** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q**

** **

| **(Mark One)**                                                                                                |
|---------------------------------------------------------------------------------------------------------------|
| ý                                                                                                        | ** ** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                          | ** ** | ** ** |
| **For the  quarterly period ended: December 31, 2004**                                                   |
| ** **                                                                                                    |
| **or**                                                                                                        |
| ** **                                                                                                    |
| o                                                                                                             | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                    |
| **For the  transition period from      to      ** |

 

**CommissionFile Numbers 333-117942; 333-117944**

 

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**iPCS****, INC.**

(ExactName of Registrant as Specified in Its Charter)

 
| **Delaware**                                                     | ** ** | **36-4350876**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State  or other jurisdiction of incorporation or  Organization) |       | (I.R.S.  Employer Identification No.) |
|                                                             |       |                                  |
| **1901 N. Roselle Road, Schaumburg, Illinois**                   | ** ** | **60195**                             |
| (Address  of Principal Executive Offices)                        |       | (Zip  Code)                           |

 

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Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes o  No ý

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Act). Yes o  No ý

 

Indicate by check markwhether the registrant has filed all documents and reports required to be filedby Section 12, 13 or15(d) of the Securities Exchange Act of 1934 subsequent to thedistribution of securities under a plan confirmed by a court. Yes ý  No o

 

As of February 7, 2005,there were 8,827,619 shares of common stock, $0.01 par value per share,outstanding.

 

 

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**TABLE OFCONTENTS**

 
| PART I                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                    | 3  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|
| ITEM 1.                                                                                                                                                                                       | FINANCIAL INFORMATION...............................................................................................................................                                                                                                                                                                    | 3  |
|                                                                                                                                                                                          | FINANCIAL STATEMENTS.................................................................................................................................                                                                                                                                                                   | 3  |
|                                                                                                                                                                                          | CONSOLIDATED BALANCE SHEETS  AS OF DECEMBER 31, 2004 AND SEPTEMBER 30, 2004 (SUCCESSOR COMPANY)  (UNAUDITED).......................................................................................................                                                                                                     | 3  |
|                                                                                                                                                                                          | CONSOLIDATED  STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2004  (SUCCESSOR COMPANY) AND DECEMBER 31, 2003 (PREDECESSOR COMPANY) (UNAUDITED)....................................................................................................................................................... | 4  |
|                                                                                                                                                                                          | CONSOLIDATED  STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2004  (SUCCESSOR COMPANY) AND DECEMBER 31, 2003 (PREDECESSOR COMPANY) (UNAUDITED)....................................................................................................................................................... | 5  |
|                                                                                                                                                                                          | NOTES  TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                   | 6  |
| ITEM 2.                                                                                                                                                                                       | MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................................................................................................................                                                                     | 16 |
| ITEM 3.                                                                                                                                                                                       | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................................                                                                                                                                                                                                                      | 29 |
| ITEM 4.                                                                                                                                                                                       | CONTROLS  AND PROCEDURES.......................................................................................................................                                                                                                                                                                         | 29 |
| PART II                                                                                                                                                                                       | OTHER  INFORMATION.......................................................................................................................................                                                                                                                                                               | 31 |
| ITEM 1.                                                                                                                                                                                       | LEGAL PROCEEDINGS.......................................................................................................................................                                                                                                                                                                | 31 |
| ITEM 2.                                                                                                                                                                                       | UNREGISTERED SALES OF  EQUITY SECURITIES AND USE OF PROCEEDS..........................................                                                                                                                                                                                                                  | 31 |
| ITEM 3.                                                                                                                                                                                       | DEFAULTS UPON SENIOR SECURITIES..........................................................................................................                                                                                                                                                                               | 31 |
| ITEM  4.                                                                                                                                                                                      | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................................                                                                                                                                                                                                         | 31 |
| ITEM 5.                                                                                                                                                                                       | OTHER INFORMATION.......................................................................................................................................                                                                                                                                                                | 31 |
| ITEM  6.                                                                                                                                                                                      | EXHIBITS...............................................................................................................................................................                                                                                                                                                 | 31 |
| SIGNATURES................................................................................................................................................................................... | 32                                                                                                                                                                                                                                                                                                                      |
| CERTIFICATIONS...........................................................................................................................................................................     |                                                                                                                                                                                                                                                                                                                    |

 

2

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**PART I****. FINANCIAL INFORMATION**

 

**ITEM 1****.****FINANCIAL STATEMENTS**

** **

**iPCS****, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(UNAUDITED)**

**(Dollars in thousands, except per share amounts)**

 
| ** **                                                                                                      | ** **              | **Successor  Company** | ** ** | **Successor  Company** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|-------------------------|------------------------|------------|------------------------|------------|
| **December 31,  2004**                                                                                          | **September 30,  2004** |
|                                                                                                            |                    |                   |       |                   |       |
| **Assets**                                                                                                      |                    |                   |       |                   |       |
| Current Assets:                                                                                                 |                    |                   |       |                   |       |
| Cash and cash  equivalents                                                                                      |                    | $                      | 59,958     |                   | $          | 57,760 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $2,034 and $1,217,  respectively                |                    | 14,184                 |       | 14,772                 |       |
| Receivable from  Sprint (Note 5)                                                                                |                    | 12,640                 |       | 13,264                 |       |
| Inventories, net  of reserves for excess/obsolescence of $87 and $50, respectively (Note 5)                     |                    | 1,657                  |       | 1,310                  |       |
| Prepaid expenses                                                                                                |                    | 3,419                  |       | 3,127                  |       |
| Other current  assets                                                                                           |                    | 98                     |       | 21                     |       |
| Total current  assets                                                                                           |                    | 91,956                 |       | 90,254                 |       |
| Property and  equipment, net (Note 7)                                                                           |                    | 119,818                |       | 134,931                |       |
| Financing costs                                                                                                 |                    | 6,534                  |       | 6,497                  |       |
| Customer  activation costs                                                                                      |                    | 628                    |       | 451                    |       |
| Intangible  assets, net of accumulated amortization of $6,099 and $3,051, respectively  (Note 8)           |                    | 75,813                 |       | 78,861                 |       |
| Other assets                                                                                                    |                    | 1,147                  |       | 1,314                  |       |
| Total assets                                                                                                    |                    | $                      | 295,896    |                   | $          | 312,308 |   |
|                                                                                                            |                    |                   |       |                   |       |
| **Liabilities and Stockholders’ Equity  (Deficiency)**                                                     |                    |                   |       |                   |       |
| Current  Liabilities:                                                                                           |                    |                   |       |                   |       |
| Accounts payable                                                                                                |                    | $                      | 3,894      |                   | $          | 2,742 |   |
| Accrued expenses                                                                                                |                    | 13,853                 |       | 20,880                 |       |
| Payable to  Sprint (Note 5)                                                                                     |                    | 22,626                 |       | 24,404                 |       |
| Deferred revenue                                                                                                |                    | 5,886                  |       | 5,764                  |       |
| Current  maturities of long-term debt and capital lease obligations (Note 9)                                    |                    | 8                      |       | 7                      |       |
| Total current  liabilities                                                                                      |                    | 46,267                 |       | 53,797                 |       |
| Customer  activation fee revenue                                                                                |                    | 628                    |       | 451                    |       |
| Other long-term  liabilities                                                                                    |                    | 2,251                  |       | 3,614                  |       |
| Long-term debt  and capital lease obligations, excluding current maturities (Note 9)                            |                    | 165,397                |       | 165,400                |       |
| Total  liabilities                                                                                              |                    | 214,543                |       | 223,262                |       |
|                                                                                                            |                    |                   |       |                   |       |
| Commitments and  contingencies (Note 14)                                                                        |                    | —                 |       | —                 |       |
|                                                                                                            |                    |                   |       |                   |       |
| Stockholders’  Equity (Deficiency):                                                                        |                    |                   |       |                   |       |
| Preferred stock,  par value $.01 per share; 25,000,000 shares authorized; none issued                           |                    | —                 |       | —                 |       |
| Common stock,  par value $.01 per share; 75,000,000 shares authorized, 8,744,164 shares  issued and outstanding |                    | 87                     |       | 87                     |       |
| Additional  paid-in-capital                                                                                     |                    | 95,275                 |       | 95,275                 |       |
| Unearned  compensation                                                                                          |                    | (317                   | )          | (340                   | )          |
| Accumulated  deficiency                                                                                         |                    | (13,692                | )          | (5,976                 | )          |
| Total stockholders’  equity                                                                                |                    | 81,353                 |       | 89,046                 |       |
| Total  liabilities and stockholders’ equity                                                                |                    | $                      | 295,896    |                   | $          | 312,308 |   |

 

Seenotes to consolidated financial statements (unaudited).

 

3

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**iPCS****, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

**(Dollars in thousands, except share data)**

 
| ** **                                                                                                                                                                    | ** **                                         | **Successor Company** | ** ** | **Predecessor Company** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------|-----------------------|------------|-------------------------|------------|
| **For the Three Months  Ended December 31,  2004**                                                                                                                            | **For the Three Months  Ended December 31,  2003** |
| ** **                                                                                                                                                                    | ** **                                         | ** **            | ** ** | ** **              | ** ** |
| **Revenues:**                                                                                                                                                                 |                                               |                  |       |                    |       |
| Service revenue                                                                                                                                                               |                                               | $                     | 38,585     |                    | $          | 34,628 |   |
| Roaming revenue                                                                                                                                                               |                                               | 15,748                |       | 12,080                  |       |
| Equipment and  other                                                                                                                                                          |                                               | 1,664                 |       | 1,352                   |       |
| Total revenues                                                                                                                                                                |                                               | 55,997                |       | 48,060                  |       |
| **Operating  Expenses:**                                                                                                                                                      |                                               |                  |       |                    |       |
| Cost of service  and roaming (exclusive of depreciation, as shown separately below)                                                                                           |                                               | (29,602               | )          | (28,470                 | )          |
| Cost of  equipment                                                                                                                                                            |                                               | (5,720                | )          | (5,063                  | )          |
| Selling and  marketing                                                                                                                                                        |                                               | (10,026               | )          | (6,162                  | )          |
| General and  administrative                                                                                                                                                   |                                               | (1,993                | )          | (904                    | )          |
| Reorganization  expense (Note 4)                                                                                                                                              |                                               | —                |       | (1,788                  | )          |
| Non-cash stock  compensation expense (In 2005, $8 related to cost of service and roaming, $10  related to general and administrative and $5 related to selling and marketing) |                                               | (23                   | )          | —                  |       |
| Depreciation                                                                                                                                                                  |                                               | (8,459                | )          | (9,525                  | )          |
| Amortization of  intangible assets (Note 8)                                                                                                                                   |                                               | (3,048                | )          | —                  |       |
| Gain (loss) on  disposal of property and equipment                                                                                                                            |                                               | (13                   | )          | 2                       |       |
| Total operating  expenses                                                                                                                                                     |                                               | (58,884               | )          | (51,910                 | )          |
| **Operating  loss**                                                                                                                                                           |                                               | (2,887                | )          | (3,850                  | )          |
| Interest income                                                                                                                                                               |                                               | 137                   |       | 27                      |       |
| Interest expense                                                                                                                                                              |                                               | (4,974                | )          | (2,329                  | )          |
| Other income                                                                                                                                                                  |                                               | 8                     |       | 2                       |       |
| **Net  loss**                                                                                                                                                                 |                                               | $                     | (7,716     | )                       | $          | (6,150 | ) |
|                                                                                                                                                                          |                                               |                  |       |                    |       |
| Basic and  diluted loss per share of common stock                                                                                                                             |                                               |                  |       |                    |       |
| Loss available  to common stockholders                                                                                                                                        |                                               | $                     | (0.83      | )                       | n/a        |   |
|                                                                                                                                                                          |                                               |                  |       |                    |       |
| Weighted average  common shares outstanding                                                                                                                                   |                                               | 9,269,166             |       | n/a                     |       |

 

Seenotes to consolidated financial statements (unuadited).

 

4

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**iPCS****, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

**(In thousands)**

 
| ** **                                                                                          | ** **                                         | **Successor Company** | ** ** | **Predecessor Company** | ** ** |
|-----------------------------------------------------------------------------------------------------|----------------------------------------------------|-----------------------|------------|-------------------------|------------|
| **For the Three Months  Ended December 31,  2004**                                                  | **For the Three Months  Ended December 31,  2003** |
| **Cash  Flows from Operating Activities:**                                                          |                                               |                  |       |                    |       |
| Net loss                                                                                            |                                               | $                     | (7,716     | )                       | $          | (6,150 | ) |
| Adjustments to  reconcile net loss to net cash flows from operating activities:                     |                                               |                  |       |                    |       |
| (Gain) loss on  disposal of property and equipment                                                  |                                               | 13                    |       | (2                      | )          |
| Depreciation                                                                                        |                                               | 8,459                 |       | 9,525                   |       |
| Amortization of  intangible assets                                                                  |                                               | 3,048                 |       | —                  |       |
| Amortization of  financing costs                                                                    |                                               | 217                   |       | 144                     |       |
| Reorganization  expense                                                                             |                                               | —                |       | 55                      |       |
| Non-cash stock  compensation                                                                        |                                               | 23                    |       | —                  |       |
| Provision for  doubtful accounts                                                                    |                                               | 820                   |       | 295                     |       |
| Changes in  assets and liabilities:                                                                 |                                               |                  |       |                    |       |
| Accounts  receivable                                                                                |                                               | (232                  | )          | 3,674                   |       |
| Receivable from  Sprint                                                                             |                                               | 624                   |       | 388                     |       |
| Inventories, net                                                                                    |                                               | (347                  | )          | (324                    | )          |
| Prepaid  expenses, other current and long term assets                                               |                                               | (469                  | )          | 292                     |       |
| Accounts  payable, accrued expenses and other long term liabilities                                 |                                               | (6,875                | )          | 530                     |       |
| Payable to  Sprint                                                                                  |                                               | (1,779                | )          | 437                     |       |
| Deferred revenue                                                                                    |                                               | 299                   |       | (586                    | )          |
| Net cash flows  from operating activities                                                           |                                               | (3,915                | )          | 8,278                   |       |
| **Cash  Flows from Investing Activities:**                                                          |                                               |                  |       |                    |       |
| Purchases of  property and equipment                                                                |                                               | (5,771                | )          | (2,578                  | )          |
| Proceeds from  disposition of property and equipment                                                |                                               | 12,139                |       | 24                      |       |
| Net cash flows  from investing activities                                                           |                                               | 6,368                 |       | (2,554                  | )          |
| **Cash  Flows from Financing Activities:**                                                          |                                               |                  |       |                    |       |
| Repayments under  senior credit facilities                                                          |                                               | —                |       | (81                     | )          |
| Debt financing  and other                                                                           |                                               | (255                  | )          | —                  |       |
| Net cash flows  from financing activities                                                           |                                               | (255                  | )          | (81                     | )          |
| Net increase in  cash and cash equivalents                                                          |                                               | 2,198                 |       | 5,643                   |       |
| **Cash  and cash equivalents at beginning of period**                                               |                                               | 57,760                |       | 17,654                  |       |
| **Cash  and cash equivalents at end of period**                                                     |                                               | $                     | 59,958     |                    | $          | 23,297 |   |
| **Supplemental  disclosure of cash flow information - cash paid for interest**                      |                                               | $                     | 9,540      |                    | $          | 3,297 |   |
| **Supplemental  disclosure for non-cash investing activities:**                                     |                                               |                  |       |                    |       |
| Accounts payable  incurred for the acquisition of property, equipment and construction in  progress |                                               | 337                   |       | 2,079                   |       |

 

Seenotes to consolidated financial statements (unaudited).

