and per share
information)


|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |        |        | 
|----------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------------- | ---------- | ------------ | -------- | ----------- | ---------- | ------------ | -------- | ---- | ---------- | --------- | --------- | - | - | - | ------- | ------ | ------ | 
|                                                                                    |                                                   |                               |            |              |          | Reorganized
|                                                                                    |                                                   | Predecessor Company           |            |              |          | Company    
|                                                                                    |                                                   |                               |            |              |          |            
|                                                                                    |                                                   |                               |            |              |          |             |            |             
|                                                                                    |                                                   | Year Ended December 31,       |            | January 1 to |          |             |            | October 8 to
|                                                                                    |                                                   |                               |            | October 7,   |          | /           |            | December 31,
|                                                                                    |                                                   | 2000                          |            | 2001         |          | 2002        |            | /            |          | 2002
|                                                                                    |                                                   |                               |            |              |          |             |            | /            |          |     
|REVENUES:                                                                           |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    | Service, rent and maintenance                     |                               | $          | 504,800      |          |             | $          | 460,448      |          |      | $          | 296,813   |           |   | / |   | $       | 81,325 |       
|                                                                                    | Product sales                                     |                               |            | 57,183       |          |             |            | 43,225       |          |      |            | 24,056    |           |   | / |   |         | 4,078  |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    |                                                   | Total revenues                |            |              | 561,983  |             |            |              | 503,673  |      |            |           | 320,869   |   |   | / |         |        | 85,403 | 
|                                                                                    | Net book value of products sold                   |                               |            | (37,509      | )        |             |            | (26,176      | )        |      |            | (13,085   | )         |   | / |   |         | (1,081 | )     
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    |                                                   |                               | 524,474    |              |          |             | 477,497    |              |          |      | 307,784    |           |           | / |   |   | 84,322  |       
|OPERATING EXPENSES:                                                                 |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    | Service, rent and maintenance                     |                               |            | 133,667      |          |             |            | 139,326      |          |      |            | 89,250    |           |   | / |   |         | 23,004 |       
|                                                                                    | Selling and marketing                             |                               |            | 103,413      |          |             |            | 92,481       |          |      |            | 50,952    |           |   | / |   |         | 11,359 |       
|                                                                                    | General and administrative                        |                               |            | 172,017      |          |             |            | 161,161      |          |      |            | 106,674   |           |   | / |   |         | 27,735 |       
|                                                                                    | Reorganization expense                            |                               |            |             |          |             |            | 15,017       |          |      |            | 19,007    |           |   | / |   |         |       |       
|                                                                                    | Depreciation                                      |                               |            | 111,160      |          |             |            | 193,532      |          |      |            | 50,386    |           |   | / |   |         | 10,927 |       
|                                                                                    | Amortization                                      |                               |            | 175,803      |          |             |            | 380,295      |          |      |            |          |           |   | / |   |         | 1,948  |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    |                                                   | Total operating expenses      |            |              | 696,060  |             |            |              | 981,812  |      |            |           | 316,269   |   |   | / |         |        | 74,973 | 
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    |                                                   | Income/(loss) from operations |            |              | (171,586 | )           |            |              | (504,315 | )    |            |           | (8,485    | ) |   | / |         |        | 9,349  | 
|INTEREST AND OTHER INCOME (EXPENSE), NET                                            |                                                   |                               | (2,450     | )            |          |             | (7,822     | )            |          |      | (822       | )         |           | / |   |   | 1,047   |       
|INTEREST EXPENSE                                                                    |                                                   |                               | (84,169    | )            |          |             | (100,672   | )            |          |      | (39,280    | )         |           | / |   |   | (2,580  | )     
|GAIN ON EARLY EXTINGUISHMENT OF DEBT                                                |                                                   |                               | 22,876     |              |          |             |           |              |          |      | 749,821    |           |           | / |   |   |        |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|INCOME/(LOSS) BEFORE FRESH START ACCOUNTING
    ADJUSTMENTS, AND INCOME TAXES       |                                                   |                               | (235,329   | )            |          |             | (612,809   | )            |          |      | 701,234    |           |           | / |   |   | 7,816   |       
|FRESH START ACCOUNTING ADJUSTMENTS                                                  |                                                   |                               |           |              |          |             |           |              |          |      | 575,491    |           |           | / |   |   |        |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|INCOME/(LOSS) BEFORE INCOME TAXES                                                   |                                                   |                               | (235,329   | )            |          |             | (612,809   | )            |          |      | 1,276,725  |           |           | / |   |   | 7,816   |       
|INCOME TAX BENEFIT (PROVISION)                                                      |                                                   |                               | 20,775     |              |          |             |           |              |          |      |           |           |           | / |   |   | (3,000  | )     
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    |                                                   | Net income/(loss)             |            |              | (214,554 | )           |            |              | (612,809 | )    |            |           | 1,276,725 |   |   | / |         |        | 4,816  | 
|PREFERRED DIVIDENDS AND ACCRETION                                                   |                                                   |                               | (9,816     | )            |          |             | (10,391    | )            |          |      | (4,855     | )         |           | / |   |   | (2,679  | )     
|REORGANIZATION ITEM  ACCRETION OF
    LIQUIDATION PREFERENCE                       |                                                   |                               |           |              |          |             |           |              |          |      | (4,715     | )         |           | / |   |   |        |       
|GAIN ON EXTINGUISHMENT OF PREFERRED STOCK                                           |                                                   |                               |           |              |          |             |           |              |          |      | 80,346     |           |           | / |   |   |        |       
|SERIES C PREFERRED EXCHANGE INDUCEMENT                                              |                                                   |                               | (6,308     | )            |          |             |           |              |          |      |           |           |           | / |   |   |        |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|                                                                                    | Income/(loss) attributable to common stockholders |                               | $          | (230,678     | )        |             | $          | (623,200     | )        |      | $          | 1,347,501 |           |   | / |   | $       | 2,137  |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|Basic and diluted earnings/(loss) per share
    attributable to common stockholders |                                                   | $                             | (3.00      | )            |          | $           | (6.93      | )            |          | $    | 14.98      |           |           | / |   | $ | 2.16    |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       
|Weighted-average common shares outstanding                                          |                                                   |                               | 76,984,096 |              |          |             | 89,975,772 |              |          |      | 89,975,772 |           |           | / |   |   | 991,398 |       
|                                                                                    |                                                   |                               |            |              |          |             |            |              |          |      |            |           |           |   |   |   |         |       

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

F-6



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY/(DEFICIT)

(In thousands, except share
information)


|                           |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |          |   |   |        |        |   |    |            |           |        |   |          |          |        |  
|-------------------------- | -------------------------------------------------------------------------------------------------- | --------------------------------- | ---------- | ----------- | - | ------- | --- | ------------ | - | ----------- | ------- | -------- | - | - | ------ | ------ | - | -- | ---------- | --------- | ------ | - | -------- | -------- | ------ | -
|                           |                                                                                                    |                                   |            |             |   |         |     |              |   |            
|                           |                                                                                                    | Common Stock                      |            |             |   |         |     |              |   |            
|                           |                                                                                                    |                                   |            | Additional  |   |         |     |              |   |            
|                           |                                                                                                    | Shares                            |            |             |   | Paid-In |     | Unearned     |   | Accumulated |         |         
|                           |                                                                                                    | Outstanding                       |            | Par Value   |   | Capital |     | Compensation |   | Deficit     |         | Total   
|                           |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |         
|Predecessor Company:       |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |          |   |   |        |        |   |    |            |           |        |   |          |         
|BALANCE, December 31, 1999 |                                                                                                    |                                   | 41,901,908 |             |   | $       | 419 |              |   | $           | 341,070 |          |   | $ |       |        |   | ($ | 493,623    | )         |        | $ | (152,134 | )       
|                           | Issuances of shares in employee stock purchase
    plan and other                                  |                                   |            | 928,534     |   |         |     | 9            |   |             |         | 3,414    |   |   |        |       |   |    |            |          |        |   |          | 3,423    |       
|                           | Warrants exercised                                                                                 |                                   |            | 1,102,920   |   |         |     | 11           |   |             |         | 2,667    |   |   |        |       |   |    |            |          |        |   |          | 2,678    |       
|                           | Issuances of shares in exchange for senior
    subordinated notes                                  |                                   |            | 8,619,537   |   |         |     | 86           |   |             |         | 47,316   |   |   |        |       |   |    |            |          |        |   |          | 47,402   |       
|                           | Issuances of shares in exchange for Series C
    Preferred                                         |                                   |            | 13,250,000  |   |         |     | 133          |   |             |         | 111,543  |   |   |        |       |   |    |            | (6,308    | )      |   |          | 105,368  |       
|                           | Other common stock issuances                                                                       |                                   |            | 23,411,633  |   |         |     | 234          |   |             |         | 51,047   |   |   |        |       |   |    |            |          |        |   |          | 51,281   |       
|                           | Preferred dividends and accretion                                                                  |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | (9,816    | )      |   |          | (9,816   | )     
|                           | Net loss                                                                                           |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | (214,554  | )      |   |          | (214,554 | )     
|                           |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |          |   |   |        |        |   |    |            |           |        |   |          |         
|BALANCE, December 31, 2000 |                                                                                                    |                                   | 89,214,532 |             |   |         | 892 |              |   |             | 557,057 |          |   |   |       |        |   |    | (724,301   | )         |        |   | (166,352 | )       
|                           | Issuances of shares for employee stock purchase
    plan and other                                 |                                   |            | 761,240     |   |         |     | 8            |   |             |         | 307      |   |   |        |       |   |    |            |          |        |   |          | 315      |       
|                           | Preferred dividends and accretion                                                                  |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | (10,391   | )      |   |          | (10,391  | )     
|                           | Net loss                                                                                           |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | (612,809  | )      |   |          | (612,809 | )     
|                           |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |          |   |   |        |        |   |    |            |           |        |   |          |         
|BALANCE, December 31, 2001 |                                                                                                    |                                   | 89,975,772 |             |   |         | 900 |              |   |             | 557,364 |          |   |   |       |        |   |    | (1,347,501 | )         |        |   | (789,237 | )       
|                           | Preferred dividends and accretion                                                                  |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | (4,855    | )      |   |          | (4,855   | )     
|                           | Reorganization item  accretion of
    liquidation preference                                      |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | (4,715    | )      |   |          | (4,715   | )     
|                           | Gain on cancellation of preferred stock                                                            |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | 80,346    |        |   |          | 80,346   |       
|                           | Net loss including elimination of predecessor
    equity in connection with fresh start accounting |                                   |            | (89,975,772 | ) |         |     | (900         | ) |             |         | (557,364 | ) |   |        |       |   |    |            | 1,276,725 |        |   |          | 718,461  |       
|                           | Issuance of common stock under plan of
    reorganization                                          |                                   |            | 991,398     |   |         |     | 9            |   |             |         |         |   |   |        |       |   |    |            |          |        |   |          | 9        |       
|                           | Restricted stock awarded to executives                                                             |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        | (1,550 | ) |    |            |          |        |   |          | (1,550   | )     
|                          
|Reorganized Company:       |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |          |   |   |        |        |   |    |            |           |        |   |          |         
|BALANCE, October 7, 2002   |                                                                                                    |                                   | 991,398    |             |   |         | 9   |              |   |             |        |          |   |   | (1,550 | )      |   |    |           |           |        |   | (1,541   | )       
|                           |                                                                                                    | Preferred dividends and accretion |            |             |  |         |     |              |  |             |         |          |  |   |        |        |  |    |            |           | (2,679 | ) |          |          | (2,679 | )
|                           | Amortization of unearned compensation                                                              |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        | 119    |   |    |            |          |        |   |          | 119      |       
|                           | Net income                                                                                         |                                   |            |            |   |         |     |             |   |             |         |         |   |   |        |       |   |    |            | 4,816     |        |   |          | 4,816    |       
|                           |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |          |   |   |        |        |   |    |            |           |        |   |          |         
|BALANCE, December 31, 2002 |                                                                                                    |                                   | 991,398    |             |   | $       | 9   |              |   | $           |        |          |   | $ | (1,431 | )      |   | $  | 2,137      |           |        | $ | 715      |         
|                           |                                                                                                    |                                   |            |             |   |         |     |              |   |             |         |          |   |   |        |        |   |    |            |           |        |   |          |         

