SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

      For the fiscal year ended December 31, 1996.

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 [NO FEE REQUIRED]

      For the transition period from __________ to ___________

                         Commission file number 1-13002

                           PAGING PARTNERS CORPORATION
           (Name of small business issuer as specified in its charter)

                  Delaware                                22-3281446
        (State of other jurisdiction of                (I.R.S. Employer
        incorporation or organization)                 Identification No.)

           Freehold Office Plaza
       4249 Route 9 North, Building 2
            Freehold, New Jersey                             07728
  (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (908) 409-7088

    Securities registered under Section 12(b) of the Securities Exchange Act
                                    of 1934:

                                                  Name of each exchange
          Title of Each Class                      on which registered
          -------------------                      -------------------

     Common Stock, $0.01 par value                Boston Stock Exchange

    Securities registered under Section 12(g) of the Securities Exchange Act
                                    of 1934:

                               Title of Each Class
                               -------------------

                                      None

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. |X| Yes   |_| No

      Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X| Yes   |_| No

      The revenues of registrant for the fiscal year ended December 31, 1996
were approximately $6,910,000.

      The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of March 21, 1997, was approximately $3,319,000 based upon a
last sales price of $1.125

      As of March 21, 1997, there were 6,265,000 shares of the registrant's
Common Stock outstanding.
<PAGE>

                                     PART I
ITEM 1. BUSINESS

General

      Paging Partners Corporation (the "Company" or "Paging Partners") operates
technologically advanced paging systems which provide one-way wireless messaging
services. The Company's Metro system, which broadcasts on 931.7875 MHz (The
"Metro System"), initially focused on the New York Metropolitan area and
currently provides service over portions of seven states (New York, New Jersey,
Connecticut, Pennsylvania, Maryland, Virginia and Delaware) and Washington, D.C.
The Company commenced construction of its Metro System in November 1990 and
initiated service in June 1991.

      During 1994 the Company obtained licenses from the Federal Communications
Commission ("FCC") to construct a paging system (its "Corridor System")
operating on a single frequency (929.6375 MHz) in the territory extending along
Interstate I-95 from Baltimore/Washington to Boston (the "Northeast Corridor").
The Company has completed sufficient construction of the Corridor system to
ensure exclusive operation on the 929.6375 MHz frequency throughout the
Corridor, including the metropolitan areas of Baltimore/Washington, D.C.,
Philadelphia, New York, and Boston and now provides continuous service from
Boston to Washington, D.C. Because the Corridor System is independent of the
company's Metro System, the Company continues to operate both Systems, and has
the flexibility to provide Resellers customized access to service on either
System.

      The Company has recently been granted licenses by the FCC for a third 900
MHz frequency covering most of the I-95 Northeast Corridor. In connection with
this grant, the Company has entered into a sharing agreement with another
carrier which was granted licenses for the frequency covering substantially the
same territory. Pursuant to this sharing agreement, the Company may use up to 50
percent of the available air-time.

      The Company does not market its services directly to paging subscribers.
The Company acts exclusively as a wholesaler and offers access to its wireless
communications systems to paging service companies, retailers and other third
parties which, in turn, directly solicit and service subscribers. In addition,
the Company solicits private network operators, radio common carriers ("RCC")
and other service providers (collectively with the paging service companies,
retailers and other parties described in the preceding sentence, "Resellers")
which have a need for access to transmission facilities in the territories
served by the Company's systems. Because the Company does not compete with
Resellers for the business of subscribers, management believes Resellers are
more likely to sell the Company's services than those of vertically integrated
paging system operators, although there can be no assurance that this, in fact,
is the case. The Company believes that by working exclusively with Resellers it
can successfully develop and market its paging systems without the costs of the
in-house sales and service personnel otherwise necessary to solicit and service
individual subscribers.

      By utilizing technologically advanced transmission systems, the Company
emphasizes and has been successful in providing high quality services targeted
toward the higher end of the paging market - pagers which receive alphanumeric
messages (i.e., messages consisting of both numbers and letters). Consequently,
the proportion of the pagers serviced by the Company which are alphanumeric far
exceeds the industry average. As part of its emphasis on data transmission and
alphanumeric services, the Company is developing proprietary software which will
enable the Company to format and transmit large quantities of information
received from multiple sources so that Resellers can offer subscribers the
ability to receive customized information on topics preselected by the
subscriber.

      The Company's emphasis on alphanumeric services is highlighted by its
AlphaPlus(R) software and services, and more recently, by its agreement with
Motorola whereby the Company broadcasts over its systems branded information
services made available to it by Motorola. AlphaPlus allows subscribers to
select from information services provided by the Company (such as customized
message dispatch, traffic, sports, weather, financial updates, and news
headlines), the content to be received by their pagers. The Company's agreement
with Motorola will allow it to supplement its AlphaPlus offerings by making
available over its Systems branded information services developed by Motorola
through its alliances with leading service providers. The first of these
services, ESPNET.To.Go(TM), was made available in May, 1996 followed by CNBC
Street Line(TM) in January 1997.


                                       2
<PAGE>

Background; Strategy

      The paging industry has been in existence since 1949, when the FCC
allocated a group of radio frequencies for use in providing one-way and two-way
wireless communications services. Over the years, technological advances,
including the use of computerized devices to transmit and receive messages, have
enhanced the capacity of pagers to transmit, receive and store large volumes of
data. Consequently, pagers and the paging industry have evolved from the
familiar single alert tone "beeper" providing service to a small network of
doctors and other professionals to include a wide array of devices capable of
receiving and storing substantial amounts of data.

      In recent years, the paging industry has placed an increased emphasis on
data transmission services as both businesses and consumers have found new
applications for paging receivers. Technological advances and changing business
and consumer demands are rapidly expanding the market from traditional pagers
("beepers") to one which includes alphanumeric pagers capable of receiving and
storing thousands of characters, as well as a wide variety of wireless data
receivers.

      From inception, the Company's principal operating strategy has been to act
as a wholesaler and market access to its transmission systems to Resellers
which, in turn, directly solicit and service subscribers. As part of this
strategy, the Company has determined not to market its transmission system
directly to individual subscribers. This permits the Company to operate with
less personnel than vertically integrated paging companies and removes the
threat of competition between the Company and substantially all of its
Resellers. The Company directly solicits service providers, including private
network operators and other RCCs, which have a need for bulk paging or data
transmission services in the territory served by the Company's transmission
facilities. Such accounts are typically given direct access to the Company's
computers. Consequently, day-to-day servicing of such accounts does not require
intervention by the Company's personnel.

      Another key strategy of the Company has been to concentrate on providing
data and information transmission services targeted toward the higher end of the
market. One aspect of this strategy has been the Company's focus on developing
technologically advanced systems designed for alphanumeric paging services.
Successful marketing of alphanumeric services requires the ability to deliver a
signal which will not be corrupted. The Company's Metro and Corridor systems
were designed and constructed to address the needs of alphanumeric subscribers.
The success of the Company's efforts to stress its alphanumeric capabilities is
evidenced by the fact that the proportion of alphanumeric pagers which it
services far exceeds the proportion of alphanumeric pagers in service throughout
the industry.

      Another element of the Company's strategy is its willingness to adapt its
transmission facilities for applications demanded by the marketplace. Because
the Company acts as a wholesaler, it does not dictate the services offered
subscribers or the uses made of its Systems by parties with a need for bulk
paging. By maintaining flexible technologically advanced Systems, the Company
hopes to be able to satisfy the evolving needs of the wireless marketplace.

      In the immediate future, the Company intends to continue to expand by
adding Resellers and hence new subscribers to its Metro and Corridor Systems. As
part of its strategy to increase the penetration of its Systems the Company will
continue to seek to increase and customize the information services available to
subscribers. As part of this effort, the Company will seek to develop
proprietary software which will enable it to format and transmit large volumes
of information received from multiple sources so that Resellers can offer
subscribers the ability to receive customized information on topics preselected
by the subscriber. In addition, the Company will consider licensing to the
operators of other paging systems the right to use its proprietary software.
Examples of the Company's efforts in this area include its AlphaPlus(R) software
and services, and its agreement with Motorola regarding branded information
services.

      In addition to providing paging services in the Northeast Corridor, the
Company, from time to time, may consider entering new geographical markets. Such
expansion could occur through the acquisition of new licenses in auctions
conducted by the FCC or the acquisition of existing paging systems, including
licenses, from current license holders.


                                       3
<PAGE>

Paging Operations

      Subscriber Services

      The pagers currently used by subscribers to the Company's Systems provide
two basic types of service, digital display and alphanumeric display - each of
which can be combined with a variety of enhancements to increase a pager's
utility. A digital display pager permits a caller, utilizing a touch tone
telephone, to transmit to the subscriber a numeric message consisting of a
series of numbers, such as a telephone number, an account number or coded
information. Digital display pagers have the capacity to store several numeric
messages that can be recalled on demand. An alphanumeric display pager allows
subscribers to receive and store messages consisting of both numbers and
letters. Alphanumeric pagers common in the industry today have sufficient memory
to store thousands of characters.

      Digital display paging service, which was introduced by the paging
industry over 10 years ago, today represents a majority of the pagers in
service. Alphanumeric display service, introduced in the mid-1980s, constitutes
a relatively small portion of the pagers in use, primarily due to the difficulty
of accurately inputting the message to be delivered and in ensuring accurate
receipt of the message by the subscriber's pager. The success of the Company's
focus on alphanumeric services is evidenced by the fact that of the pagers
served by the Company, over 30% are alphanumeric as compared to an industry
average of approximately 10%.

