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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K


(MARK ONE)

|X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2003 OR

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 for the transition period from __________ to __________

                        Commission file number 000-33343

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

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

                            1719A ROUTE 10, SUITE 300
                          PARSIPPANY, NEW JERSEY 07054
               (Address of principal executive offices) (Zip Code)

                                 (973) 560-8000
               Registrant's telephone number, including area code

Securities registered under Section 12(b) of the Securities Exchange Act of 1934
                                      None


          Securities registered under Section 12(g) of the Securities
                             Exchange Act of 1934:
                          Common Stock, $0.01 par value

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 there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained herein, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. |X|

Indicate by check mark if the registrant is an accelerated filer (under
Exchange Act Rule 12b-2) | | Yes |X| No

The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of June 30, 2003, was approximately $228,000 based upon
a last sales price on such date of $0.01. The information provided shall in
no way be construed as an admission that any person whose holdings are
excluded from the figure is an affiliate or that any person whose holdings
are included is not an affiliate, and any such admission is hereby
disclaimed. The information provided is solely for record keeping purposes
of the Securities and Exchange Commission.

As of March 25, 2004, there were 179,611,939 shares of the registrant's Common
Stock outstanding.


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                                     Part I

Item 1.  Business

General

         Aquis Communications Group, Inc. ("Aquis" or the "Company") was
incorporated in Delaware in 1997. Through our operating subsidiary, Aquis
Wireless Communications, Inc. ("Aquis Wireless"), we offer messaging services in
a nine-state network that provides coverage from Boston to Virginia and
Washington D.C., penetrating into New York, New Jersey, Connecticut,
Pennsylvania, Maryland, Virginia, Delaware, Rhode Island, and Massachusetts
utilizing our 900MHz and 150MHz wireless messaging systems. We also resell
nationwide and regional services, offer alpha dispatch, news, data circuits,
telecommunications consulting and other messaging enhancements. Customers
include businesses, government agencies, hospitals, individual users and
resellers. From inception through March 2000, the Company experienced
substantial growth primarily as a result of its strategy of acquiring similar
businesses. Beginning in April 2000, our strategy shifted from acquiring new
businesses to focusing on internal growth, integrating acquired operations and
achieving operating efficiencies. In January 2002 we completed the sale of our
wireless messaging assets in the Midwest region of the United States. In August
of that year we completed a financial restructuring. As of March 15, 2004, Aquis
employed 43 non-unionized full and part-time people, and believes that employee
relations are good.

         The Company's business strategy continues to be centered on maximizing
utilization of its own wireless messaging networks. As a result, our reselling
activities and our reseller business continue to become a smaller part of our
targeted sales and service activities. However, on a supplemental basis, we
expect to continue to provide and resell service to customers that may receive
messages in over 1,000 U.S. cities, including the top 100 Standard Metropolitan
Statistical Areas through interconnect agreements with nationwide wireless
messaging providers including Skytel, a division of MCI Worldwide, Metrocall,
and Verizon Wireless Messaging Service (formerly AirTouch).

         From the start of Aquis' wireless messaging operations at the beginning
of 1999 through December 31, 2000, Aquis' subscriber base increased to
approximately 342,000 units in service. However, as a result of subscriber
attrition, market and asset abandonment and slowing sales, our subscriber base
has subsequently declined to approximately 120,000 units as of December 31,
2003. Initial growth was achieved through a combination of internal growth and a
program of mergers and acquisitions. Later declines resulted primarily from
industry-wide declines in wireless messaging users and Aquis' shortage of
wireless messaging devices caused by our lack of capital. Between December 31,
2000 and December 31, 2003, the Company's end-user base declined from
approximately 130,000 to 74,000 units in service and our indirect or reseller
base declined from 212,000 to approximately 46,000. We believe that the decline
in our customer base, and in the size of the wireless messaging industry in
general, is largely attributable to the declining costs and technological
advances provided by competing services provided by cellular phone, personal
communications services ("PCS"), two-way wireless messaging and other mobile
messaging services, and uncertainty regarding our long-term viability, as well
as that of others in our industry.

                  Aquis has historically operated traditional wireless messaging
systems that provide one-way wireless messaging services to numeric and
alphanumeric messaging devices. Such services are available at pricing that is
lower than cellular or similar services, but that cost differential has declined
over time as these alternative service providers have sought to gain market
share through competitive pricing as well as through the offering of more
technologically-advanced two-way voice communications. Our lower-cost numeric
messaging service allows a user to receive a telephone number or other
numerically coded data and to store several such data messages that can be
recalled at the convenience of the user. Alphanumeric service adds text
messaging capabilities and the ability to receive internet-routed messages.
Aquis also offers messaging enhancements, such as voice mail service that can
include a personalized greeting, message repeat and retention services that may
help a user access messages that were sent at a time when the user's paging
device was turned off or was beyond the range of our transmitters, sports and/or
weather information, device maintenance and loss protection features that help
preserve the value of a subscriber's investment in the device, and other
value-added features.

                                       2
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                  We believe that the wireless messaging industry is likely to
continue to consolidate as the overall messaging marketplace declines. Recently,
Metrocall and Arch Wireless announced their intent to merge by the end of this
year, creating the largest wireless messaging company in this country. Due to
our limited access to additional capital for business acquisitions, our ability
to participate in this consolidation will be limited to transactions that will
require minimal cash commitments, if any, and that ideally will improve the
utilization of our own wireless messaging networks. Accordingly, our
participation may necessarily be limited to acquiring bases of subscribers from
operators or sales organizations located within our regional service areas,
primarily resellers, that have decided to exit the wireless messaging services
business. Based on preliminary estimates, we believe that some such
opportunities presently exist, but on a limited basis only. We continue to
experience interest from certain of our resellers in transferring their
declining customer bases to us in exchange for a share of future collected
revenues, allowing them to devote more attention to other business activities
and allowing Aquis to prolong revenue streams from the underlying wireless
messaging units by directly providing a higher level of support to those users.

                  Aquis derives the substantial majority of its revenues from
fixed, periodic (primarily monthly) fees, generally not dependent on usage,
charged to subscribers for wireless messaging and wireless messaging services.
During the time that a subscriber continues to use our services, operating
results benefit from this recurring revenue with minimal requirements for
incremental selling expenses or fixed costs. The recurring monthly or other
periodic service fee is typically based on several factors, including the type
of service provided, primarily alpha or numeric, the geographical region of
coverage, the number of wireless messaging units in service for a subscriber,
and the period of the customer's service commitment. Our customers either
purchase those units most typically from Aquis or lease them from us for a
periodic fee. Devices that are leased by our subscribers require a capital
outlay to be made by Aquis and accordingly generate slightly more recurring
revenue than customer-owned units, which do not require such capital outlays. We
also sell wireless messaging devices to resellers who then sell or lease those
units to their own customers and provide all sales, billing, collections and
other support services at their own cost. Since our resellers incur all costs
associated with their end-users, eliminating such costs from Aquis' cost
structure for those particular customers, we are able to charge lower recurring
service rates to our resellers for these units.