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

F-7



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |        |         |        |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------ | ---------------------------------------------------------- | ------------------------------------------------------- | ------------ | ------- | ----------- | ------ | ------------ | ------- | -------- | ------ | --------- | -------- | ------- | - | - | ------ | ------ | ------- | ------ | -
|                                                         |                                                                                      |                                                            |                                                         |              |         | Reorganized
|                                                         |                                                                                      | Predecessor Company                                        |                                                         |              |         | Company    
|                                                         |                                                                                      |                                                            |                                                         |              |         |            
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |             
|                                                         |                                                                                      | Year Ended                                                 |                                                         |              |         |             |        |             
|                                                         |                                                                                      | December 31,                                               |                                                         | January 1 to |         |             |        | October 8 to
|                                                         |                                                                                      |                                                            |                                                         | October 7,   |         | /           |        | December    
|                                                         |                                                                                      | 2000                                                       |                                                         | 2001         |         | 2002        |        | /            |         | 31, 2002
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        | /            |         |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                    |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|                                                         | Net loss                                                                             |                                                            | $                                                       | (214,554     | )       |             | $      | (612,809     | )       |          | $      | 1,276,725 |          |         | / |   | $      | 4,816  |        
|                                                         | Adjustments to reconcile net loss to net cash
    provided by operating activities  |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |        |        
|                                                         |                                                                                      | Gain on early extinguishment of debt                       |                                                         |              | (22,876 | )           |        |              |        |          |        |           | (749,821 | )       |   | / |        |        |        |       
|                                                         |                                                                                      | Depreciation and amortization                              |                                                         |              | 286,963 |             |        |              | 573,827 |          |        |           | 50,386   |         |   | / |        |        | 12,875  |       
|                                                         |                                                                                      | Fresh start accounting adjustment                          |                                                         |              |        |             |        |              |        |          |        |           | (575,491 | )       |   | / |        |        |        |       
|                                                         |                                                                                      | Equity in loss of affiliate                                |                                                         |              | 4,966   |             |        |              | 6,248   |          |        |           | 1,228    |         |   | / |        |        |        |       
|                                                         |                                                                                      | Amortization of debt financing costs and debt
    discount |                                                         |              | 3,273   |             |        |              | 18,634  |          |        |           | 1,095    |         |   | / |        |        |        |       
|                                                         |                                                                                      | Amortization of unearned compensation                      |                                                         |              |        |             |        |              |        |          |        |           |         |         |   | / |        |        | 119     |       
|                                                         |                                                                                      | Accretion on and issuance of PIK Notes                     |                                                         |              |        |             |        |              |        |          |        |           |         |         |   | / |        |        | 869     |       
|                                                         |                                                                                      | Accretion on long-term debt                                |                                                         |              |        |             |        |              |        |          |        |           |         |         |   | / |        |        | 665     |       
|                                                         |                                                                                      | Increase (decrease) in deferred income taxes               |                                                         |              | (20,955 | )           |        |              |        |          |        |           |         |         |   | / |        |        | 3,000   |       
|                                                         | Changes in current assets and liabilities, net of
    effects of acquisitions:       |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |        |        
|                                                         |                                                                                      | Restricted cash                                            |                                                         |              |        |             |        |              |        |          |        |           | (10,499  | )       |   | / |        |        | 1,983   |       
|                                                         |                                                                                      | Accounts receivable                                        |                                                         |              | 2,111   |             |        |              | 6,278   |          |        |           | 18,480   |         |   | / |        |        | (192    | )     
|                                                         |                                                                                      | Prepaid expenses and other current assets                  |                                                         |              | (4,017  | )           |        |              | (3,650  | )        |        |           | 2,027    |         |   | / |        |        | (5,303  | )     
|                                                         |                                                                                      | Accounts payable                                           |                                                         |              | (2,773  | )           |        |              | (6,387  | )        |        |           | 7,492    |         |   | / |        |        | (11,251 | )     
|                                                         |                                                                                      | Deferred revenues and subscriber deposits                  |                                                         |              | (6,508  | )           |        |              | (4,198  | )        |        |           | (10,210  | )       |   | / |        |        | 1,927   |       
|                                                         |                                                                                      | Accrued interest                                           |                                                         |              |        |             |        |              | 60,827  |          |        |           | 30,714   |         |   | / |        |        |        |       
|                                                         |                                                                                      | Accrued expenses and other current liabilities             |                                                         |              | 779     |             |        |              | 771     |          |        |           | 262      |         |   | / |        |        | (812    | )     
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|                                                         |                                                                                      |                                                            | Net cash provided by operating activities               |              |         | 26,409      |        |              |         | 39,541   |        |           |          | 42,388  |   |   | /      |        |         | 8,696  |  
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                    |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|                                                         | Cash paid for acquisitions, net of cash acquired                                     |                                                            |                                                         | (12,575      | )       |             |        |             |         |          |        |          |          |         | / |   |        |       |        
|                                                         | Capital expenditures                                                                 |                                                            |                                                         | (95,268      | )       |             |        | (41,961      | )       |          |        | (24,095   | )        |         | / |   |        | (2,626 | )      
|                                                         | Other                                                                                |                                                            |                                                         | (2,136       | )       |             |        | 800          |         |          |        | (124      | )        |         | / |   |        | (45    | )      
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|                                                         |                                                                                      |                                                            | Net cash used in investing activities                   |              |         | (109,979    | )      |              |         | (41,161  | )      |           |          | (24,219 | ) |   | /      |        |         | (2,671 | )
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                    |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|                                                         | Proceeds from long-term debt                                                         |                                                            |                                                         | 67,497       |         |             |        |             |         |          |        |          |          |         | / |   |        |       |        
|                                                         | Repayment of long-term debt                                                          |                                                            |                                                         | (9,497       | )       |             |        |             |         |          |        | (633      | )        |         | / |   |        | (166   | )      
|                                                         | Principal payments on long-term debt                                                 |                                                            |                                                         | (643         | )       |             |        | (735         | )       |          |        |          |          |         | / |   |        |       |        
|                                                         | Net proceeds from issuance of common stock                                           |                                                            |                                                         | 51,886       |         |             |        | 304          |         |          |        |          |          |         | / |   |        |       |        
|                                                         | Deferred debt financing costs and other                                              |                                                            |                                                         | (1,863       | )       |             |        | (413         | )       |          |        |          |          |         | / |   |        |       |        
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|                                                         |                                                                                      |                                                            | Net cash provided by (used in) financing
    activities |              |         | 107,380     |        |              |         | (844     | )      |           |          | (633    | ) |   | /      |        |         | (166   | )
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS |                                                                                      |                                                            | 23,810                                                  |              |         |             | (2,462 | )            |         |          | 17,536 |           |          | /       |   |   | 5,859  |       
|CASH AND CASH EQUIVALENTS, beginning of period           |                                                                                      |                                                            | 2,787                                                   |              |         |             | 26,597 |              |         |          | 24,135 |           |          | /       |   |   | 41,671 |       
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       
|CASH AND CASH EQUIVALENTS, end of period                 |                                                                                      | $                                                          | 26,597                                                  |              |         | $           | 24,135 |              |         | $        | 41,671 |           |          | /       |   | $ | 47,530 |       
|                                                         |                                                                                      |                                                            |                                                         |              |         |             |        |              |         |          |        |           |          |         |   |   |        |       

|                                                                                      |                                            |                     |        |              |  |             |        |              |  |      |       |        |  |   |   |   |       |       | 
|------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------- | ------ | ------------ |  | ----------- | ------ | ------------ |  | ---- | ----- | ------ |  | - | - | - | ----- | ----- | 
|                                                                                      |                                            |                     |        |              |  | Reorganized
|                                                                                      |                                            | Predecessor Company |        |              |  | Company    
|                                                                                      |                                            |                     |        |              |  |            
|                                                                                      |                                            |                     |        |              |  |             |        |             
|                                                                                      |                                            | Year Ended          |        |              |  |             |        |             
|                                                                                      |                                            | December 31,        |        | January 1 to |  |             |        | October 8 to
|Supplemental disclosures of cash flow information: (in thousands)                     |                                            |                     |        | October 7,   |  | /           |        | December 31,
|                                                                                      |                                            | 2000                |        | 2001         |  | 2002        |        | /            |  | 2002
|                                                                                      |                                            |                     |        |              |  |             |        | /            |  |     
|Cash payments for interest                                                            |                                            | $                   | 82,000 |              |  | $           | 21,000 |              |  | $    | 6,800 |        |  | / |   | $ | 1,000 |      
|Cash payments for income taxes                                                        |                                            | $                   | 80     |              |  | $           |       |              |  | $    |      |        |  | / |   | $ |      |      
|Supplemental disclosure of non-cash investing
    and financing items: (in thousands) |                                            |                     |        |              |  |             |        |              |  |      |       |        |  |   |   |   |       |      
|                                                                                      | Preferred stock dividends and accretion    |                     | $      | 9,816        |  |             | $      | 10,391       |  |      | $     | 9,570  |  |   | / |   | $     | 2,679 | 
|                                                                                      | Gain on extinguishments of preferred stock |                     | $      |             |  |             | $      |             |  |      | $     | 80,346 |  |   | / |   | $     |      | 

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

F-8



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

1.     Organization
and Chapter 11 Emergence

Metrocall Holdings, Inc. together with its
subsidiaries (Metrocall or the Company), is a leading provider
of local, regional and national paging and advanced wireless
data and messaging services in the United States. Through its
nationwide wireless network, Metrocall provides messaging
services to over 1,000 U.S. cities, including the top 100
Standard Metropolitan Statistical Areas.



| |                                                    
| | ---------------------------------------------------
| | Exit from Chapter 11 and Plan of
    Reorganization

On October 8, 2002, (the Effective
Date), Metrocall, Inc. together with its licensing and
operating subsidiaries Metrocall USA Inc. (Metrocall USA),
Advanced Nationwide Messaging Corporation Inc. (ANMC), MSI Inc.
(MSI), McCaw RCC Communications, Inc. (McCaw), and Mobilfone
Service, LP (Mobilfone), (collectively, the Debtors)
emerged from chapter 11 of the U.S. Bankruptcy Code
pursuant to a Joint Plan of Reorganization (the
Plan) that was confirmed by the U.S. Bankruptcy
Court for the District of Delaware, (the Bankruptcy
Court) in an order entered on September 26, 2002.
Metrocall, Inc. and its subsidiaries are referred to herein as
the Predecessor Company for the periods prior to October 8,
2002. The reorganized company, Metrocall Holdings, Inc.,
together with its licensing and operating subsidiaries are
collectively referred to herein as the Reorganized Company for
the period from October 8, 2002 through December 31,
2002.



| |           
| | ----------
| | Background

The Predecessor Companys year ended
December 31, 2001 notes to its consolidated financial
statements indicated that it may not be able to continue as a
going concern. The Company filed voluntary petitions for relief
under chapter 11 on June 3, 2002 (the Petition
Date). The chapter 11 cases were jointly administered
for procedural purposes only before the Bankruptcy Court under
the docket of Metrocall, Inc. Case No. 02-11579. Metrocall
Ventures, Inc. (Ventures), one of the Companys
subsidiaries, did not file a voluntary petition and was not a
party to the chapter 11 cases. From June 3, 2002 until
October 7, 2002, the Debtors operated their businesses as
debtors-in-possession under the Bankruptcy Code.