      Traditionally, the message to be delivered to an alphanumeric pager was
transcribed by an operator of the paging company during a telephone conversation
with the party desiring to send the message. Today, a properly equipped
transmission facility, such as the Company's, permits callers to input messages
directly into the transmission facility either by using a personal computer
equipped with a modem or a dedicated input device such as an AlphaMate(TM)
manufactured by Motorola. For those parties lacking such equipment, the Company
assigns to subscribers a telephone number answered at a dispatch center selected
by the subscriber which will take a message when a party calls the subscriber's
pager telephone number seeking to send an alphanumeric message. To ensure that
data transmitted is received accurately by the subscriber's pager, the Company
designs and operates its system so that its transmitters send out a synchronized
radio signal. This reduces interference and increases the probability that the
message will be received accurately.

      The Company's AlphaSelectSM software allows Resellers to select several
independent alphanumeric dispatch companies (i.e., companies that have the
equipment necessary to properly input alphanumeric messages into the Company's
central computers) for their subscribers. The AlphaSelectSM software was
designed exclusively for the Company, and enables Resellers not only to provide
a choice of several dispatch companies, but also to provide subscribers with the
opportunity to select a private "800" or local telephone number with a custom
answer phrase of their choosing.

      Message Mail is an enhancement that allows a Reseller to add a custom
greeting to a pager and which gives the subscriber the ability to retrieve the
last ten numeric messages that were sent to the pager. In addition, the Company
provides a feature that enables a caller to leave a voice (voice mail) message
for a subscriber which the subscriber can retrieve by calling his voice mail box
at the Company's facility. A subscriber's pager displays a numeric code alerting
the subscriber whenever a voice mail message is left.

      As part of its AlphaPlus(R) service, the Company transmits a variety of
information services which Resellers can sell to their subscribers. This service
allows subscribers to receive information on their alphanumeric pagers which
they can review at their convenience. Currently, the information provided by the
Company includes headline news stories, hourly financial updates, sports scores
and a variety of other "infotainment" items purchased by the Company from
various third party information providers. The Company provides additional
premium information services, including more detailed sports, weather,
financial, traffic and emergency information, which Resellers can sell to
individual subscribers. The Company has entered into an arrangement with
Motorola whereby the Company will make available branded information services
developed by Motorola through its alliance with leading information service
providers. The Company began transmitting the first of these, ESPNET.To.Go,(TM)
in May, 1996 followed by CNBC Street Line(TM) in January 1997. The Company
intends to transmit additional information services as they are made available
by Motorola, as well as services supplied by other providers.


                                       4
<PAGE>

      The Company's programming software allows the subscriber (through its
Reseller) to select any of the enhancements offered by the Company at the
initial programming of a pager or at any time that the pager is in service. In
addition, because the Company has incorporated Motorola's FLEX(TM) OTA (over the
air) technology into its systems, a subscriber need not bring his pager to the
Reseller for adjustments when he decides to add on new enhancements. The Company
constantly monitors the paging market to determine what new enhancements it
might successfully sell to Resellers.

      Network Services

      In addition to marketing its paging Systems and related services to
Resellers, the Company also markets these Systems to private network operators,
RCCs and service providers which have a need for bulk paging or data
transmission services in the territories serviced by the Company's transmission
facilities. The Company has entered into arrangements with other RCCs and
private network customers, permitting such parties to "network" their systems
with the Company's and expand the coverage offered to their end users. More
recently, the Company has allowed Resellers to directly connect their switches
into the Company's terminal, permitting Resellers to service their subscribers
through the Company's Systems. The Company charges for such access on either a
fixed fee or per-usage basis.

      The Company has also entered into arrangements with specialized
information providers (for example, sports scores/lines, stock quotes, emergency
information) which have a "niche" subscriber base but which do not have their
own transmission facilities, whereby the Company transmits data selected by the
information provider for receipt by that provider's customers. Each of these
arrangements differs depending upon the amount of data to be transmitted and
time of transmission. By maintaining technologically sophisticated flexible
transmission systems, the Company hopes to profit from new applications of
wireless information services as they are developed.

Marketing

      Rather than solicit and service individual subscribers directly, the
Company recruits Resellers which, in effect, act as the Company's salesforce.
The Resellers purchase from the Company, on a wholesale basis, access to its
transmission system which, in the case of paging service providers and
retailers, they provide to individual members of the general public. The Company
recruits Resellers through industry contacts, its seminar program, and a small
sales force.

      Management believes that Resellers are attracted to the Company because of
the quality of coverage provided by its paging systems, the computerized nature
of the Company's operations, which allows the Reseller 24-hour access to its
accounts, and the responsiveness of the Company to each of its Resellers. In
addition, because the Company incorporated Motorola's FLEX OTA technology into
its systems, a Reseller can change the services received by a subscriber without
requiring the subscriber to bring his pager in for adjustment.

      As part of its marketing efforts, the Company conducts seminars for
Resellers, potential Resellers and other interested members of the paging
industry. These programs give the Company an opportunity to maintain contact
with each of its Resellers. Further, they afford the Company the opportunity to
update Resellers on the service enhancements available. The Company provides
technical, marketing, sales and operations support to its Resellers and will
participate with Resellers in their efforts to solicit large volume subscribers.
The Company employs sales representatives to directly solicit Resellers in their
respective territories.

      The Company's current Resellers are from both within and without the
communications industry. The Resellers include answering services, two-way radio
companies and other participants in the communications industry seeking to
expand the services offered to their customers; nationwide paging companies
which rely upon the Company to service their customers in territories serviced
by the Company's Systems; private network operators and other radio common
carriers which supplement their transmission facilities by networking into the
Company's facilities; retailers, electronics distributors and other specialty
retail outlets seeking to supplement their product lines and information
providers which rely on the Company to transmit information to their
subscribers. The Company has constructed both of its paging Systems as a series
of interconnected modules, which allows the Company to give Resellers the
ability to offer services to subscribers in only those portions of the service
area which the subscriber designates. The Company makes such subregional
services available at rates below those for service throughout the Company's
service area.


                                       5
<PAGE>

      When a Reseller decides to market the Company's services, it is provided
with on-line access to the Company's computer terminal and can directly
activate, deactivate or modify the services provided to a subscriber's pager.
Because the Reseller, through its computer terminal, interacts directly with the
Company's computers, there is no incremental cost to the Company. Further,
because the Company's computers are active 24 hours a day, Resellers can service
accounts at their convenience.

      As a convenience to its Resellers, the Company maintains an inventory of
pagers and Resellers can either purchase pagers from industry suppliers or
purchase pagers from the Company. Each Reseller maintains its own sales,
marketing and accounting staff and directly services, bills and collects
payments from its subscribers. The Company derives the majority of its revenue
from a per-unit monthly fee, not dependent on usage, charged to Resellers for
each active pager. This fee, along with any other amounts due for incremental
services provided to a subscriber, must be paid by the Reseller regardless of
whether the subscriber pays the Reseller. Because each Reseller has direct
access to the Company's computers, billing disputes between the Company and its
Resellers, common throughout the industry, are virtually eliminated.

      The Company is not dependent on any single Reseller. No single Reseller
accounted for more than 5% of the Company's gross revenues during 1995 or 1996.

Sources of Equipment

      The Company does not manufacture any of the pagers or related transmitting
and computerized paging terminal equipment used in its operations, all of which
are available from a variety of sources. The Company anticipates that pagers and
paging equipment will continue to be available to the Company, its Resellers and
subscribers in the foreseeable future, consistent with normal manufacturing and
delivery lead times. Due to the high degree of compatibility among different
models of transmitters, computers and other paging and voice mail equipment
available from suppliers, the Company has been able to design its paging
networks so as not to be dependent upon any single source for such equipment.

      To achieve cost savings from volume purchases and simplify inventory
control, the Company currently purchases substantially all of its pagers from
Motorola. Although this makes the Company dependent on Motorola's lead times in
ensuring that it has sufficient inventory, the Company has not, to date,
experienced significant delays as a result of such lead times. Nevertheless,
there can be no assurance that it will not experience such delays in the future.

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

Data Receipt and Transmission

      A key strategy of the Company has been to emphasize the utility of pagers
and devices equipped with paging receivers to receive large volumes of data on a
timely and economical basis. In furtherance of this strategy, the Company
transmits a variety of information streams, including headline news stories,
hourly financial updates, sports scores, traffic, weather and an assortment of
what is referred to as "infotainment," for receipt by its subscribers.
Additional categories of information are added periodically in response to
market demand.

      As part of its emphasis on data transmission, the Company continues to
seek to develop software capable of receiving large volumes of information,
analyzing the information to determine what is relevant to a particular
subscriber and then reformatting the information for transmission over the
Company's systems for receipt by subscribers. Fully developed, such software
would allow a paging receiver to function as a personal information device
receiving an individualized data stream selected by the subscriber and broadcast
over the Company's systems.

      To increase the visibility of its AlphaPlus(R) services, the Company
entered into an agreement with Motorola whereby the Company will make available
to subscribers branded information services developed by Motorola through its
alliances with leading service providers. The first of these services,
ESPNET.To.Go(TM), was made available in May 1996, followed by CNBC
StreetLine(TM) in January 1997.


                                       6
<PAGE>

      In addition to attracting subscribers to the Company's Systems, management
believes that the software developed in connection with the Company's
AlphaPlus(R) services may be of interest to other radio paging system operators.
Consequently, the Company will seek to profit from the information market by
distributing to other system operators preprocessed information for transmission
to their subscribers or processing software developed by the Company.

      In addition to information services broadcast by the Company, the
Company's systems have been designed to allow subscribers to send information
for receipt on their pagers. Developments in software and information processing
equipment, such as the Motorola AlphaMate(TM), allow subscribers to a properly
equipped facility, such as the Company's, to receive messages sent by an
appropriate device directly to the operator's facility for transmission to the
subscriber. Such a facility allows a subscriber to receive messages directly
from his office without the possibility of transcription errors. In addition,
existing technology permits information broadcast over a paging system to be
received on a computer equipped with a paging modem. Management anticipates that
as paging systems evolve they will be capable of transmitting virtually all
electronic data currently transmitted over traditional telephone lines.