 

5

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**iPCS****, INC. ANDSUBSIDIARIES**

**NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

 

**(1)  Business and Basis of Presentation**

 

iPCS, Inc.and subsidiaries (collectively, the “Company” or “iPCS”) were created for thepurpose of becoming a leading provider of wireless Personal CommunicationServices (“PCS”). On January 22, 1999, the Company entered into amanagement and related agreements with Sprint Corporation (“Sprint”) whereby itbecame a network partner of Sprint with the exclusive right to market andprovide Sprint PCS products and services under the Sprint and Sprint PCS brandnames in 16 markets in Illinois and Iowa. The Sprint agreements were subsequentlyamended in March 2000, February 2001, April 2004, July 2004and November 2004. With these five amendments, the number of markets increasedto forty and the size of the Company’s territory was increased from a totalpopulation of 2.8 million residents to 7.8 million residents. OnNovember 30, 2001, AirGate PCS, Inc. (“AirGate”), a network partnerof Sprint providing service in North Carolina, South Carolina, and Georgia,acquired iPCS in a tax-free stock transaction. iPCSwas designated as an unrestricted subsidiary of AirGate and both companiesoperated as separate business entities. Due to restrictions in AirGate’sindenture governing its outstanding notes, AirGate was not permitted to providefunding or financial support to iPCS. On February 23, 2003, the Companyand its subsidiaries filed for Chapter 11 bankruptcy protection (the “Filing”)in the United States Bankruptcy Court for the Northern District of Georgia (the“Bankruptcy Court”) (see Note 3). On March 31, 2004, the Company andits subsidiaries filed its Joint Plan of Reorganization with the BankruptcyCourt and subsequently amended it on April 16, 2004 and May 25, 2004(the “Plan of Reorganization”). On July 9, 2004, the Plan ofReorganization was approved by the Bankruptcy Court and was declared effectiveon July 20, 2004.

 

The unaudited condensedconsolidated financial statements included herein include the accounts ofiPCS, Inc. and its subsidiaries, iPCS Wireless, Inc. and iPCSEquipment, Inc. In accordance with the American Institute of CertifiedPublic Accountants Statement of Position 90-7, Financial Reporting by Entitiesin Reorganization under the Bankruptcy Code, the Company adopted fresh-startaccounting as of July 1, 2004, and the Company’s emergence from Chapter 11resulted in a new reporting entity. The periods as of and prior to July 1,2004 have been designated “Predecessor Company” and the periods subsequent toJuly 1, 2004 have been designated as “Successor Company.” Under fresh-startaccounting, the reorganization equity value of the company was allocated to theassets and liabilities based on their respective fair valuesand was in conformity with SFAS No. 141 “Business Combinations.” Asa result of the implementation of fresh-start accounting, the financialstatements of the Company after the effective date are not comparable to theCompany’s financial statements for prior periods. The unaudited consolidatedbalance sheet as of December 31, 2004, the unaudited consolidated statements ofoperations for the three months ended December 31, 2004 and 2003, the unauditedconsolidated statements of cash flows for the three months ended December 31,2004 and 2003 and related footnotes have been prepared in accordance withaccounting principles generally accepted in the United States of America forinterim financial information and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements. The financialinformation presented herein should be read in conjunction with the Company’s2004 Annual Report on Form 10-K.  Allsignificant intercompany accounts and transactions have been eliminated inconsolidation. In the opinion of management, the unaudited consolidatedfinancial statements contain all of the adjustments, consisting only of normalrecurring adjustments, necessary to present fairly, in summarized form, theconsolidated financial position, results of operations and cash flows of the Company.  The results of operations for the threemonths ended December 31, 2004, are not indicative of the results that may beexpected for the full fiscal 2005.

 

The PCS market ischaracterized by significant risks as a result of rapid changes in technology,increasing competition and the cost associated with continued upgrades to, andmaintenance of, the portion of the Sprint PCS network in our territory. TheCompany’s continuing operations are dependent upon Sprint’s ability to performits obligations under the Sprint Agreements. In addition, the Company must beable to attract and maintain a sufficient customer base and achievesatisfactory growth while successfully managing operations to generate enoughcash from operations to meet future obligations. Changes in technology,increased competition, or the inability to obtain required financing or achievebreak-even operating cash flow, among other factors, could have an adverseeffect on the Company’s financial position and results of operations.  With the net proceeds from the offering ofthe senior notes approved by the Plan of Reorganization and subject to theCompany’s ability to manage subscriber growth and achieve operatingefficiencies, cash and cash equivalents, combined with cash flows from operations,are expected to be sufficient to fund any operating losses and working capitaland to meet capital expenditure needs and debt service requirements for theforeseeable future.

 

6

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**(2)  Summary of Significant Accounting Policies**

 

*Loss PerShare:*

 

Basic and diluted lossper share for the Successor Company are calculated by dividing the net lossavailable to common stockholders by the weighted average number of shares ofcommon stock of the Company. Pursuant to the Company’s Plan of Reorganization,8.6 million shares were distributed to its unsecured creditors on theeffective date and the remaining 0.4 million shares held in reserve willbe distributed upon resolution of disputed claims. The full nine million shareswere used in the calculation of weighted average shares. The calculation wasmade in accordance with SFAS No. 128, “Earnings PerShare.” The basic and diluted loss per share are thesame because the inclusion of the incremental potential common shares from anyassumed exercise of stock options is antidilutive. Per share information is notpresented for the Predecessor Company as it is not meaningful.

 

Potential common sharesexcluded from the loss per share computations were 620,500 stock options becausethey were antidilutive.

 

*New Accounting Pronouncements*

* *

In December 2004,the FASB issued SFAS No. 123 (Revised 2004) “Share-Based Payment” (“SFASNo. 123R”) that addresses the accounting for share-based paymenttransactions in which a Company receives employee services in exchange for(a) equity instruments of the Company or (b) liabilities that arebased on the fair value of the Company’s equity instruments or that may besettled by the issuance of such equity instruments. SFAS No. 123Raddresses all forms of share-based payment awards, including shares issuedunder employee stock purchase plans, stock options, restricted stock and stockappreciation rights. SFAS No. 123R eliminates the ability to account forshare-based compensation transactions using APB Opinion No. 25, “Accountingfor Stock Issued to Employees”, that was provided in Statement 123 asoriginally issued. Under SFAS No. 123R companies are required to recordcompensation expense for all share based payment award transactions measured atfair value. This statement is effective for quarters beginning afterJune 15, 2005. The Company has not yet determined the impact of applyingthe various provisions of SFAS No. 123R.

 

(**3)  Plan ofReorganization**

 

On February 23,2003, the Company and its subsidiaries made the Filing in the Bankruptcy Court.On this same date, the Company filed an action against Sprint alleging thatSprint had breached its agreements with the Company, causing it severefinancial damage. The Company continued to operate as adebtor-in-possession.  As part of itsplan of reorganization, on March 22, 2004, the Bankruptcy Court authorizedthe Company to proceed with an offering of new senior notes and the executionof related agreements, to issue a preliminary and final offering memorandum,and to use cash collateral to pay expenses and interest to be funded intoescrow related to the new senior notes.

 

On March 31, 2004,the Company filed the Plan of Reorganization with the Bankruptcy Court and amendedit on April 16, 2004 and May 25, 2004. On April 17, 2004, theCompany filed with the Bankruptcy Court a disclosure statement summarizing thePlan of Reorganization that was subsequently amended on May 26, 2004. OnMay 27, 2004, there was a hearing in Bankruptcy Court that approved theadequacy of the disclosure statement.

 

The Bankruptcy Courtconfirmed the Plan of Reorganization on July 9, 2004 and it was declaredeffective on July 20, 2004. The significant terms of the Plan ofReorganization are as follows:

 

•                  The net proceeds from the offering of $165.0 millionin aggregate principal amount of 11.5% senior notes were used to pay off infull the balance outstanding under the Company’s then existing senior creditfacility. The remaining net proceeds were used by the Company to satisfy allother secured claims, administrative and other priority claims and unsecuredconvenience claims and will be used in the future for general corporatepurposes.

 

•                  All of the Company’s subordinated claims weredischarged and all of its existing capital stock was cancelled.

 

•                  The Company issued 8.6 million shares of newcommon stock to the Company’s general unsecured creditors in satisfaction andretirement of their claims. An additional 0.4 million shares are held inreserve to be issued upon resolution of the outstanding disputed claims. TheCompany believes that the resolution of the disputed claims will

 

7

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not have a material effect on the Company’sconsolidated financial statements. An additional one million shares werereserved for issuance to certain members of the Company’s management, directorsand other employees.

 

•                  The Company assumed its affiliation agreements, asamended, with Sprint; settled all claims by and between the Company and Sprint,which resulted in the write-off of all pre-petition claims, as set forth in thesettlement agreement and mutual release; and paid Sprint approximately$5.1 million in full and complete satisfaction of the Company’s obligationto cure defaults under its affiliation agreements with Sprint.

 

•                  The Company assumed all contracts and leases thathad not been previously rejected.

 

•                  Timothy M. Yager was appointed as president andchief executive officer.

 

•                  Four new directors were appointed to the Company’sboard of directors.

 

•                  The Plan of Reorganization released (a) all ofthe Company’s officers, directors and employees, in each case, as of the dateof the commencement of the hearing on the disclosure statement; (b) theCompany’s creditors’ committee and all of its members, in their respectivecapacities as such; (c) the trustee under the indenture for the Company’sthen existing senior discount notes, in its capacity as such; (d) thelenders under the Company’s senior credit facility, in their capacities as such;(e) the agent for the lenders under the Company’s then existing seniorcredit facility, in its capacity as such; (f) the holders of the thenexisting senior discount notes, in their capacity as such; and (g) withrespect to each of the above-named persons, such person’s present affiliates,principals, employees, agents, officers, directors, financial advisors,attorneys and other professionals, in their capacities as such.

 

The Company’s emergencefrom Chapter 11 proceedings resulted in a new reporting entity with theadoption of fresh-start accounting in accordance with the SOP 90-7. Pursuant toSOP 90-7, the accounting for the effects of the reorganization occurred as ofthe confirmation date because there were no remainingconditions precedent to the effectiveness of the plan as of theJuly 9, 2004 confirmation date. For accounting purposes, the Companyapplied fresh-start accounting as of July 1, 2004, because the results ofoperations for the eight days through July 9, 2004 did not have a materialimpact on the reorganized company’s financial position, results of operationsand cash flows. The estimated reorganization equity value of the Company of$95.0 million, which served as the basis for the Plan of Reorganizationapproved by the Bankruptcy Court, was used to determine the value allocated tothe assets and liabilities of the Reorganized Company in proportion to theirfair values and is in conformity with SFAS No. 141 “Business Combinations.”The reorganization equity value was determined utilizing appraisals, commonlyused discounted cash flow valuation methods and selected price earningsmultiples of publicly-traded companies similar to the Company to determine therelative fair values of the Company’s assets and liabilities. Factors takeninto consideration included projected revenue growth, market and industrygrowth rates, competition and general economic conditions, working capital andcapital expenditure requirements. Changes to the values allocated to the assetsand liabilities of the Reorganized Company are not expected to be material.

 

**(4)  Reorganization Expense**

 

Reorganization expense inthe statement of operations for the three months ended December 31, 2003 wascomprised of professional fees and other costs related to the bankruptcy filing.

 

**(5)  Sprint Agreements**

 

Under the Sprintagreements, Sprint provides the Company significant support services such ascustomer service, billing, long distance transport services, national networkoperations support, inventory logistics support, use of the Sprint and SprintPCS brand name, national advertising, national distribution and productdevelopment. Additionally, the Company derives substantial roaming revenue whenSprint’s and other PCS Affiliates of Sprint’s wireless customers incur minutesof use in the Company’s territories and incurs expense to Sprint and to otherPCS Affiliates of Sprint when the Company’s customers incur minutes of use inSprint’s and other PCS Affiliates of Sprint’s territories. The expense isrecorded in the cost of service and roaming and in the selling and marketingdetail lines within the statement of operations. Cost of service and roamingtransactions with Sprint include the 8% affiliation fee, long distance, roamingexpenses, billing support and customer care support. Cost of equipment relatesto inventory sold by the Company that was purchased from Sprint under theSprint agreements. Selling and marketing transactions relate to subsidizedcosts on wireless handsets and commissions under Sprint’s national distributionprogram.

 

8

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Sprint is a serviceprovider for a significant portion of technical, marketing and administrativefunctions. These functions include billing, customer care, credit andcollections, network operations support, inventory logistics handling, longdistance transport and marketing and design of the products and services theCompany sells. In addition, Sprint collects payments from customers, andaccording to the terms of the Sprint agreements, remits to the Company itspercentage of these revenues, net of the 8% affiliation fee. Because theCompany derives substantial revenues and expenses from Sprint and Sprint PCS,should Sprint be unable to provide these services, the Company could benegatively impacted.

 

For both the three monthsended December 31, 2004 and 2003, 97% of the Company’s revenue was derivedfrom data provided by Sprint. Of the Company’s cost of service and roaming, 70%and 65% for the three months ended December 31, 2004, and 2003, respectively,was derived from data provided by Sprint. The Company reviews all charges fromSprint and disputes certain of these charges in cases where the Company doesnot receive enough supporting detail to validate the charges or it does notbelieve Sprint can charge the Company for certain expenses under the terms ofthe Sprint agreements.  At December 31,2004 and September 30, 2004, the Company had $0.2 million and$0.1 million, respectively, in disputed charges.

 

Amounts relating to theSprint agreements for the three months ended December 31, 2004 and 2003 are asfollows (in thousands):

 
| ** **                                                          | ** **                                 | **Successor  Company** | ** ** | **Predecessor  Company** | ** ** |
|---------------------------------------------------------------------|--------------------------------------------|------------------------|------------|--------------------------|------------|
| **Three Months  Ended  December 31, 2004**                          | **Three Months  Ended  December 31, 2003** |
| **Amounts  included in the Consolidated Statements of Operations:** | ** **                                 | ** **             | ** ** | ** **               | ** ** |
| Service revenue                                                     |                                       | $                      | 38,585     |                     | $          | 34,628 |   |
| Roaming revenue                                                     |                                       | $                      | 15,748     |                     | $          | 12,080 |   |
| Cost of service  and roaming:                                       |                                       |                   |       |                     |       |
| Roaming                                                             |                                       | $                      | 9,839      |                     | $          | 7,404 |   |
| Customer service                                                    |                                       | 5,588                  |       | 4,007                    |       |
| Affiliation fees                                                    |                                       | 3,054                  |       | 2,886                    |       |
| Long distance                                                       |                                       | 1,580                  |       | 2,076                    |       |
| Other                                                               |                                       | 676                    |       | 2,115                    |       |
| Total cost of  service and roaming                                  |                                       | $                      | 20,737     |                     | $          | 18,488 |   |
| Cost of  equipment                                                  |                                       | $                      | 5,720      |                     | $          | 5,063 |   |
| Selling and  marketing                                              |                                       | $                      | 3,382      |                     | $          | 2,292 |   |

** **
| ** **                                                | ** **                  | **Successor  Company** | ** ** | **Successor  Company** | ** ** |
|-----------------------------------------------------------|-----------------------------|------------------------|------------|------------------------|------------|
| **December 31, 2004**                                     | **September 30, 2004** |
| **Amounts  included in the Consolidated Balance Sheets:** | ** **                  | ** **             | ** ** | ** **             | ** ** |
| Receivable from  Sprint                                   |                        | $                      | 12,640     |                   | $          | 13,264 |   |
| Inventories                                               |                        | 1,657                  |       | 1,310                  |       |
| Payable to  Sprint                                        |                        | 22,626                 |       | 24,404                 |       |
|                                                           |                             |                        |            |                        |            |  |  |

 

**(6)  Amendments to Sprint Agreement**

 

On November 1, 2004, the Company’s wholly ownedsubsidiary, iPCS Wireless, Inc., entered into Amended and Restated AddendumVIII to the Sprint Agreements and Sprint PCS Services Agreement with SprintPCS. This amendment, which was effective as of April 1, 2004, amended andrestated, and superceded in its entirety, the existing Addendum VIII, dated asof March 26, 2004.