Chapter 11 is the principal business
reorganization chapter of the Bankruptcy Code. Under
chapter 11, a debtor is authorized to continue to operate
its business in the ordinary course and to reorganize its
business for the benefit of its creditors. In addition to
permitting the rehabilitation of the debtor, section 362 of the
Bankruptcy Code generally provides for an automatic stay of
substantially all judicial, administrative and other actions or
proceedings against a debtor and its property, including all
attempts to collect claims or enforce liens that arose prior to
the commencement of the debtors case under
chapter 11. Also, the debtors may assume or reject
pre-petition executory contracts and unexpired leases pursuant
to section 365 of the Bankruptcy Code and other parties to
executory contracts or unexpired leases being rejected may
assert rejection damage claims as permitted thereunder.

Confirmation and consummation of a plan of
reorganization are the principal objectives of a chapter 11
reorganization case. A plan of reorganization sets forth the
means for satisfying claims against, and interests in, a debtor.
On June 3, 2002, the Predecessor Company filed with the
Bankruptcy Court its Proposed Joint Plan of Reorganization,
which was subsequently amended and supplemented on several
occasions.



| |                    
| | -------------------
| | Summary of the Plan

Upon the effectiveness of its Plan, the Company
implemented a series of operational consolidations and
restructurings pursuant to the Plan, which included the
following:



| |     |                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | Each of ANMC, MSI and Mobilfone were merged with
    and into McCaw and all assets and liabilities of these companies
    were conveyed to McCaw;

F-9



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | Metrocall, Inc. contributed all right, title and
    interest in all of its assets to McCaw other than
    (a) certain intellectual property conveyed to the license
    subsidiary, Metrocall USA, (b) a sufficient amount of cash
    to pay claims and to administer the Metrocall, Inc. estate and
    (c) its ownership interest in Inciscent, Inc., Metrocall
    USA or Ventures. These assets were contributed subject to all
    existing liens in place at that time. McCaw simultaneously
    assumed all of the underlying obligations directly attributable
    to these assets;
|
| | (iii) | Concurrently with the contributions by Metrocall,
    Inc. to McCaw, Metrocall, Inc. contributed certain intellectual
    property (including trademarks, trade names, and copyrights) to
    Metrocall USA. Immediately thereafter, Metrocall USA entered
    into a license agreement with McCaw for the use of the FCC
    licenses and other intellectual property; and                                                                                                                                                                                                                  
|
| | (iv)  | Metrocall, Inc., McCaw and Metrocall USA each
    reorganized and continued in operations pursuant to the Plan.
    Following the mergers and capital contributions described above,
    McCaw and Metrocall USA each reincorporated under the laws of
    the State of Delaware with amended and restated certificates of
    incorporation and by-laws, McCaw was renamed Metrocall, Inc. and
    the registrant, as reorganized, was renamed Metrocall Holdings,
    Inc.                                                                                                                 

The reorganized and reincorporated entities are
as follows: Metrocall Holdings, Inc. (HoldCo.,
formerly Metrocall, Inc.), Metrocall, Inc. (OpCo.,
formerly McCaw) and Metrocall USA, Inc.
(LicenseCo.), respectively.

The Companys Plan provided for separate
classes of claims and interests for creditors and equity holders
of each of the Debtors. Distributions to creditors of the
Debtors have commenced and include, among other distributions:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | The execution by OpCo. of a $60.0 million
    senior secured promissory note and the related loan and security
    agreements in favor of the Debtors senior lenders (under
    our former pre-petition $133.0 million senior secured
    credit facility the Old Credit Facility). OpCo. is
    the direct borrower of the senior lenders as a result of the
    reorganization described above while LicenseCo. together with
    HoldCo. and Ventures each have guaranteed the senior secured
    note. The guaranty of HoldCo. is secured by a pledge of its
    stock and ownership interests in LicenseCo., as well as a pledge
    of its stock and ownership interests in OpCo., Ventures and
    Inciscent, Inc.
|
| | (ii)  | The execution by HoldCo. of $20.0 million
    secured Paid-in-Kind PIK promissory notes and the
    related loan and security agreements in favor of the senior
    lenders. LicenseCo. and Ventures each have guaranteed the
    secured PIK notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (iii) | The payment by OpCo. to all holders of allowed
    general unsecured claims against any of the consolidated
    operating subsidiaries of 100% of such allowed claims in cash or
    pursuant to any other such arrangement that has been agreed to
    between the parties;                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (iv)  | Cash distributions to holders of allowed tax
    priority claims, administrative claims and convenience claims;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (v)   | The distribution by HoldCo. of 5,300,000 shares
    of new Series A Preferred Stock (Series A
    Preferred), representing 88.3% of the preferred stock to
    be issued and $53.0 million of the total $60.0 million
    initial liquidation preference to holders of the allowed claims
    of the senior lenders;                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (vi)  | HoldCo. beginning November 18, 2002, and
    through interim distributions thereafter (to give effect to
    resolutions of disputed claims), will distribute to the holders
    of allowed general unsecured claims against Metrocall, Inc.
    500,000 shares of the new Series A Preferred, representing
    8.3% of the preferred stock to be issued and $5.0 million
    of the $60.0 million initial liquidation preference;                                                                                                                                                                                                                                                                                          

F-10



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (vii)  | The issuance by HoldCo. of the remaining 3.4% of
    new Series A Preferred, or 200,000 shares, representing
    $2.0 million of the $60.0 million initial liquidation
    preference for distribution to the Metrocalls senior
    executives subject to and in connection with their respective
    new employment agreements with HoldCo. and OpCo.; and                                                                                                                                                                                                                                                                                                                                                             
|
| | (viii) | The issuance by HoldCo. of 420,000 shares of its
    new common stock, representing 42% of the shares to be issued,
    to the allowed claims of the senior lenders (subject to ratable
    dilution for the issuance of restricted stock and options to
    employees of OpCo. not to exceed 7%) and, beginning
    November 18, 2002 and thereafter (to give effect to
    resolutions of disputed claims) 580,000 shares of its new common
    stock, representing 58% of the total shares to be issued, to the
    allowed holders of general unsecured claims against Metrocall,
    Inc. (subject to ratable dilution for the issuance of restricted
    stock and options to employees of OpCo. not to exceed 7%).

Holders of the Predecessor Companys
preferred and common stock outstanding prior to the confirmation
date of the Plan received no distributions under the Plan. Such
shares of stock were canceled pursuant to the Plan.



| |                                  
| | ---------------------------------
| | Risks and Other Important Factors

Metrocall is subject to risks and uncertainties
including but not limited to competition; reliance on the
advanced messaging network of another provider; satellite
transmission failures; subscriber turnover; dependence on key
management personnel and regulatory changes.

In February 2003, the Companys Board of
Directors approved a plan to reorganize the corporate
management, sales distribution function and several other
support functions. The Company expects to recognize severance
and related expenses of approximately $5.8 million in the
three months ended March 31, 2003 related to the reduction
of approximately 300 employee positions.

2.     Basis of
Presentation

The Reorganized Companys consolidated
financial statements for the period October 8, 2002 to
December 31, 2002 have been prepared in accordance with the
American Institute of Certified Public Accountants Statement of
Position Financial Reporting by Entities in Reorganization
under the Bankruptcy Code (SOP 90-7), which
provides guidance for financial reporting by entities that have
filed petitions under the Bankruptcy Code and have reorganized
in accordance with the Bankruptcy Code.

As a result of the application of fresh start
accounting, Metrocalls financial results for the twelve
months ended December 31, 2002 include two different bases
of accounting and, accordingly, the operating results and cash
flows of Reorganized Company and the Predecessor Company are
separately presented. The Reorganized Companys financial
statements are not comparable with those of the Predecessor
Companys.

The accompanying consolidated financial
statements of the Reorganized Company include the accounts of
Metrocall Holdings, Inc. and its wholly-owned subsidiaries
Metrocall, Inc; Metrocall Ventures, Inc., which holds a majority
interest in Beacon Peak Associates, Ltd. (Beacon
Peak) and other limited partnership or LLC interests; and
Metrocall USA, Inc. a non-operating wholly-owned subsidiary that
holds certain regulatory licenses issued by the Federal
Communications Commission and other intellectual property.

The accompanying consolidated financial
statements of the Predecessor Company include the accounts of
Metrocall, Inc. and its wholly owned operating subsidiaries
McCaw RCC Communications, Advanced Nationwide Messaging
Corporation, Mobilfone Service LP, Metrocall Ventures, Inc. and
Metrocall USA, Inc. Please refer to Note 1 for a discussion
of the reorganization of certain of these entities.

All significant inter-company transactions have
been eliminated in consolidation.

F-11



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

3.     Fresh Start
Accounting

Pursuant to SOP 90-7, the fair value of the
Reorganized Company on October 8, 2002, which was
determined to be approximately $123.5 million, was
allocated to long term debt and equity. The fair value was based
on a discounted cash flow analysis utilizing cash flow
projections through 2006 pursuant to the Plan. These cash flows
were discounted at a discount rate of 25%.

In accordance with SOP 90-7, the reorganization
value of the Reorganized Company allocated to assets was
determined to be $193.6 million, which includes the fair
value of the Reorganized Companys long-term debt and
equity plus the fair value of the current and other liabilities
at the date of emergence of $70.1 million. Under SOP 90-7,
the reorganization value was allocated to its tangible and
identifiable intangible assets in accordance with Statement of
Financial Accounting Standards (SFAS) No. 141
Business Combinations and liabilities, including
debt, were recorded at their net present values.

The effects of the Plan and the application of
fresh start accounting as defined by SOP 90-7 on the
Predecessor Companys unaudited consolidated balance sheet
through October 7, 2002 is set forth below. It reflects the
pro forma effect of the cancellation of indebtedness and
predecessor equity under the Plan, the debt and equity
consideration issued under the Plan and the application of fresh
start accounting. The balance sheet should be reviewed in
conjunction with the corresponding notes and the audited
consolidated financial statements contained elsewhere herein.