Competition

      The Company faces intense competition from operators of other wireless
transmission systems in its efforts to recruit Resellers. Such competition is
based upon price, as well as on the quality and variety of services offered, and
the geographic area covered. The Company's Resellers in turn face intense
competition from operators of other wireless message transmission system as well
as the Resellers representing such systems. Many of the competitors of the
Company and its Resellers, which include local, regional and national paging
companies, possess greater financial, technical and other resources than the
Company. Certain competitors offer wider coverage than does the Company and
certain competitors follow a low-price discounting strategy to expand market
share.

      Management believes that the quality of the service the Company provides,
as well as the variety of enhancements offered, appeal to Resellers. To date,
the Company has focused its efforts on providing higher end alphanumeric and
data transmission services. The merits of this strategy are attested to by the
fact that the proportion of the pagers served by the Company which are
alphanumeric far exceeds the proportion of pagers throughout the industry which
are alphanumeric. Moreover, management believes that because the Company
concentrates on Resellers and does not maintain a competitive sales force,
Resellers are more likely to rely upon the Company than on its competitors,
although there can be no assurance this, in fact, is the case. Further, because
the Company does not compete with Resellers, the Company provides more
responsive service to Resellers, which leads to improved loyalty and makes the
Company more attractive to potential Resellers.

      The Company's Metro System competes with at least ten other paging system
operators in the New York metropolitan area and others throughout its coverage
area. These include systems operated by Paging Network, Inc., Mobilemedia
Communications, Inc., a division of MobileMedia Corporation, and SkyTel, a
division of Mobile Telecommunications Technologies Corp., as well as systems
operated by privately owned companies. The Company's Corridor System competes
with several or more competitors in all regions of the Northeast Corridor. Some
of these competitors are small, privately owned companies serving only one
market area, while others are larger companies, including those mentioned above,
that provide service in more than one market and, in some cases, continuous
coverage throughout the Northeast Corridor of the United States.

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

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


                                       7
<PAGE>

Regulation

      The Company's paging operations are subject to regulation by the FCC under
the Communications Act of 1934, as amended (the "Communications Act") and the
Telecommunications Act of 1996. Prior to August 1996, paging services were
primarily offered over radio frequencies that the FCC allocated for either
common carriage [the licensees for which are known as radio common carriers
("RCCs")], or private carriage [the licensees for which are known as private
carrier paging operators ("PCPs")]. RCCs are granted an exclusive license to a
particular radio frequency in a particular locality or region. In 1994,
qualified PCPs were granted authority to obtain exclusive use of their licensed
frequencies. The Company operated its Metro System pursuant to RCC licenses. The
Company's Corridor System was operated pursuant to PCP licenses, but the Company
has been granted exclusive use of its regional PCP frequency throughout the
Northeast Corridor.

      The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act"), amended
the Communications Act by eliminating many of the distinctions between RCC's and
PCP's and by creating a new category called commercial mobile radio services
("CMRS"). In general, changes caused by the creation of the commercial mobile
radio services category affecting current paging services (i.e., those utilized
frequencies allocated by the FCC as of January 1, 1993) became effective in
August 1996, as determined by the FCC Rules. In March of 1994, the FCC
promulgated regulations to implement these new statutory requirements. Further
regulations went into effect on January 2, 1995. In August 1996, PCP licensees
became subject to the same obligations as RCC's.

      The Company operates its paging systems pursuant to licenses granted by
the FCC. Licenses issued by the FCC set forth the technical parameters, such as
power output and tower height, under which the Company is authorized to use its
allocated frequencies. The FCC licenses granted to the Company are for varying
terms of up to 10 years, at the end of which time renewal applications must be
approved by the FCC. Most of the Company's current licenses begin expiring in
1999. FCC renewals are routinely granted in most cases upon a demonstration of
compliance with FCC regulations and adequate service to the public. Although the
Company is unaware of the existence of any circumstances which would prevent the
grant of any pending or future renewal applications, no assurance can be given
that the Company's licenses will be renewed by the FCC in the future.
Furthermore, although revocation and involuntary modification of licenses are
extraordinary regulatory measures, the FCC has the authority to restrict the
operation of licensed facilities or revoke or modify licenses. No license of the
Company has ever been revoked or modified involuntarily.

      The Budget Act also amended the Communications Act to authorize the FCC to
use competitive bidding to issue initial licenses for the use of frequencies for
which there are mutually exclusive applications and where the license will be
used to offer service for compensation. The FCC has stated that the future
issuance of CMRS licenses will generally be subject to competitive bidding,
though competitive bidding will not be required of the renewal of existing
licenses. On February 8, 1996, the FCC froze all applications for new licenses
and major modifications to existing licenses on the 929 and 931 Mhz frequencies.
In February 1997, the FCC issued a Report and Order setting forth its geographic
licensing rules and auction procedures. This action was taken in anticipation of
geographic licensing and possible auction of licenses for the affected
frequencies. Competitive bidding requirements for such licenses in any market
could increase the company's cost of entry into that market to the extent of
prevailing market prices for such licenses, but may result in a more efficient
granting of licenses. The FCC has also imposed a new structure of regulatory
fees, which the Company will have to pay with respect to its FCC licenses. The
Company believes that these regulatory fees will not have any material adverse
effect on the Company's business.

      The Communications Act requires licensees such as the Company to obtain
prior approval from the FCC for the assignment of any station license or the
transfer of control of any entity holding such licenses. The Communications Act
also requires prior approval by the FCC of acquisitions of paging companies. The
Company also applies for FCC authority to use frequencies, modify the technical
parameters of existing licenses, expand its service territory and provide new
services. Although there can be no assurance that any requests for approval or
applications filed by the Company will be approved or acted upon in a timely
manner by the FCC, or that the FCC will grant the relief requested, the Company
has no reason to believe any such requests, applications or relief will not be
approved or granted.


                                       8
<PAGE>

      The Communications Act limits foreign ownership of entities that hold
certain licenses from the FCC. Because of this limitation, no more than 20% of
the Company's stock may be owned directly or voted by non-U.S. citizens or their
representatives, a foreign government or its representatives, or a foreign
corporation, and none of the Company's officers or directors may be non-U.S.
citizens. The Company believes that the foreign ownership of its stock is well
below the 20% limitation referred to above. If the Company obtains knowledge
that the foreign ownership of its stock exceeds 20%, it would have to either
seek approval from the FCC for the additional foreign ownership or redeem Common
Stock at its current market value from foreign shareholders in an amount
sufficient to reduce such ownership to below 20%. Presently, both Congress and
the FCC are reviewing the viability of this foreign ownership limitation.

       In connection with state regulation under the amendments to the
Communications Act included in the Budget Act, states generally are prohibited
from regulating the entry of or the rates charged by any commercial mobile radio
service provider. The new law does not, however, prohibit a state from
regulating other terms and conditions of commercial mobile radio services. These
new statutory provisions took effect in August 1994.

      From time to time, legislation and regulations which could potentially
affect the Company, either beneficially or adversely, are proposed by federal
and state legislators and regulators. As stated above, management is currently
aware of the FCC's Report and Order on geographical licenses and auctions which
could have a material adverse impact on the Company's ability to expand its
operations. However, management is not aware of any such legislation or
regulations which would have a material adverse impact on the Company's current
operations. The foregoing does not purport to be a complete summary of all
present or proposed regulations or legislation relating to the Company's paging
operations.

Employees

      As of March 21, 1997, the Company had 26 full-time employees and one
part-time employee. The Company believes that its relationships with its
employees are generally good.

ITEM 2. PROPERTY

      The Company's principal office is located in approximately 4,300 square
feet of leased space at Freehold Office Plaza, 4249 Route 9 North, Building 2,
Freehold, New Jersey. The fixed rent on the lease, which expires August 31,
1999, is currently approximately $71,000 per year. The fixed rent will increase
approximately 6% on September 1, 1997. In addition to fixed rent, the lease
requires the Company to pay its proportionate share of certain maintenance
expenses and any increase in real estate taxes and insurance costs. The Company
leases approximately 230 locations for its transmitters on commercial broadcast
towers, buildings and other fixed structures. In addition, the Company leases
space in New York, Pennsylvania, Maryland, and Massachusetts, primarily to house
equipment related to its paging systems. The rental payable for such leases,
together with those for the Company's transmitter locations, aggregated
approximately $130,000 per month, as of December 31, 1996.

ITEM 3. LEGAL PROCEEDINGS

      There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      Not Applicable.


                                       9
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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

Common Stock:             1995             Common Stock:          1996

   Quarter          High        Low      Quarter             High         Low

First Quarter      6 5/8       3 7/8     First Quarter       3 1/2       2 3/4
Second Quarter     4 1/8       2 1/2     Second Quarter      3 3/8       2 1/2
Third Quarter      3 3/8       2 1/2     Third Quarter       3 3/8       1 3/8
Fourth Quarter     3 21/32     2 1/2     Fourth Quarter      3 1/4         3/4

Warrants:

   Quarter          High        Low      Quarter             High         Low

First Quarter      1 5/8         3/4     First Quarter        1 3/16       3/4
Second Quarter     1 1/16        7/16    Second Quarter       1 1/8        5/8
Third Quarter      1             3/4     Third Quarter          3/4        3/8
Fourth Quarter     1 1/4         11/16   Fourth Quarter         11/16      1/16

      On March 21, 1997, the closing bid prices of the Company's Common Stock
and Warrants were 1.125 and $.125, respectively. As of March 21, 1997, there
were approximately 80 record holders of the Company's Common Stock. The number
of record holders does not reflect the number of beneficial owners of the
Company's Common Stock for whom shares are held by banks, brokerage firms and
others. Based on information requests received from representatives of such
beneficial owners, management believes that there are at least 800 beneficial
holders of the Company's Common Stock. At the Company's request, trading in the
Company's Units was suspended in February, 1996.