Recent Developments

         Effective December 31, 2003, the Company and FINOVA executed the Second
Amendment to the Second Amended and Restated Loan Agreement (the "Second
Amendment"). This modification of our loan agreements with FINOVA eliminated all
financial covenants and eliminated previously scheduled payments of principal
and interest. In exchange, Aquis agreed to make quarterly payments to FINOVA in
the amount of our total available cash balances less $350,000, which may be
retained for use in our business. Prior to the Second Amendment, during 2002, we
completed the restructuring of our debt and equity through agreements with our
significant creditors of that time.

         On July 1, 2002, the Company, its subsidiaries and certain creditors
entered into agreements that would effect the restructuring (the
"Restructuring") of the Company's long term debt with its principal lender,
FINOVA Capital Corporation ("FINOVA"). Under the terms of the Restructuring, the
Company's outstanding long-term debt was reduced and the Company's institutional
lenders were provided with equity in the Company that resulted in a change in
control of the Company. FINOVA and a minority partner, through an affiliate,
Desert Communications I, LLC, acquired a 79.99% equity interest and voting
control of the Company, along with two secured notes in the total principal
amount of $9,000,000. In exchange, all other existing outstanding debts due to
FINOVA were cancelled. Simultaneously, AMRO International, S.A. ("AMRO"), the
Company's unsecured lender, acquired a 9.9% equity interest in the Company and
an unsecured subordinated note in the principal amount of $1,000,000 in exchange
for the forgiveness of all obligations due under the 11% Convertible Debenture
previously outstanding and the cancellation of all outstanding warrants held by
AMRO. The final component of the Restructuring provided the previous holders of
Aquis' 7.5% Redeemable Preferred Stock with a new issue of non-convertible
redeemable preferred stock in the face amount of $300,000.Previous holders of
Aquis' 7.5% Redeemable Preferred Stock in the face amount of $1,500,000 plus
unpaid accrued dividends executed agreements providing for the exchange of those
securities for new securities. These holders received Aquis' non-convertible
Redeemable Preferred Stock, with a face value of $300,000, accruing dividends at
the annual rate of 10% and redeemable two years after the payment in full of the
AMRO Note.

                                       3
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Marketing

         Aquis views traditional numeric and alphanumeric wireless messaging as
the most cost-effective and reliable means of communicating messages over a
regional area to either mobile or relatively-fixed location users. Although the
price gap has continued to shrink between cellular, PCS, two-way and other
messaging services, our traditional messaging alternative continues to be the
low-cost leader. Additionally, we believe that wireless messaging network
buildout and radio signal penetration provides a more thorough and extensive
communications medium than that of those competing services. Furthermore,
battery life may provide messaging devices with an advantage over other devices
that may require more frequent attention to their power supply. Finally, we
believe that messaging devices are more convenient and portable, and can be used
in a less intrusive manner than cellphones in many applications.

         We market our wireless messaging products and services through a
wholly-owned subsidiary, Aquis Wireless. Aquis Wireless employs a direct sales
force that targets business accounts and, to a lesser and declining extent,
markets services through an indirect distribution channel consisting primarily
of resellers and also including agents. Resellers purchase airtime and resell
this airtime to their own subscribers. Aquis Wireless provides one invoice to
the reseller and the reseller invoices and collects from its subscribers on an
individual basis. Our resellers are generally not exclusive distributors of our
wireless messaging services and may provide services of other carriers. Agents
offer a branded Aquis Wireless product and receive a commission or margin for
doing so, and Aquis Wireless subsequently bills and collects from the subscriber
for services sold by its agents.

         In past years, we grew our business by broadening our distribution
network and expanding our target market to capitalize on the growing appeal of
messaging and other wireless products and services. During this time, we
emphasized a distribution channel including resellers that was characterized by
lower average revenue per unit ("ARPU") and correspondingly lower operating
costs. The decline in the wireless messaging industry during recent periods
appears to be largely attributable to the reduction in the size of the consumer
segment of this market. As a result of price competition from cellular and
similar services and technological advances leading to size reductions and
enhanced capabilities for the related communications devices, a significant
portion of the wireless messaging marketplace has moved to these alternative
services. Consequently, our target market emphasizes businesses, government
agencies, the medical industry, and certain other commercial groups and
organizations.

         Approximately 80% of our service revenues for each of 2003 and 2002
were derived from direct subscribers, including those of our aforementioned
target markets, with significant representation from medical and governmental
users. We believe that these users continue to view wireless messaging as an
important wireless communications tool based on the following factors:

         o     Coverage - wireless messaging typically provides stronger
               propagation and in-building penetration and rural coverage
               providing more reliable signal reception

         o     Battery life - a single AAA or AA battery can power a wireless
               messaging device 24/7 for more than 4 weeks

         o     Cost - wireless messaging services can cost one-tenth of many
               cellular plans

         o     Message delivery speed - most messages are delivered to the pager
               in less than 30 seconds

         Accordingly, our marketing strategy has remained centered on the
medical, governmental and certain other targeted users that value the relative
advantages of wireless messaging services. During 2002 and 2003, we engaged a
professional marketing consulting firm to conduct market research and analyze
the Aquis brand within our targeted markets. This provided for the development
of a marketing strategy to pursue, acquire and support this group of potential
subscribers and to further enhance the Aquis brand name. In connection with this
effort, we continued the development of enhanced wireless messaging-related
messaging services designed to increase the perception of the value that may be
added through effective use of messaging devices. Finally, we expanded and
re-structured our sales organization to better enable our customer support
activities to deliver a higher level of customer satisfaction, and to allow more
focused efforts to be directed toward identifying and soliciting new business
from new customers.

                                       4
<PAGE>

                  We also operate an inbound call center that accepts orders for
products and services and maintain field offices in New Jersey and Virginia for
sales and support functions. These two field offices are also available for
subscribers to walk in and purchase products and services. Aquis Wireless also
maintains an Internet site through which customers may purchase products and
services. The web site also allows Aquis Wireless resellers access to maintain
their accounts via web based technology and provides bill-paying capabilities.

Sources of Equipment

                  We do not manufacture any of the equipment used in our
operations, all of which is available from a variety of sources. Due to the high
degree of compatibility among different models of transmitters, computers and
other wireless messaging and voice mail equipment, Aquis has been able to design
its networks to limit dependence upon any single source for such equipment.
Aquis periodically evaluates its purchasing arrangements for messaging devices
to help ensure that the equipment it is offering is current and is available at
competitive prices.