F-12



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |        |        | 
|---------------------------------------- | --------------------------------------------------------- | ---------------------------- | -------- | --------------- | ------- | --------------- | ------- | --------------- | -------- | - | ------ | ------- | ------- | - | ------- | ------ | ------ | 
|                                         |                                                           |                              |          | Debt, Preferred |         |                 |         |                
|                                         |                                                           | Predecessor                  |          | and Common      |         |                 |         | Reorganized    
|                                         |                                                           | Company                      |          | Stock           |         | Fresh Start     |         | Company        
|                                         |                                                           | October 7, 2002              |          | Discharge (a)   |         | Adjustments (b) |         | October 7, 2002
|                                         |                                                           |                              |          |                 |         |                 |         |                
|Assets                                   |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|Current assets:                          |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         | Cash and cash equivalents                                 |                              | $        | 52,170          |         |                 | $       |                |          |   | $      | (10,499 | )       |   | $       | 41,671 |       
|                                         | Restricted cash                                           |                              |          | 0               |         |                 |         |                |          |   |        | 10,499  |         |   |         | 10,499 |       
|                                         | Accounts receivable, net                                  |                              |          | 24,169          |         |                 |         |                |          |   |        |        |         |   |         | 24,169 |       
|                                         | Prepaid expenses and other current assets                 |                              |          | 9,121           |         |                 |         |                |          |   |        | (4,709  | )       |   |         | 4,412  |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         | Total current assets                                      |                              |          | 85,460          |         |                 |         |                |          |   |        | (4,709  | )       |   |         | 80,751 |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|Property and equipment:                  |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         | Land, buildings and leasehold improvements                |                              |          | 6,784           |         |                 |         |                |          |   |        | (3,594  | )       |   |         | 3,190  |       
|                                         | Furniture, office equipment and vehicles                  |                              |          | 62,970          |         |                 |         |                |          |   |        | (42,752 | )       |   |         | 20,218 |       
|                                         | Paging and plant equipment                                |                              |          | 134,221         |         |                 |         |                |          |   |        | (77,112 | )       |   |         | 57,109 |       
|                                         | Less  accumulated depreciation and
    amortization      |                              |          | (111,416        | )       |                 |         |                |          |   |        | 111,416 |         |   |         |       |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         |                                                           | Total property and equipment |          |                 | 92,559  |                 |         |                 |         |   |        |         | (12,042 | ) |         |        | 80,517 | 
|Intangible and other assets, net         |                                                           |                              | 6,829    |                 |         |                 |         |                 |          |   | 25,482 |         |         |   | 32,311  |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         |                                                           | $                            | 184,848  |                 |         | $               |        |                 |          | $ | 8,731  |         |         | $ | 193,579 |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|Liabilities and Stockholders
    Equity |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|Current liabilities:                     |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         | Current maturities of long-term debt                      |                              | $        | 920             |         |                 | $       | 23,000          |          |   | $      |        |         |   | $       | 23,920 |       
|                                         | Accrued expenses and other current liabilities            |                              |          | 43,815          |         |                 |         |                |          |   |        | (765    | )       |   |         | 43,050 |       
|                                         | Deferred revenues and subscriber deposits                 |                              |          | 17,282          |         |                 |         |                |          |   |        | (3,692  | )       |   |         | 13,590 |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         | Total current liabilities not subject to
    compromise   |                              |          | 62,017          |         |                 |         | 23,000          |          |   |        | (4,457  | )       |   |         | 80,560 |       
|                                         | Liabilities subject to compromise                         |                              |          | 881,580         |         |                 |         | (871,714        | )        |   |        | (9,866  | )       |   |         |       |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         |                                                           | Total current liabilities    |          |                 | 943,597 |                 |         |                 | (848,714 | ) |        |         | (14,323 | ) |         |        | 80,560 | 
|Long-term liabilities:                   |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         | Long-term debt, less current maturities                   |                              |          | 1,107           |         |                 |         | 54,000          |          |   |        |        |         |   |         | 55,107 |       
|                                         | Other long term liabilities                               |                              |          | 492             |         |                 |         |                |          |   |        | 12,518  |         |   |         | 13,010 |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         | Total long-term liabilities not subject to
    compromise |                              |          | 1,599           |         |                 |         | 54,000          |          |   |        | 12,518  |         |   |         | 68,117 |       
|                                         | Liabilities subject to compromise                         |                              |          | 6,700           |         |                 |         |                |          |   |        | (6,700  | )       |   |         |       |       
|Redeemable Preferred Stock (c)           |                                                           |                              | 80,346   |                 |         |                 | (33,903 | )               |          |   |       |         |         |   | 46,443  |       
|Stockholders equity/(deficit)           |                                                           |                              | (847,394 | )               |         |                 | 828,617 |                 |          |   | 17,236 |         |         |   | (1,541  | )     
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       
|                                         |                                                           | $                            | 184,848  |                 |         | $               |        |                 |          | $ | 8,731  |         |         | $ | 193,579 |       
|                                         |                                                           |                              |          |                 |         |                 |         |                 |          |   |        |         |         |   |         |       



---



|    |                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | To record the discharge or reclassification of
    prepetition obligations related to debt, preferred stock and
    equity and the issuance of new debt, preferred stock and equity
    (valued at $77.0 million, $46.4 million, and $0,
    respectively).

F-13



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | To record fresh start adjustments to reflect
    assets and liabilities at fair value, including the
    reclassification of cash reserved for payment of administrative
    expenses, general unsecured claims of subsidiaries and tax
    claims to restricted cash.
|   
|(c) | The $33.9 million preferred stock discharge
    represents $80.3 million extinguishment of preferred stock
    of the Predecessor Company, net of $46.4 million fair value
    of preferred stock issued by Reorganized Company.                                      

4.     Significant
Accounting Policies



| |                                                                
| | ---------------------------------------------------------------
| | Use of Estimates in the Preparation of
    Financial Statements

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



| |                    
| | -------------------
| | Revenue Recognition

Metrocall recognizes revenue under service,
rental and maintenance agreements with customers as the related
services are performed. Metrocall leases (as lessor) pagers and
messaging devices under operating leases. Substantially all the
leases are on a month-to-month basis. Advance billings for
services are deferred and recognized as revenue when earned.
Sales of one-way paging and ancillary equipment are recognized
upon delivery. The company bundles the sale of two-way paging
equipment with the related service and recognizes the revenue
and related cost of sales over the expected customer
relationship, which the company estimates is one year.



| |            
| | -----------
| | Credit Risk

Metrocalls assets that are exposed to
credit risk primarily consist of its accounts receivable.
Accounts receivable are due from customers, resellers, and
governmental entities located in the United States. The carrying
value of accounts receivable, net of the allowance for doubtful
accounts, approximates fair value.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash and cash equivalents consist primarily of
investments, all having maturities of ninety days or less when
purchased. The carrying amount reported in the accompanying
balance sheets for cash equivalents approximates fair value due
to the short-term maturity of these instruments.



| |                
| | ---------------
| | Restricted Cash

In accordance with the Plan, the Company had
approximately $8.5 million of cash balances restricted for
payment of administrative, disputed general unsecured claims of
subsidiaries, and, disputed tax claims related to the chapter 11
proceedings at December 31, 2002.



| |                              
| | -----------------------------
| | Reserve for Doubtful Accounts

Estimates are used in determining the reserve for
doubtful accounts and are based on historical collection
experience, current trends and a percentage of the accounts
receivable aging categories. In determining these percentages
Metrocall reviews historical write-offs, including comparisons
of write-offs to provisions for doubtful accounts as a
percentage of net revenues; Metrocall compares the ratio of the
reserve to gross receivables to historical levels and Metrocall
monitors collection amounts and statistics.

F-14



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment of the Predecessor Company
was carried at cost less accumulated depreciation. Property and
equipment of the Reorganized Company was stated at fair value as
of the Effective Date of the Plan. Depreciation is computed
using the straight-line method over the following estimated
useful lives:

|                                     |  |       |     | 
|------------------------------------ |  | ----- | --- | 
|                                     |  | Years
|                                     |  |      
|Buildings and leasehold improvements |  |       | 2   | 
|Furniture and office equipment       |  |       | 5-7 | 
|Vehicles                             |  |       | 3   | 
|Subscriber paging equipment          |  |       | 2   | 
|Transmission and plant equipment     |  |       | 7   | 

New pagers and advanced messaging devices are
depreciated using the half-year convention upon acquisition.
Costs to refurbish pagers are charged to service, rent and
maintenance expense. Prior to 2002 these costs were charged to
depreciation expense and such prior year amounts
($16.2 million in 2001 and $13.4 million in 2000) have
been reclassified to conform to the 2002 presentation.
Subscriber equipment sold is recorded in the consolidated
statements of operations at net book value at the date of sale.
Devices leased to customers under operating leases continue to
be depreciated over their remaining useful lives.



| |                  
| | -----------------
| | Intangible Assets

On January 1, 2002, the company fully
adopted the provisions of SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 142 requires that
goodwill and intangible assets with indefinite lives no longer
be amortized but reviewed annually (or more frequently if
impairment indicators arise) for impairment. Intangible assets
that are not deemed to have indefinite lives continue to be
amortized over their useful lives. SFAS No. 142 did not
have an impact on the Predecessor Company in 2002, however prior
years would have been affected  see Note 5. As
part of fresh start accounting, the Reorganized Company recorded
intangible assets including indefinite lived intangibles, and
therefore applied the provisions of SFAS No. 142. However,
the impact of not amortizing such assets was nominal. In
accordance with SFAS No. 142s impairment evaluation,
indefinite lived intangibles will be tested for impairment
annually, in October, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. No such
impairment occurred in 2002. Intangible assets, consisted of the
following at December 31, 2002 (dollars in thousands):

|                                  |  |                   |        |              |  |     |       |           |  |   |        |  |  |  |   | 
|--------------------------------- |  | ----------------- | ------ | ------------ |  | --- | ----- | --------- |  | - | ------ |  |  |  | - | 
|                                  |  |                  
|                                  |  | December 31, 2002
|                                  |  |                  
|                                  |  |                   |        | Amortization
|                                  |  |                   |        | Accumulated  |  |     |       | Period in
|                                  |  | Gross             |        | Amortization |  | Net |       | Years    
|                                  |  |                   |        |              |  |     |       |          
|Customer lists                    |  | $                 | 17,067 |              |  | $   | 1,672 |           |  | $ | 15,395 |  |  |  | 3 | 
|Trademarks, Tradenames and others |  |                   | 5,514  |              |  |     | 276   |           |  |   | 5,238  |  |  |  | 5 | 
|FCC licenses                      |  |                   | 1,123  |              |  |     |      |           |  |   | 1,123  |  |  |  | 0 | 
|                                  |  |                   |        |              |  |     |       |           |  |   |        |  |  |  |   | 
|                                  |  | $                 | 23,704 |              |  | $   | 1,948 |           |  | $ | 21,756 |  |  |  |   | 
|                                  |  |                   |        |              |  |     |       |           |  |   |        |  |  |  |   | 

The amortization expense for intangible assets
for the year ended December 31, 2001 was
$380.3 million. Amortization expense for the Reorganized
Company was $1.9 million for the period from
October 8, 2002 to December 31, 2002. The Predecessor
Company did not record amortization expense for the period from
January 1, 2002 to October 7, 2002 as all intangible
assets of the Predecessor Company were written off during 2001.
Estimated amortization expense for intangible assets for each of
the next five years are as follows (in thousands): $6,791 in
2003; $6,791 in 2004; $5,120 in 2005; $1,103 in 2006 and $827 in
2007.

F-15



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company accounts for long-lived assets in
accordance with the provisions of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. SFAS No. 144 requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Recoverability of assets is measured by comparing the carrying
amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the
assets exceeds their fair value. Assets to be disposed of by
sale are reflected at the lower of their carrying amount or fair
value less cost to sell.



| |                       
| | ----------------------
| | Reorganization Expense

For the period from January 1, 2002 to
October 7, 2002, the company recognized $19.0 million
in reorganization expense. These expenses included
$10.6 million for professional fees related to implementing
our plan of reorganization, $3.2 million for the
termination of approximately 575 positions, and
$4.7 million of facility lease exit costs. Through
December 31, 2002, approximately $14.0 million in
reorganization related cash payments had been made and
$3.5 million were settled through issuances of preferred
and common stock in connection with the Plan of Reorganization.



| |                                                               
| | --------------------------------------------------------------
| | Earnings Per Common Share Available to Common
    Stockholders

Basic earnings per share is computed by dividing
earnings available to common stockholders by the
weighted-average number of common shares outstanding for the
period. Diluted earnings per share is similar to basic earnings
per share, except the weighted-average number of common shares
outstanding is increased to include stock options and warrants,
that dilute earnings. Total stock options outstanding of 6.5 and
7.9 million at December 31, 2000 and 2001,
respectively, and warrants outstanding of 100,000 and 0 at
December 31, 2000 and 2001, respectively, were excluded
from the computation of diluted earnings (loss) per share
because of their anti-dilutive effect. For the period
January 1, 2002 to October 7, 2002, there was no
dilution caused from outstanding stock options of the
Predecessor Company, as the exercise price of all such options
exceeded the average market price of common stock for this
period. There were no stock options or warrants issued by the
Reorganized Company. As a result, the basic and diluted earnings
per share amounts are identical.



| |             
| | ------------
| | Income Taxes

Metrocall utilizes the asset and liability method
of accounting for income taxes. Under this method, deferred
income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities, less valuation allowances, if required.



| |                                            
| | -------------------------------------------
| | Accounting for Stock Based
    Compensation

The Predecessor Company accounted for employee
stock options using the method of accounting prescribed by
Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees, and the associated interpretations using the
intrinsic method. Generally, no expense is recognized related to
the companys stock options because the options
exercise price is set at the stocks fair market value on
the date the option is granted. The Predecessor Company followed
the disclosure requirements of SFAS No. 123,
Accounting for Stock Compensation.