Dividends

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

Recent Sale of Unregistered Securities

      On May 7, 1996, the Company sold 857,143 shares of its Common Stock in a
private placement to a group of thirteen investors, including Allen & Company,
for an aggregate price of $1.5 million. In March 1997, the Company sold 515,000
shares of its Common Stock in a private placement to an institutional investor
and four of the Company's directors for an aggregate purchase price of $531,093.
Both of the foregoing placements were exempt from the registration requirements
of the Securities Act of 1933, as amended, by virtue of the exemption provided
in Section 4(2) of the Act. In both placements, the Company made offers only to
a limited number of investors who were approached directly by the Company or its
placement agent, the investors, each of whom was "accredited" (as that term is
defined in Regulation D) acknowledged that the shares had not been registered
under the Act and agreed that they could not be sold unless they were


                                       10
<PAGE>

registered for sale under the Act or an exemption from registration was
available. Further, appropriate legends were affixed to the certificates
representing the shares and stop orders were given to the Company's stock
transfer agent.

      In connection with the May 1996 placement, Bentley Securities Corporation
acted as placement agent for the Company and received a fee of $75,000.


                                       11
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Results Of Operations

      The Table below presents certain items in the Company's statements of
operations in dollars and as percentages of total revenues and changes therein
for the years ended December 31, 1996 and 1995.

<TABLE>
<CAPTION>
                               1996                 1995                 Change
                           $          %         $           %          $          %
<S>                    <C>          <C>      <C>          <C>      <C>           <C>
Revenues:
   Service             4,950,000     71.7    3,510 000     64.2    1,440,000     41.0
  Equipment Sales      1,960,000     28.3    1,964,000     35.8       (4,000)    (0.2)
                      ----------    -----   ----------    -----     --------
  Total Revenue        6,910,000    100.0    5,474,000    100.0    1,436,000     26.2
                      ----------    -----   ----------    -----     --------
Operating Expenses:
  Service              3,416,000     49.4    2,303,000     42.1    1,113,000     48.3
  Cost of Equipment
    Sold               2,136,000     30.9    2,110,000     38.6       26,000      1.2

  Selling              1,250,000     18.1    1,072,000     19.5      178,000     16.7
  General and
Administrative         1,608,000     23.3    1,544,000     28.2       64,000      4.0
                      ----------    -----   ----------    -----     --------
                       8,410,000    121.7    7,029,000    128.4    1,381,000     19.6
                      ----------    -----   ----------    -----     --------
EBITDA                (1,500,000)   (21.7)  (1,555,000)   (28.4)      55,000      3.5
Depreciation and
    amortization       1,056,000     15.3      790,000     14.4      266,000     33.7
                      ----------    -----   ----------    -----     --------
Loss from operations  (2,556,000)   (37.0)  (2,345,000)   (42.8)    (211,000)    (9.0)
Interest and other
expense (Income)         160,000      2.3       (7,000)     (.1)     167,000     --
                      ----------    -----   ----------    -----     --------
Net loss              (2,716,000)   (39.3)  (2,338,000)   (42.7)    (378,000)   (16.2)
                      ----------    -----   ----------    -----     --------
</TABLE>

----------

      The service component of revenue increased during the periods presented
reflecting the continuing penetration of both the Metro and Corridor Systems.

      Service cost includes transmission site rentals, telephone interconnect
services, message dispatch costs, and the costs (mostly personnel-related) of
the Company's engineering function. The increases in such costs are primarily
attributable to an increase in the number of transmission sites, which grew from
145 at the beginning of 1995 to over 230 at the end of 1996; increased telephone
expenses reflecting both the growth in utilization of the Company's systems and
the initial infrastructure for the Corridor System; and increased message
dispatch costs resulting from greater alphanumeric penetration.

      Equipment sales and cost of equipment sold were essentially unchanged in
1996 as compared to 1995. The Company continues to sell pagers as an
accommodation to Resellers and not as a source of profit but its competitors
have been offering even more aggressive pricing to certain Resellers, reducing
the Company's unit pager sales. Additionally, during the third quarter of 1996,
the Company determined it had excess inventory of certain types of pagers. This
excess has since been sold at reduced prices, widening loss margins on pager
sales. Management has streamlined the Company's product offerings to reduce the
likelihood of future excess inventory accumulation and to reduce the need for
working capital investment in pager inventory.

      Selling expenses increased as a result of an increase in the number of the
Company's sales and marketing personnel from a peak of thirteen full-time
equivalent positions during 1995 to a peak of twenty during 1996. This increase
was partially offset by the elimination of the position of Vice President Sales
and Marketing as of July 1, 1996 and the market launching expenses for the
Corridor System incurred during the first half of 1995 which were not repeated
in 1996.

      Increases in general and administrative expenses were driven by personnel
and salary increases, most notably the addition of a new Executive Vice
President/General Manager in June 1996.


                                       12
<PAGE>

      EBITDA reflects the Company's earnings (excluding interest and
non-operating items) before taxes, depreciation and amortization, and measures
the Company's operating cash flows, which the Company considers to be a
significant measure of performance. EBITDA is commonly used in the paging
industry and by financial analysts and others who follow the industry to measure
operating performance, but should not be considered in isolation or as an
alternative to measures of operating performance or cash flows pursuant to
generally accepted accounting principles. EBITDA did not change significantly
from 1995 to 1996 as expense growth kept pace with revenue growth during 1996.

      Interest and other expense was $160,000 for the year ended December 31,
1996, mostly reflecting interest expense for the Company's equipment financing
with Motorola. This compares to interest and other income of $7,000 for 1995
reflecting interest income on unused proceeds of the Company's initial public
offering offset by a $50,000 write off of a joint venture investment.

      Depreciation increased as the Company put into service equipment purchased
for the final portion of the Corridor System. Additionally, in recognition of
the faster pace of product obsolescence in the telecommunications industry, the
Company is depreciating this equipment more rapidly than in the past.

      Net loss increased consistent with the increases in depreciation and
interest expense noted above.

Liquidity and Capital Resources

   In May 1994 the Company completed its initial public offering of 1,800,000
Units from which it derived net proceeds of $8,942,000. In June 1995, the
Company secured $1.5 million of equipment financing from Motorola. Borrowings
under this financing bear interest at the 90-day commercial paper rate plus 6%
and are collateralized by the Company's assets. By the end of 1996 the Company
had utilized $1,468,000 of the amount available from Motorola. By the end of the
first quarter of 1996 the Company had expended substantially all of the proceeds
from its initial public offering. Consequently, in May 1996 the Company
completed a private placement of 857,143 shares of its Common Stock from which
it derived net proceeds of $1,300,000. In March 1997, the Company completed a
private placement of Common Stock from which it derived net proceeds in excess
of $500,000. In addition, in March 1997 the Company restructured the repayment
terms of its loan from Motorola and obtained an increase in this credit line to
$2.27 million.

   By relying primarily upon Resellers to build its subscriber base, the Company
has been able to avoid many of the expenses associated with the solicitation and
servicing of subscribers. Nevertheless, the construction and initial operation
of a paging system requires substantial expenditures which can only be recouped,
if at all, from the subsequent operation of the system.. Consistent with the
Company's expectations, capital expenditures were $1,644,000 for 1995, primarily
as a result of the construction of the Company's Corridor System. Capital
expenditures continued to be significant ($770,000) during 1996 as the Company
supplemented its Corridor System. The Company used net cash of $1,039,000 in its
operations during 1996 as compared to $1,734,000 during 1995. This use of cash
reflects primarily the expenditures associated with the operation and initial
marketing activities related to the Corridor System and the Company's software
development efforts. The reduction in the use of cash from 1995 to 1996 reflects
management's efforts to decrease working capital requirements through
streamlining of pager inventory and more stringent receivable collection
policies.

   In July 1995 the Company agreed to pay $340,000, $130,000 of which is payable
in service credits, in connection with the acquisition of licenses and related
assets intended to expand its Metro System to the Washington, D.C. market. Of
the $210,000 to be paid in cash, $185,000 has already been paid and $25,000 is
due during 1997.


                                       13
<PAGE>

   In August 1996 the Company was granted licenses by the FCC for a third 900
MHz frequency covering most of the I-95 Northeast Corridor. To date, the Company
has capitalized approximately $60,000 of professional and regulatory fees
incurred in connection with the grant of these licenses. In connection with the
grant of these licenses, the Company entered into a sharing agreement with
another carrier which was also granted licenses for this frequency covering
substantially the same territory. Pursuant to this sharing agreement, the
Company may use up to 50% of the available air time.

   In March 1997, Motorola agreed to restructure the Company's loan to eliminate
principal payments during the first half of 1997 and to reduce the amount of the
principal payments by approximately $10,000 per month below their original level
during the second half of 1997. In connection with this restructuring, Motorola
also agreed to amend certain financial convenants to be consistent with the
Company's current business plan. Absent the modification of the covenants, the
Company would have been in default on its loan agreement with Motorola,
entitling Motorola to demand immediate repayment of all outstanding amounts. In
addition to rescheduling the principal payments due under the Company's loan,
Motorola also increased the amount available under this credit line from $1.5
million to $2.27 million.