                  We currently purchase our messaging devices from foreign
manufacturers as well as secondary market dealers that may supply Motorola and
other products. We have conducted internal studies of pager performance in order
to help determine the most reliable and cost-effective source of new and quality
pre-owned devices, and to identify the most reliable providers of repair
services for our customers' damaged units. We believe that available supplies of
suitable one-way and other messaging devices are adequate for the foreseeable
future.

         Our transmitting infrastructure, switches and other wireless network
equipment was purchased primarily from Motorola and Glenayre, which at the time
were two of the most technologically advanced leaders in the wireless messaging
infrastructure industry. Our wireless messaging networks are controlled through
the use of satellites, data circuits and Internet connections. Aquis' switching
equipment has a modular design, which permits significant future expansion by
adding or replacing modules rather than replacing the entire system. Although
Motorola and Glenayre have ceased their manufacture of messaging equipment, we
believe that the existing secondary market for transmission equipment and
messaging switches is sufficient to meet operating requirements for the
foreseeable future. We obtained a one-year software and systems maintenance and
support agreement with Glenayre and expect that it can be renewed in 2004 with
Glenayre's successors. We also believe that adequate support for existing
wireless messaging infrastructure, whether manufactured by Glenayre, Motorola or
others will continue to be available. We believe that our inventory of
infrastructure components, purchased in anticipation of the departure of
Motorola, Glenayre and others from this manufacturing industry, is sufficient
for our foreseeable requirements. Aquis believes that its historical investment
in the most technologically advanced transmission equipment then-available
reduces its cost of maintenance and system expansion over the long term and that
its wireless messaging system equipment is among the most technologically
sophisticated in the one-way industry.

Competition

         Wireless messaging is a highly competitive industry, resulting in
competition based on price, infrastructure and messaging device reliability and
message delivery time, coverage area and customer service. The financial
stability of the service provider has also become an issue that may have some
impact on sales efforts. A number of technologies, including cellular telephone
service, PCS, enhanced specialized mobile radio, low-speed data networks and
mobile satellite services are technological competitors of wireless one- and
two-way communications. Through our agreements with WebLink Wireless and
BellSouth, Aquis offers two-way messaging services. Aquis believes that one-way
wireless messaging will remain one of the lowest cost forms of communications
due to the low-cost infrastructure associated with wireless messaging systems,
allowing unlimited monthly wireless messaging services to be offered at flat
monthly rates as much as 90% lower than some time-limited cellular or PCS
calling plans.

         The marketing study and evaluation that we commissioned during early
2003 indicated that our strongest competitors are Arch Wireless and Metrocall,
who recently announced their intent to complete the merger of their two
businesses by the end of this year. We also compete with Verizon Wireless
Messaging, formerly AirTouch, WebLink Wireless which merged with Metrocall in
November 2003, Skytel, a division of MCIWorldCom, and others. More localized
privately owned providers covering smaller geographical areas also compete for
customers within the Northeast and Mid-Atlantic markets in which we operate.

                                       5
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         The wireless messaging industry in general has steadily declined in
recent years, and continues to do so at this time, and many of our competitors
have filed for bankruptcy protection and suffered other financial hardships,
including Arch, Metrocall and Weblink among others. Although we completed a
financial restructuring and made substantial gains in restructuring our
operations, our own difficulties have prevented us from taking full advantage of
our competitors' weaknesses. Unlike some of our competitors, we have been able
to avoid filing for bankruptcy protection, and we hope to benefit from a
competitive edge that such an avoidance could provide. The uncertainties
experienced by competitors that must proceed through contentious and lengthy
bankruptcy issues may be viewed by potential customers as a hurdle to securing
the desired level of stability that is important when changing wireless
messaging carriers. We also anticipate that one of the effects of the
Arch-Metrocall merger may be that customer support during the pre- and
post-merger integration period may weaken, providing added incentive for some of
the effected customers to more seriously consider our messaging and support
capabilities.

         Future technological developments in the wireless communications
industry and the enhancement of current technologies will likely create new
products and services that will compete with the wireless messaging services
currently offered by Aquis. At this time, however, Aquis believes that its
technological advantages include superior signal penetration into buildings,
basements and other hard to reach areas resulting from the stronger transmitting
power and higher-ground location of network transmitters. These characteristics
also provide greater coverage area using fewer transmitters than required of
cellular or PCS systems covering the same geography. Further, a less costly,
smaller and more lightweight communications device and longer battery life are
viewed as subscriber conveniences that are not matched by currently-available
cellular or PCS handsets. Finally, much longer email and other text messages can
be sent and received via wireless messaging technologies than through cellular
or PCS systems, which continue to limit message size. Conversely, one
significant disadvantage facing the wireless messaging industry is that its
services are not designed to provide two-way voice communications. There can be
no assurance that Aquis will not be adversely affected by developing
technological advances.

Regulation

         Aquis' wireless messaging operations are subject to regulation by the
Federal Communications Commission (the "FCC") and applicable federal laws and
regulations. The FCC has granted licenses to Aquis for the conduct of its
business. These licenses establish the particular locations and frequencies
authorized for use by Aquis and set technical parameters such as power, tower
height and antenna specifications under which Aquis is permitted to use its
frequencies. Each FCC license held by Aquis carries construction and operating
requirements that must be met within specific timeframes. The FCC does have the
authority to auction most new licenses for mobile wireless communications, but
currently does not have authority to auction licenses for renewal or
modification purposes. It does, however, have the authority to revoke, modify or
otherwise restrict the operation of licensed facilities. Further, FCC oversight
and revision of rules affecting Aquis and its competitors is ongoing and is
subject to change significantly over time. For example, new licenses are now
awarded through an auction process, as compared to prior practices of lottery or
other means. However, incumbent messaging carriers that hold licenses in
geographic regions in which new licenses are being auctioned are entitled to
continue to operate without interference from auction winners.

         Licenses granted by the FCC to Aquis and others in its industry provide
varying terms of up to 10 years, after which renewal applications require FCC
approval. In the past, most renewal applications have been routinely granted by
the FCC upon a demonstration of compliance with FCC regulations and adequate
service to the public. The FCC has previously granted each of Aquis' requests
for renewal, but no assurance can be given that all future renewal applications
will be similarly granted. No license of Aquis has been revoked or involuntarily
modified. In some instances, Aquis must obtain the FCC's approval before any
significant changes to its messaging networks can be implemented. However, once
the FCC's geographic licensing rules are fully in place, much of these
obligations related to license modification are expected to be eliminated.

                                       6
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         In order to transfer control of any construction permit or
communications station license that is regulated by the FCC, its specific
approval must be obtained. This includes the transfer of individual licenses as
well as a bulk transfer of controlling interests in licenses as may be involved
in the acquisition or disposition of another messaging company. Similarly, FCC
approval is required when requests are made to use additional frequencies at
existing locations, change service territory, provide new services, change
ownership or control of the licenses, or modify the technical specifications of
existing licenses or the conditions under which service is provided. The FCC has
granted its approval for the change in control of our licenses that occurred as
a result of our recently-completed financial restructuring. Aquis has not been
denied any such request for which approval has been requested, and knows of no
reason to believe that any such request will not be approved, but cannot provide
assurance that all such future requests will be granted.