The Reorganized Company has not issued employee
stock options. The Reorganized Company will account for employee
stock options using the fair value method of accounting
prescribed by SFAS No. 123.

F-16



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                  
| | -----------------
| | Reclassifications

Certain reclassifications have been made to the
prior year financial statements to conform to the 2002
presentation.



| |                               
| | ------------------------------
| | New Accounting Pronouncements:

In April 2002, the Financial Accounting Standards
Board (FASB) issued Statement No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. The primary impact of this Statement is to
rescind SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, which required that gains and
losses from extinguishment of debt that were included in the
determination of net income be aggregated and, if material,
classified as an extraordinary item.

The provisions of this Statement related to the
rescission of Statement 4 shall be applied in fiscal years
beginning after May 15, 2002. Any gain or loss on
extinguishment of debt that was classified as an extraordinary
item in prior periods presented that does not meet the criteria
in Opinion 30 for classification as an extraordinary item shall
be reclassified.

SOP 90-7 requires that changes in accounting
principles that will be required in the financial statements of
the emerging entity within the twelve months following the
adoption of fresh-start reporting should be adopted at the time
fresh-start reporting is adopted. As a result, Metrocall adopted
SFAS No. 145 as part of fresh start accounting, resulting
in the reclassification of gains from the extinguishment of debt
($22,876,000 in 2000 and $749,821,000 in the period
January 1, 2002 to October 7, 2002).

In connection with its implementation of fresh
start accounting, the Company also adopted SFAS 143,
Accounting for Asset Retirement Obligations. This
statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The
purpose of this statement is to develop consistent accounting
for asset retirement obligations and related costs in financial
statements and provide more information about future cash
outflows, leverage and liquidity regarding retirement
obligations and the gross investment in long-lived assets. The
Company leases approximately 5,000 transmitter locations, many
of which require it to remove its transmitting equipment and
deliver the leased premises back to the landlord at the sites
pre-installation condition upon expiration or early termination
of the lease agreement. At October 7, 2002, the Company
recognized a $3.1 million asset and liability for the
estimated fair value of this retirement obligation. For the
period from October 8, 2002 to December 31, 2002
accretion expense was $0.1 million. There were no
liabilities incurred or settled for the period from
October 8, 2002 to December 31, 2002. If SFAS
143 had been adopted in 2000, the impact on the
accompanying financial statements as of December 31, 2001
and for each of the two years in the period then ended and the
period from January 1, 2002 to October 7, 2002 would
not have been significant.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. This Statement addresses financial accounting
and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring). Statement 146 had no impact on the
Company.

On December 31, 2002, the FASB issued
SFAS 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an
amendment of FASB Statement No. 123. This Statement amends
FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. This Statement had no
impact on the Company. No options have been issued for the
Reorganized Company.

F-17



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                  
| | -----------------
| | Segment Reporting

Metrocall operates in one reportable segment.

5.     Long Lived
Assets

All long-lived assets are reviewed for impairment
on a periodic basis and whenever events or changes in
circumstances indicate that the carrying amount should be
reviewed. Impairment is determined by comparing the net book
value to the estimated undiscounted future cash flows expected
to result from use of the assets and their eventual disposition.
For the period October 8, 2002 to December 31, 2002,
Metrocall determined that no impairment existed.

The Company adopted SFAS 142, Goodwill
and Other Intangible Assets as required on January 1,
2002. SFAS 142 requires that goodwill and intangible assets
with indefinite lives no longer be amortized but reviewed at
least annually for impairment. The adoption of SFAS 142 had
no impact on the period January 1, 2002 to October 7,
2002 (as no intangible assets existed during that period) and
had nominal impact in the period from October 8, 2002 to
December 31, 2002. However, prior years would have been
impacted under SFAS 142. As of January 1, 2000, the
Predecessor Company had goodwill balances related to acquired
companies of approximately $132.6 million, with useful
lives of up to ten years. The Predecessor Company had no
intangible assets with indefinite lives except for its FCC
licenses. The following provides pro forma disclosure of the
elimination of goodwill and FCC license amortization as if the
Predecessor Company had adopted the SFAS in 2000:

|                                                                                           |                                                         |      |          |        |  |   |          |         |  
|------------------------------------------------------------------------------------------ | ------------------------------------------------------- | ---- | -------- | ------ |  | - | -------- | ------- | -
|                                                                                           |                                                         | 2000 |          | 2001  
|                                                                                           |                                                         |      |          |       
|Reported net loss                                                                          |                                                         | $    | (214,554 | )      |  | $ | (612,809 | )      
|                                                                                           | Add back of goodwill and FCC amortization               |      |          | 46,146 |  |   |          | 24,347  |  
|                                                                                           | Write-off unamortized goodwill and FCC
    amortization |      |          |       |  |   |          | (70,493 | )
|                                                                                           |                                                         |      |          |        |  |   |          |        
|Adjusted net loss                                                                          |                                                         | $    | (168,408 | )      |  | $ | (658,955 | )      
|                                                                                           |                                                         |      |          |        |  |   |          |        
|Reported loss per common share attributable to
    common stockholders  basic and diluted |                                                         | $    | (3.00    | )      |  | $ | (6.93    | )      
|                                                                                           | Add back goodwill amortization                          |      |          | 0.60   |  |   |          | 0.27    |  
|Write-off unamortized goodwill and FCC
    amortization                                    |                                                         |      |         |        |  |   | (0.78    | )      
|                                                                                           |                                                         |      |          |        |  |   |          |        
|Adjusted net loss per share  basic and
    diluted                                        |                                                         | $    | (2.40    | )      |  | $ | (7.44    | )      
|                                                                                           |                                                         |      |          |        |  |   |          |        

The Predecessor Companys reported net loss
for 2001 includes a write down of all remaining goodwill and
acquired FCC license balances of $297.6 million. Had the
Predecessor Company adopted SFAS 142 in 2000, net loss for
2001 would have been impacted by the additional write-down of
unamortized goodwill and FCC license balances which would not
have been amortized in 2000.

In June, 2001, the Predecessor Company reviewed
the carrying value of its long lived assets for impairment.
Factors that indicated an impairment may have occurred during
this period included a continued reduction in revenues and
operating cash flows, the termination of its merger agreement
with Weblink Wireless Inc. (Weblink) and continuing competitive
industry and economic conditions. Based on its analysis, which
indicated the net book value of such assets exceeded the
estimated undiscounted future cash flows expected from such
assets over their remaining useful lives, the Predecessor
Company determined that a write-down of $279.7 million to
the carrying value of its intangible assets was necessary.

The estimated fair value of the long-lived assets
was determined by estimating future discounted cash flows of
such assets over their remaining useful lives. The amount of the
write down has been reported in

F-18



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

amortization expense on the accompanying
statements of operations of the Predecessor Company. The amount
of the write down affected the carrying value of the following
intangible assets. ($s in thousands):

|                                    |  |            |         | 
|----------------------------------- |  | ---------- | ------- | 
|Description                         |  | Write Down
|                                    |  |           
|Goodwill                            |  | $          | 107,007 | 
|State certificates and FCC licenses |  |            | 172,698 | 
|                                    |  |            |         | 
|                                    |  | $          | 279,705 | 
|                                    |  |            |         | 

In December 2001, the Predecessor Company again
reviewed the carrying value of its long-lived assets for
impairment. Factors that indicated an impairment had occurred in
this period included a greater than expected decline in actual
and expected future recurring traditional revenues and
subscribers and a slower than expected growth rate in its
advanced messaging business. Based on its analysis, the
Predecessor Company wrote down the carrying value of its
long-lived assets by approximately $108.3 million to their
estimated fair value, which was determined by estimating future
discounted cash flows of such assets over their remaining useful
lives. The amount of the write down was reported in depreciation
and amortization expenses on the accompanying statements of
operations of the Predecessor Company. The amount of the write
down affected the carrying value of the following assets.
($s in thousands):

|                        |                                     |                            |   |        |         | 
|----------------------- | ----------------------------------- | -------------------------- | - | ------ | ------- | 
|Description             |                                     | Write Down                
|                        |                                     |                           
|Intangible Assets:      |                                     |                            |   |       
|                        | State certificates and FCC licenses |                            | $ | 17,877 |        
|                        | Customer lists                      |                            |   | 7,415  |        
|                        | Other                               |                            |   | 907    |        
|                        |                                     |                            |   |       
|                        |                                     | Total amortization expense |   | $      | 26,199  | 
|                        |                                     |                            |   |       
|Property and Equipment: |                                     |                            |   |       
|                        | Paging and plant equipment          |                            | $ | 74,521 |        
|                        | Building and leasehold improvements |                            |   | 7,509  |        
|                        |                                     |                            |   |       
|                        |                                     | Total depreciation expense |   | $      | 82,030  | 
|                        |                                     |                            |   |       
|                        |                                     | Total Impairment           |   | $      | 108,229 | 
|                        |                                     |                            |   |       

F-19



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

6.     Supplementary
Balance Sheet Information

Prepaid expenses and other current assets and
accrued expenses and other current liabilities consist of (in
thousands):

|                                               |                                                     |              |   |       |        |  |   |        |        | 
|---------------------------------------------- | --------------------------------------------------- | ------------ | - | ----- | ------ |  | - | ------ | ------ | 
|                                               |                                                     |             
|                                               |                                                     | December 31,
|                                               |                                                     |             
|                                               |                                                     | 2001         |   | 2002 
|                                               |                                                     |              |   |      
|Prepaid expenses and other current
    assets: |                                                     |              |   |       |        |  |   |       
|                                               | Deferred cost of sales                              |              | $ | 6,737 |        |  | $ | 677    |       
|                                               | Inventory                                           |              |   | 1,413 |        |  |   | 571    |       
|                                               | Prepaid rent                                        |              |   | 234   |        |  |   | 3,400  |       
|                                               | Prepaid services                                    |              |   | 468   |        |  |   | 3,076  |       
|                                               | Other                                               |              |   | 2,297 |        |  |   | 2,071  |       
|                                               |                                                     |              |   |       |        |  |   |       
|                                               |                                                     | Total        |   | $     | 11,149 |  |   | $      | 9,795  | 
|                                               |                                                     |              |   |       |        |  |   |       
|                                               | Accrued expenses and other current
    liabilities: |              |   |       |        |  |   |        |       
|                                               | Accrued payroll and payroll taxes                   |              | $ | 9,729 |        |  | $ | 5,650  |       
|                                               | Accrued state and local taxes                       |              |   | 9,670 |        |  |   | 13,520 |       
|                                               | Accrued insurance claims                            |              |   | 1,399 |        |  |   | 1,092  |       
|                                               | Other                                               |              |   | 3,147 |        |  |   | 2,298  |       
|                                               |                                                     |              |   |       |        |  |   |       
|                                               |                                                     | Total        |   | $     | 23,945 |  |   | $      | 22,560 | 
|                                               |                                                     |              |   |       |        |  |   |       

7.     Long-Term
Debt

Long-term debt and capital lease obligations
consisted of the following ($s in thousands)

|                                                                          |  |              |         |      |  |   |        | 
|------------------------------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------ | 
|                                                                          |  |             
|                                                                          |  | December 31,
|                                                                          |  |             
|                                                                          |  | 2001         |         | 2002
|                                                                          |  |              |         |     
|Senior Secured Promissory Note 
    Reorganized Company                  |  | $            |        |      |  | $ | 60,000 | 
|Senior Subordinated PIK Promissory
    Note  Reorganized Company         |  |              |        |      |  |   | 17,869 | 
|Bank Debt  Predecessor Company                                           |  |              | 133,000 |      |  |   |       | 
|Subordinated notes  Predecessor Company                                  |  |              | 625,707 |      |  |   |       | 
|Capital lease obligations at a weighted average
    interest rate of 9.7% |  |              | 2,341   |      |  |   | 1,585  | 
|Other                                                                     |  |              | 301     |      |  |   | 257    | 
|                                                                          |  |              |         |      |  |   |        | 
|                                                                          |  | $            | 761,349 |      |  | $ | 79,711 | 
|Less  Current portion                                                    |  |              | 759,544 |      |  |   | 58,949 | 
|                                                                          |  |              |         |      |  |   |        | 
|Long-term portion                                                         |  | $            | 1,805   |      |  | $ | 20,762 | 
|                                                                          |  |              |         |      |  |   |        | 

As discussed in Note 1, the Debtors filed
voluntary petitions for relief under chapter 11 on the
Petition Date. As further discussed in Note 1, upon
emergence from chapter 11, the debt that the Predecessor
Company had in place prior to the Effective Date was terminated,
discharged, re-instated, modified or assumed.