   In connection with the restructuring of the Company's loan, Motorola required
the Company to raise net proceeds of $500,000 in the form of equity or $700,000
of subordinated debt. To satisfy this condition, in March 1997, the Company sold
an aggregate of 515,000 of shares of Common Stock to an institutional investor
and four of the Company's directors for aggregate net proceeds in excess of
$500,000. Further, the Company agreed that if it were to fail to meet the
revised financial covenants, it would grant Motorola warrants to purchase up to
180,000 shares of Common Stock exercisable at a price of one cent per share, and
engage an investment banker to liquidate the Company. Management believes that
if the Company's business continues to improve as it has during the past six
months, it will meet the revised financial covenants in the Motorola loan.

   On its Report on Form 10-QSB for the quarter ended June 30, 1996, management
noted that if the Company were to continue operating as it was then doing, the
Company would not have sufficient cash to achieve its business goals. Based upon
its assessment of the Company's operations, management altered some of the
Company's operating policies to reduce the Company's working capital needs and
elected to respond to the price-competitive environment of the paging industry.
Since the Company determined to simplify its pricing policies and offer
resellers discounts on incremental units in service, the Company's revenues have
increased consistently on a month-to-month basis.

   To preserve its cash, the Company has adopted stringent collection procedures
and streamlined the categories of products included in inventory. In addition,
certain vendors were issued stock in satisfaction of amounts due from the
Company and members of management agreed to defer all or portions of their
salaries. As a result of the cash saving measures taken by management and the
growth in the Company's revenues, it appears that the Company will begin to
generate cash from operations during 1997. Of course, actual results may differ
as a result of factors over which the Company has no control, including
continued price and product competition by the Company's competitors or a
general slowing of the economy in the territory served by the Company's systems.

ITEM 7. FINANCIAL STATEMENTS

      See Index to Financial Statements, Page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      Not Applicable.


                                       14
<PAGE>

                           PAGING PARTNERS CORPORATION
                                      INDEX


Report of Independent Certified Public Accountants .........................  16

Balance Sheet ..............................................................  17

Statements of Operations ...................................................  18

Statements of Changes in Stockholders' Equity ..............................  19

Statements of Cash Flows ...................................................  20

Notes to Financial Statements ..............................................  21


                                       15
<PAGE>

                    [LETTERHEAD OF BERENSON & COMPANY LLP]


                         INDEPENDENT AUDITORS' REPORT


Board of Directors
Paging Partners Corporation
Freehold, NJ

We have audited the accompanying balance sheet of Paging Partners Corporation as
of December 31, 1996, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years ended December 31, 1996 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Paging Partners Corporation as
of December 31, 1996 and the results of its operations and its cash flows for
the years ended December 31, 1996 and 1995 in conformity with generally accepted
accounting principles.


                                                    /s/ Berenson & Company LLP



New York, NY
February 6, 1997, except notes 5 and 10 as to which the date is March 1, 1997.


                                       16
<PAGE>

                           PAGING PARTNERS CORPORATION
                                  BALANCE SHEET

                                December 31, 1996

                                     Assets
Current assets:

    Cash and cash equivalents...................................   $    507,000
    Accounts receivable (net of allowances of $108,000) ........        555,000
    Inventory ..................................................         93,000
    Other current assets .......................................         69,000
                                                                   ------------
         Total current assets ..................................      1,224,000

Property and equipment .........................................      4,800,000
Licenses (less accumulated amortization of $643,000) ...........        667,000
                                                                   ------------
                                                                   $  6,691,000
                                                                   ============

                                  Liabilities

Current liabilities:

    Current maturities of notes payable ........................   $    170,000
    Accounts payable and accrued expenses ......................        614,000
                                                                   ------------
        Total current liabilities ..............................        784,000

Notes payable (less current maturities) ........................      1,335,000
                                                                   ------------
                                                                      2,119,000
                                                                   ------------

Commitments

                              Stockholders' Equity

Common stock, $.01 par value, 20,000,000 shares authorized .....         57,000
Preferred stock, $.01 par value, 1,000,000 shares
  authorized (none issued) .....................................     12,044,000
Additional paid-in capital .....................................     (7,529,000)
                                                                   ------------
Accumulated deficit ............................................      4,572,000
                                                                   ------------
                                                                   $  6,691,000
                                                                   ============


   The accompanying notes to financial statements are an integral part hereof


                                       17
<PAGE>

                           PAGING PARTNERS CORPORATION

                            STATEMENTS OF OPERATIONS

                                                      Year Ended December 31,
                                                    ---------------------------
                                                       1996            1995
                                                    -----------     -----------
Revenues:
  Service ......................................    $ 4,950,000     $ 3,510,000
  Equipment sales ..............................      1,960,000       1,964,000
                                                    -----------     -----------
                                                      6,910,000       5,474,000
                                                    -----------     -----------
Expenses:
  Service ......................................      3,416,000       2,303,000
  Cost of equipment sold .......................      2,136,000       2,110,000
  Selling ......................................      1,250,000       1,072,000
  Administrative ...............................      1,608,000       1,544,000
                                                    -----------     -----------
                                                      8,410,000       7,029,000
                                                    -----------     -----------

Loss from operations before depreciation
 and amortization ..............................     (1,500,000)     (1,555,000)
Depreciation and amortization ..................      1,056,000         790,000
                                                    -----------     -----------

Loss from operations ...........................     (2,556,000)     (2,345,000)

Interest and other income (expense) - net ......       (160,000)          7,000

NET LOSS .......................................    $(2,716,000)    $(2,338,000)
                                                    ===========     ===========

NET LOSS PER COMMON SHARE ......................    $     (0.50)    $     (0.49)
                                                    ===========     ===========

Weighted average common shares outstanding .....      5,371,000       4,800,000
                                                    ===========     ===========


  The accompanying notes to financial statements are an integral part hereof.


                                       18
<PAGE>

                           PAGING PARTNERS CORPORATION

                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        Additional                 Unrealized
                                    Common Stock          Paid-In    Accumulated    Loss On
                                Shares        Amount      Capital      Deficit     Securities
                             -----------   -----------  -----------  -----------   -----------
<S>                            <C>         <C>          <C>          <C>           <C>
Balance - December 31, 1994    4,800,000   $    48,000  $10,663,000  $(2,475,000)  $   (36,000)

Net loss                                                              (2,338,000)
Other                                                                                   36,000
                             -----------   -----------  -----------  -----------   -----------
BALANCE - DECEMBER 31, 1995    4,800,000        48,000   10,663,000   (4,813,000)          -0-

Net Proceeds of private          857,000         9,000    1,291,000
placement
Net loss                                                              (2,716,000)
Other                             16,000           -0-       90,000
                             ===========   ===========  ===========  ===========   ===========
BALANCE - DECEMBER 31, 1996  $ 5,673,000   $    57,000  $12,044,000  $(7,529,000)  $       -0-
                             -----------   -----------  -----------  -----------   -----------
</TABLE>

The accompanying notes to financial statements are an integral part hereof


                                       19
<PAGE>

                           PAGING PARTNERS CORPORATION
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                          Year ended
                                                                          December 31,
                                                                          ------------
                                                                      1996          1995
                                                                   -----------   -----------
<S>                                                                <C>           <C>
Cash flows from operating activities:
  Net loss ......................................................  $(2,716,000)  $(2,338,000)
  Adjustments to reconcile net loss
      to net cash used by operating activities:
     Depreciation ...............................................      928,000       681,000
     Amortization ...............................................      128,000       109,000
     Non-cash compensation ......................................       34,000           -0-
     Loss on joint venture investment ...........................          -0-        50,000
     Changes in operating assets and liabilities:
     (Increase) in accounts receivable net
       of allowances and deferred revenue .......................       41,000       (72,000)
     (Increase) decrease in other assets ........................      (12,000)       99,000
     Decrease in inventory ......................................      289,000       341,000
     (Decrease) Increase in accounts payable and accrued expenses      269,000      (604,000)
                                                                   -----------   -----------
          Net cash used by operating activities .................   (1,039,000)   (1,734,000)
                                                                   -----------   -----------
Cash flows from investing activities:
  Redemption of marketable securities ...........................          -0-     4,595,000
  Acquisition of property and equipment .........................     (230,000)     (706,000)
  Acquisition of licenses .......................................      (62,000)      (43,000)
  Joint venture investment ......................................          -0-       (50,000)
                                                                   -----------   -----------
          Net cash provided (used) by investing activities ......     (292,000)    3,796,000
                                                                   -----------   -----------
Cash flows from financing activities:
  Net proceeds from private equity placement ....................    1,300,000           -0-
  Proceeds from stock option exercise ...........................       46,000           -0-
  Repayment of notes payable ....................................      (61,000)   (1,812,000)
                                                                   -----------   -----------
          Net cash provided (used) by financing activities ......    1,285,000    (1,812,000)
                                                                   -----------   -----------

Net increase (decrease) in cash and cash equivalents ............      (46,000)      250,000
Cash and cash equivalents-beginning of year .....................      553,000       303,000
                                                                   -----------   -----------

Cash and cash equivalents-end of year ...........................  $   507,000   $   553,000
                                                                   ===========   ===========

Supplemental disclosures of cash flow information:
  Cash paid for interest ........................................  $   150,000   $    91,000
  Debt incurred for the purchase of equipment ...................      540,000       938,000
  Other .........................................................       10,000       (36,000)
  Debt incurred for license acquisition .........................          -0-       100,000
  Deferral of revenue in connection with license acquisition ....          -0-       130,000
</TABLE>

The accompanying notes to financial statements are an integral part hereof.


                                       20
<PAGE>

                            PAGING PARTNERS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


1. The Company and Basis of Presentation:

   Paging Partners Corporation ("The Company") was incorporated in February 1994
   to acquire all of the partnership interests and business of Paging Partners,
   L.P. ("L.P.") a limited partnership, in exchange for 2,939,605 shares of the
   Company's common stock, pursuant to a reorganization agreement effective
   simultaneously with the closing of the initial public offering. The
   acquisition by the Company of L.P. has been accounted for as a combination of
   companies under common control in a manner similar to a pooling of interests
   and, accordingly, the historical basis of the assets and liabilities was
   recorded by the Company.