         The Communications Act of 1934, as amended, limits foreign ownership in
FCC licensed Commercial Mobile Radio Services entities to no more than twenty
percent (20%) direct ownership and, without Commission consent, no more than
twenty-five (25%) indirect ownership. However, as the result of the World Trade
Organization Agreement on Basic Telecommunications Service entered into February
15, 1997 and effective February 5, 1998, the Commission liberalized foreign
participation in the U.S. telecommunications market by action taken November 25,
1997. This action allows for an expedited process of approving indirect
ownership over the 25% level for World Trade Organization signatories. Aquis'
licenses are held by its wholly-owned operating subsidiary, which is subject to
the 20% direct ownership limitation. That limitation is not subject to waiver.

         Increased demand for telephone numbers, particularly in metropolitan
areas, results in depletion of available telephone numbers. Plans to address
this shortage have included elements that could impact Aquis' operations.
Solutions being evaluated include the pooling of blocks of numbers for use by
multiple carriers, the mandatory return of numbers previously allocated and
assigned for use, and service-specific plans under which only specified
services, such as voice and messaging services, would be assigned numbers in a
new area code. Aquis cannot predict which of these alternatives will be
implemented, if any, and can provide no assurance that the FCC or a governing
state commission will not adopt a solution that will require Aquis to incur
substantial expenses in order for it to obtain new telephone numbers for the use
of its customers. Under currently existing circumstances, however, management
believes that the quantity of numbers available to Aquis will be sufficient for
the foreseeable future.

         Recent amendments to federal communications laws have attempted to
increase competition in this industry by lowering or removing barriers to entry,
imposing upon telecommunications carriers the duty to interconnect their
communications facilities with those of other carriers. The FCC and the 9th
Circuit Court of Appeals have interpreted this to mean that local telephone
companies must compensate mobile wireless companies for calls originated by
local telephone company customers that terminate on a mobile wireless company's
network. The FCC has also ruled against the imposition of charges to mobile
wireless companies for the use of interconnected facilities or phone numbers.
These FCC interpretations and findings are subject to challenge in the courts,
and Aquis cannot predict the outcome of these proceedings. Compensation may be
determined at the federal or state level, or may be determined based on
negotiations between the mobile wireless carriers and the local telephone
companies that may be subject to the approval of regulatory authorities. Aquis
is in negotiations with local telephone companies but its ability to negotiate
refunds and/or future cost reductions related to call traffic terminated within
its networks cannot be predicted. During 2002 we negotiated and received a
payment of $260,917 from Verizon with respect to these interconnect charges. If
these issues are decided in favor of the local phone companies, Aquis may be
required to repay interconnect fees or cost reductions earned in the past as a
result of the FCC and Circuit Court rulings.

         In order to assure the delivery of local phone service to high cost
areas and to cover other specified costs and objectives, the FCC has required
companies such as Aquis to contribute to a "Universal Service Fund." It has also
determined that payphone providers must be compensated for calls to toll-free
numbers that are made from payphones. Further, federal law requires that Aquis
and others in its industry modify systems and services to the extent necessary
to ensure that electronic surveillance or message interceptions can be
performed. Because applicable industry technical standards have been established
but not acknowledged by all regulatory agencies to date, Aquis cannot determine
what compliance modifications or related costs might be required. Additionally,
the Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") imposed a
structure of regulatory fees, which Aquis is required to pay with respect to its
licenses. These fees are revised on an annual basis. Finally, the FCC is
continuing to assess the manner in which carriers are permitted to market
certain services. The outcome of this proceeding could result in higher costs to
administer such marketing programs. There is no assurance that Aquis will be
able to continue to pass these costs through to its customers.

                                       7
<PAGE>

         In addition to regulation by the FCC, messaging providers are also
subject to regulation by state agencies in some states. However, Federal law
preempts any state regulation in the case of rates charged to customers or the
ability of a carrier to enter a market area. Under certain circumstances, states
may petition the FCC for authority to regulate commercial mobile radio service
rates. Past petitions seeking rate regulation authority have been denied by the
FCC, although this does not guaranty that future filings will meet the same
result. On the other hand, some states and localities continue to have authority
over many facets of a carriers' operations, including oversight and approval
requirements related to acquisitions of assets and license transfers, resolution
of consumer complaints, construction and operation of radio transmitters that
may be subject to zoning, land use, public health and safety, consumer
protection and other legal requirements. Aquis believes that it has made all
required filings and has complied with applicable regulations. It knows of no
reason to believe that it will not continue to receive approvals as requested of
any regulatory agency with oversight authority over its existing operations,
although it cannot predict or provide any assurance to that effect.

Risk Factors

         This Section summarizes certain risks, among others, that should be
considered by stockholders and prospective investors in the Company. Many of
these risks are discussed in other sections of this report. If any of the
following risks actually occur, Aquis' business, financial condition or results
of operations could be materially adversely affected. In such case, the trading
price of Aquis' common stock could decline, and stockholders may lose all or
part of their investment.

         Substantial Leverage. Even following the Restructuring, the Company
maintains a significant amount of debt pursuant to the Tranche A Note, the
Tranche B Note, and the AMRO Note (collectively, the "Notes"). The principal
indebtedness under the Notes totals $10 million and the interest payable on the
Notes for fiscal year 2004 approximates $554,000. The Tranche A Note (in the
principal amount of $7 million) and the Tranche B Note (in the principal amount
of $2 million) both mature on June 30, 2006. The AMRO Note (in the principal
amount of $1 million) matures on June 30, 2008. Actual future cash flow from
operations may not be sufficient to satisfy the Notes. If we are unable to
generate sufficient cash flow, then the Company's ability to satisfy its
obligations under the Notes will be contingent upon an additional refinancing or
obtaining replacement financing. There can be no assurance that the Company can
obtain such financing on terms acceptable to the Company or at all. If an event
of default occurs under the Notes, the holders of the Notes have the right to
exercise all remedies provided thereunder, including but not limited to,
accelerating all indebtedness, substantially increasing the interest rate for
such indebtedness, offsetting amounts in most of the Company's bank accounts,
and selling all assets of the Company to repay such indebtedness.