Under the Plan and as discussed in Note 1,
the Company issued two promissory notes as partial consideration
for amounts outstanding under the Debtors Credit Facility. These
notes included a $60.0 million senior secured promissory
note issued by Metrocall, Inc. and a $20.0 million senior
subordinated PIK promissory note issued by Metrocall Holdings,
Inc. Each note is described below:

Senior Secured Promissory Note (the
Senior Note).The
$60.0 million Senior Note issued by Metrocall, Inc. is
guaranteed by Metrocall Holdings, Inc. and its subsidiaries. The
Senior Note accrues interest at the prime lending rate plus a
margin of 2.875%. Interest payments are made on the last
business day of each month. The final maturity date of the note
is March 31, 2004. The Senior Note is secured by

F-20



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

substantially all of the Companys assets.
The note is required to be repaid on a quarterly basis beginning
in March 2003 according to the following schedule (dollars in
millions):

|                   |       |           |      |      | 
|------------------ | ----- | --------- | ---- | ---- | 
|                   |       | Quarterly
|Payment Dates      |       | Amount   
|                   |       |          
|March 31, 2003     |       | $         | 10.0 |     
|June 30, 2003      |       |           | 7.0  |     
|September 30, 2003 |       |           | 4.0  |     
|December 31, 2003  |       |           | 2.0  |     
|March 31, 2004     |       |           | 37.0 |     
|                   |       |           |      |     
|                   | Total |           | $    | 60.0 | 
|                   |       |           |      |     

Within 5 business days of December 31, 2002
and thereafter within five business days after the end of each
fiscal quarter, the Company is required to make a mandatory
repayment of 100% of its Unrestricted Cash in excess of $10.0
million. To the extent that such mandatory prepayments are made,
the payments will be applied to the scheduled amortization
payments described in the table above in inverse order of
maturity. Unrestricted Cash is cash on hand with Metrocall
Holdings, Inc, Metrocall, Inc. and Metrocall USA, Inc. excluding
(i) cash necessary to make distributions pursuant to the Plan or
to establish reserves as may be required or permitted under the
Plan or otherwise appropriate or (ii) cash encumbered by
permitted liens. The Company has classified $58.0 million
of Senior Notes as a current liability to reflect amounts
required to be repaid in 2003 and a $35.0 million payment
made on January 7, 2003, which was applied against the
payment due March 31, 2004. The Company recorded the Senior
Note at its fair value of $60 million as part of fresh
start accounting.

Senior Subordinated PIK Promissory Note (the
PIK Note).The $20.0
million PIK note issued by Metrocall Holdings, Inc. is
guaranteed by Metrocall USA, Inc. and Metrocall Ventures, Inc.
The note accrues interest at a rate of 12% per annum due
quarterly in arrears by issuance of additional PIK notes until
the Senior Note is fully repaid. Thereafter, interest shall be
due and payable monthly in arrears in cash.

The Company recorded the PIK Note at its
estimated fair value of approximately $17.0 million on
October 7, 2002. The Company recorded approximately
$0.3 million of additional interest expense for the period
October 8, 2002 through December 31, 2002 as it
accretes to the $20.0 million face amount of the initial
PIK Note issued under the Plan. Such accretion is based upon the
effective interest method over the maturity period of the PIK
Note. Effective December 31, 2002, the Company issued
approximately $559,000 in additional PIK Notes to reflect
accrued but unpaid interest on the notes for the period
October 8, 2002 through December 31, 2002.

The maturity date of the note is
December 31, 2004. The PIK note is secured by the
Companys investments in the common stock of its
subsidiaries. Repayment of the PIK Note is on a quarterly basis
beginning in June 2004 according to the following schedule
(dollars in millions):

|                   |       |           |      |      | 
|------------------ | ----- | --------- | ---- | ---- | 
|                   |       | Quarterly
|Payment Dates      |       | Amount   
|                   |       |          
|June 30, 2004      |       | $         | 3.0  |     
|September 30, 2004 |       |           | 2.0  |     
|December 31, 2004  |       |           | 15.6 |     
|                   |       |           |      |     
|                   | Total |           | $    | 20.6 | 
|                   |       |           |      |     

Upon payment in full of the Senior Note and the
end of each quarter thereafter, the Company is required to
reduce the PIK note by an amount equal to 100% of its
Unrestricted Cash (as defined with respect to the senior secured
promissory note) in excess of $10.0 million. This
prepayment shall be payable within five business days of the end
of each such quarter.

F-21



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Under the Senior Note and the PIK Note, the
Company is required to remain in compliance with certain
financial covenants including (i) a ratio of total net debt
to annualized operating cash flow not to exceed the ratio of
1.0:1.0; and, (ii) a ratio of operating cash flow to cash
interest expense that must exceed the ratio of 2.0:1.0 at all
times. In addition, there are limitations on system and pager
device capital expenditures.

From October 8, 2002 through
December 31, 2002, the Company made cash payments of
interest of approximately $1.0 million on the Senior Note.
No cash interest payments were made on the PIK note.

The estimated fair value of the long-term debt
excluding capital lease obligations is listed below. The fair
value of the senior notes and PIK Note is based on discounted
cash flows as of the dates indicated.

|                                     |  |                   |        |       |  |   |        | 
|------------------------------------ |  | ----------------- | ------ | ----- |  | - | ------ | 
|                                     |  |                  
|                                     |  | December 31, 2002
|                                     |  |                  
|                                     |  | Carrying          |        | Fair 
|                                     |  | Amount            |        | Value
|                                     |  |                   |        |      
|Senior and PIK notes                 |  | $                 | 77,310 |       |  | $ | 77,500 | 
|Other                                |  | $                 | 257    |       |  |   | 257    | 
|                                     |  |                   |        |       |  |   |        | 
|Total debt, excluding capital leases |  | $                 | 77,567 |       |  | $ | 77,757 | 
|                                     |  |                   |        |       |  |   |        | 

Prepetition
Bank Debt

The Predecessor Companys indebtedness under
its then existing credit facility consisted of borrowings of
$133.0 million under two loan facilities. Facility A was a
$83.0 million reducing revolving credit facility, and
Facility B was a $50.0 million term loan facility
(collectively, the Old Bank Debt).

The Predecessor Companys credit facility
was terminated and the Predecessor Companys obligations
under Old Bank Debt were canceled in accordance with and upon
confirmation of the Plan in exchange for the distributions to
the senior lenders thereunder, including the Senior Note and PIK
Note referenced above at the time of the Companys
emergence from chapter 11. Metrocall paid interest to the
holders of the Old Bank Debt at the prime lending rate plus an
applicable margin of 2.875% through September 27, 2002.
Prior to cancellation, the interest rates on the Old Bank Debt
ranged from 8.6% to 9.8% in 2000, 6.6% to 9.4% in 2001 and
7.125% to 7.625% in 2002. During 2001 and through
October 7, 2002, no principal payments were made on the Old
Bank Debt.

Prepetition
Subordinated Notes

Under the Plan, claims of holders of the
Subordinated Notes issued by the Predecessor Company (the
Old Subordinated Notes) were satisfied in full by a
distribution of preferred and common stock. As of
December 31, 2001 the Subordinated Notes consisted of the
following ($s in thousands):

|                                              |  |              |         | 
|--------------------------------------------- |  | ------------ | ------- | 
|                                              |  | December 31,
|                                              |  | 2001        
|                                              |  |             
|10 3/8% Senior subordinated notes due in 2007 |  | $            | 134,970 | 
|9 3/4% Senior subordinated notes due in 2007  |  |              | 171,340 | 
|11 7/8% Senior subordinated notes due in 2005 |  |              | 92,968  | 
|11% Senior subordinated notes due in 2008     |  |              | 226,255 | 
|11 7/8% Senior subordinated notes due in 2005 |  |              | 174     | 
|                                              |  |              |         | 
|                                              |  | $            | 625,707 | 
|                                              |  |              |         | 

As of March 15, 2001, the Predecessor
Company suspended the payments of interest due to the holders of
its senior subordinated notes. As of December 31, 2001,
accrued and unpaid interest on the notes was approximately
$81.2 million. As of the Petition Date, the Predecessor
Company, pursuant to SOP 90-7, ceased accruing interest on the
Old Subordinated Notes. If such interest had been accrued
accrued from

F-22



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

January 1, 2002 through the Effective Date,
interest expenses for this period would have been approximately
$24.1 million higher than the amount reported.

The Predecessor Company made cash payments of
interest on long term debt of $82.0 million,
$21.0 million and $6.8 million for the years ended
December 31, 2000 and 2001 and for the period
January 1, 2002 through October 7, 2002 respectively.

During the year ended December 31, 2000, the
Predecessor Company issued approximately 8.6 million shares
of its common stock in exchange for $73.4 million aggregate
principal amount of its outstanding senior subordinated notes.
As a result of these exchanges, the Predecessor Company
recognized a gain of $22.9 million, which represented the
difference between the carrying value of the notes at the time
of the exchange and the fair value of the common stock issued,
less the write-off of a pro-rata portion of the related deferred
financing costs.

8.     Preferred
Stock and Common Stock

General

The authorized capital stock of the Company after
the Effective Date consists of 1.2 million shares of common
stock and 8.5 million shares of Series A Preferred
stock, par value $0.01 per share.

At December 31, 2002, there were 991,398 and
5,992,572 shares of common and Series A Preferred
outstanding, respectively. In addition, approximately 8,602 and
7,428 shares of common and Series A Preferred will be
issued as remaining claims are resolved in accordance with the
Plan.

Prior to the Effective Date, the Predecessor
Company had 89,975,772 outstanding shares of common stock and
321,385 outstanding shares of Series A Preferred that were
cancelled under the Plan on the Effective Date.

In conjunction with the fresh-start accounting,
the historical amounts of Series A Preferred, common stock,
additional paid-in-capital and accumulated deficit of the
Predecessor Company were eliminated as of October 7, 2002.