   The Company operates two paging systems providing one-way wireless messaging
   services in portions of ten states from New Hampshire to Virginia.

2. Capitalization:

   a.  Initial Public Offering:

   In May 1994, the Company completed an initial public offering of 1,800,000
   units at $6.00 per unit. Each unit consists of one share of common stock and
   one redeemable common stock purchase warrant. The Company issued the units to
   the underwriter for a total of $10,800,000. Net proceeds to the Company after
   underwriting costs was $8,942,000.

   In connection with the initial public offering, the Company sold to the
   representative of the underwriters, for an aggregate of $100, the right to
   purchase up to an aggregate of 170,000 units. The units are identical to
   those described herein except that the warrants are not redeemable and have
   an exercise price equal to 122% of the exercise price of the warrants
   described below.

   Each warrant entitles the holder to purchase one share of common stock of the
   Company for $6.60, subject to adjustment in certain circumstances, at any
   time during the period commencing May 19, 1995 and ending on May 19, 1999.
   The Company may call the warrants for redemption, in whole or in part, at a
   price of $.01 per warrant at any time after they become exerciseable upon 30
   days' notice if the last sale price of the common stock has been at least
   175% of the then exercise price of the warrants for the 20 consecutive
   trading days ending on the third day prior to the date on which the notice of
   redemption is given.

   b.  Private Equity Placement

   In May 1996 the Company completed a private placement of 857,143 shares of
   its Common Stock for gross proceeds of $1.5 million yielding net proceeds of
   $1,300,000 after deduction of placement agent and professional fees,
   including $130,000 of placement agent fees paid to affiliates of one of the
   Company's directors.


                                       21
<PAGE>

                           PAGING PARTNERS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

   c.  Options:

   The Company has adopted a stock option plan (the "Plan"), pursuant to which
   options to purchase shares of the Company's common stock, intended to qualify
   as "incentive stock options" may be granted to employees and directors of the
   Company and independent contractors providing services to the Company. A
   total of 400,000 shares of common stock have been reserved for issuance under
   the Plan. Options are exercisable for terms of six months to ten years from
   the date granted. Details are as follows:

                                        Number                 Option
                                       of Shares             Price Range
                                       ---------             -----------
        1996

        Granted                         176,700             $1.38 - 4.38

        Exercised                        16,000             $2.88

        Canceled                        110,600             $2.75 - 6.00

        Outstanding, December 31        260,600             $1.38 - 6.25

        Exercisable, December 31        129,350             $2.75 - 6.25

        1995

        Outstanding, January 1.         145,500             $4.18 - 6.25

        Granted                          71,300             $2.75 - 3.25

        Canceled                          6,300             $2.75

        Outstanding, December 31        210,500             $2.75 - 6.25

        Exercisable, December 31        103,000             $4.18 - 6.25


The Company continues to measure compensation cost pursuant to APB No. 25, as
permitted by the Financial Accounting Standards Board (FASB) Statement No. 123.
Had compensation cost been determined on the basis of FASB Statement No. 123,
net income and earnings per share would have been reduced as follows:

                                           1996             1995
                                           ----             ----
         Net Loss:
           As reported                 $(2,716,000)     $(2,338,000)
           Pro forma                   $(2,733,000)     $(2,346,000)

         Primary     Earnings
         per share:
           As reported                 $     (0.50)     $     (0.49)
           Pro forma                   $     (0.51)     $     (0.50)


                                       22
<PAGE>

                           PAGING PARTNERS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

The fair value of compensation was computed using an option-pricing model which
    took into account the following factors as of the grant date:

    o   the exercise price and expected life of the option

    o   the current price of the stock and its expected volatility

    o   expected dividends, if any, on the stock

    o   the risk-free interest rate for the expected term of the option using
        the Treasury Note rate with a remaining term equal to the expected life
        of the options.

3. Significant Accounting Policies:

   a.  Cash and Cash Equivalents:

   Investments in liquid, marketable securities with original maturities of less
   than three months are considered to be cash equivalents and are carried at
   amortized cost.

   b.  Inventory:

   Inventory is stated at the lower of cost (first-in, first-out basis) or
   market, and consists of pagers for resale.

   c.  Property and Equipment:

   Property and equipment are recorded at cost. The Company provides for
   depreciation using the straight-line method over the estimated useful lives
   ranging from 5 to 10 years.

   d.  Licenses:

   Licenses are amortized using the straight-line method over their terms (10
   years).

   e.  Income Taxes:

   Income taxes for the Company have been provided for the tax effects of
   transactions reported in the financial statements and will consist of taxes
   currently due plus deferred taxes related primarily to differences between
   the basis of assets for financial and income tax reporting.

   f.  Concentration of Risk:

   The Company maintains its cash and cash equivalents in one commercial bank
   and one money market fund which invests solely in securities issued by the US
   government. The Company's accounts receivable are due from resellers located
   in the Northeast and Mid-Atlantic regions of the United States and the
   ability to collect is based upon economic conditions in the area. The Company
   purchases substantially all of its paging system equipment and pagers for
   resale from Motorola. However, such items are also available from Motorola's
   competitors.

   g. Estimates

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


                                       23
<PAGE>

                           PAGING PARTNERS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

   h.  Fair Value of Financial Instruments

   The carrying amounts of financial instruments including cash and cash
   equivalents, accounts receivable and accounts payable approximate fair value
   because of the short maturity of these instruments. The carrying amounts of
   notes payable approximate fair value because of similar current rates at
   which the Company could borrow funds with consistent remaining maturities.

4. Property and Equipment:

   Transmission and other paging ..............................     $6,340,000
   equipment
   Telephone and computer equipment ...........................        493,000
   Other ......................................................        138,000
                                                                    ----------
                                                                     6,971,000
        Less accumulated depreciation .........................      2,171,000
                                                                    ----------
                                                                    $4,800,000
                                                                    ==========

5. Notes Payable:

   a.  Equipment financing:

   In June 1995, Motorola agreed to provide financing for up to $1.5 million of
   equipment to complete the build-out of the Company's Corridor paging system.
   Simultaneous with the above financing, the Company prepaid the remaining $1.8
   million principal balance of its bank loan. This prepayment was financed
   through the sale of certain of the Company's marketable securities.
   $1,486,000 has been borrowed under the Motorola arrangement through December
   31, 1996, bearing interest at the 90-day commercial paper rate +6% and are
   collateralized by all of the Company's assets.

   On March 14, 1997, Motorola and the Company amended their financing
   agreement. The borrowing limit has been raised to $2.27 million and the
   timing of principal payments has been restructured as reflected in the
   maturity schedule below. Financial covenants have been adjusted to be
   consistent with recent operating performance trends.

   b.  Other:

   In connection with the transaction described in Note 6, the Company has a
   note payable in three equal quarterly principal installments of $12,500 plus
   interest at prime + 1%.

   Principal maturities of notes payable are as follows:

   1997...........................................................  $170,000
   1998...........................................................   384,000
   1999...........................................................   444,000
   2000...........................................................   504,000
   2001...........................................................     3,000

   Interest expense for 1996 and 1995 was $150,000 and $100,000, respectively.


                                       24
<PAGE>

                           PAGING PARTNERS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

6. Asset Purchase:

   In July 1995, the Company purchased certain equipment and paging licenses
   that allow the Company to expand one of its paging systems to encompass the
   Philadelphia, Baltimore and Washington, DC areas. Consideration consisted of
   cash, notes payable, and service credits aggregating $340,000.

7. Other Expenses:

   During 1995, the Company invested $50,000 in a joint venture to bid on
   certain PCS licenses to be auctioned by the FCC. The joint venture was
   terminated in August 1995 and the Company has written off its investment.

8. Commitments:

   a.  Leases/Related Parties:

   The Company leases office space, satellite transmission services, and
   transmitter sites both on a month-to-month basis and under noncancelable
   operating leases which provide for increased rentals based upon increases in
   real estate taxes, operating costs or selected price indices.
   Minimum annual rentals under leases expiring at various times through January
   2006 are as follows:

      1997.............................................   $1,323,000
      1998.............................................      883,000
      1999.............................................      581,000
      2000.............................................      294,000
      2001.............................................      106,000
      Thereafter.......................................      160,000

   Rent expense was $1,483,000 and $1,170,000 for 1996 and 1995, respectively.

   b.  Employment Agreements:

   The Company has employment agreements with four executives and consulting
   agreements with two former executives with total compensation due as follows:

      1997                $487,000
      1998                 405,000
      1999                  96,000

   c.  Royalty Agreement

   The Company has royalty agreements with a branded information service
provider with estimated minimum payments as follows:

      1997               $  72,000
      1998                  72,000
      1999                  18,000


                                       25
<PAGE>

                           PAGING PARTNERS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

9. Income Taxes:

   The Company is permitted to recognize currently the future benefit of its net
operating loss carryforwards and future tax deductions for expenses previously
recorded for financial reporting purposes. At December 31, 1996, the Company had
available net operating loss carryforwards of approximately $5,700,000 expiring
through 2011.

   As of December 31, 1996, the recorded deferred tax asset, representing the
expected benefit from the future realization of the net operating losses, net of
the valuation allowance, was $-0-. The sources of the deferred tax asset and the
tax effect is as follows:

             Net operating  loss carry forward benefit         $2,280,000

             Valuation allowance                               (2,280,000)
                                                               ----------
             Deferred tax asset                                $      -0-
                                                               ==========

10. Subsequent Event:

   On March 13, 1997, the Company completed a private placement of 515,000
shares of its Common Stock at $1.03125 per share for gross proceeds of $532,000
yielding estimated net proceeds in excess of $500,000 after deduction of
professional fees and other expenses. 115,000 of the shares were purchased by
members of the Company's Board of Directors.