 

The amendment reflects the Company’s agreement withSprint PCS with respect to its participation in the Sprint PCS resellerprogram. The Company agreed to participate in all resale arrangements betweenSprint and resellers that are entered into, renewed or extended by Sprint priorto December 31, 2006, provided the terms and conditions of such resalearrangement are at least as favorable to iPCS as the terms and conditions ofthe AT&T resale arrangement, and subject to a minimum pricing floor forvoice minutes of use. With respect to resale arrangements entered into, renewedor extended by Sprint between April 1, 2004 and December 31, 2006, the Companywill receive the amount of fees collected by Sprint from such resellers on apass-through basis as payment for the use of the Company’s service area networkby customers of such resellers. The Company may elect to discontinue itsparticipation in any resale arrangement on the later to occur of

 

9

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(1) December 31, 2006, and (2) expiration of the then remaining term ofsuch resale arrangement, giving effect to any renewals or extensions occurringprior to December 31, 2006, but not giving effect to any renewals or extensionswhich occur after December 31, 2006. For purposes of determining renewals andextensions of resale arrangements, if an arrangement does not expressly statean initial term, then the arrangement will be deemed to have a five-yearinitial term, and if an arrangement states an initial terms in excess of tenyears, then the arrangement shall be deemed to have a ten-year initial term.

 

In addition, pursuant tothe right granted to the Company in its management agreement to obtain the mostfavorable terms provided under affiliation agreements with another Sprint PCSAffiliate of similar size, the Company exercised its right to amend the termsof its affiliation agreements with Sprint PCS to incorporate the terms of the affiliationagreements of another PCS Affiliate of Sprint. Accordingly, the amendment alsoreflects changes to the Company’s affiliation agreements as a result of theexercise of this ‘‘most favored nation’’ right. These amendments clarify anumber of provisions in the Company’s affiliation agreements with Sprint PCS.The amendments also set the 3G data fee at 90% of Sprint PCS’ retail yieldbeginning on January 1, 2007 (provided that such amount is not less than theCompany’s network costs plus a reasonable return), enhance the disputeresolution procedures for the Company and Sprint PCS, and provide for theCompany’s ability to elect to outsource customer care services by providingSprint PCS with notice after January 1, 2006, and before June 30, 2006, and bypaying Sprint PCS $3.0 million.

 

**(7)****         Property and Equipment**

 

Property and equipmentconsists of the following at December 31, 2004 and September 30, 2004 (inthousands):

 
| ** **                                      | ** **                  | **Successor Company** | ** ** | **Successor Company** | ** ** |
|-------------------------------------------------|-----------------------------|-----------------------|------------|-----------------------|------------|
| **December 31, 2004**                      | **September 30, 2004** |
| Network assets                                  |                        | $                     | 124,903    |                  | $          | 134,552 |   |
| Computer  equipment                             |                        | 1,000                 |       | 874                   |       |
| Furniture,  fixtures, and office equipment      |                        | 3,485                 |       | 2,935                 |       |
| Vehicles                                        |                        | 488                   |       | 530                   |       |
| Construction in  progress                       |                        | 6,732                 |       | 4,830                 |       |
| Total property  and equipment                   |                        | 136,608               |       | 143,721               |       |
| Less accumulated  depreciation and amortization |                        | (16,790               | )          | (8,790                | )          |
| Total property  and equipment, net              |                        | $                     | 119,818    |                  | $          | 134,931 |   |

 

On July 1, 2004, asa result of the Company’s reorganization and in accordance with fresh-startaccounting under SOP 90-7, the Company reduced its property and equipment by$9.1 million to their estimated fair values. No additional impairment was necessary at September 30, 2004.

 

**(8)  Intangible Assets**

 

On July 1, 2004, asa result of the Company’s reorganization and in accordance with fresh-startaccounting under SOP 90-7, the Company revalued its assets to their estimatedfair values. With the implementation of fresh-start accounting, the Companyrecorded intangible assets of $19.8 million relating to the fair value ofthe customer base and $62.1 million relating to the fair value of theright to provide service under the Sprint agreements. The customer base isbeing amortized over the estimated average life of a customer, or30 months. The right to provide service under the Sprint agreements isbeing amortized over the remaining term of the agreement or 14.5 years.

 

The amortization period,gross carrying amount, accumulated amortization and net carrying amount ofintangible assets at December 31, 2004 and September 30, 2004 are asfollows (in thousands):

 

10

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| ** **                                            | ** ** | **Successor Company**    | ** ** |
|-------------------------------------------------------|------------|--------------------------|------------|
| **December 31, 2004**                                 |
| ** **                                            | ** ** | **Amortization  Period** | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net Carrying  Value** | ** ** |
| Amortized  intangible assets:                         |       |                     |       |   |   |   |   |   |   |
| Right to provide  service under the Sprint agreements |       | 174 months               |       | $ | 62,127 |   | $ | (2,142 | ) | $ | 59,985 |   |
| Customer base                                         |       | 30 months                |       | 19,785 |   | (3,957 | ) | 15,828 |   |
|                                                  |       |                     |       | $ | 81,912 |   | $ | (6,099 | ) | $ | 75,813 |   |

 
| ** **                                            | ** ** | **Successor Company**    | ** ** |
|-------------------------------------------------------|------------|--------------------------|------------|
| **September 30, 2004**                                |
| ** **                                            | ** ** | **Amortization  Period** | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net Carrying  Value** | ** ** |
| Amortized  intangible assets:                         |       |                     |       |   |   |   |   |   |   |
| Right to provide  service under the Sprint agreements |       | 174 months               |       | $ | 62,127 |   | $ | (1,072 | ) | $ | 61,055 |   |
| Customer base                                         |       | 30 months                |       | 19,785 |   | (1,979 | ) | 17,806 |   |
|                                                  |       |                     |       | $ | 81,912 |   | $ | (3,051 | ) | $ | 78,861 |   |

 

The amortization of intangible assets for the three months endedDecember 31, 2004 was $3.0 million. There was no amortization expense during the three months ended December31, 2003.  Aggregate amortization expenserelative to intangible assets for the periods shown will be as follows:

 
| **Year  Ended September 30,** | ** ** | ** ** | ** ** |
|-------------------------------|------------|------------|------------|
| 2005                          |       | $          | 12,199     |   |
| 2006                          |       | 12,199     |       |
| 2007                          |       | 6,263      |       |
| 2008                          |       | 4,285      |       |
| 2009                          |       | 4,285      |       |
| Thereafter                    |       | 39,630     |       |
| Total                         |       | $          | 78,861     |   |

 

**(9)  Long-Term Debt**

 

Long-term debtconsists of the following at December 31, 2004 and September 30, 2004 (inthousands):

 
| ** **                                                                  | ** **                  | **Successor Company** | ** ** | **Successor Company** | ** ** |
|-----------------------------------------------------------------------------|-----------------------------|-----------------------|------------|-----------------------|------------|
| **December 31, 2004**                                                  | **September 30, 2004** |
| Senior notes due  2012                                                      |                        | $                     | 165,000    |                  | $          | 165,000 |   |
| Capital lease  obligations                                                  |                        | 405                   |       | 407                   |       |
| Total long-term  debt and capital lease obligations                         |                        | 165,405               |       | 165,407               |       |
| Less: current  portion                                                      |                        | 8                     |       | 7                     |       |
| Long-term debt  and capital lease obligations, excluding current maturities |                        | $                     | 165,397    |                  | $          | 165,400 |   |

 

Senior Notes

 

OnApril 21, 2004, iPCS Escrow Holding Company and iPCS Escrow Company wereformed. iPCS Escrow Holding Company was a wholly owneddirect subsidiary of the Company. iPCS Escrow Companywas a wholly owned direct subsidiary of iPCS Escrow Holding Company and was notpart of the bankruptcy estate of the Company. iPCSEscrow Company was a special purpose vehicle and was created solely to issue$165.0 million in aggregate principal amount of new 11.5% senior notes. OnJuly 20, 2004, the effective date of the Company’s reorganization, iPCSEscrow Holding Company merged with and into the Company and the proceeds fromthe new senior notes became general unsecured obligations of the Company. Thenotes contain covenants which restrict the Company’s ability to incuradditional indebtedness, merge, pay dividends, dispose of its assets, and

 

11

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certain other matters as defined in the indenture. However,the new senior notes are subordinated to all secured indebtedness of theCompany to the extent of the assets securing such indebtedness, and to anyindebtedness of subsidiaries of the Company that do not guarantee the newsenior notes. Interest is payable semi-annually in arrears on May 1 andNovember 1, commencing on November 1, 2004 to the holders of recordon the immediately preceding April 15 and October 15.  During the three months ended December 31,2004, the Company made its first interest payment totaling $9.5 million.

 

**(10)  Income Taxes**

 

The Company’s effectiveincome tax rate for the interim periods presented is based on management’sestimate of the Company’s effective tax rate for the applicable year anddiffers from the federal statutory income tax rate primarily due tonondeductible permanent differences, state income taxes and changes in thevaluation allowance for deferred income taxes. In assessing the realizability of deferred tax assets, managementconsiders whether it is more likely than not that some portion or all of thedeferred tax assets will not be realized. The ultimate realization of deferredtax assets is dependent upon the generation of future taxable income during theperiods in which those temporary differences become deductible. No benefit forfederal income taxes has been recorded for the three months ended December 31,2004 and 2003 as the net deferred tax asset generated, primarily from temporarydifferences related to the net operating loss, was offset by a full valuationallowance because it is not considered more likely than not that these benefitswill be realized due to the Company’s losses since inception.

 

**(11)  Stock Compensation**

 

The Company applies APBOpinion No. 25, “Accounting for Stock Issued to Employees,” and relatedinterpretations to account for its employee and director stock options. Compensationexpense is determined as the excess of the fair value of the Company’s commonstock at date of grant over the exercise price. On July 15, 2004, theCompany’s board of directors approved the 2004 long-term incentive plan, asprovided under the Plan of Reorganization (see Note 3). Under the 2004long-term incentive plan, the Company may grant to employees, directors andconsultants of the Company incentive and non-qualified stock options, stockappreciation rights (SARs), restricted and unrestricted stock awards and cashincentive awards. The maximum number of shares of stock that may be awarded toparticipants is one million. Up to 500,000 shares may be issued in conjunctionwith awards other than options and SARs.

 

If compensation expensefor the stock option grants had been determined on fair value at the grant dateconsistent with the requirements of SFAS No. 123, the Company’s net lossand net loss per common share would have been the pro forma amounts below:

 
| ** **                                                 | ** ** | **Three Months Ended  December 31, 2004** | ** ** |
|------------------------------------------------------------|------------|-------------------------------------------|------------|
| **Net  loss (in thousands):**                              | ** ** | ** **                                | ** ** |
| As reported                                                |       | $                                         | (7,716     | ) |
| Less noncash  compensation in accordance with SFAS No. 123 |       | (351                                      | )          |
| Pro forma                                                  |       | $                                         | (8,067     | ) |
| **Basic  and diluted loss per common share:**              | ** ** | ** **                                | ** ** |
| As reported                                                |       | $                                         | (0.83      | ) |
| Pro forma                                                  |       | $                                         | (0.87      | ) |

 

There were no outstandingstock options during the three months ended December 31, 2003.

 

The Company’s calculationof fair value of the options was made using the Black-Scholes model with thefollowing assumptions:

 
| ** **               | ** ** | **Three Months Ended  December 31, 2004** | ** ** |
|--------------------------|------------|-------------------------------------------|------------|
| Risk free interest  rate |       | 3.52                                      | %          |
| Volatility               |       | 67.83                                     | %          |
| Dividend yield           |       | 0.0                                       | %          |
| Expected life in  years  |       | 4                                         |       |

 

12

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**(12)  Related Party Transactions**

 

Prior to theCompany’s Chapter 11 filing, and**atthe request of the senior lenders and the majority holders of the then existingsenior discount notes, on January 27, 2003, the Company signed arestructuring management services agreement with YMS Management, L.L.C.  (“YMS”) to performrestructuring management services for the Company and to appoint a ChiefRestructuring Officer (“CRO”). The Company appointed Timothy M. Yager asCRO at the time the agreement was signed. Under terms of this agreement, YMSreceived a weekly fee of $15,000, reimbursement of reasonable administrative expensesplus a success fee, as defined in the agreement. During the three months endedDecember 31, 2003, the Company incurred expenses of $0.2 million to YMS.

 

**(13)**  **Tower Sales**

 

On September 4, 2004, theCompany signed an agreement with TCP Communications, LLC (“TCP”) whereby theCompany agreed to sell up to 92 of its owned towers to TCP. The towers arepriced individually and the sale of all 92 towers would provide the Companywith gross proceeds of approximately $16.5 million. After the sale, theCompany will lease space on the towers sold to TCP at rates and termsconsistent with that of the Company’s existing leases. The transaction isexpected to close in several installments during fiscal year 2005 and issubject to exclusion of towers by TCP based on its due diligence and othercustomer closing conditions.

 

On November 9, 2004 and December 29, 2004, the Companysold 51 and 17 towers, respectively, to TCP for gross proceeds net of broker’sfees totaling approximately $12.1 million. Because the cost basis of these towers was adjusted to fair value aspart of fresh-start accounting, no gain or loss on the sales was recorded.

 

**(14)  Commitments and Contingencies**

 

*Commitments*

 

On November 22, 2004, the Company signed a letter ofagreement with Nortel Networks to replace the Company’s Lucent networkequipment currently deployed in its Michigan markets with Nortel equipmentincluding one switch, 232 base stations and various additional capacity andnetwork equipment. Under the terms of the agreement, the Company has agreed topurchase equipment totaling approximately $15.2 million and will receivespecial pricing on future purchases through December 31, 2007.  As of December 31, 2004, the Company hadpurchased approximately $4.6 million under the agreement.

 

*Litigation*

 

On October 1,2003, AT&T filed an administrative proof of claim and a pre-petition proofof claim against the Company, both of which claims the Company disputes. Inconnection with the Company’s Plan of Reorganization, the Company deposited$0.7 million in escrow pending resolution of both of these disputedclaims.  On August 31, 2004,AT&T filed a cure claim against the Company, contending that a portion ofthe amount set forth in the pre-petition proof of claim, and a portion of theamount set forth in the administrative proof of claim are presently due in cashas cure amounts, which is also in dispute. Also on August 31, 2004,AT&T amended its administrative proof of claim originally filed onOctober 1, 2003. If all of AT&T’s claims are allowed as valid,AT&T would have a $0.2 million pre-petition claim payable in stockunder our Plan of Reorganization, with the remaining claims (both cure andadministrative) payable in $6.6 million of cash. Both the administrativeand pre-petition claims between AT&T and the Company have been consolidatedin claims proceedings pending before the Bankruptcy Court. OnSeptember 30, 2004, the Company filed a response to the cure claimrequesting that the dispute on the cure claim be consolidated with theadministrative and pre-petition claim dispute. The Company is currently in thediscovery stage of the proceedings with respect to the administrative andpre-petition claims. If the Company cannot reach a settlement regarding thesedisputes after discovery, the Bankruptcy Court will determine the outcome. Inthe event that the Company’s response to the cure claim is denied or that theBankruptcy Court does not find in the Company’s favor if a settlement is notreached with AT&T the Company believes it has sufficient resources to fundany potential claim. The Company believes the accompanying consolidatedfinancial statements adequately reflect its obligations to AT&T for theseservices provided.