Preferred
Stock

In connection with the Plan, Metrocall Holdings,
Inc. will issue up to 6.0 million shares of Series A
Preferred with an initial liquidation of $60.0 million or $10.0
per share. The Series A Preferred accrues dividends at a
rate of 15% per annum compounded quarterly. Dividends on the
Series A Preferred accrue (but will not become payable) and
increase the initial liquidation preference until such time as
the Senior Note and PIK Note are repaid in full and thereafter
dividends shall accrue and become payable in cash. As of
December 31, 2002 the liquidation preference per share was
$10.345 per share.

Holders of Series A Preferred have voting
rights which in the aggregate constitute 95% of the total voting
power of Metrocall Holdings, Inc. In the event that any portion
of the Series A Preferred is redeemed by the Company, the
voting rights attributable to each remaining share shall
increase proportionately such that the Series A Preferred
shall continue to hold 95% of the total voting stock of
Metrocall Holdings, Inc. until such time that the Series A
Preferred has been fully redeemed at which time all of the
voting power shall vest with holders of the common stock.

The Series A Preferred is subject to trading
restrictions for two years from and after the Effective Date as
set forth in the Amended and Restated Certificate of
Incorporation of Metrocall Holdings, Inc. The Series A
Preferred Stock shall rank senior to any capital stock of
Metrocall Holdings, Inc. The Company may not, without the
consent of holders of the shares of the Series A Preferred,
authorize or issue parity or senior stock or any obligation or
security convertible or exchangeable into, or evidencing a right
to purchase shares of any

F-23



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

class or series of parity or senior stock. The
terms parity or senior stock includes warrants, rights, calls or
options exercisable for or convertible into that type of stock.

In the event of any sale or merger with respect
to all or substantially all of the assets of Metrocall Holdings,
Inc., or any liquidation, dissolution or winding up of the
Company, the holders of the Series A Preferred shall
receive payment of the then current liquidation preference of
the Series A Preferred, together with any and all accrued
and unpaid dividends not included or then added to the
liquidation preference, before any payments to holders of any
other capital stock of the Company.

After repayment of the Senior and PIK Notes, the
Series A Preferred will be redeemed on a pro-rata basis,
together with any and all unpaid accrued dividends to the
redemption date on a quarterly basis by an amount equal to 100%
of Unrestricted Cash (as defined with respect to the senior
secured promissory note) over $10.0 million. All of the
shares of the Series A Preferred will be redeemed on or
before the later of December 31, 2006 or 180 days after the
date that the PIK Note is paid in full, whichever is later. The
Company is accreting the Series A Preferred Stock, which
was recorded at fair value of $46.4 million on
October 7, 2002, to its redemption value.

In connection with its Plan, the Company issued
200,000 shares of its Series A Preferred stock on the
Effective Date to certain of its executives subject to a
three-year restriction period. The awards were recorded at fair
value on the date of grant, with a corresponding amount recorded
as unearned compensation. The unearned compensation is being
amortized over the restriction period. The Reorganized Company
recognized approximately $ 0.1 million of compensation expense
in the period from October 8, 2002 to December 31,
2002 related to the stock awards.

Common
Stock

Holders of the common stock have voting rights
which in the aggregate constitute 5% of the total voting power
of Metrocall Holdings, Inc. until the Series A Preferred
has been fully redeemed. Dividend payments on common stock are
not permitted until the Senior and PIK Notes are paid in full
and the Series A Preferred is redeemed.

Due to FCC limitations on the foreign ownership
of FCC licenses, no more than 20 percent of the
Companys common stock may, in the aggregate, be owned
directly, or voted by a foreign government, a foreign
corporation, or resident of a foreign country. The
Companys amended and restated certificate of incorporation
permits the redemption of the common stock from stockholders,
where necessary, to protect its regulatory licenses. Such stock
may be redeemed at fair market value or, if the stock was
purchased within one year of such redemption, at the lower of
fair market value or such holders purchase price.

9.     Employee Stock
Option and Other Benefit Plans

Stock
Option Plans

In connection with the Plan, approximately 7% of
the shares of common stock issuable under the Plan have been
reserved for issuance to employees or directors of the Company
in the form of stock options. As of December 31, 2002, no
options or restricted stock had been issued. In addition, no
formalized stock or option plan had been adopted.

The Predecessor Company terminated its stock
option plans in April 2002 and all outstanding options were
cancelled as of October 7, 2002. No options had been
granted or exercised in 2001 or during 2002 through
October 7, 2002.

F-24



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Employee
Stock Purchase Plan

The Predecessor Company terminated the Metrocall,
Inc. 1996 Employee Stock Purchase Plan in August 2001.

Profit
Sharing Plan and Retirement Benefits

The Metrocall, Inc. Savings and Retirement Plan
(the Plan), a combination employee savings plan and
discretionary profit-sharing plan, is open to all employees
working a minimum of twenty hours per week with at least six
months of service. The Plan qualifies under section 401(k) of
the Internal Revenue Code (the IRC). Under the Plan,
participating employees may elect to voluntarily contribute on a
pretax basis between 1% and 15% of their salary up to the annual
maximum established by the IRC. Metrocall has agreed to match
50% of the employees contribution, up to 4% of each
participants gross salary. Contributions made by Metrocall
vest 20% per year beginning on the second anniversary of the
participants employment. Other than Metrocalls
matching obligations, discussed above, profit sharing
contributions are discretionary. Metrocalls matching
contributions under the Plan recorded were $1.5 million,
$1.7 million and $1.1 million for the years ended
December 31, 2000, 2001 and 2002, respectively.

Metrocall,
Inc. Severance Plan

The Metrocall, Inc. Severance Pay Plan for
Regular Employees (the Severance Plan) provides for
severance payments on a discretionary basis for full and
part-time regular employees who are terminated involuntarily,
for reasons other than their own and under specific
circumstances. The Severance Plan constitutes a formal Employee
Welfare Benefit Plan under the Employee Retirement Income
Security Act of 1974, as amended. Under the Severance Plan, the
severance benefit shall be the equivalent of two weeks
compensation for each full year of service with the Company, up
to a maximum of twenty-six (26) weeks compensation, less
all sums owed by the participant to the Company. Severance
amounts paid under this plan were $429,278, $1,531,708, and
$3,175,091 for the years ended December 31, 2000, 2001 and
2002, respectively.

Metrocall,
Inc. Key Employee Retention Plan

The Metrocall, Inc. Key Employee Retention Plan
(the KERP) was established by the Companys
Board of Directors in 2001 to promote the long-term financial
interests of the Company and its stockholders by providing key
employees with an incentive to remain employed with the Company
so they can actively perform their duties with full attention
and dedication while a Retention Event or Change in Control of
the Company is pending. Under the KERP, a Retention Event means
the first to occur of the following: (1) the date a Change
in Control occurs; or (2) there is consummated an exchange
or series of exchanges of at least $250 million in accreted
value of the Companys notes for the Companys equity
securities. For purposes of the KERP, a Change in Control means
the first to occur of the following: (1) acquisition of
more than 50% of the combined voting power of the Companys
then outstanding securities that have a right to vote for the
election of directors; (2) there is consummated a merger,
consolidation or other business combination of the Company,
other than (i) a merger, consolidation or business
combination which would result in the voting securities of the
Company outstanding immediately prior to such transaction
continuing to represent a majority of the combined voting power
of the securities having the right to vote for the election of
directors generally of the Company or the surviving entity or
any parent thereof outstanding immediately after such
transaction; (3) there is consummated an agreement for the
sale, lease, or other disposition by the Company of all or
substantially all of the Companys assets, other than a
sale, lease or other disposition by the Company of all or
substantially all of the Companys assets to an entity, at
least a majority of the combined voting power of the outstanding
securities of which are owned by the stockholders of the Company
in substantially the same proportions as their ownership of the
Company immediately prior to such sale; or (4) there has
been an entry

F-25



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

by a court of competent jurisdiction of an order
confirming a plan of reorganization of the Company under
chapter 11 of the Bankruptcy Code.

All full time regular employees of the Company
who have been designated as a participant and have had a
retention percentage and severance percentage established by the
Board of Directors may participate. The KERP provides for a
retention bonus benefit to be paid to each participant as they
provide service in the event that a Change in Control occurs.
Such benefit would be paid in four equal installments beginning
within 5-business days after the Change in Control occurs and
each subsequent three-month period. On September 26, 2002,
a Change of Control in the Company occurred, as such the Company
was obligated to pay out a total of $3.6 million over the
four installment periods. Approximately $1.8 million was
expensed under the KERP in 2002 ($0.9 million under
Predecessor Company and $0.9 million under Reorganized
Company) and an additional $1.8 million is expected to be
expensed during 2003 as a result of the change in control.

The KERP also provides for a severance benefit to
each participant in the event that the participants
employment is involuntarily terminated by the Company, the
participant terminates for good reason (as defined
in the KERP) or the Participant dies or becomes disabled during
the 24-consecutive months period immediately following a Change
in Control.

10.     Contingencies
and Commitments

Metrocall is subject to certain legal and
regulatory matters in the normal course of business. In the
opinion of management, the outcome of such assertions will not
have a material adverse effect on the financial position or the
results of the operations of Metrocall.

Lease
Obligations and Other Commitments

Metrocall has various operating lease
arrangements (as lessee) for office space and communications
equipment sites. Rental expenses related to operating leases
were approximately ($s in thousands) $47,547 and $52,704
for the years ended December 31, 2000 and 2001 and
approximately $35,700 and $9,600 for the period January 1,
2002 to October 7, 2002 and October 8, 2002 and
December 31, 2002, respectively.

Minimum rental payments as of December 31,
2002, required under operating leases that have initial or
remaining non-cancelable lease terms in excess of one year are
as follows ($s in thousands): $27,712 in 2003, $21,214 in
2004, $15,122 in 2005, $5,439 in 2006; $2,557 in 2007 and $1,804
thereafter.

The strategic alliance agreement between
Metrocall and Weblink requires, among other things, Weblink to
provide certain service levels in exchange for Metrocall paying
for use on a per unit in service basis. This agreement also
requires, that beginning in October 2004, Metrocall make certain
Engineering payments, as defined in the strategic alliance
agreement, to Weblink totaling approximately $15.0 million
payable ratably in installments over four quarters.

11.     Income
Taxes

As of December 31, 2002, the tax effect of
the net operating loss carryforward, together with net temporary
differences, represents a deferred tax asset for which
management has provided a 100% valuation allowance due to the
uncertainty of future taxable income. The valuation allowance
was reduced by $3 million on December 31, 2002 with a
resulting decrease in intangible assets. Future reductions in
the valuation allowance will first reduce intangibles, and
second, will be credited to paid in capital.

The net operating losses of the Reorganized
Company were substantially reduced due to tax rules regarding
the Cancellation of Indebtedness Income (COD income)
that resulted as part of the Companys reorganization in
Bankruptcy.

F-26



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of December 31, 2002, the Companys
consolidated net operating loss carryforwards were approximately
$44 million, which expire in years 2017 through 2022. This
carryforward may be limited in the event of future changes in
the ownership of the Companys stock.