                                       26
<PAGE>

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS

   The Company has a classified Board of Directors of five persons divided into
three classes. Directors of each class are elected at the annual meeting of
stockholders held in the year in which the term for such class expires and serve
for three years. Below is the name and age of each director, the year in which
he or she became a director of the Company, the year in which his or her term
expires, his or her principal occupations during the last five years and any
other directorships in publicly-held companies. Unless otherwise indicated, the
following information is current as of March 21, 1997.

Term expired in 1996:

   Robert M. Davidoff, 70, has served as a director of the Company since its
organization in February 1994. He is currently serving as Managing Director of
Carl Marks & Co., Inc., an investment banking firm, where he has been employed
since June 1950. He is also a general partner of CMNY Capital, L.P., a small
business investment company founded in March 1962, and chairman of CM Capital
Corporation, an investment vehicle which he founded in March 1982, both of which
are affiliated with Carl Marks & Co., Inc. Mr. Davidoff is currently serving on
the Board of Directors of Hubco Exploration, Inc., Marisa Christina Corporation,
Sidari Corp. and Rex Stores Corporation, all of which are publicly held
corporations.

   Richard J. Giacchi, 48, founded the Company along with Leonard Fink in August
1990. He served as the President of the general partner of Paging Partners,
L.P., since its formation and was appointed a director and the President and
Chief Executive Officer of the Company upon its organization in February 1994.
From March 1986 to October 1990, Mr. Giacchi was employed as the Director of
Engineering for O.R. Estman, Inc. (also known as Satellite Paging), a company
which provides paging services. In this position, Mr. Giacchi's responsibilities
included design, construction and maintenance of a wide-area paging system
operating throughout the Northeast Corridor.

   Although the terms of Messrs. Davidoff and Giacchi were scheduled to expire
in 1996, they have continued to serve as directors because the Company
determined not to hold an annual meeting during 1996. Their positions will be
subject to election at the Company's next annual meeting.

Term expires in 1997:

   Leonard D. Fink, 58, founded the Company along with Mr. Giacchi in August
1990. Mr. Fink served as Secretary and Treasurer of the general partner of
Paging Partners, L.P., since its formation and was appointed Chairman of the
Company upon its organization in February 1994. Since August 1984, Mr. Fink has
served as President of MessageBank, Inc., a privately held voice
mail/telecommunications service business which he founded and continues to own.
From June 1964 through February 1983, Mr. Fink served as President of Phone
Depots, Inc., a radio common carrier paging business he founded and subsequently
sold to Paging Network, Inc. (PageNet).

Term expires in 1998:

   Monte Engler, 55, served as legal advisor to Paging Partners, L.P.,
predecessor to the Company, since its inception, and as a director of the
Company since its organization in February 1994. He is currently a partner at
the law firm of Phillips Nizer Benjamin Krim & Ballon LLP specializing in
telecommunications matters, where he has worked since November 1984. In
addition, Mr. Engler currently serves as the attorney for the New York State
Radio Common Carrier Association, a paging company trade association. Mr. Engler
was one of the founders of and formerly counsel to the predecessor company to
Cellular One, the non-wireline cellular operator in the New York metropolitan
area.

   Rochelle B. King, 59, served as an investment banker to Paging Partners,
L.P., since its inception and as a director of the Company since its
organization in February 1994. From January 1992 to the present, she has been a
Senior Advisor to Bentley Associates, L.P., and Bentley Securities Corporation,
investment banking firms. In April 1989, she established King Investment Banking
Services to provide financial services and consulting to the broadcasting, media
and communications industries, which she continues today. Ms. King has served as
an independent general partner in Kagan Media Partners, a Paine Webber public
limited partnership, since its inception in January 1989, and from April 1989 to
January 1990 on the Mabon Nugent & Co., independent advisory board of
Euro-American Media Partners.


                                       27
<PAGE>

   The names of the directors and executive officers of the Company and their
respective ages and positions are as follows:

         Name            Age                    Position
         ----            ---                    --------

Leonard D. Fink          58      Chairman of the Board of Directors
Richard J. Giacchi       48      President, Chief Executive Officer and Director
Keith J. Powell          42      Executive Vice President and General Manager

Jeffrey M. Bachrach      41      Vice President, Chief Financial Officer,
                                 Treasurer and Secretary

Robert M. Davidoff       70      Director
Monte Engler             55      Director
Rochelle B. King         59      Director

   Set forth below is information concerning certain executive officers and key
personnel of the Company.

   Keith J. Powell, 42, has served as Executive Vice President and General
Manager of the Company since June 1996. From April 1992 through May 1996, he was
Vice President and General Manager first for PageNet of New York and then
PageNet of New Jersey. From 1983 to 1992 Mr. Powell held various positions
including Vice President, Marketing with the Texwipe Company, a manufacturer of
engineered products for aerospace, electronics and biomedical markets.

   Jeffrey M. Bachrach, 41, has served as the Company's Vice President, Finance,
and Principal Financial and Accounting Officer, since September 1994. From 1988
to December 1992, Mr. Bachrach served as the Vice President, Finance, and
Principal Accounting Officer of Polymerix, Inc., a publicly held company engaged
in the manufacture of plastic lumber. In October 1992 Trimax of Long Island,
Inc., a subsidiary of Polymerix, filed for protection under Chapter 11 of the
Bankruptcy Code in the U.S. Bankruptcy Court, Eastern District of New York. From
January 1993 to March 1994, Mr. Bachrach was employed as the Vice President,
Finance of Sadat Associates, Inc., a privately held environmental consultant.

   Frank Atkinson, 51, has served as a consultant to the Company since its
inception and became Vice President, Director of Management Information Systems
of the Company in May 1994. In December 1993, Mr. Atkinson founded Atkinson
Micro Systems, a company engaged in the design of telecommunications software.
Prior to that, from November 1982 to November 1993, Mr. Atkinson was Vice
President of Atlanta Micro Software, Inc., a telecommunications software company
which he also founded.

ITEM 10. EXECUTIVE COMPENSATION

   The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to Mr. Giacchi, the
Company's Chief Executive Officer, during the years ended December 31, 1994,
1995 and 1996. Mr. Giacchi was the only employee of the Company whose
compensation exceeded $100,000 during such years.

                           Summary Compensation Table

================================================================================
                               Annual Compensation
================================================================================
                                           Salary      Bonus    Other Annual
Name and Principal Position     Year        ($)         ($)     Compensation
--------------------------------------------------------------------------------
Richard J. Giacchi
President and Chief             1996      146,000        0           --
Executive Officer
--------------------------------------------------------------------------------

                                1995      136,000        0           --

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

                                1994      126,000     25,000         --

================================================================================


                                       28
<PAGE>

Compensation Arrangements

   The Company entered into five-year employment agreements with Mr. Giacchi and
Mr. Fink effective May 1994. Mr. Giacchi agreed to devote his entire working
time and attention to the business of the Company during the term of his
agreement. Mr. Fink agreed to devote such of his working time and attention to
the business of the Company as is necessary for him to effectively perform his
duties under his agreement. Mr. Fink currently serves as President of
MessageBank, Inc., a corporation which he founded and continues to own, which is
engaged in the provision of voice mail services and is permitted by the terms of
his agreement to continue to serve in such capacity and to engage in such other
non-competing business activities as will not prevent him from performing his
duties on behalf of the Company. Mr. Giacchi and Mr. Fink have also agreed not
to compete with the business of the Company for a period of two years following
termination of their respective employment agreements.

   Pursuant to his employment, Mr. Giacchi received a salary of $130,000 for the
first contract year, and $140,000 for the second contract year and is entitled
to receive $150,000 for the contract year ending May 1997. In addition, Mr.
Giacchi received as a bonus incentive compensation of $25,000 for services
rendered prior to December 31, 1994. The Company also provides Mr. Giacchi with
certain disability and life insurance in addition to that provided to its
employees generally, and the use of an automobile. Mr. Giacchi's compensation
for contract years beginning May 1997 shall be as determined by the Compensation
Committee of the Board of Directors provided that in no event will his base
salary for any contract year be less than the base salary for the previous
contract year, plus 7%, and the maximum incentive compensation that can be
earned during any calendar year shall not be less than the maximum incentive
compensation which could have been earned during the previous calendar year. To
enable the Company to preserve cash, Mr. Giacchi has agreed to defer receipt of
approximately 20% of his current salary and to temporarily forego the salary
increase due in May 1997. As of March 21, 1997, Mr. Giacchi has deferred receipt
of a total of $10,000 of his salary.

   Pursuant to his employment agreement, Mr. Fink received a salary of $40,000
for the first contract year and $45,000 for the second contract year and is
entitled to receive $50,000 for the contract year ending May 1997. In addition,
Mr. Fink received incentive compensation of $10,000 for services rendered prior
to December 31, 1994. Mr. Fink's compensation for contract years beginning May
1997 shall be as determined by the Compensation Committee of the Board of
Directors provided that in no event will his base salary for any contract year
be less than the salary for the previous contract year, plus 7%, and the maximum
incentive compensation that can be earned during any calendar year shall not be
less than the maximum incentive compensation which could have been earned during
the previous calendar year. To enable the Company to preserve cash, Mr. Fink has
agreed to defer receipt of his entire salary, commencing September 1996. As of
March 21, 1997, Mr. Fink had deferred receipt of a total of $27,000 of his
salary.

      The Company also has entered into employment agreements with Jeffrey
Bachrach and Frank Atkinson.