 

**(15)  Consolidating Financial Information**

 

The senior notes arefully, unconditionally and joint and severally guaranteed by iPCSWireless, Inc. and iPCS Equipment, Inc., which are wholly ownedsubsidiaries of the Company. The following unaudited consolidating financial

 

13

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information as ofDecember 31, 2004 and September 30, 2004 and for the three months endedDecember 31, 2004 and 2003 is presented for the Company, iPCSWireless, Inc. and iPCS Equipment, Inc. (in thousands):

 

**iPCS****Inc. and Subsidiaries**

**CondensedConsolidating Balance Sheet**

**as****of December 31, 2004**

 
| ** **                                                    | ** ** | **Successor Company** | ** ** |
|---------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                    | ** ** | **iPCS Inc.**         | ** ** | **iPCS Wireless** | ** ** | **iPCS Equipment** | ** ** | **Eliminations** | ** ** | **iPCS Consolidated** | ** ** |
| Cash and cash  equivalents                                    |       | $                     | —     |   | $ | 59,958 |   | $ | — |   | $ | — |   | $ | 59,958 |   |
| Other current  assets                                         |       | 156,203               |       | 42,491 |   | 19,036 |   | (185,732 | ) | 31,998 |   |
| Total current  assets                                         |       | 156,203               |       | 102,449 |   | 19,036 |   | (185,732 | ) | 91,956 |   |
| Property and  equipment, net                                  |       | —                |       | 100,495 |   | 19,433 |   | (110 | ) | 119,818 |   |
| Intangible  assets, net                                       |       | —                |       | 75,813 |   | — |   | — |   | 75,813 |   |
| Other noncurrent  assets                                      |       | 6,534                 |       | 1,775 |   | — |   | — |   | 8,309 |   |
| Investment in  subsidiaries                                   |       | 86,963                |       | — |   | — |   | (86,963 | ) | — |   |
| Total assets                                                  |       | $                     | 249,700    |   | $ | 280,532 |   | $ | 38,469 |   | $ | (272,805 | ) | $ | 295,896 |   |
|                                                          |       |                  |       |   |   |   |   |   |   |   |   |
| Current  liabilities                                          |       | $                     | 3,347      |   | $ | 228,679 |   | $ | 83 |   | $ | (185,842 | ) | 46,267 |   |
| Long-term debt                                                |       | 165,000               |       | 397 |   | — |   | — |   | 165,397 |   |
| Other long-term  liabilities                                  |       | —                |       | 2,879 |   | — |   | — |   | 2,879 |   |
| Total  liabilities                                            |       | 168,347               |       | 231,955 |   | 83 |   | (185,842 | ) | 214,543 |   |
| Stockholders’  equity (deficiency)                       |       | 81,353                |       | 48,577 |   | 38,386 |   | (86,963 | ) | 81,353 |   |
| Total liabilities  and stockholders’ equity (deficiency) |       | $                     | 249,700    |   | $ | 280,532 |   | $ | 38,469 |   | $ | (272,805 | ) | $ | 295,896 |   |

 

**iPCS****Inc. and Subsidiaries**

**CondensedConsolidating Statement of Operations**

**For theThree Months Ended December 31, 2004**

 
| ** **                                         | ** ** | **Successor Company** | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **iPCS Inc.**         | ** ** | **iPCS Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
| Total revenue                                      |       | $                     | —     |   | $ | 55,997 |   | $ | 2,251 |   | $ | (2,251 | ) | $ | 55,997 |   |
| Cost of revenue                                    |       | —                |       | (36,630 | ) | (938 | ) | 2,246 |   | (35,322 | ) |
| Selling and  marketing                             |       | —                |       | (10,026 | ) | — |   | — |   | (10,026 | ) |
| General and  administrative                        |       | (140                  | )          | (1,876 | ) | — |   | — |   | (2,016 | ) |
| Depreciation and  amortization                     |       | —                |       | (10,118 | ) | (1,389 | ) | — |   | (11,507 | ) |
| Gain (loss) on  disposal of property and equipment |       | —                |       | (18 | ) | — |   | 5 |   | (13 | ) |
| Total operating  expenses                          |       | (140                  | )          | (58,668 | ) | (2,327 | ) | 2,251 |   | (58,884 | ) |
| Other, net                                         |       | (4,961                | )          | (451 | ) | 583 |   | — |   | (4,829 | ) |
| Loss in  subsidiaries                              |       | (2,615                | )          | — |   | — |   | 2,615 |   | — |   |
| Net income  (loss)                                 |       | $                     | (7,716     | ) | $ | (3,122 | ) | $ | 507 |   | $ | 2,615 |   | $ | (7,716 | ) |

 

14

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**iPCS****Inc. and Subsidiaries**

**CondensedConsolidating Statement of Cash Flows**

**For theThree Months Ended December 31, 2004**

 
| ** **                                        | ** ** | **Successor Company** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **iPCS Inc.**         | ** ** | **iPCS Wireless** | ** ** | **iPCS Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
| Operating  activities                             |       | $                     | 255        |   | $ | (3,411 | ) | $ | (759 | ) | $ | — |   | $ | (3,915 | ) |
| Investing  activities                             |       | —                |       | 5,609 |   | 759 |   | — |   | 6,368 |   |
| Financing  activities                             |       | (255                  | )          | — |   | — |   | — |   | (255 | ) |
| Decrease in cash  or cash equivalents             |       | —                |       | 2,198 |   | — |   | — |   | 2,198 |   |
| Cash and cash  equivalents at beginning of period |       | —                |       | 57,760 |   | — |   | — |   | 57,760 |   |
| Cash and cash  equivalents at end of year         |       | $                     | —     |   | $ | 59,958 |   | $ | — |   | $ | — |   | $ | 59,958 |   |

 

**iPCS****Inc. and Subsidiaries**

**Condensed Consolidating BalanceSheet**

**as****of September 30, 2004**

 
| ** **                                                    | ** ** | **Successor Company** | ** ** |
|---------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                    | ** ** | **iPCS Inc.**         | ** ** | **iPCS Wireless** | ** ** | **iPCS Equipment** | ** ** | **Eliminations** | ** ** | **iPCS Consolidated** | ** ** |
| Cash and cash  equivalents                                    |       | $                     | —     |   | $ | 57,760 |   | $ | — |   | $ | — |   | $ | 57,760 |   |
| Other current  assets                                         |       | 166,126               |       | 32,276 |   | 16,387 |   | (182,295 | ) | 32,494 |   |
| Total current  assets                                         |       | 166,126               |       | 90,036 |   | 16,387 |   | (182,295 | ) | 90,254 |   |
| Property and equipment,  net                                  |       | —                |       | 113,394 |   | 21,647 |   | (110 | ) | 134,931 |   |
| Intangible  assets, net                                       |       | —                |       | 78,861 |   | — |   | — |   | 78,861 |   |
| Other noncurrent  assets                                      |       | 6,497                 |       | 1,765 |   | — |   | — |   | 8,262 |   |
| Investment in  subsidiaries                                   |       | 89,578                |       | — |   | — |   | (89,578 | ) | — |   |
| Total assets                                                  |       | $                     | 262,201    |   | $ | 284,056 |   | $ | 38,034 |   | $ | (271,983 | ) | $ | 312,308 |   |
|                                                          |       |                  |       |   |   |   |   |   |   |   |   |
| Current  liabilities                                          |       | $                     | 8,155      |   | $ | 227,892 |   | $ | 155 |   | $ | (182,405 | ) | 53,797 |   |
| Long-term debt                                                |       | 165,000               |       | 400 |   | — |   | — |   | 165,400 |   |
| Other long-term  liabilities                                  |       | —                |       | 4,065 |   | — |   | — |   | 4,065 |   |
| Total liabilities                                             |       | 173,155               |       | 232,357 |   | 155 |   | (182,405 | ) | 223,262 |   |
| Stockholders’  equity (deficiency)                       |       | 89,046                |       | 51,699 |   | 37,879 |   | (89,578 | ) | 89,046 |   |
| Total  liabilities and stockholders’ equity (deficiency) |       | $                     | 262,201    |   | $ | 284,056 |   | $ | 38,034 |   | $ | (271,983 | ) | $ | 312,308 |   |

 

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**iPCS****Inc. and Subsidiaries**

**Condensed Consolidating Statementof Operations**

**For the Three Months EndedDecember 31, 2003**

 
| ** **                                         | ** ** | **Predecessor Company** | ** ** |
|----------------------------------------------------|------------|-------------------------|------------|
| ** **                                         | ** ** | **iPCS Inc.**           | ** ** | **iPCS Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
| Total revenue                                      |       | $                       | —     |   | $ | 48,060 |   | $ | 2,842 |   | $ | (2,842 | ) | $ | 48,060 |   |
| Cost of revenue                                    |       | —                  |       | (34,664 | ) | (1,702 | ) | 2,833 |   | (33,533 | ) |
| Selling and  marketing                             |       |                    |       | (6,162 | ) | — |   | — |   | (6,162 | ) |
| General and  administrative                        |       | (31                     | )          | (873 | ) | — |   | — |   | (904 | ) |
| Depreciation and  amortization                     |       | —                  |       | (8,363 | ) | (1,162 | ) | — |   | (9,525 | ) |
| Gain (loss) on  disposal of property and equipment |       | —                  |       | 2 |   | — |   | — |   | 2 |   |
| Reorganization  expense                            |       | —                  |       | (1,783 | ) | (5 | ) | — |   | (1,788 | ) |
| Total operating  expenses                          |       | (31                     | )          | (51,843 | ) | (2,869 | ) | 2,833 |   | (51,910 | ) |
| Other, net                                         |       | 7,217                   |       | (8,810 | ) | (709 | ) | 2 |   | (2,300 | ) |
| Loss in  subsidiaries                              |       | (13,329                 | )          | — |   | — |   | 13,329 |   | — |   |
| Net income  (loss)                                 |       | $                       | (6,143     | ) | $ | (12,593 | ) | $ | (736 | ) | $ | 13,322 |   | $ | (6,150 | ) |

 

**iPCS****Inc. and Subsidiaries**

**Condensed Consolidating Statementof Cash Flows**

**For the Three Months EndedDecember 31, 2003**

 
| ** **                                        | ** ** | **Predecessor Company** | ** ** |
|---------------------------------------------------|------------|-------------------------|------------|
| ** **                                        | ** ** | **iPCS Inc.**           | ** ** | **iPCS Wireless** | ** ** | **iPCS Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
| Operating  activities                             |       | $                       | 7,328      |   | $ | 529 |   | $ | 428 |   | $ | (7 | ) | $ | 8,278 |   |
| Investing  activities                             |       | —                  |       | (3,640 | ) | 1,080 |   | 6 |   | (2,554 | ) |
| Financing  activities                             |       | (7,328                  | )          | 8,259 |   | (1,013 | ) | 1 |   | (81 | ) |
| Increase in cash  or cash equivalents             |       | —                  |       | 5,148 |   | 495 |   | — |   | 5,643 |   |
| Cash and cash  equivalents at beginning of period |       | —                  |       | 18,168 |   | (514 | ) | — |   | 17,654 |   |
| Cash and cash  equivalents at end of the period   |       | $                       | —     |   | $ | 23,316 |   | $ | (19 | ) | $ | — |   | $ | 23,297 |   |

 

**(16)  Subsequent Events**

 

On January 18, 2005, the Company made adistribution of approximately 50,000 shares to settle an additional thirteendisputed claims.  On February 4, 2005,the Company made an additional distribution of approximately 34,000 shares tosettle seven disputed claims.  With thesedistributions, the Company currently has approximately 316,000 shares reservedfor its remaining disputed claims.

 

**ITEM 2**.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

** **

# **Forward-Looking Statements**

# ** **

This quarterly report onForm 10-Q contains statements about future events and expectations that are “forward-lookingstatements.” These statements relate to future events or our future financialperformance, and involve known and unknown risks,

 

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uncertaintiesand other factors that may cause our actual results, levels of activity,performance or achievements to be materially different from any future results,levels of activity, performance or achievements expressed or implied by theseforward-looking statements. In some cases, you can identify forward-lookingstatements by terminology such as “may,” “will,” “should,” “expects,” “intends,”“plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” orthe negative use of these terms or other comparable terminology. Any statementin this report that is not a statement of historical fact may be deemed to be aforward-looking statement. These forward-looking statements include:

 

•                  statements regarding our anticipated revenues, expense levels,liquidity and capital resources and operating losses; and

 

•                  statements regarding expectations or projections about marketsin our territory.

 

Although webelieve that the expectations reflected in such forward-looking statements arereasonable, we can give no assurance that such expectations will prove to becorrect. Important factors with respect to any such forward-looking statements,including certain risks and uncertainties that could cause actual results todiffer materially from our expectations, are further discussed in our annualreport on Form 10-K for the period ended September 30, 2004.  Important factors that could cause actualresults to differ materially from those in the forward-looking statementsinclude, but are not limited to:

 

•                  our dependence on our affiliation with Sprint;

 

•                  the ability of Sprint PCS to alter the terms of ouraffiliation agreements with it, including fees paid or charged to us and otherprogram requirements;

 

•                  our dependence on back office services, such as billingand customer care, provided by Sprint PCS;

 

•                  potential fluctuations in our operating results;

 

•                  changes or advances in technology in general, orspecifically related to Sprint and its affiliates;

 

•                  competition in the industry and markets in which we operate;

 

•                  our ability to attract and retain skilled personnel;

 

•                  our potential need for additional capital or the needfor refinancing any existing indebtedness;

 

•                  our potential inability to expand our services andrelated products in the event of substantial increases in demand for theseservices and related products;

 

•                  the potential impact of wireless local numberportability;

 

•                  changes in government regulation;

 

•                  future acquisitions;

 

•                  the competitiveness and impact of Sprint PCS’ pricingplans and PCS products and services on us;

 

•                  our subscriber credit quality;

 

•                  the potential for us to experience a continued highrate of subscriber turnover;

 

•                  inaccuracies in our financial information provided to us bySprint PCS;

 

•                  rates of penetration in the wireless industry and in ourterritories;

 

•                  our significant level of indebtedness;

 

•                  the impact and outcome of legal proceedings betweenother PCS Affiliates of Sprint and Sprint PCS;

 

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•                  the final resolution of any remaining claims to be paidin cash as a result of our bankruptcy filing;

 

•                  adequacy of bad debt and other reserves;

 

•                  our anticipated future losses;

 

•                  our subscriber purchasing patterns;

 

•                  subscriber satisfaction with our network and operations;

 

•                  an adequate supply of subscriber equipment to SprintPCS and to us specifically;

 

•                  risks related to future growth and expansion, includingsubscriber growth;

 

•                  general economic and business conditions; and

 

•                  effects of mergers and consolidations within the wirelesstelecommunications industry, particularly business combinations involvingSprint, such as the proposed merger with Nextel, or affiliates of Sprint, andunexpected announcements or developments from others in the wirelesstelecommunications industry.