The components of net deferred tax assets
(liabilities) were as follows as of December 31, 2001
and December 31, 2002 ($s in thousands):

|                          |                                                           |                                |          |             |         |   |          |        |         |  
|------------------------- | --------------------------------------------------------- | ------------------------------ | -------- | ----------- | ------- | - | -------- | ------ | ------- | -
|                          |                                                           | Predecessor                    |          | Reorganized
|                          |                                                           | Company                        |          | Company    
|                          |                                                           |                                |          |            
|                          |                                                           | December                       |          | December   
|                          |                                                           | 2001                           |          | 2002       
|                          |                                                           |                                |          |            
|Deferred tax assets:      |                                                           |                                |          |             |         |   |          |       
|                          | Allowance for doubtful accounts                           |                                | $        | 3,007       |         |   | $        | 2,200  |        
|                          | Management reorganization                                 |                                |          | 429         |         |   |          | 415    |        
|                          | Contributions                                             |                                |          | 314         |         |   |          | 313    |        
|                          | New pagers on hand                                        |                                |          | 479         |         |   |          | 701    |        
|                          | Intangibles                                               |                                |          | 94,238      |         |   |          | 71,565 |        
|                          | Other                                                     |                                |          | 25,758      |         |   |          | 4,153  |        
|                          | Depreciation                                              |                                |          |            |         |   |          | 10,261 |        
|                          | Net operating loss carryforwards                          |                                |          | 179,972     |         |   |          | 16,784 |        
|                          |                                                           |                                |          |             |         |   |          |       
|                          |                                                           | Total deferred tax assets      |          |             | 304,197 |   |          |        | 106,392 |  
|                          |                                                           |                                |          |             |         |   |          |       
|Deferred tax liabilities: |                                                           |                                |          |             |         |   |          |       
|                          | Basis differences attributable to purchase
    accounting |                                |          | (783        | )       |   |          |       |        
|                          | Other                                                     |                                |          | (185        | )       |   |          | (2,680 | )      
|                          |                                                           |                                |          |             |         |   |          |       
|                          |                                                           | Total deferred tax liabilities |          |             | (968    | ) |          |        | (2,680  | )
|Net deferred tax asset    |                                                           |                                | 303,229  |             |         |   | 103,712  |       
|Less: Valuation allowance |                                                           |                                | (303,229 | )           |         |   | (103,712 | )     
|                          |                                                           |                                |          |             |         |   |          |       
|                          |                                                           | $                              |         |             |         | $ |         |       
|                          |                                                           |                                |          |             |         |   |          |       

The income tax benefit for the year ended
December 31, 2000 is primarily the result of the
amortization of the basis differences attributable to purchase
accounting related mergers and acquisitions occurring in 1998
and prior years and is composed of the following ($s in
thousands):

|                               |            |                     |        |              |        |              |   |      |   |   |       |   |   |   |        |   |        |  
|------------------------------ | ---------- | ------------------- | ------ | ------------ | ------ | ------------ | - | ---- | - | - | ----- | - | - | - | ------ | - | ------ | -
|                               |            |                     |        | Reorganized 
|                               |            | Predecessor Company |        | Company     
|                               |            |                     |        |             
|                               |            |                     |        |              |        |             
|                               |            | Year Ended          |        |              |        |             
|                               |            | December 31,        |        | January 1 to |        | October 8 to
|                               |            |                     |        | October 7,   |        | December 31,
|                               |            | 2000                |        | 2001         |        | 2002         |   | 2002
|                               |            |                     |        |              |        |              |   |     
|Income tax (provision) benefit |            |                     |        |              |        |              |   |      |   |   |       |   |   |   |        |  
|                               | Current   |                     |        |              |        |              |   |      |   |   |       |   |   |   |        |   |       
|                               |            | Federal             |        | $            |       |              |   | $    |  |   |       | $ |  |   |        | $ | 5,240  |  
|                               |            | State               |        |              | (180   | )            |   |      |   |   |       |   |   |   |        |   | 1,160  |  
|                               | Deferred  |                     |        |              |        |              |   |      |   |   |       |   |   |   |        |   |       
|                               |            | Federal             |        |              | 18,517 |              |   |      |  |   |       |   |  |   |        |   | (7,700 | )
|                               |            | State               |        |              | 2,438  |              |   |      |  |   |       |   |  |   |        |   | (1,700 | )
|                               |            |                     |        |              |        |              |   |      |   |   |       |   |   |   |        |  
|                               |            | $                   | 20,775 |              |        | $            |  |      |   | $ | 7,000 |   |   | $ | (3,000 | )
|                               |            |                     |        |              |        |              |   |      |   |   |       |   |   |   |        |  

F-27



---



##### 



METROCALL HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The effective tax rate reconciliation is shown
below.

|                                               |  |                     |       |              |  |              |       |      |  |  |       |   |  |  |      |  
|---------------------------------------------- |  | ------------------- | ----- | ------------ |  | ------------ | ----- | ---- |  |  | ----- | - |  |  | ---- | -
|                                               |  |                     |       | Reorganized 
|                                               |  | Predecessor Company |       | Company     
|                                               |  |                     |       |             
|                                               |  |                     |       |              |  |             
|                                               |  | Year Ended          |       |              |  |             
|                                               |  | December 31,        |       | January 1 to |  | October 8 to
|                                               |  |                     |       | October 7,   |  | December 31,
|                                               |  | 2000                |       | 2001         |  | 2002         |       | 2002
|                                               |  |                     |       |              |  |              |       |     
|Statutory Federal income tax rate              |  |                     | 35.0  | %            |  |              | 35.0  | %    |  |  | 35.0  | % |  |  | 35.0 | %
|Effect of graduated rates                      |  |                     | (1.0  | )            |  |              | (1.0  | )    |  |  | (1.0  | ) |  |  | (1.0 | )
|State income taxes, net of Federal tax benefit |  |                     | 4.6   |              |  |              | 4.6   |      |  |  | 4.6   |   |  |  | 4.6  |  
|Change in valuation allowance                  |  |                     | (23.3 | )            |  |              | (14.9 | )    |  |  |      |   |  |  | (0.3 | )
|Permanent differences                          |  |                     | (6.7  | )            |  |              | (23.7 | )    |  |  | (38.6 | ) |  |  |     |  
|                                               |  |                     |       |              |  |              |       |      |  |  |       |   |  |  |      |  
|                                               |  |                     | 8.6   | %            |  |              | 0.0   | %    |  |  | 0.0   | % |  |  | 38.3 | %
|                                               |  |                     |       |              |  |              |       |      |  |  |       |   |  |  |      |  

Metrocall made cash payments for income taxes of
$80,000 in 2000 and $0 in 2001 and 2002, respectively.

12.     Unaudited
Quarterly Financial Data

The following table of unaudited quarterly
financial data has been prepared from the financial records of
Metrocall, without audit, and reflects all adjustments that are,
in the opinion of management, necessary for a fair presentation
of the results of operations for the interim periods presented
($s in thousands, except per share amount). All periods
reflect results of the Predecessor Company, except the
December 31, 2002 period, which reflects Reorganized
Company results.

|                                                                  |  |          |         |         |  |              |         |             |  |      |          |            |  |         |         |         |  |   |         |   |  |   |           |   |  |   |          |   |  |   |        | 
|----------------------------------------------------------------- |  | -------- | ------- | ------- |  | ------------ | ------- | ----------- |  | ---- | -------- | ---------- |  | ------- | ------- | ------- |  | - | ------- | - |  | - | --------- | - |  | - | -------- | - |  | - | ------ | 
|                                                                  |  |          |         |         |  |              |         |            
|                                                                  |  | March 31 |         | June 30 |  | September 30 |         | December 31
|                                                                  |  |          |         |         |  |              |         |            
|                                                                  |  | 2001     |         | 2002    |  | 2001(d)      |         | 2002        |  | 2001 |          | 2002(a)(c) |  | 2001(d) |         | 2002(b)
|                                                                  |  |          |         |         |  |              |         |             |  |      |          |            |  |         |         |        
|Revenues                                                          |  | $        | 131,019 |         |  | $            | 112,068 |             |  | $    | 127,280  |            |  | $       | 106,485 |         |  | $ | 126,737 |   |  | $ | 102,316   |   |  | $ | 118,637  |   |  | $ | 85,403 | 
|Income/(loss) from operations                                     |  | $        | (35,281 | )       |  | $            | (9,508  | )           |  | $    | (326,412 | )          |  | $       | 2,655   |         |  | $ | (22,461 | ) |  | $ | (1,632    | ) |  | $ | (120,161 | ) |  | $ | 9,349  | 
|Income /(loss) attributable to common stockholders                |  | $        | (59,721 | )       |  | $            | (32,029 | )           |  | $    | (351,665 | )          |  | $       | (22,729 | )       |  | $ | (48,448 | ) |  | $ | 1,402,259 |   |  | $ | (163,366 | ) |  | $ | 5,137  | 
|Earnings/(loss) per share attributable to common
    stockholders |  | $        | (0.66   | )       |  | $            | (0.36   | )           |  | $    | (3.91    | )          |  | $       | (0.25   | )       |  | $ | (0.54   | ) |  | $ | 14.98     |   |  | $ | (1.82    | ) |  | $ | 2.16   | 




The sum of the per share amounts may not equal
the annual amounts because of the changes in the
weighted-average number of shares outstanding during the year.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Predecessor Company September 30, 2002
    results include the period from October 1, 2002 to
    October 7, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(b) | Reorganized Company December 31, 2002
    results include the period from October 8, 2002 to
    December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(c) | Income (loss) attributable to common
    stockholders for the September 30, 2002 period includes
    several items related to our emergence from the chapter 11
    proceedings and the related cancellation or discharge of certain
    of our debt obligations and equity securities. These items
    include: a net gain of $749.8 million from the discharge
    and termination of debt; a net gain of $575.5 million due
    to fresh-start accounting adjustments; a gain of
    $80.3 million from the cancellation of outstanding
    Preferred Stock; and the cessation of recording contractual
    interest of $64.4 million while we were operating in
    bankruptcy from June 3, 2002 to the Effective Date.
|(d) | Results for the periods ended June 30, 2001
    and December 31, 2001 were negatively impacted by asset
    writedowns discussed in Note 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-28



---



##### 



SCHEDULE II

METROCALL HOLDINGS, INC. AND
SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2000 and
2001


and the periods from January 1, 2002 to
October 7, 2002


and October 8, 2002 to December 31,
2002


(In Thousands)


|                                        |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |       | 
|--------------------------------------- | ------------------------------- | ---------- | - | ---------- |  | ------------ | - | -------------- |  | ---------- | - | ----- |  |  | - | ------ |  |  | - | ----- | 
|                                        |                                 |            |   |            |  |              |   |               
|                                        |                                 |            |   | Additions  |  |              |   |               
|                                        |                                 |            |   |            |  |              |   |               
|                                        |                                 | Balance at |   | Charged to |  |              |   |                |  | Balance at
|                                        |                                 | Beginning  |   | Costs and  |  |              |   |                |  | End of    
|Description                             |                                 | of Year    |   | Expenses   |  | Acquired (1) |   | Deductions (2) |  | Year      
|                                        |                                 |            |   |            |  |              |   |                |  |           
|Predecessor Company                     |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|Year ended December 31, 2000            |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|                                        | Allowance for doubtful accounts |            | $ | 7,103      |  |              | $ | 17,441         |  |            | $ | 897   |  |  | $ | 19,947 |  |  | $ | 5,494 | 
|                                        |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|Year ended December 31, 2001            |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|                                        | Allowance for doubtful accounts |            | $ | 5,494      |  |              | $ | 20,393         |  |            | $ | 1,946 |  |  | $ | 20,297 |  |  | $ | 7,536 | 
|                                        |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|January 1  October 7, 2002             |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|                                        | Allowance for doubtful accounts |            | $ | 7,536      |  |              | $ | 13,578         |  |            |   |      |  |  | $ | 14,440 |  |  | $ | 6,674 | 
|                                        |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|Reorganized Company                     |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|October 8, 2002 
    December 31, 2002 |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      
|                                        | Allowance for doubtful accounts |            | $ | 6,674      |  |              | $ | 1,744          |  |            |   |      |  |  | $ | 1,905  |  |  | $ | 6,513 | 
|                                        |                                 |            |   |            |  |              |   |                |  |            |   |       |  |  |   |        |  |  |   |      



---



|    |                                                            
|--- | -----------------------------------------------------------
|(1) | Allowance for doubtful accounts of businesses
    acquired.
|   
|(2) | Deductions represent write-offs of accounts
    receivable.

S-1