      Mr. Bachrach's current employment agreement, as amended, is effective
through September 30, 1998, and, if not terminated by either party, renews on a
year-to-year basis thereafter. The agreement provides for an annual salary of
$88,000 through September 30, 1996, $99,000 thereafter through September 30,
1997 and $110,000 thereafter through September 30, 1998. In addition, the
Company granted to Mr. Bachrach options to purchase an aggregate of 40,000
shares of the Company's Common Stock, exercisable at the fair market prices of
the Common Stock as determined on the respective dates of grant of the options.
To facilitate Mr. Bachrach's exercise of his stock options, the Company agreed
to pay to him at such time as he should choose to exercise his options
exercisable during the second half of 1997 for 10,000 shares him an amount equal
to the exercise price of such options, $8,750 in the aggregate. To enable the
Company to preserve cash, Mr. Bachrach has agreed to defer receipt of a portion
of his salary. As of March 21, 1997, Mr. Bachrach had deferred receipt of a
total of $5,000 of his salary.

      Mr. Atkinson's current employment agreement is effective through May 26,
1998, and, if not terminated by either party, renews on a year-to-year basis
thereafter. The agreement provided for an annual salary of $85,000 through May
26, 1996, $92,000 thereafter through May 26, 1997 and $101,000 thereafter
through May 26, 1998, plus a bonus each year of $7,000 and a car allowance of
$500 per month. As an inducement to Mr. Atkinson to become employed by the
Company, the Company issued him 13,421 shares of Common Stock. The Company has
granted to Mr. Atkinson options to purchase 75,000 shares of the Company's
Common Stock, exercisable at the various fair market prices of the Common Stock
as determined on the respective dates of grant of the options. To enable the
Company to preserve cash, Mr. Atkinson has agreed to defer receipt of the $7,000
bonus otherwise payable in May 1997.


                                       29
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      As of March 21, 1997, the Company had outstanding and entitled to vote
6,265,000 shares of Common Stock, par value $.01 per share ("Common Stock"), and
1,800,000 Common Stock Purchase Warrants ("Warrants"). In addition, the
representative of the underwriters of the Company's initial public offering held
options to purchase 170,000 units ("Unit"), each Unit consisting of one share of
Common Stock and one Warrant, and the Company had issued an aggregate of 262,000
options, exercisable at various prices, to its employees for services rendered
to the Company.

      To the knowledge of the Company the following table sets forth the
ownership of the Company's Common Stock as of March 21, 1997, by each person
owning more than 5% of such Common Stock, by each officer and director and by
all officers and directors as a group:

                                                    Number        Percentage
                                                      of         Beneficially
              Name of Beneficial Owner              Shares          Owned
              ------------------------              ------          -----

        Richard J. and Celeste Giacchi(1)(2)      1,012,406          16.2%

        Leonard D. and Nancy Fink(1)(3)           1,000,372          16.0%

        Allen & Company                             443,571           7.1%

        Dolphin Offshore Partners, L.P.             400,000           6.4%

        Robert Davidoff(1)(4)                       280,168           4.5%

        Rochelle B. King(1)(5)                      135,139           2.2%

        Monte Engler(1)(6)                           39,396             *

        Keith Powell(7)                              35,000             *

        Jeffrey Bachrach(7)                          12,500             *

        All directors and officers as a
         group (7 persons)(2)(3)(4)(5)(6)(7)      2,519,980          39.9%


----------
    *   Less than 1%


                                       30
<PAGE>

(1) The business address of Mr. And Mrs. Fink, Mr. and Mrs. Giacchi, Mr.
    Bachrach and Mr. Powell is c/o Paging Partners, 4249 Route 9 North,
    Freehold, New Jersey 07728. The business address of Robert Davidoff is c/o
    Carl Marks & Co., Inc. 135 E. 57th Street, New York, New York 10022. The
    business address of Rochelle B. King is c/o Bentley Associates L.P., 1155
    Avenue of the Americas, New York, New York 10036. The business address of
    Monte Engler is c/o Phillips, Nizer, Benjamin, Krim & Ballon LLP, 666 Fifth
    Avenue, New York, New York 10103.

(2) Includes (i) 518,553 shares held of record by Mr. Giacchi; (ii) 470,337
    shares held of record by Mrs. Giacchi, his wife, and (iii) 23,516 shares
    held of record by trusts for the benefit of their minor children. Mr. and
    Mrs. Giacchi each disclaims any beneficial ownership of the shares held of
    record by the other. Excludes shares held of record by Mr. Giacchi's adult
    son, Jeremy Giacchi.

(3) Includes (i) 530,035 shares held of record by Mr. Fink and (ii) 470,337
    shares held of record by Mrs. Fink, his wife, Mr. and Mrs. Fink each
    disclaims any beneficial ownership of the shares held of record by the
    other. Excludes 58,792 shares held of record by the adult children of Mr.
    and Mrs. Fink.

(4) 235,168 of the shares attributed to Mr. Davidoff are owned by CMNY Capital I
    and CMNY Capital II; Mr. Davidoff is a general partner of CMNY Capital I and
    CMNY Capital II and disclaims beneficial ownership of such shares.

(5) Includes 7,895 shares held of record by trusts for the benefit of Ms. King's
    grandchildren. Excludes 7,894 shares held of record by Ms. King's adult
    children.

(6) 29,396 of such shares are held of record by Mr. Engler's wife and he
    disclaims any beneficial ownership thereof.

(7) These are shares which may be acquired pursuant to options exercisable
    within sixty (60) days of the date hereof.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The Company currently leases space from MessageBank, Inc., a corporation
owned by Mr. Fink, for which it pays approximately $1,300 per month. Management
believes that the terms of such lease are no less favorable to the Company than
those which would be available from a third party. MessageBank, Inc., also
provides voicemail and other services to the Company for which it is paid its
standard charges. The amount of revenues paid to MessageBank, Inc., during each
of 1995 and 1996 for services rendered to the Company was less than $5,000. The
Company anticipates that it will continue to lease space and purchase certain
services from MessageBank, Inc. in the future, but the volume of such purchases
is not anticipated to substantially increase.

      From time to time Rochelle King renders investment banking services to the
Company for which she or Bentley Associates, L.P., which she serves as a senior
adviser, is compensated. During 1995 and 1996, the Company paid $23,000 and
$105,000 respectively, for investment banking services performed by Ms. King.

      Monte Engler, a director of the Company, is a partner at the law firm of
Phillips, Nizer, Benjamin, Krim & Ballon LLP, which performs legal services for
the Company.


                                       31
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

   The following documents are filed as part of this report:

 Exhibit No.                Description of Exhibit
 -----------                ----------------------

    3.1     Amended and Restated Certificate of Incorporation of the
            Registrant. (1)

    3.2     Revised By-Laws of the Registrant. (1)

    4.1     Form of Common Stock Certificate. (1)

    4.2     Form of Warrant Certificate. (1)

    4.3     Form of Unit Purchase Option granted to GKN Securities Corp. (1)

    4.4     Warrant Agreement between Continental Stock Transfer & Trust
            Company and the Registrant. (1)


    10.1    Revised Form of Employment Agreement between the Company and
            Richard J. Giacchi. (1)

    10.2    Revised Form of Employment Agreement between the Company and
            Leonard D. Fink. (1)

    10.6    Form of Employment Agreement between the Company and Jeff
            Bachrach. (2)

    10.8    Lease dated August 11, 1994, between Freehold Office Plaza and
            The Company, with respect to the office space at Freehold Office
            Plaza. (2)

    10.9    1994 Incentive Stock Option Plan. (1)

    10.10   Common Stock Purchase Agreement by and among the Company, Allen
            & Company, Incorporated and certain other purchases dated May 7,
            1996. (3)

    10.11   Registration Rights Agreement dated May 7, 1996. (3)

    10.12   Common Stock Purchase Agreement by and among the Company,
            Dolphin Offshore Partners, L.P., Leonard D. Fink, Richard J.
            Giacchi, Monte Engler, and Robert Davidoff dated March 11, 1997.
            (4)

    10.13   Registration Rights Agreement dated March 11, 1997. (4)

    10.14   Second Waiver and Amendment Agreement between the Company and
            Motorola, Inc. (4)

    10.15   Amended and Restated Promissory Note between the Company and
            Motorola, Inc. (4)

    10.16   Independent Auditors' Consent (4)

    10.27   Financial Data Schedule (4)

(1) Incorporated by reference to the Company's Registration Statement on Form
    SB-2 (Registration No. 33-76744).

(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
    the year ended December 31, 1994.

(3) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
    for the quarterly period ended March 31, 1996.

(4) Filed herewith.


                                       32
<PAGE>

                                   SIGNATURES

        Pursuant to the requirements of Section 13 and 15(d) of the Securities
    Exchange Act of 1934, the registrant has duly caused this report to be
    signed on its behalf by the undersigned, thereunto duly authorized.

    Dated: March 25, 1997

                                         PAGING PARTNERS CORPORATION
                                         (Registrant)



                                         By: /s/Richard J. Giacchi
                                             ---------------------------------
                                             Richard J. Giacchi, President

        Pursuant to the requirements of the Securities Exchange Act of 1934,
    this report has been signed below by the following persons on behalf of the
    registrant and in the capacities and on the dates indicated.


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

/s/Leonard D.  Fink          Chairman of the Board of Directors   March 25, 1997
-------------------------
Leonard D. Fink

/s/Richard J. Giacchi        President, Director and Principal    March 25, 1997
-------------------------    Executive Officer
Richard J. Giacchi

/s/Jeffrey M. Bachrach       Vice President, Treasurer,           March 25, 1997
-------------------------    Secretary, and Principal
Jeffrey M. Bachrach          Financial and Accounting
                             Officer

/s/Robert Davidoff           Director                             March 25, 1997
-------------------------
Robert Davidoff

/s/Monte Engler              Director                             March 25, 1997
-------------------------
Monte Engler

/s/Rochelle B. King          Director                             March 25, 1997
-------------------------
Rochelle B. King