 

**Business**

 

*Overview*

 

We are an affiliate of Sprint PCS, the operator of a 100% digitalpersonal communications service, or PCS, wireless network with licenses toprovide voice and data service to the entire United States population using asingle frequency band and a single technology. As a PCS Affiliate of Sprint, wehave the exclusive right to provide wireless mobility communications servicesand products under the Sprint brand name in the territory licensed to us bySprint PCS. We own and are responsible for building, operating and managing theportion of the PCS wireless network of Sprint PCS located in our territory. Ournetwork is designed to offer a seamless connection with the wireless network ofSprint PCS and uses the same technology as Sprint PCS to transmit wirelesscalls – known as “code division multiple access” or CDMA. We have completed therequired build-out of our portion of the PCS wireless network of Sprint PCS,although we may elect to build-out additional markets in our territory. Weoffer national calling plans designed by Sprint PCS, as well as local planstailored to the markets within our territory. We market Sprint PCS products andservices through a number of distribution outlets located in our territory,including our own retail stores, major national retailers (including RadioShackand Best Buy stores) and local third-party distributors.  Our territory consists of 40 markets – knownas “basic trading areas” or BTAs – located in Illinois, Michigan, Iowa andeastern Nebraska. Based on the 2000 population counts compiled by the U.S.Census Bureau and adjusted by estimated growth rates from third partyproprietary demographic databases, at December 31, 2004, our licensed territoryhad a total population of approximately 7.8 million residents, of whichour wireless network covered approximately 5.9 million residents. AtDecember 31, 2004, we had approximately 249,200 subscribers in all our markets.

 

We recognizerevenues from our subscribers for the provision of wireless telecommunicationsservices, proceeds from the sale of handsets and accessories throughdistribution channels controlled by us and fees from Sprint PCS and otherwireless service providers and resellers when their subscribers roam onto ournetwork. Sprint PCS retains 8% of all service revenue collected from oursubscribers (not including product sales or roaming charges billed to oursubscribers) and 8% of all fees collected from non-Sprint wireless serviceproviders and resellers when their subscribers roam onto our network. We reportthe amount retained by Sprint PCS as an operating expense. In addition, SprintPCS bills our subscribers for taxes, handset insurance and Universal ServiceFund charges which we do not record. Sprint collects these amounts from thesubscribers and remits them to the appropriate entity.

 

As part of ouraffiliation agreements with Sprint PCS, we have contracted with Sprint PCS toreceive back-office services such as subscriber activation, handset logistics,billing, customer care and network monitoring services. We initially elected todelegate the performance of these services to Sprint PCS to take advantage ofits economies of scale, to accelerate our build-out and market launches and tolower our initial capital requirements. Under the terms of the amendment to ouraffiliation agreements we have contracted with Sprint PCS for these servicesthrough December 31, 2006. The cost for these services is primarily on a per subscriber or per transaction basis and is recorded asan operating expense.

 

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As we do not ownany PCS licenses to operate a wireless network, our operations and revenues aresubstantially dependent on the continuation of our affiliation with Sprint PCS.Additionally, our affiliation agreements with Sprint PCS give Sprint PCS a substantialamount of control over factors that significantly affect the conduct of ourbusiness.

 

*Reorganization*

 

We filed avoluntary petition in bankruptcy court pursuant to Chapter 11 of the BankruptcyCode on February 23, 2003.  From the dateof our bankruptcy filing through the effective date of our plan ofreorganization, we operated our business and managed our assets asdebtors-in-possession, subject to the supervision of the bankruptcy court,without obtaining debtor-in-possession financing. On April 30, 2004, we,through a newly formed special purpose entity, issued $165.0 million inaggregate principal amount of 11.5% senior notes, the net proceeds of whichoffering were deposited into an escrow account to be used in accordance withour plan of reorganization upon confirmation by the bankruptcy court andeffectiveness.

 

On July 9,2004, the bankruptcy court confirmed our plan of reorganization and declared iteffective as of July 20, 2004. Pursuant to the terms of our plan ofreorganization, on the effective date we paid a portion of the net proceedsfrom the senior notes offering to satisfy in full the balance outstanding underour then-existing senior secured credit facility and to permanently retire theloans thereunder.  The remaining netproceeds from the senior notes were used to satisfy all other secured claims,administrative and other priority claims and unsecured convenience claims andto pay fees and expenses related to the reorganization, as well as for generalcorporate purposes. Additionally, all of our subordinated claims weredischarged and all of our then existing capital stock was cancelled.

 

Our plan ofreorganization authorized us to issue ten million shares of our common stockupon our emergence from bankruptcy. On the effective date of our plan ofreorganization, we issued 8.6 million shares of common stock to ourgeneral unsecured creditors who held undisputed claims, including holders ofour then-existing senior discount notes, in satisfaction and retirement oftheir claims. We also reserved 400,002 shares of our common stock for futureissuances to our general unsecured creditors upon resolution of their disputedclaims, which claims total approximately $9.7 million at December 31, 2004. Since December 31, 2004, we have distributed an additional 83,455 sharesand still have 316,547 shares reserved for our remaining disputed claims.   Accordingly, our former general unsecuredcreditors are now our principal equity holders. The remaining one millionshares were reserved for issuance to certain members of our management,directors and other employees through our 2004 Long-Term Incentive Plan.

 

With respect toSprint, our plan of reorganization provided for the following:

 

•                  theassumption of our affiliation agreements with Sprint PCS, as amended to provideus a number of benefits;

 

•                  thesettlement of all claims by and between us and Sprint which resulted in ourwrite-off of all prepetition claims, as set forth in the settlement agreementand mutual release; and

 

•                  thepayment to Sprint, in cash, of approximately $5.1 million in full andcomplete satisfaction of our obligation to cure defaults under our affiliationagreements with Sprint PCS.

 

Our plan ofreorganization also provided for various other matters relating to ouroperations post-reorganization, including the following:

 

•                  ourassumption of all contracts and leases that have not been previously rejected;

 

•                  theappointment of Timothy M. Yager as president and chief executive officer anddirector;

 

•                  theappointment of four new directors to the iPCS board of directors as selected bythe committee of unsecured creditors; and

 

•                  ourrelease of any and all claims against: (i) all of our officers, directorsand employees, in each case, as of the date of the commencement of the hearingon the disclosure statement; (ii) our creditors’ committee and all of itsmembers, in their respective capacities as such; (iii) trustee under theindenture for our existing senior discount notes, in its capacity as such;(iv) the lenders under our senior secured credit facility, in theircapacities as such; (v) the agent for the lenders under our senior securedcredit facility, in its capacity as such; (vi) the holders of the newnotes offered hereby, in their capacity as such; and (vii) with respect toeach of the above-named

 

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persons, such person’spresent affiliates, principals, employees, agents, officers, directors,financial advisors, attorneys and other professionals, in their capacities as such.

 

**Definitionsof Operating Metrics**

 

In this “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”section, we provide certain financial measures that are calculated inaccordance with accounting principles generally accepted in the United States (“GAAP”)and as adjusted to GAAP (“non-GAAP”) to assess our financial performance. Inaddition, we use certain non-financial terms that are not measures of financialperformance under GAAP. Terms such as subscriber additions and churn are termsused in the wireless telecommunications industry. The non-GAAP financialmeasures of average revenue per user (“ARPU”) and cost per gross addition (“CPGA”)reflect standard measures of liquidity, profitability or performance commonlyused in the wireless telecommunications industry. The non-financial terms andthe non-GAAP measures reflect wireless telecommunications industry conventionsand are commonly used by the investment community for comparability purposes.The non-GAAP measures included in this “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” are reconciled below in “—ConsolidatedResults of Operations—Reconciliation of Non-GAAP Financial Measures” and aresummarized as follows:

 

•                  Churn is a measure of the rate at which subscribersbased in our territory deactivate service on a voluntary or involuntary basis.We calculate average monthly churn based on the number of subscribersdeactivated during the period (net of transfers out of our territory and thosewho deactivated within 30 days of activation) as a percentage of ouraverage monthly subscriber base during the period divided by the number ofmonths during the period.

 

•                  ARPU, or average revenue per user, is a measure ofthe average monthly service revenue earned from subscribers based in ourterritory, excluding roaming revenue. This measure is calculated by dividingsubscriber revenues in our consolidated statement of operations by the numberof our average monthly subscribers during the period divided by the number ofmonths in the period.

 

•                  CPGA, or cost per gross addition, is a measure ofthe average cost we incur to add a new subscriber in our territory. These costsinclude handset subsidies on new subscriber activations, commissions, rebatesand other selling and marketing costs. We calculate CPGA by dividing(a) the sum of cost of products sold and selling and marketing expensesassociated with transactions with new subscribers during the measurementperiod, less product sales revenues associated with transactions with newsubscribers during the measurement period, by (b) the total number ofsubscribers activated in our territory during the period.

 

•                  Licensed population represents the number ofresidents in the markets in our territory for which we have an exclusive rightto provide wireless mobility communications services under the Sprint brandname. The number of residents located in our territory does not represent thenumber of wireless subscribers that we serve or expect to serve in ourterritory.

 

•                  Covered population represent the number of residentscovered by our network in our territory. The number of residents covered by ournetwork does not represent the number of wireless subscribers that we serve orexpect to serve in our territory.

 

**CriticalAccounting Policies**

 

The fundamentalobjective of financial reporting is to provide useful information that allows areader to comprehend the business activities of an entity. To aid in thatunderstanding, we have identified our “critical accounting policies.” Thesepolicies have the potential to have a significant impact on our consolidatedfinancial statements, either because of the significance of the financialstatement item to which they relate or because they require judgment and estimationdue to the uncertainty involved in measuring, at a specific point in time,events which are continuous in nature.

 

***Revenuerecognition.***  Werecognize revenues when persuasive evidence of an arrangement exists, serviceshave been rendered, the price to the buyer is fixed or determinable, andcollectibility is reasonably assured. We recognize service revenue from oursubscribers as they use the service. We pro-rate monthly subscriber revenueover the billing period and record airtime usage in excess of thepre-subscribed usage plan. Our subscribers pay an activation fee when theyinitiate service. We reduce recorded service revenue for billing adjustments,and estimated uncollectible fees for late payments and early cancellation. Wealso reduce service revenue for rebates and discounts given to subscribers onwireless handset sales in accordance with the Emerging Issues Task Force (“EITF”),EITF 01-9 “Accounting for Consideration Given by a Vendor to a Customer(Including a

 

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Reseller of the Vendor’sProducts).” Effective July 1, 2003, we adopted EITF No. 00-21, “Accountingfor Revenue Arrangements with Multiple Deliverables.” This EITF guidanceaddresses accounting for arrangements that involve multiple revenue-generatingactivities. In applying this guidance, separate contracts with the same party,entered into at or near the same time, will be presumed to be a bundledtransaction, and the consideration will be measured and allocated to theseparate units of the arrangement based on their relative fair values. Theguidance in EITF 00-21 became effective for revenue arrangements entered intofor quarters beginning after June 15, 2003. We have elected to apply thisguidance prospectively from July 1, 2003. Prior to the adoption of EITF00-21, under the provisions of SAB No. 101, we accounted for the sale ofour handsets and our subsequent service to the customer as a single unit ofaccounting because our wireless service is essential to the functionality ofour handsets. Accordingly, we deferred all activation fee revenue and itsassociated direct costs and amortized these revenues and costs over the averagelife of our subscribers which we estimate to be 30 months. Under EITF00-21 we no longer need to consider whether customers can use their handsetswithout our wireless service provided to them. Because we meet the criteriastipulated in EITF 00-21, the adoption of EITF 00-21 requires us to account forthe sale of the handset as a separate unit of accounting from the subsequentservice to the customer. With the adoption of EITF 00-21, we now recognizeactivation fee revenue generated from our retail stores as equipment revenue.In addition, we recognize the portion of the direct activation fee costs relatedto the handsets sold in our retail stores. Subsequent to July 1, 2003, wehave continued to apply the provisions of SAB No. 101 and have deferredand amortized activation fee revenue and costs generated by subscribersactivated other than through our retail stores.

 

We participate inthe Sprint PCS national and regional distribution program in which nationalretailers such as RadioShack and Best Buy sell Sprint PCS products andservices. In order to facilitate the sale of Sprint PCS products and services,national retailers purchase wireless handsets from Sprint for resale andreceive compensation from Sprint PCS for products and services sold. Forindustry competitive reasons, Sprint PCS subsidizes the price of these handsetsby selling the handsets at a price below cost. Under our affiliation agreementswith Sprint PCS, when a national retailer sells a handset purchased from SprintPCS to a subscriber in our territory, we are obligated to reimburse Sprint PCSfor the handset subsidy that Sprint originally incurred. The national retailerssell Sprint wireless services under the Sprint and Sprint PCS brands and marks.We do not receive any revenues from the sale of wireless handsets by nationalretailers. We classify these Sprint PCS wireless handset subsidy charges as asales and marketing expense for a wireless handset sale to a new subscriber andclassify these subsidies as a cost of service for a wireless handset upgrade toan existing subscriber.

 

Sprint PCS retains8% of service revenues collected from our subscribers and from non-Sprintsubscribers who roam onto our network. The amount retained by Sprint PCS isrecorded as cost of service and roaming. Revenues generated from the sale ofhandsets and accessories and from roaming services provided to Sprint PCS andother Sprint PCS affiliate subscribers who are not based in our markets are notsubject to the 8% affiliation fee for Sprint PCS.

 

***Allowancefor doubtful accounts.*** Estimates are used in determining our allowance for doubtful accountsand are based on our historical write-off experience, and the uncollectibilityof accounts receivable by aging category, as well as current informationregarding the credit quality of our subscribers. Using this historicalinformation, we estimate allowances for uncollectibility relative to the agingcategories. If our estimates are insufficient for any reason, our operatinglosses and available cash would be negatively impacted.

 

***Long-livedasset recovery.*** Long-lived assets, consisting primarily of property and equipment andintangibles, comprise approximately 66% of our total assets, at December 31,2004. Changes in technology or in our intended use of these assets may causethe estimated period of use or the value of these assets to be reduced. Inaddition, changes in general industry conditions could cause the value ofcertain of these assets to be reduced. We monitor the appropriateness of theestimated useful lives of these assets. Whenever events or changes incircumstances indicate that the carrying amounts of these assets may not berecoverable, we review the respective assets for impairment. As part of ourreorganization, our assets and liabilities were revalued to their fair value.Estimates and assumptions used in both the estimated useful life and evaluatingpotential impairment issues require a significant amount of judgment.

 

***Incometaxes.***  As part ofthe process of preparing our consolidated financial statements we are requiredto estimate our taxes in each of the jurisdictions of our operations. This processinvolves management estimating the actual current tax expense together withassessing temporary differences resulting from differing treatment of items fortax and accounting purposes. These differences result in deferred tax assetsand liabilities, which are included within the consolidated balance sheets. Wemust then assess the likelihood that the deferred tax assets will be recoveredfrom future taxable income and to the extent recovery is not likely, we mustestablish a valuation allowance. Future taxable income depends on the abilityto generate income in excess of allowable deductions. To the extent weestablish a valuation allowance or increase this allowance in a period, anexpense is recorded within the tax provision in the consolidated statement ofoperations. Significant management judgment is required in

 

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determining our provisionfor income taxes, our deferred tax assets and liabilities and any valuationallowance recorded against net deferred tax assets. In the event that actualresults differ from these estimates or we adjust these estimates in futureperiods, we may need to establish an additional valuation allowance that couldmaterially impact our financial condition and results of operations.