         Auditor's Going Concern Qualification. Prior to December 31, 2003, at
which date the Second Amendment to the Second Amended and Restated Loan
Agreement with FINOVA became effective, we were required to meet certain
financial covenants pursuant to the terms of the Notes and underlying loan
agreements, as then amended. That Second Amendment eliminated non-compliance
with those financial covenants as a condition of default by eliminating those
covenants from our agreements. However, other events of default specified in our
agreements have not been eliminated and remain in effect. These may include, but
are not limited to, matters related to insolvency, impairment of our ability to
operate under the terms of our communications or business licenses, seizure of
our operating assets, significant interruptions in the operations of our
wireless messaging systems and facilities, or the entry of significant
judgements against Aquis. If we fail to cure any such default condition within
FINOVA's specifications, we will be in default and FINOVA will have the right to
accelerate payment. The acceleration of payments due under the Notes, without
refinancing, would have a material adverse effect on the Company's liquidity,
business, financial condition and results of operations. The degree to which the
Company is leveraged is likely to continue to impair the Company's ability to
finance its future operations or pursue its business strategy finance, either
through its own cash flows or from additional financing. The Company's
independent auditors have added an explanatory paragraph to their opinion
covering the Company's consolidated financial statements as of and for the year
ended December 31, 2003 that expresses substantial doubt as to the Company's
ability to continue as a going concern. This explanatory paragraph reflects the
effects of our history of losses, the declining state of the wireless messaging
industry and our ability to profitably provide service in our marketplace, our
limited ability if any to obtain third party funding to fund any future
operating losses that may be realized, and other factors. These factors may
impair the Company's business relationships and impair the Company's ability to
receive trade credit from its vendors, which could have a further material
adverse effect on the Company's business, financial condition, results of
operations and cash flows. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."

                                       8
<PAGE>

         Significant Stockholder. FINOVA, through an affiliate, Desert
Communications I, LLC, beneficially owns a 77.32% equity interest in the
Company. Furthermore, pursuant to the Restructuring, FINOVA has the contractual
right to appoint 3 of the 6 members of the Board of Directors. Accordingly,
FINOVA has voting control of a majority of the Company's common stock and
controls a significant part of the Board of Directors and, as a result, can
control the direction and objectives of the Company. Furthermore, FINOVA may use
this control to cause the Company to engage in transactions that FINOVA believes
to be in its best interests. Such transactions may include, among others, a sale
of substantially all of the Company's assets, a going-private transaction, a
merger of the Company with another company or a liquidation of the Company.
There can be no assurance that any control exerted by FINOVA over the Company
will not conflict with the interests of the Company's minority stockholders.

         Declining Wireless Messaging Market. During 2003, we experienced a net
decrease in the number of wireless messaging units in service of approximately
50,000 resulting from connecting approximately 34,000 units while disconnecting
84,000 units. We believe that the demand for traditional wireless messaging
services has significantly declined industry-wide in recent years and will
continue to decline for the foreseeable future. Due to our high level of fixed
costs, revenues lost as the result of subscription cancellations cannot be fully
offset by expense reductions and therefore would adversely impact our cash
flows. While we will make efforts to replace lost subscribers, the marketing and
other expenses associated with adding subscribers and units in service is high
and could adversely effect our cash flows.

         Limited Trading Market. In October 2000, NASDAQ de-listed the Company's
common stock and it is no longer listed for trading on the NASDAQ National
Market. As a result, trading of the Company's common stock is conducted on the
over-the-counter market ("OTC") or, on application by broker-dealers, in the
NASD's Electronic Bulletin Board. As a result of the de-listing, the liquidity
of the Company's common stock and its price have been adversely affected, which
may limit the Company's ability to raise additional capital and may adversely
effect our stockholders' ability to realize value for their equity.

         Capital Constraints. The Company's ability to raise capital is limited
by expected and historical losses, the indebtedness under the Notes, and the
resulting going concern qualifications contained in the Company's audit opinion.
The Company's assets already serve as collateral under the Tranche A Note, which
severely limits the Company's ability to obtain capital from additional sources.
Therefore, the Company may not be able to obtain additional financing on terms
favorable to it, if at all. If adequate funds are not available or are not
available on favorable terms, the Company may not be able to effectively execute
its business plan.

         Liquidation Value. At December 31, 2003, Aquis' total assets were
approximately $3.8 million following the current write off of net intangible and
deferred assets in the amount of $1.52 million. These intangible assets
consisted primarily of FCC licenses and certificates. Previously, the Company
also recognized impairment of its intangible assets at December 31, 2001 and
2000 through writedowns of $2,298,000 and $9,500,000, respectively. The Company
also wrote off all previously deferred financing costs in the approximate amount
of $1,650,000 as the result of defaults under the loan agreements that were
eliminated pursuant to the Restructuring. If the Company defaults under the
Notes or the Company was otherwise required to liquidate, the holders of the
Notes could proceed against Aquis' assets to satisfy the amounts payable under
the Notes. The value of these intangible assets and the Company's fixed and
other assets is not expected to be sufficient to satisfy the Notes.

         Competition and Technological Advancements. The telecommunications
industry is extremely competitive. Some of Aquis' competitors, which include
local, regional and national wireless messaging companies, possess substantially
greater financial, technical and other resources than we do, and may therefore
be better able to compete for subscribers in the one-way wireless messaging
marketplace. Moreover, some of Aquis' competitors offer broader network coverage
than that provided by Aquis' systems, and some follow a low-price discounting
strategy to expand their market shares. In addition, advancements in wireless
communications services such as cellular and PCS have created new and lower cost
services that compete with Aquis' existing service offerings and have made
Aquis' technology obsolete for many applications and customers. Additional
competition could result in accelerated reductions in Aquis' subscriber base,
declining revenues and smaller operating margins. Narrowband PCS, providing
advanced messaging capabilities, and broadband PCS, providing wireless phone
service along with wireless messaging capabilities, likely will affect the
Company's subscriber base as service becomes more prevalent and prices fall.
Aquis' management cannot provide any assurance that Aquis will be able to
introduce new and competitive services in a timely fashion, if at all, nor can
we represent that our margins, inventory costs or cash flows will be unaffected
by these developments.

                                       9
<PAGE>

         Government Regulation. Aquis' business is dependent on FCC licenses
that may not be renewed. If renewals are not secured, a significant reduction in
Aquis' business may result. Aquis' FCC licenses have varying terms of up to 10
years, at the end of which renewal applications must be approved by the FCC.
Renewals are typically granted by the FCC upon a demonstration of compliance
with FCC regulations and of adequate service to the public. Although the Company
is unaware of any circumstances which would prevent the grant of any pending or
future renewal applications, the Company cannot assure investors that any of its
renewal applications will be free of challenge. There may be competition for the
radio spectrum associated with the Company's FCC licenses at the time they
expire, which could increase the chances of third party interventions in the
renewal proceedings. The Company cannot assure investors that its applications
for renewal of its FCC licenses will be granted. Future changes in the
regulatory environment may adversely affect Aquis' business, making it harder or
more expensive to run the business. The wireless communications industry is
subject to regulation by the FCC and various state regulatory agencies. From
time to time, legislation and regulations that could potentially adversely
affect the Company are proposed by federal and state legislators. The Company
cannot assure investors that federal or state legislation or regulations will
not be adopted that would adversely affect Aquis' business by making it harder
or more expensive to conduct its operations.