 

**Implementationof Fresh-Start Accounting**

 

Pursuant toAmerican Institute of Certified Public Accountants, or “AICPA,” Statement ofPosition 90-7 “Financial Reporting by Entities in Reorganization under theBankruptcy Code,” or “SOP 90-7,” the accounting for the effects of thereorganization occurs once the Plan of Reorganization is confirmed by theBankruptcy Court and there are no remaining contingencies material tocompleting the implementation of the plan. There were no material conditions precedentto the effectiveness of the plan of reorganization existing as of theJuly 9, 2004 confirmation date. For financial reporting purposes, weapplied fresh-start accounting as of July 1, 2004 because the results ofoperations for the eight days through July 9, 2004 did not have a materialimpact on the reorganized company’s financial position, results of operationsand cash flows. The fresh-start accounting principles pursuant to SOP 90-7provide, among other things, for us to determine the value to be assigned tothe assets of reorganized iPCS, Inc. as of the confirmation date, assumingno significant contingencies precedent to emergence.

 

Under fresh-startaccounting, our reorganization equity value was allocated to our assets andliabilities based on their respective fair values in conformity with thepurchase method of accounting for business combinations.

 

**RecentAccounting Pronouncements**

 

InDecember 2004, the FASB issued SFAS No. 123 (Revised 2004) “Share-BasedPayment” (“SFAS No. 123R”) that addresses the accounting for share-basedpayment transactions in which a Company receives employee services in exchangefor (a) equity instruments of the Company or (b) liabilities that arebased on the fair value of the Company’s equity instruments or that may besettled by the issuance of such equity instruments. SFAS No. 123Raddresses all forms of share-based payment awards, including shares issuedunder employee stock purchase plans, stock options, restricted stock and stockappreciation rights. SFAS No. 123R eliminates the ability to account forshare-based compensation transactions using APB Opinion No. 25, “Accountingfor Stock Issued to Employees”, that was provided in Statement 123 asoriginally issued. Under SFAS No. 123R companies are required to recordcompensation expense for all share based payment award transactions measured atfair value. This statement is effective for quarters beginning afterJune 15, 2005. We have not yet determined the impact of applying thevarious provisions of SFAS No. 123R.

 

**ConsolidatedResults of Operations**

 

***Forthe three months ended December 31, 2004 compared to the three months endedDecember 31, 2003***

 

In accordance withthe American Institute of Certified Public Accountants Statement of Position90-7, “Financial Reporting by Entities in Reorganization under the BankruptcyCode”, we adopted fresh-start accounting as of July 1, 2004, and ouremergence from Chapter 11 resulted in a new reporting entity. The periods as ofand prior to July 1, 2004 have been designated “Predecessor Company” andthe periods subsequent to July 1, 2004 have been designated as “SuccessorCompany”. Under fresh-start accounting, our reorganization equity value wasallocated to the assets and liabilities based on their respective fair valuesand was in conformity with SFAS No. 141 “Business Combinations”. As aresult of the implementation of fresh-start accounting, our financialstatements after July 1, 2004 are not comparable to our financial statementsfor prior periods.

 

***Subscriber Additions.***  As of December 31, 2004, we had approximately249,200 subscribers in all our markets compared to approximately 220,500as of December 31, 2003.  For the threemonths ended December 31, 2004, we added approximately 8,600 net subscribers inall our markets compared to approximately 400 for the three months endedDecember 31, 2003.  As a result of ourChapter 11 bankruptcy filing in February 2003, we closed stores and cancelleddistribution agreements with local agents in order to limit new activations andconserve cash.  During the second half of2004, we began to regrow our distribution outlets and increase promotionalefforts to attract new subscribers.

 

***Churn.*** Churn for the three months ended December 31, 2004, was 2.9% versus 3.0%for the three months ended December 31, 2003.

 

***Average Revenue Per User.***  ARPU was $52.65 for the three months endedDecember 31, 2004 compared to $52.64 for the three months ended December 31,2003.  ARPU has remained steady despitethe increases in monthly recurring charges for

 

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voice and data.  The increases are being offset with decreasesin minutes over plan revenue.  This isdiscussed in more detail under the “Service Revenue” description below.

 

***Cost Per Gross Addition.***  CPGA was $406 for the three months endedDecember 31, 2004 compared to $395 for the three months ended December 31,2003.  The increased CPGA in 2004 was dueto higher costs associated with an increased sales effort, which included thecosts of five new stores opened since December 31, 2003.

 

***Revenues.***

 

•      ***ServiceRevenue.***  Service revenueis comprised of the monthly recurring charges for voice and data usage and themonthly non-recurring charges for voice and data minutes over plan, longdistance, travel and roaming usage charges, other feature revenues and latepayment fee and early cancellation fee revenues. Deductions for billingadjustments and promotional credits are recorded as a reduction to servicerevenue. For the three months ended December 31, 2004, service revenues totaled$38.6 million compared to $34.6 million for the three months endedDecember 31, 2003. As a result of both more subscribers and more subscribersactivating or converting to service plans with more minutes at a higher monthlyrecurring charge, our service revenue derived from minutes over plan decreased$0.2 million, but was offset with higher monthly recurring charges of $4.0million.  In addition, because the usageof our data products continues to gain popularity with our subscriber base,data revenue of $3.6 million for the three months ended December 31, 2004 was$2.3 million higher than for the three months ended December 31, 2003.

 

•      ***RoamingRevenue.***  Roaming revenueis comprised of revenue we receive from Sprint and other wireless subscribersthat roam onto our network. We receive revenue on a per minute basis for voicetraffic and per kilobyte basis for data traffic when subscribers other thanours use our network. We also receive toll revenue for any roaming longdistance calls made on our network. The reciprocal roaming rate arrangement wehave with Sprint for inbound and outbound roaming relative to Sprintsubscribers was $0.058 per minute for voice charges effective January 1,2003, and dropped to $0.041 per minute effective January 1, 2004.Effective April 1, 2004, this rate returned to $0.058 per minute. For datatraffic, this rate was $0.0013 per kilobyte in 2003 and $0.0020 in 2004. Forthe three months ended December 31, 2004, roaming revenue from Sprint and theother PCS Affiliates of Sprint totaled $14.3 millioncompared to $10.2 million for the three months ended December 31, 2003.  The increase in roaming revenue is dueprimarily to increases in roaming minutes and kilobytes.  Roaming minutes and kilobytes from Sprint andthe other PCS affiliates of Sprint for the three months ended December 31, 2004were 202.0 million and 541.1 million, respectively, compared to 152.4 millionand 291.6 million for the three months ended December 31, 2003, respectively.  Roaming revenue from other wirelesssubscribers including reseller revenue was $1.4 million and $1.8 millionfor the three months ended December 31, 2004 and December 31, 2003,respectively.  We signed our firstreseller agreement in April 2004, therefore, there was no reseller revenue inthe three months ended December 31, 2003 compared to $0.3 million of resellerrevenue in the three months ended December 31, 2004.  Excluding reseller revenue, the net decreaseof $0.7 million of roaming revenue from other wireless subscribers was due toboth lower minutes and a lower average per minute rate.  Roaming minutes and the per minute rate forthe three months ended December 31, 2004 were 9.3 million and $0.12,respectively.   For the three monthsended December 31, 2003, the roaming minutes and per minute rate were 12.9million and $0.14, respectively.

 

•      ***Equipment and Other Revenue.*** Equipment revenue is derived fromthe sale of handsets and accessories to our subscribers from our retail andlocal distribution channels, net of sales incentives, rebates and an allowancefor returns. Our handset return policy allows customers to return theirhandsets for a full refund within 14 days after the date of purchase. Whenhandsets are returned to us, we may be able to reissue the handsets tocustomers at little additional cost to us; however, when used handsets arereturned to Sprint PCS for refurbishing, we receive a credit fromSprint PCS which is less than what we originally paid for the handset. Forthe three months ended December 31, 2004 and 2003, handset revenues were $1.6 million and $1.2****million,respectively.   Other revenues were $0.1 million for both the threemonths ended December 31, 2004 and 2003. The increase in handset revenues for the three months ended December 31,2004 was due to increased sales for new activations and upgrades for currentsubscribers.

 

***Cost of Service and Roaming.***  Cost of service and roaming include networkoperations expense, roaming expense relating to when our subscribers roameither on other Sprint PCS networks or other wireless carriers’ networks,back-office customer services provided by Sprint PCS, the provision fordoubtful accounts, long distance expense and the 8% affiliation fee due toSprint PCS for collected revenues. Network operations expenses includesalaries and benefits for network personnel, cell site rent, utilities andmaintenance expenses, fees relating to the connection of our cell sites to ourswitches and other transport and facility expenses. Roaming expense is our costof our subscribers using Sprint and other wireless carriers’ networks. Roamingexpense on the Sprint PCS network is at the reciprocal rates as described aboveunder “Roaming Revenue”. Roaming expense when our subscribers use otherwireless carriers networks is at rates as determined by the roaming agreementssigned by Sprint PCS with these other wireless carriers. For the threemonths ended December 31, 2004 cost of service and roaming was

 

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$29.6 million comparedto $28.5 million for the three months ended December 31, 2003.  For the three months ended December 31, 2004compared to December 31, 2003, roaming expense increased $2.4 million due to ahigher subscriber base and higher usage. Travel and roaming minutes per subscriber increased from 159 minutes forthe three months ended December 31, 2003 to 184 minutes for the three monthsended December 31, 2004.  Affiliationfees increased $0.2 million for the three months ended December 31, 2004compared to December 31, 2003 due mainly to higher service revenues.  Offsetting these increases were lower networkoperations expenses of $1.0 million in facilities, transport and toll expenseand $0.7 million in property taxes. These lower costs were the result of savings from rejected agreementsand other initiatives we were able to take advantage of through the bankruptcyprocess.  We incurred higher rent expensein network operations in the three months ended December 31, 2004 compared tothe same period in 2003, because of additional cell sites and the revaluationeffects of fresh-start accounting which eliminated a deferred liability whichreduced rent expense in the three months ended December 31, 2003.  At December 31, 2004 our network consisted of672 cell sites and two switches compared to 651 cell sites and threeswitches at December 31, 2003.

 

***Cost of Equipment.***  For the three months ended December 31, 2004,cost of equipment includes the cost of handsets and accessories sold orupgraded from our retail and local distribution channels. For the three monthsended December 31, 2004, cost of equipment totaled $5.7 million compared to$5.1 million for the three months ended December 31, 2003.  The increase in 2004 is due primarily tohigher gross adds partially offset by lower costs for upgrades.  The cost of equipment for upgrades totaled$1.8 million in the three months ended December 31, 2003 compared to $1.1million in the same period in 2004.  Inthe three months ended December 31, 2003 we changed our policy for upgrades inour retail stores to give our customers instant rebates for the cost of theirphones whereas previously the customer had to pay the full price for the phoneand receive their rebate check through the mail.  Initially because of a pent-up demand forupgrades, this increased the number of upgrades we processed in the threemonths ended December 31, 2003.

 

***Selling and Marketing.***  Selling and marketing costs include the coststo operate our retail stores, advertising and promotional expenses, commissionsand equipment subsidies and rebate expenses relating to new subscriberadditions from national third parties and other Sprint controlled channels.Selling and marketing expense for the three months ended December 31, 2004 was$10.0 million compared to $6.2 million for the three months ended December 31,2003.    The increase was due to 46%higher gross adds in the three months ended December 31, 2004 compared to thethree months ended December 31, 2003. Advertising expense increased by $1.7million for the three months ended December 31, 2004 compared to the threemonths ended December 31, 2003.  Theadditional expense in 2004 was a part of our plan to grow our subscriber baseonce we emerged from bankruptcy in July 2004.

 

***General and Administrative.***  General and administrative expenses includeadministrative salaries and benefits, legal fees, insurance expense and otherprofessional expenses.******Forthe three months ended December 31, 2004, general and administrative expenseswere $2.0 million compared to $0.9 million in the three months ended December31, 2003. The increase was due to higher legal, audit and other professionalfees coupled with salaries for the senior management team that was hired in2004 in preparation for our emergence from bankruptcy.

 

***Reorganization Expense.***  Reorganization expenses consist of expensesincurred or accrued as a direct result of our Chapter 11 filing.  Reorganization expenses, which consistedentirely of professional fees, totaled $1.8 million for the three months ended December31, 2003.  We emerged from bankruptcy inJuly 2004 and incurred no reorganization expenses in the three months endedDecember 31, 2004.

 

***Non-Cash Stock Compensation Expense***.  For the three months ended December 31, 2004,we recorded $23,000 of non-cash stock compensation expense related to therestricted stock grants to employees under our long-term incentive plan. Therewas no non-cash stock compensation expense for the three months ended December31, 2003.

 

***Depreciation and Amortization.***  For the three months ended December 31, 2004depreciation and amortization expense totaled $11.5 million compared to$9.5 million for the three months ended December 31, 2003.  Amortization of intangibles totaled $3.0 millionand $0 for the three months ended December 31, 2004 and 2003,respectively.  As a result of fresh-startaccounting, all our assets were revalued and we recorded $81.9 million of newintangibles that are being amortized over their remaining lives.  For the three months ended December 31, 2003,the remaining value of our intangible assets was fully amortized.

 

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***Interest Income.* **Interest income totaled $137,000 for thethree months ended December 31, 2004 compared to $27,000 for the three monthsended December 31, 2003.  The increasewas due to a higher cash balance in 2004 as a result of the net proceeds fromthe senior notes offering completed in April 2004.

 

***Interest Expense.***  For the three months ended December 31, 2004interest expense was $5.0 million compared to $2.3 million for the threemonths ended December 31, 2003.  Higherinterest expense in the three months ended December 31, 2004 related to the11.5% interest on the $165.0 million in aggregate principal amount of seniornotes issued in April 2004.  For thethree months ended December 31, 2003, interest expense on our then outstandingsenior credit facility accrued at the prime interest rate under the BankruptcyCourt’s cash collateral order.

 

***Net Loss.***  Net loss for the three months ended December31, 2004 was $7.8 million compared to the net loss at December 31, 2003 of $6.2million.   The increase in our net lossof $1.6 million was due to the increases in sales and marketing expenses,amortization of intangibles, and interest expense offset with higher revenues.