         Ability to Attract and Retain Management. The Company is highly
dependent upon its senior management, and competition for qualified management
personnel is intense. The Company's current financial results and capital
constraints, among other factors, may limit the Company's ability to attract and
retain qualified personnel, which in turn could adversely affect its operating
results.

Item 2.  Properties

         Aquis' principal office is located in approximately 17,400 square feet
of leased space at 1719A Route 10, Suite 300, Parsippany, New Jersey. The fixed
base payment on the lease, which expires July 31, 2006, is currently
approximately $30,088 per month until expiration. In addition to fixed rent, the
lease requires Aquis to pay a proportionate share of certain maintenance
expenses and any increase in real estate taxes and insurance costs. Aquis has
two options to renew the lease for consecutive five-year periods at the fair
market value prevailing at the time of renewal. We are currently negotiating to
reduce our monthly rental expenses by reducing the amount of space we occupy in
Parsippany. Aquis also leases a sales office in Virginia at a total monthly cost
of approximately $4,000.

         As of March 1, 2004, Aquis leased approximately 285 locations for
transmitters on commercial broadcast towers in the Northeastern and Mid-Atlantic
regions of the United States and space for wireless messaging terminals and
storage areas. The rent payable for such leases aggregated approximately
$151,000 per month, as of that date. The Company believes that its facilities
are adequate for its current requirements and that suitable additional or
alternate facilities will be available when needed at commercially reasonable
terms.

Item 3.  Legal Proceedings

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


                                       10
<PAGE>

Item 4.  Submission of Matters to a Vote of Security Holders

         Not applicable.



                                       11
<PAGE>

                                     Part II

Item 5.  Market for Common Equity And Related Stockholder Matters

         Aquis common stock has traded over the counter on the OTC Bulletin
Board under the symbol "AQIS.OB" since October 19, 2000 when the Company was
notified that its stock was to be de-listed from the NASDAQ SmallCap market,
where it had traded under the symbol "AQIS." Over the counter market quotations
reflect inter-dealer prices without mark-up, mark-down or commissions, and may
not represent actual transactions. The quarterly high and low closing bid prices
for Aquis common stock for the past two years as reported by the National
Association of Securities Dealers, Inc., are as follows:

<TABLE>
<CAPTION>
Quarter                                    High   Low      Quarter                            High     Low
                                               2002                                                2003
<S>                                        <C>    <C>                                         <C>      <C>
First Quarter............................. 0.02   0.01     First Quarter..................... 0.01*    0.01*
Second Quarter............................ 0.03   0.01     Second Quarter.................... 0.04     0.01
Third Quarter............................. 0.03   0.01*    Third Quarter..................... 0.05     0.01
Fourth Quarter............................ 0.01   0.01*    Fourth Quarter.................... 0.05     0.01
</TABLE>

* Share prices at a fraction of $0.01 are not meaningful and rounded up
  accordingly

         On February 29, 2004, there were approximately 174 record holders of
Aquis common stock. At that time, the closing price of Aquis common stock was
$0.03. The number of record holders does not reflect the number of beneficial
owners of Aquis 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 approximately 3,000
beneficial holders of Aquis common stock.

Dividends

         Aquis has neither declared nor paid any dividends during its two most
recent fiscal years. The payment of dividends is contingent upon Aquis' revenues
and earnings, if any, capital requirements and general financial condition. The
payment of dividends is currently prohibited by the Notes. It is the present
intention of Aquis' board of directors to retain its earnings, if any, for use
in Aquis' business.

Recent Issuances of Unregistered Securities

         None during this reporting period.

         The Equity Compensation Plan Information set forth in Item 12 of this
Form 10-K is incorporated to this Item 5 by reference.


                                       12
<PAGE>

Item 6.  Selected Consolidated Financial Data

         The following table, as it relates to the 2003, 2002, 2001, 2000 and
1999 consolidated balance sheets and the statements of operations for
corresponding periods, has been derived from the historical financial data of
Aquis Communications Group, Inc. The statements as of and for the years ended
December 31, 2003, 2002, 2001 and 2000 were audited by Wiss & Company LLP; those
as of and for the year ended December 31, 1999 were audited by
PricewaterhouseCoopers LLP. Due to material uncertainties discussed elsewhere
herein, the financial position and results of operations presented below are not
necessarily indicative of the results to be expected for subsequent periods.
Comparability and trends depicted by the data below are affected by the March
31, 1999 merger with Paging Partners Corporation. The following information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and the notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                 2003           2002          2001           2000            1999
                                                 ----           ----          ----           ----            ----
                                                       (amounts are in thousands, except per share amounts)

<S>                                              <C>            <C>           <C>                            <C>
Statement of Operations Data:
Revenues..................................       $11,631        $13,872       $18,863        $28,683         $31,159
Depreciation and amortization.............         1,720          2,424         6,889         10,450          10,878
Costs of abandoned business combinations..             -              -             -             57           1,692
Provision for asset impairment............         1,520 (2)          -         4,569 (2)      9,500 (1)           -
Other operating expenses, net.............        10,167         12,152        15,790         25,860          26,493
                                                 -------        -------      --------       --------         -------
Operating loss............................        (1,776)         (704)        (8,385)       (17,184)         (7,904)
Other expenses, net.......................             1        (2,570)        (3,452)        (6,554) (3)     (2,975)
Provision for income taxes................             -             -             -              -               -
Extraordinary item, net of taxes..........             -         22,071 (4)        -              -               -
                                                 -------        -------      --------       --------         -------
Net (loss) income.........................        (1,775)        18,797       (11,837)       (23,738)        (10,879)
Preferred stock dividends.................            -             (69)         (113)          (103)              -
                                                 -------        -------      --------       --------         -------
(Loss) income attributable to common
  stockholders............................       $(1,775)       $18,728      $(11,950)       $(23,841)      $(10,879)
                                                 -------        -------      --------       --------         -------

Net income (loss) per common share........       $ (0.01)         $0.69        $(0.66)        $(1.37)         $(0.76)
Net loss per common share  before
   Extraordinary item..........................  $ (0.01)        $(0.12)       $(0.66)        $(1.37)         $(0.76)

Balance Sheet Data (period end):
Working capital (deficit)                        $(1,050)         $(844)     $(32,891)      $(32,167)        $(3,894)
Total assets..............................        $3,782         $7,627       $11,439        $23,138         $39,324
Current maturities of long-term debt......          $698 (6)       $912       $30,195        $29,857            $508
Long-term debt, less current maturities...       $12,309        $13,708          $541             $-         $25,963
7.5% Redeemable Preferred Stock...........            $-             $-        $1,716  (5)    $1,603  (5)         $-
10% Redeemable Preferred Stock...........           $540           $540 (4)        $-             $-              $-
</TABLE>

-----------
(1)      As a result of the Company's ongoing losses, its forecast for
         continuing losses and its defaults under its loan agreements, Aquis has
         recognized a provision for impairment of the carrying value of its FCC
         licenses and state certificates in the amount of $9,500 at December 31,
         2000. The amount of the loss was based on the difference between the
         net book value of those intangible assets and the amount of the
         estimated annual cash flows through December 31, 2008 discounted to net
         present value using a discount rate of 20%. Management believes that
         the remaining adjusted value of these intangible assets to be
         representative of their fair value.
(2)      Aquis has recognized a provision for the impairment of the value of its
         Midwest wireless messaging assets held for sale at December 31, 2001
         based on the proceeds received for those assets in January 2002. During
         that period, we also recognized further impairment of $2,298 of our FCC
         and State licenses based on current industry conditions and our
         estimates of future cash flows. During the year ended December 31,
         2003, we also recognized a provision for the impairment of the carrying
         value of our licenses and other intangible assets, writing off the
         remaining carrying value of those assets.

                                       13
<PAGE>

(3)      Other expenses for 2000 include a write off of $1,648 of deferred
         financing costs resulting from Aquis' defaults and concurrent
         reclassification of its term debt to a currently payable status. Other
         expenses also include the ascribed value of warrants in the amount of
         $1,553 issued in connection with Aquis' bridge loan and its equity line
         of credit.
(4)      Aquis completed agreements and obtained final approvals in August 2002
         for the debt and equity restructuring that resulted in the cancellation
         of all prior existing Aquis obligations to our senior and junior
         lenders and our preferred stockholders, including accrued interest and
         dividends. In exchange, Aquis provided the affected creditors with
         convertible stock, warrants, notes and redeemable preferred stock.
         Accordingly, Aquis recognized an extraordinary gain on this troubled
         debt restructuring of $22,071. Aquis' senior lender, FINOVA Capital
         Corporation, gained control of the Company as a result of this
         transaction as discussed elsewhere in this report.
(5)      Includes $1,500 at stated value and cumulative accrued dividends of
         $216 and $103 at December 31, 2001 and 2000, respectively.
(6)      Includes a note currently payable to a vendor in addition to amounts
         due FINOVA and under installment obligations



                                       14
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results

         This Annual Report on Form 10-K includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
including, without limitation, statements containing the words "believes,"
"anticipates," "intends," "expects," "estimates," "may," "will," "likely,"
"could" and words of similar import. Such statements include statements
concerning the Company's business strategy, operations, cost savings
initiatives, future compliance with accounting standards, industry, economic
performance, financial condition, liquidity and capital resources, existing
government regulations and changes in, or the failure to comply with,
governmental regulations, future compliance with covenants under the Tranche A
Note, the Tranche B Note, and the AMRO Note, and legislative proposals for the
communications industry. Such statements are subject to various risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in such forward-looking statements because of a number of
factors, including those identified in the "Risk Factors" section and elsewhere
in this Annual Report on Form 10-K. The forward-looking statements are made as
of the date of this Annual Report on Form 10-K and the Company does not
undertake to update the forward-looking statements or to update the reasons that
actual results could differ from those projected in the forward-looking
statements.

General

         Aquis operates two regional one-way wireless messaging systems
providing wireless alpha and numeric messaging services in portions of nine
states, principally in the Northeast and the Mid-Atlantic regions of the United
States, from Virginia to Boston and including the District of Columbia. We also
resell nationwide and regional services, offer alpha dispatch, news and other
messaging enhancements. Customers include businesses, government agencies,
hospitals, individual users and resellers. Beginning in April 2000, the
Company's strategy shifted from acquiring new businesses to focusing on internal
growth, integrating acquired operations and achieving operating efficiencies. In
January 2002, we completed the sale of our wireless messaging assets in the
Midwest region of the United States, and during the third quarter of 2002 we
completed a financial restructuring. Since that time, we have focused our
efforts on our sales and customer support operations and structure, and have
continued efforts to optimize our communications infrastructure both
operationally and from a cost-benefit standpoint.

         On August 12, 2002, after receiving FCC approval, our financial
restructuring took effect resulting in a change in control of Aquis and changes
in our debt and equity positions. These agreements were the culmination of many
months of negotiations necessitated by defaults under our loan agreements.
Accordingly, our senior secured lender, FINOVA Capital Corporation, acquired
control of Aquis through our issuance of convertible preferred stock and
warrants as part of this restructuring transaction. As a result, prior members
of the Board of Directors resigned and were replaced by appointees of FINOVA and
AMRO International, S.A., an unsecured lender. In addition, AMRO acquired a
non-controlling equity interest in our Company, and holders of our 7.5%
Redeemable Preferred Stock exchanged those shares for shares of Aquis' Series B
10% Redeemable Preferred Stock. FINOVA and AMRO also received notes in the
combined face amount of $10 million. In exchange, all prior existing Aquis
obligations to these parties, including accrued interest and dividends, were
cancelled, resulting in the recognition during 2002 of an extraordinary gain on
this troubled debt restructuring of $22,071,000. Before recognition of this
gain, results of operations for 2002 produced a loss of $3,274,000. The most
recent modification of our loan agreement with FINOVA became effective on
December 31, 2003. This modification of our loan agreements with FINOVA
eliminated all financial covenants and eliminated previously scheduled payments
of principal and interest. In exchange, Aquis agreed to make quarterly payments
to FINOVA in the amount of our total available cash balances less $350,000,
which may be retained for use in our business.

         We can provide no assurance that the recent restructuring of our sales
and support operations, our 2002 financial restructuring, or our ability to
effectively gain market share in a declining wireless messaging marketplace at
sufficiently profitable margins will be adequate to ensure our ability to
continue as a going concern. It is management's belief, however, that our
business strategy and focus as a niche provider of one-way wireless messaging
services in our Northeast and Mid-Atlantic regional marketplace and our ability
to work closely with our key creditors and vendors in order to avoid seeking
legal protection from creditors provides a basis for the continued development
of our business.

                                       15
<PAGE>

Organization and Basis of Presentation

         Aquis' consolidated financial statements as of and for the years ended
December 31, 2003, 2002 and 2001 have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. However, we incurred losses before
extraordinary items of $1,775,000, $3,274,000 and $11,837,000, respectively,
during that three year period. In addition, our securities were de-listed from
the NASDAQ SmallCap Market during the year ended December 31, 2000 and our
common stock subsequently began trading on the OTC Bulletin Board under the
symbol AQIS.OB. The effect of the change in trading markets caused or
contributed to the reduction in trading volume and liquidity of our shares.
This, coupled with our history of losses and continuing working capital
deficits, diminished our ability to raise additional funding through debt or
equity offerings, resulted in the technical and functional termination of the
right or ability of Aquis to obtain funding under an equity line of credit
agreement, impaired our liquidity, and led to our past defaults under our loan
agreements with FINOVA. These conditions continue to limit our ability to obtain
any significant third party funding.