 

***Reconciliationof Non-GAAP Financial Measures (All Revenues and Expenses in Thousands)***

 

We utilize certainfinancial measures that are not calculated in accordance with GAAP to assessour financial performance. A non-GAAP financial measure is defined as anumerical measure of financial performance that (a) excludes amounts, oris subject to adjustments that have the effect of excluding amounts, that areincluded in the comparable measure calculated and presented in accordance withGAAP in the statement of income or statement of cash flows; or(b) includes amounts, or is subject to adjustments that have the effect ofincluding amounts, that are excluded from the comparable measure so calculatedand presented. The non-GAAP financial measures discussed in “—ConsolidatedResults of Operations” are ARPU and CPGA. A description of each of thesenon-GAAP financial measures is provided in “ —Definition of Operating Metrics.”The following tables reconcile the non-GAAP financial measures with ourconsolidated financial statements presented in accordance with GAAP, excludingsubscriber data.

 
| ** **                                         | ** **                                         | **Successor Company** | ** ** | **Predecessor Company** | ** ** |
|----------------------------------------------------|----------------------------------------------------|-----------------------|------------|-------------------------|------------|
| **For the Three Months  Ended  December 31, 2004** | **For the Three Months  Ended  December 31, 2003** |
| **ARPU**                                           |                                               |                  |       |                    |       |
| Service revenue                                    |                                               | $                     | 38,585     |                    | $          | 34,628 |   |
| Average  subscribers                               |                                               | 244,276               |       | 219,288                 |       |
| ARPU                                               |                                               | $                     | 52.65      |                    | $          | 52.64 |   |

 

ARPU, which isutilized by most wireless companies to determine recurring monthly revenue on aper subscriber basis, is used by analysts and investors to compare relativesubscriber revenue across the wireless industry. We use ARPU to assist inevaluating past selling performance and the success of specific rate planpromotions. We also use ARPU as a basis to forecast future service revenues.

 
| ** **                                                      | ** **                                         | **Successor Company** | ** ** | **Predecessor Company** | ** ** |
|-----------------------------------------------------------------|----------------------------------------------------|-----------------------|------------|-------------------------|------------|
| **For the Three Months  Ended  December 31, 2004**              | **For the Three Months  Ended  December 31, 2003** |
| **CPGA**                                                        |                                               |                  |       |                    |       |
| Selling and  Marketing:                                         |                                               | $                     | 10,026     |                    | $          | 6,162 |   |
| Plus: Activation  costs included in cost of service and roaming |                                               | (177                  | )          | 466                     |       |
| Plus: Equipment  costs, net of cost of upgrades                 |                                               | 4,613                 |       | 3,215                   |       |
| Less: Equipment  revenue, net of upgrade revenue                |                                               | (1,092                | )          | (920                    | )          |
| CPGA costs                                                      |                                               | $                     | 13,370     |                    | $          | 8,923 |   |
| Gross adds                                                      |                                               | 32,905                |       | 22,588                  |       |
| CPGA                                                            |                                               | $                     | 406        |                    | $          | 395 |   |

 

CPGA is utilized bymost wireless companies to determine their cost to acquire a new subscriber.CPGA is used by analysts and investors to compare us to other wirelesscompanies. We use CPGA to evaluate past selling performance, the success ofspecific promotions and as a basis to determine the amount of time we mustretain a new subscriber before we recover this cost. In addition, we use CPGAas a basis for budgeting.

 

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**Liquidityand Capital Resources**

 

As of December 31,2004, we had $60.0 million in cash and cash equivalents compared to$57.8 million at September 30, 2004.

 

With the netproceeds from the offering of the senior notes and subject to our ability tomanage subscriber growth and achieve operating efficiencies, cash and cashequivalents, combined with cash flows from operations, are expected to besufficient to fund any operating losses and working capital and to meet capitalexpenditure needs and debt service requirements for the foreseeable future.

 

###### ***Net Cash Flows from Operating Activities***

###### *** ***

For the threemonths ended December 31, 2004, cash flows used in operations totaled $3.9million compared to $8.3 million generated for the three months ended December31, 2003.  The decrease was mainly due toan increase in the net loss and unfavorable working capital effects in thethree months ended December 31, 2004. Those working capital effects included $9.5 million in interest paidduring the three months ended December 31, 2004, compared to only $3.3 millionpaid during the three months ended December 31, 2003.

 

***NetCash Flows from Investing Activities***

 

For the threemonths ended December 31, 2004, we generated $6.3 million in cash flows frominvesting activities.  We generated $12.1million from the sale of 68 towers to TCP Communications as describedbelow.  Offsetting this were expenditurestotaling $5.8 million, which included $4.6 million for Nortel equipmentpurchased under the agreement with Nortel as described below in “-ContractualObligations”.

 

For the three monthsended December 31, 2003, cash flows used in investing activities totaled $2.6million and related mainly to the purchase of property and equipment for theconstruction of five cell sites that became operational in the three monthsended December 31, 2003.

 

***NetCash Flows from Financing Activities***

 

Net cash used forfinancing activities for the three months ended December 31, 2004 totaled $0.3million for debt financing costs related to the 11.5% senior notes.

 

For the threemonths ended December 31, 2003, cash flows used for financing activitiestotaled $0.1 million for principal payments made under the senior securedcredit facility in place at that time.

 

***TowerSale Leasebacks***

 

On September 4, 2004, theCompany signed an agreement with TCP Communications, LLC whereby the Companyagreed to sell up to 92 of its owned towers to TCP Communications. The towersare priced individually and the sale of all 92 towers would provide the Companywith gross proceeds of approximately $16.5 million. After the sale, theCompany will lease space on the towers sold to TCP Communications at rates andterms consistent with that of the Company’s existing leases. The transaction isexpected to close in several installments during fiscal year 2005 and issubject to exclusion of towers by TCP Communications based on its due diligenceand other customer closing conditions.

 

On November 9, 2004 and December 29, 2004, the Companysold 51 and 17 towers, respectively, to TCP Communications for gross proceeds,net of broker’s fees, totaling approximately $12.1 million.  Because the cost basis of these towers wasadjusted to fair value as part of fresh-start accounting, no gain or loss onthe sales was recorded.

 

***Commitmentsand Contingencies***

 

On October 1,2003, AT&T filed an administrative proof of claim and a pre-petition proofof claim against us, both of which claims we dispute. In connection with ourplan of reorganization, we deposited $0.7 million in escrow pendingresolution of both of these disputed claims. On August 31, 2004, AT&T filed a cure claim against us,contending that a portion of the

 

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amount set forth in thepre-petition proof of claim, and a portion of the amount set forth in theadministrative proof of claim are presently due in cash as cure amounts, whichwe also dispute. Also on August 31, 2004, AT&T amended itsadministrative proof of claim originally filed on October 1, 2003. If allof AT&T’s claims are allowed as valid, AT&T would have a$0.2 million pre-petition claim payable in stock under our plan ofreorganization, with the remaining claims (both cure and administrative)payable in $6.6 million of cash. Both the administrative and pre-petitionclaims between AT&T and us have been consolidated in claims proceedingspending before the Bankruptcy Court. On September 30, 2004, we filed aresponse to the cure claim requesting that our dispute on the cure claim beconsolidated with the administrative and pre-petition claim dispute. We arecurrently in the discovery stage of the proceedings with respect to theadministrative and pre-petition claims. If we cannot reach a settlementregarding these disputes after discovery, the Bankruptcy Court will determinethe outcome. In the event that our response to the cure claim is denied or thatthe Bankruptcy Court does not find in our favor if a settlement is not reachedwith AT&T we believe we will have sufficient resources to fund anypotential claim. We believe the accompanying consolidated financial statementsadequately reflect our obligations to AT&T for these services provided.

 

The costs for theservices provided by Sprint PCS under our service agreements with Sprint PCSrelative to billing, customer care and other back-office functions for thethree months ended December 31, 2004 and 2003, totaled approximately$5.6 million and $4.0 million, respectively. Because we incur themajority of these costs on a per subscriber basis which is fixed until the endof December 2006 and after which will be adjusted by Sprint PCS based on aformula related to Sprint PCS’ costs to provide the services, we expect theaggregate cost for such services to increase as the number of our subscribersincreases after December 2006. Sprint PCS may terminate any serviceprovided under such agreements upon nine months’ prior written notice, but ifwe would like to continue receiving such service, Sprint PCS has agreed that itwill assist us in developing that function internally or locating a third-partyvendor that will provide that service. Although Sprint PCS has agreed in suchan event to reimburse us for expenses we incur in transitioning to any serviceinternally or to a third-party, if Sprint PCS terminates a service for which wehave not developed or are unable to develop a cost-effective alternative, ouroperating costs may increase beyond our expectations and our operations may beinterrupted or restricted. We do not currently have a contingency plan ifSprint PCS terminates a service we currently receive from it.

 

***ContractualObligations***

 

We are obligatedto make future payments under various contracts we have entered into, includingamounts pursuant to the senior notes, capital leases and non-cancelableoperating lease agreements for office space, cell sites, vehicles and officeequipment. Future minimum contractual cash obligations for the next five yearsand in the aggregate at September 30, 2004, are as follows (dollars inthousands):

 
| ** **                   | ** ** | **Payments Due by Period** | ** ** |
|------------------------------|------------|----------------------------|------------|
| **Year Ended September 30,** |
| ** **                   | ** ** | **Total**                  | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **Thereafter** | ** ** |
| Senior notes(1)              |       | $                          | 165,000    |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 165,000 |   |
| Operating  leases(2)         |       | 48,826                     |       | 12,118 |   | 9,401 |   | 7,258 |   | 6,498 |   | 5,947 |   | 7,604 |   |
| Capital lease  obligations   |       | 858                        |       | 59 |   | 61 |   | 64 |   | 66 |   | 69 |   | 539 |   |
| Total                        |       | $                          | 214,684    |   | $ | 12,177 |   | $ | 9,462 |   | $ | 7,322 |   | $ | 6,564 |   | $ | 6,016 |   | $ | 173,143 |   |

 

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(1)           Does not include interest paymentobligations.

 

(2)           Does not include payments due underrenewals to the original lease terms.

 

The senior notescontain covenants which restrict our ability to incur additional indebtedness,merge, pay dividends, dispose of our assets, and certain other matters asdefined in the indenture. In addition, the senior notes:

 

•                  rank pari passu in right of payment with all ourexisting and future unsecured senior indebtedness;

 

•                  rank senior in right of payment to all our futuresubordinated indebtedness; and

 

•                  are unconditionally guaranteed by iPCSWireless, Inc., iPCS Equipment, Inc. and any new domestic restrictedsubsidiaries of ours.

 

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However, thesenior notes are subordinated to all our secured indebtedness to the extent ofthe assets securing such indebtedness, and to any indebtedness of oursubsidiaries that do not guarantee the new senior notes.

 

Interest is payablesemi-annually in arrears on May 1 and November 1, commencing onNovember 1, 2004 to the holders of record on the immediately precedingApril 15 and October 15. At any time prior to May 1, 2007, wemay redeem up to 35% of the aggregate principal amount of the senior notes at aredemption price of 111.50% of the principal amount thereof, plus accrued andunpaid interest, and liquidated damages (as defined in the indenture), ifapplicable, to the redemption date with the net cash proceeds of a sale of ourequity interests or a contribution to our common equity capital; provided that:

 

•                  at least 65% of aggregate principal amount of seniornotes originally issued remains outstanding immediately after the redemption;and

 

•                  the redemption occurs within 45 days of thedate of the closing of such sale of equity interests or contribution.

 

Except pursuant to thepreceding paragraph, the senior notes will not be redeemable at our optionprior to May 1, 2008.

 

On or after May 1,2008, we may redeem all or a part of the senior notes issued under theindenture upon not less than 30 nor more than 60 days’ notice, at theredemption prices (expressed as percentages of principal amount) set forthbelow plus accrued and unpaid interest and liquidated damages, if any, on thesenior notes redeemed, to the applicable redemption date, if redeemed duringthe twelve-month period beginning on May 1 of the years indicated below,subject to the rights of holders of senior notes on the relevant record date toreceive interest on the relevant interest payment date:

 
| **Year**             | ** ** | **Percentage** | ** ** |
|----------------------|------------|----------------|------------|
| 2008                 |       | 105.750        | %          |
| 2009                 |       | 102.875        | %          |
| 2010 and  thereafter |       | 100.000        | %          |

 

Upon a change of controlas defined in the indenture, we will be required to make an offer to purchasethe senior notes at a price equal to 101% of the aggregate principal amount ofsenior notes repurchased plus accrued and unpaid interest and liquidateddamages, if any, to the date of purchase.

 

In addition, onNovember 22, 2004, we signed a letter of agreement with Nortel Networks toreplace our Lucent network equipment currently deployed in our Michigan marketswith Nortel equipment including one switch, 232 base stations, variousadditional capacity growth and network equipment. Under the terms of theagreement, we have agreed to purchase equipment totaling $15.2 million andwill receive special pricing on future purchases through December 31,2007.

 

***Seasonality***

 

Our business is subjectto seasonality because the wireless telecommunications industry historicallyhas been heavily dependent on fourth calendar quarter results. Among otherthings, the industry relies on significantly higher subscriber additions andhandset sales in the fourth calendar quarter as compared to the other threecalendar quarters. A number of factors contribute to this trend, including: theuse of retail distribution, which is heavily dependent upon the year-endholiday shopping season; the timing of new product and service announcementsand introductions; competitive pricing pressures; and aggressive marketing and promotions.The increased level of activity requires a greater use of available financialresources during this period.

 

***Inflation***

 

We believe that inflationhas not had a significant impact in the past and is not likely to have asignificant impact in the foreseeable future on our results of operations.

 

***FutureTrends That May Affect Operating Results, Liquidity and Capital Resources***

 

During 2003 and into 2004we experienced overall declining net subscriber growth compared to previousperiods. We believe this trend was attributable to increased competition andslowing aggregate subscriber growth in the wireless telecommunications industryas well as the implementation of a tighter credit policy that decreased thenumber of sub-prime activations. In addition, as a means to conserve cash in2003, we closed 15 company-owned retail stores and cancelled 21 agreements withlocal third party distributors, thereby reducing our retail presence in anumber of our markets.  We have seen

 

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improvements in our netsubscriber growth in our last three quarters; however, we still incur netlosses to acquire new subscribers.  As weseek to accelerate our subscriber growth, we will incur significant upfront subscriberacquisition expenses (including the customer handset subsidy, commissions andpromotional expenses) that initially will result in increased losses andreduced levels of cash flows from operating activities as compared to our mostrecent prior periods. Alternatively, we may not be able to sustain our plannedgrowth in subscribers or obtain sufficient revenue to achieve and sustainprofitability. Net subscriber growth was approximately 8,600 subscribers in allour markets for the three months ended December 31, 2004. For the threemonths ended December 31, 2003 we added 400 net subscribers in all ourmarkets. If we are not able to achieve our planned subscriber growth, it willlengthen the amount of time it will take for us to reach a sufficient number ofsubscribers to achieve positive free cash flow, which in turn will have anegative effect on capital resources. In addition, to the extent our subscribergrowth includes a higher percentage of sub-prime credit subscribers, our churnand bad debt expense may increase.

 

We may continue toexperience higher costs to acquire subscribers. For the three months endedDecember 31, 2004, our CPGA was $406 per activation compared to $395 peractivation for the period ended December 31, 2003.  To accelerate our subscriber growth, we areoffering more aggressive handset promotions and spending more in advertising toacquire new customers than we did while we were in bankruptcy and trying toconserve cash.  With a higher CPGA,subscribers must remain our subscribers for a longer period of time at a stableARPU for us to recover those acquisition costs.

 

We may experience ahigher churn rate. Our average subscriber monthly churn (net of deactivationsthat take place within 30 days of the activation date) for the threemonths ended December 31, 2004 was 2.9% compared to 3.0% for the threemonths ended December 31, 2003.  In our 2003fiscal year, our churn rate was the highest we had experienced to date due to asignificantly higher number of involuntary deactivations relating to sub-primecredit subscribers. A tighter credit policy implemented in mid-2003 decreasedthe number of sub-prime activations which helped to reduce churn but it alsocontributed to the overall smaller subscriber growth than we had experienced inthe past. If churn increases over the long-term, we would lose the cash flowsattributable to these subscribers and have greater-than-projected losses.

 

We may incur significantwireless handset subsidy costs for existing subscribers who upgrade to a newhandset. As our subscriber base matures and technological innovations occur,more existing subscribers will begin to upgrade to new wireless handsets forwhich we subsidize the cost to the subscriber. We incurred net upgrade costs ofapproximately $1.0 million and $2.3 million associated with wirelesshandset upgrade costs for the three months ended December 31, 2004 and 2003,respectively. We have limited historical experience regarding the adoption ratefor wireless handset upgrades. If more subscribers upgrade to new wirelesshandsets than we project, near term EBITDA and cash flows would be lower thanprojected.

 

**ITEM 3.****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We do not engage incommodity futures trading activities and do not enter into derivative financialinstrument transactions for trading or other speculative purposes. We also donot engage in transactions in foreign currencies that could expose us to marketrisk.

 

**ITEM 4.****CONTROLSAND PROCEDURES**

 

(a)           Evaluation of Disclosure Controls andProcedures. Each of our Chief Executive Officer and Chief Financial Officer hasevaluated the effectiveness of our disclosure controls and procedures (as suchterm is defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act)as of December 31, 2004. Based on such evaluation, such officers have concludedthat, as of the end of the period covered by this report, our disclosurecontrols and procedures are effective in alerting them on a timely basis tomaterial information relating to us (including our consolidated subsidiaries)required to be included in our reports filed or submitted under the ExchangeAct.

 

(b)           Changes in Internal Controls overFinancial Reporting. There have not been any changes in our internal controlsover financial reporting (as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the three months ended December 31,2004 that have materially affected, or are reasonably likely to materiallyaffect, our internal controls over financial reporting.

 

We place reliance onSprint PCS to adequately design its internal controls with respect to theprocesses established to provide financial information and other information tous and the other PCS Affiliates of Sprint. To address this issue, Sprintengages an independent registered public accounting firm to perform a periodicevaluation of these controls and to provide a

 

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“Report on ControlsPlaced in Operation and Tests of Operating Effectiveness for Affiliates” underguidance provided in Statement of Auditing Standards No. 70. This reportis provided bi-annually to us.

 

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**PARTII** . OTHER INFORMATION

** **

**ITEM 1. LEGAL PROCEEDINGS**

 

See Item 2 – “Management’s Discussion and Analysisof Financial Condition and Results of Operations –Commitments and Contingencies” of thisreport.

 

In addition to the above, from time to time, we are involved in variouslegal proceeding relating to claims arising in the ordinary course of businessand in connection with our bankruptcy petition. We are not currently a party toany such legal proceedings, the adverse outcome to which, individually or inthe aggregate, is expected to have a material adverse effect on our business,financial condition or results of operations.

 

# **ITEM 2. UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

# ** **

None.

 

# **ITEM 3. DEFAULTS UPONSENIOR SECURITIES**

# ** **

None.

 

# **ITEM 4. SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

# ** **

None.

 

# **ITEM 5. OTHER INFORMATION**

# ** **

None.

 

**ITEM 6. EXHIBITS**

 

Seethe Index to Exhibits following the signature page hereto for a list of theexhibits files pursuant to Item 601 of Regulation S-K.

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                    | iPCS, Inc. |
|-------------------------|------------|
|                    |       |   |
|                    | By:        |  /s/  TIMOTHY M. YAGER |   |
|                    |       |  Timothy M.  Yager   *President and Chief Executive Officer*   (Principal Executive Officer) |
| Date: February 9, 2005  |       |   |
|                    | By:        |  /s/ STEBBINS B.  CHANDOR, JR. |   |
|                    |       |  Stebbins B.  Chandor, Jr.   *Executive Vice President Operations and   Chief Financial Officer*   (Principal Financial Officer) |
| Date: February 9,  2005 |       |   |

 

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**INDEX TO EXHIBITS**

 
| **Exhibit  Number** | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                 |       | Second Amended and  Restated Joint Plan of Reorganization for iPCS, Inc., iPCS  Wireless, Inc. and iPCS Equipment, Inc., dated as of May 26,  2004 (Incorporated by reference to Exhibit 2.1 to the registration  statement on Form S-4 filed by the Registrants with the SEC on  August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                       |
| 2.2                 |       | Technical Amendment to  Second Amended and Restated Joint Plan of Reorganization for iPCS, Inc.,  iPCS Wireless, Inc. and iPCS Equipment, Inc., dated as of  July 8, 2004 (Incorporated by reference to Exhibit 2.2 to the  registration statement on Form S-4 filed by the Registrants with the SEC  on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                           |
| 2.3                 |       | Modification to Second  Amended and Restated Joint Plan of Reorganization for iPCS, Inc., iPCS  Wireless Inc. and iPCS Equipment, Inc., dated as of July 8, 2004  (Incorporated by reference to Exhibit 2.3 to the registration statement  on Form S-4 filed by the Registrants with the SEC on August 5, 2004  (SEC File No. 333-117942))                                                                                                                                                                                             |
| 2.4                 |       | Findings of Fact,  Conclusions of Law and Order under U.S.C. Section 1129(a) and  (b) and Federal Rules of Bankruptcy Procedure 3020 confirming the Second  Amended Joint Plan of Reorganization of iPCS, Inc., iPCS  Wireless, Inc. and iPCS Equipment, Inc., Debtors and Debtors In  Possession, as modified, dated as of July 8, 2004 (Incorporated by  reference to Exhibit 2.4 to the registration statement on Form S-4  filed by the Registrants with the SEC on August 5, 2004 (SEC File  No. 333-117942)) |
| 3.1                 |       | Restated Certificate of  Incorporation of iPCS, Inc. (Incorporated by reference to  Exhibit 3.1 to the registration statement on Form S-4 filed by the  Registrants with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                                                                                                                                    |
| 3.2                 |       | Amended and Restated  Bylaws of iPCS, Inc. (Incorporated by reference to Exhibit 3.2 to  the registration statement on Form S-4 filed by the Registrants with the  SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                                                                                                                                         |
| 3.3                 |       | Certificate of  Incorporation of iPCS Wireless, Inc. (Incorporated by reference to  Exhibit 3.4 to the registration statement on Form S-4 filed by the  Registrants with the SEC on January 8, 2001 (SEC File  No. 333-47688))                                                                                                                                                                                                                                                                                                              |
| 3.4                 |       | Bylaws of iPCS  Wireless, Inc. (Incorporated by reference to Exhibit 3.5 to the  registration statement on Form S-4 filed by the Registrants with the SEC  on January 8, 2001 (SEC File No. 333-47688))                                                                                                                                                                                                                                                                                                                                          |
| 3.5                 |       | Certificate of  Incorporation of iPCS Equipment, Inc. (Incorporated by reference to  Exhibit 3.6 to the registration statement on Form S-4 filed by the  Registrants with the SEC on January 8, 2001 (SEC  File No. 333-47688))                                                                                                                                                                                                                                                                                                        |
| 3.6                 |       | Bylaws of iPCS  Equipment, Inc. (Incorporated by reference to Exhibit 3.7 to the  registration statement on Form S-4 filed by the Registrants with the SEC  on January 8, 2001 (SEC File No. 333-47688))                                                                                                                                                                                                                                                                                                                                    |
| 4.1                 |       | Specimen Common Stock  Certificate (filed as an exhibit to the Registration Statement filed on  August 5, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.2                 |       | Common Stock  Registration Rights Agreement, dated as of July 20, 2004, by and among  iPCS, Inc., affiliates of Silver Point Capital, affiliates of American  International Group and the Timothy M. Yager 2001 Trust (filed as an  exhibit to the Registration Statement filed on August 5, 2004)                                                                                                                                                                                                                                               |
| 4.3                 |       | Indenture dated as of  April 30, 2004, by and among, iPCS Escrow Company, iPCS, Inc., iPCS  Wireless, Inc., iPCS Equipment, Inc. and U.S. Bank National  Association (Incorporated by reference to Exhibit 4.1 to the  registration statement on Form S-4 filed by the Registrants with the SEC  on August 5, 2004 (SEC File No. 333-117942)).                                                                                                                                                                               |
| 4.4                 |       | Registration Rights  Agreement, dated as of April 30, 2004, by and among, iPCS, Inc.,  iPCS Wireless, Inc., iPCS Equipment, Inc., iPCS Escrow Company,  Credit Suisse First Boston LLC and Bear Stearns & Co. Inc.  (Incorporated by reference to Exhibit 4.2 to the registration statement  on Form S-4 filed by the Registrants with the SEC on August 5, 2004  (SEC File No. 333-117942))                                                                                                                   |
| 10.1                | *          | Sprint PCS Management  Agreement dated as of January 22, 1999 between WirelessCo, L.P., Sprint Spectrum,  L.P., SprintCom, Inc., and Illinois PCS, L.L.C. (predecessor of iPCS  Wireless, Inc.) as amended by Addendum I through Addendum V  thereto (Incorporated by reference to Exhibit 10.1 to the registration  statement on Form S-4 filed by the Registrants with the SEC on  January 9, 2001 (SEC File No. 333-47688))                                                                                          |
| 10.2                |       | Addendum VI to Sprint  PCS Management Agreement (Incorporated by reference to Exhibit 10.40 to  the annual report on Form 10-K by the Registrants with the SEC on  March 29, 2001))                                                                                                                                                                                                                                                                                                                                                                   |
| 10.3                |       | Addendum VII to Sprint  PCS Management Agreement (Incorporated by reference to Exhibit 10.3 to  the registration statement on Form S-4 filed by the Registrants with the  SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                                                                                                                                       |
| 10.4                |       | Addendum VIII to Sprint  PCS Management Agreement (Incorporated by reference to Exhibit 10.4 to  the registration statement on Form S-4 filed by the Registrants with the  SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                                                                                                                                      |
| 10.5                |       | Addendum IX to Sprint  PCS Management Agreement (Incorporated by reference to Exhibit 10.5 to  the registration statement on Form S-4 filed by the Registrants with the  SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                                                                                                                                        |

 

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| 10.6  | *      | Sprint PCS Services  Agreement dated as of January 22, 1999 by and between Sprint Spectrum,  L.P. and Illinois PCS, L.L.C. (predecessor of iPCS Wireless, Inc.)  (Incorporated by reference to exhibits to the registration statement on  Form S-4 filed by the Registrants with the SEC (SEC File No. 333-47688))                                                                  |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.7  | *      | Sprint Trademark and  Service Mark License Agreement dated as of January 22, 1999 between  Sprint Communications Company, L.L.C. and Illinois PCS, L.L.C. (predecessor  of iPCS Wireless, Inc.) (Incorporated by reference to Exhibit 10.3  to the registration statement on Form S-4 filed by the Registrants with  the SEC on January 8, 2001 (SEC File No. 333-47688)) |
| 10.8  | *      | Sprint Spectrum  Trademark and Service Mark License Agreement dated as of January 22,  1999 between Sprint Spectrum L.P. and Illinois PCS, L.L.C. (predecessor of  iPCS Wireless, Inc.) (Incorporated by reference to Exhibit 10.4 to  the registration statement on Form S-4 filed by the Registrants with the  SEC on January 8, 2001 (SEC File No. 333-47688))         |
| 10.9  |   | Master Lease Agreement  dated as of August 31, 2000 between iPCS Wireless, Inc. and Trinity  Wireless Towers, Inc. (Incorporated by reference to Exhibit 10.43  to the annual report on Form 10-K405 filed by the Registrants with the  SEC on March 29, 2001)                                                                                                            |
| 10.10 |   | Master Tower Space  Reservation and License Agreement dated as of July 20, 2002 by and  between American Tower, L.P. and iPCS Wireless, Inc. (Incorporated by  reference to Exhibit 10.10 to the registration statement on  Form S-4 filed by the Registrants with the SEC on August 5, 2004  (SEC File No. 333-117942))                                                  |
| 10.11 |   | Restructuring  Management Services Agreement between iPCS, Inc. and YMS Management LLC  dated as of January 27, 2003, as amended. (Incorporated by reference to  Exhibit 10.11 to the registration statement on Form S-4 filed by  the Registrants with the SEC on August 5, 2004 (SEC File  No. 333-117942))                                                             |
| 10.12 |   | iPCS, Inc. Amended  and Restated 2004 Long-Term Incentive Plan, (Incorporated by reference to  Exhibit 99.1 to the current report on Form 8-K filed by the  Registrant with the SEC on February 2, 2005)                                                                                                                                                                                 |
| 10.13 |   | Employment Agreement,  dated as of July 20, 2004, by and between Timothy M. Yager and iPCS  Wireless, Inc. (Incorporated by reference to Exhibit 10.13 to the  registration statement on Form S-4 filed by the Registrants with the SEC  on August 5, 2004 (SEC File No. 333-117942))                                                                                |
| 10.14 |   | Employment Agreement,  dated as of July 20, 2004, by and between Stebbins B. Chandor, Jr.  and iPCS Wireless, Inc. (Incorporated by reference to Exhibit 10.14  to the registration statement on Form S-4 filed by the Registrants with  the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                        |
| 10.15 |   | Employment Agreement,  dated as of July 20, 2004, by and between Patricia M. Greteman and  iPCS Wireless, Inc. (Incorporated by reference to Exhibit 10.15 to  the registration statement on Form S-4 filed by the Registrants with the  SEC on August 5, 2004 (SEC File No. 333-117942))                                                                            |
| 10.16 |   | Employment Agreement,  dated as of July 20, 2004, by and between Craig A. Kinley and iPCS  Wireless, Inc. (Incorporated by reference to Exhibit 10.16 to the  registration statement on Form S-4 filed by the Registrants with the SEC  on August 5, 2004 (SEC File No. 333-117942))                                                                                 |
| 10.17 |   | Form of Incentive Stock  Option Agreement (Incorporated by reference to Exhibit 10.17 to the  registration statement on Form S-4 filed by the Registrants with the SEC  on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                |
| 10.18 |   | Form of Non-Qualified  Stock Option Agreement (Incorporated by reference to Exhibit 10.18 to  the registration statement on Form S-4 filed by the Registrants with the  SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                            |
| 10.19 |   | Form of Director  Non-Qualified Stock Option Agreement (Incorporated by reference to  Exhibit 10.19 to the registration statement on Form S-4 filed by  the Registrants with the SEC on August 5, 2004 (SEC File  No. 333-117942))                                                                                                                                                  |
| 10.20 |   | Timothy M. Yager’s  Amended and Restated Stock Unit Agreement, dated as of January 27, 2005  (Incorporated by reference to Exhibit 99.3 to the current report on Form 8-K  Filed by the Registrant with the SEC on February 2, 2005)                                                                                                                                                               |
| 10.21 |   | Form of Restricted  Stock Agreement (filed as an exhibit to the Registration Statement filed on  October 5, 2004)                                                                                                                                                                                                                                                                                  |
| 10.22 |   | Agreement of Purchase  and Sale, dated September 8, 2004, between iPCS Wireless, Inc. and  TCP Communications LLC (Incorporated by reference to Exhibit 10.1 to the  Form 8-K filed by the Registrant with the SEC on September 14,  2004)                                                                                                                                     |
| 10.23 |   | Employment Agreement by  and between iPCS Wireless, Inc. and John J. Peterman, dated as of  August 24, 2004 (Incorporated by reference to Exhibit 10.1 to the  Form 8-K filed by the Registrant with the SEC on September 14,  2004)                                                                                                                                           |
| 10.24 |   | Amended and Restated  Addendum VIII to Sprint PCS Management Agreement (Incorporated by reference  to Exhibit 10.1 to the Form 8-K filed by the Registrant with the  SEC on November 4, 2004)                                                                                                                                                                                            |
| 10.25 |   | Employment Agreement by  and between iPCS Wireless, Inc. and Edmund L. Quatmann, Jr. dated  as of November 30, 2004 (Incorporated by reference to Exhibit 10.1  to the Form 8-K filed by the Registrant with the SEC on December 3,  2004)                                                                                                                                |
| 10.27 |   | Form of Non-Qualified  Stock Option Agreement for Non-Employee Directors (Employing Stockholder  version) (Incorporated by reference to Exhibit 99.2 to the current report on  Form 8-K filed by the Registrant with the SEC on                                                                                                                                                                         |

 

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|   |   | February 2, 2005)                                                                                                        |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|
| 31.1   |   | Certification of Chief  Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                |
| 31.2   |   | Certification of Chief  Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                |
| 32.1   |   | Certification Pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 |

 

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*              Confidential treatment has been granted on portions ofthese documents.

 

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