         This discussion should be read in conjunction with Aquis' consolidated
financial statements and the notes thereto. Some of the following financial data
is presented on a per subscriber unit basis. Management believes that such a
presentation is useful in understanding year-to-year comparative results by
providing a meaningful basis for comparison, given the differences in business
management and in the number of subscribers of other wireless messaging
companies.

RESULTS OF OPERATIONS-YEARS ENDED DECEMBER 31, 2003 AND 2002

Units in Service

         Units in service totaled 120,000 and 170,000 at December 31, 2003 and
2002, respectively. The overall net decline of 50,000 units represented 29.4% of
those on service at the start of the year, compared to the prior year decline of
23.1%. The decline in 2003 included a net reduction of approximately 34,000
low-ARPU reseller units. Approximately 34,000 units were added during the year
through our direct and indirect sales channels. The annual churn rate during the
year ended December 31, 2003 dropped to 49.2% from the 2002 level of 57.7%.
Approximately 61.3% of the units in service at December 31, 2003 were used by
direct customers rather than resellers, compared to 52.7% at December 31, 2002.

Revenues

         Service revenues for the years ended December 31, 2003 and 2002 were
$11,197,000 and $13,602,000, respectively, a decrease of approximately
$2,405,000 or approximately 17.7% compared to a decrease of 26.1% during the
prior year-to-year comparison. Approximately $773,000, of this decline is
attributed to the reduction of our reseller business, primarily due to the
aforementioned loss of 34,000 low-ARPU reseller units. Resellers purchase Aquis'
services in bulk and are therefore provided rates lower than those made
available to Aquis' direct subscribers. The balance of the revenue decline
primarily was the result of the loss of approximately 16,000 net units from the
direct customer base and the slightly lower average ARPU from all such direct
units on service during 2003 resulting from ongoing price competition in the
wireless messaging marketplace. There has been significant competition in our
industry and the new and add-on units we were able to add during 2003 totaled
approximately 44% of the new and add-on volume we were able to add during 2002.
Partially offsetting these negative influences on overall service revenues was
the continuing shift toward a higher proportion of higher-rate direct customers
comprising our overall customer base and a rate increase during the latter part
of 2003. Approximately 97% of the total service revenues recognized in 2003,
compared to 95% in 2002, were derived from fixed periodic fees from wireless
messaging services that are not dependent upon usage. The increased flat rate
weighting resulted from lower usage-sensitive revenues primarily resulting from
lower billings for wireless messaging overcalls due to competitive pressures.

         Revenues from sales of wireless messaging equipment increased to
$434,000 in 2003 compared to $270,000 in 2002, an increase of $164,000.
Equipment sales increased in terms of both unit volume and unit pricing as our
marketplace began to indicate a preference for COAM, rather than leased-unit,
services, and a steady desire for alphanumeric service rather than the more
basic and less costly numeric service. In addition, preference for new units, as
opposed to refurbished units has been growing. As a result, our base of end-user
alphanumeric COAM business remained essentially flat during the current year.

                                       16
<PAGE>

Cost of Equipment Sales

         The cost of equipment sold during fiscal year 2003 totaled $203,000
compared to $108,000 in 2002, an increase of $95,000. The higher unit sales
volume and relatively stronger performance of the higher-cost COAM alphanumeric
portion of our sales efforts, and a preference for new rather than refurbished
units have combined to increase costs of units sold. We have continued to resist
subsidizing sales of messaging devices to new subscribers in exchange for market
share.

Cost of Wireless messaging Services

         Cost of service consists of Aquis' technical operating expenses and of
fees paid to third party carriers and message dispatch companies. Total services
costs decreased to $5,084,000 in 2003 compared to $6,238,000 in 2002. Technical
operating expenses include transmission site rentals, telephone interconnect
services and the costs of network maintenance and engineering. These expenses
totaled $4,121,000 and $4,710,000 during the years ended December 31, 2003 and
2002, respectively. Our ongoing cost reduction initiatives during 2003 included
tower site consolidation which concurrently helped drive down interconnect costs
significantly. Our program of negotiating site lease renewals directly with site
owners, rather than their agents, also helped reduce lease costs during the
year.

         Costs of third party wireless messaging carriers and dispatchers
declined by approximately 36.9% to $963,000 for 2003. Third party carriers are
utilized when a customer requires service outside of Aquis' service area, and
are most commonly used to provide nationwide coverage. The decreases are the
expected result of the decline of the overall subscriber base and the sales
strategies we utilize that encourage growth of units serviced by Aquis' owned
and operated wireless messaging networks.

Sales and Marketing

         Selling and marketing expenses include the cost to acquire and retain
subscribers, operating costs associated with the sales and marketing
organization, and other advertising and marketing expenses. These costs
increased to $1,640,000 in 2003 from $1,526,000 in 2002, or approximately 7.5%.
A service and product marketing study and branding campaign was completed during
2003, contributing to this overall cost increase. In addition, employment costs
increased as the average size of our sales team expanded by about 10% and costs
associated with an executive-level employment termination were incurred.
Partially offsetting these cost increases were reductions of sales commission
costs resulting from lower unit sales volumes to resellers and leased-unit
end-users. Office rental expenses also declined, resulting from the closure or
subletting of several of our remote sales offices during 2003 and 2002.

General and Administrative

         General and administrative expenses include costs associated with
customer service, field administration and corporate headquarters. These costs
decreased to $3,471,000 in 2003 from $3,685,000 in 2002, or approximately 5.8%.
Continued targeted staff reductions and attrition of approximately 16% effected
during 2003, represented an employment cost reduction of 6.9%. Lower telephone
costs and lower billing and data processing costs resulting from the smaller
subscriber base requiring less customer support also provided cost savings, as
did reduction of our costs to insure our business interests resulting from our
downsized operations and our financial restructuring.

Depreciation and Amortization

         Depreciation and amortization decreased from $2,424,000 in 2002 to
$1,720,000 in 2003. Amortization decreased significantly as the result of the
full amortization of the costs of the customer lists we acquired from Bell
Atlantic Wireless messaging and Paging Partners in those transactions concluded
in early 1999. Depreciation also declined, primarily as the result of the
continuing sales of non-core operating assets as our network consolidation and
optimization projects permit.

                                       17
<PAGE>

Provision for (Recovery of) Doubtful Accounts

         Estimates used in determining the allowance for doubtful accounts are
based on several factors, including receivable aging statistics and related
historical trends, historical collections experience, write-off history, and
other information that may be available and specific to any major account
balances. Although write-offs of subscriber account balances have historically
fallen within our estimates, we must adjust these estimates when actual
collections or other circumstances change and support such adjustments. During
2003, we settled and collected certain charges for services that had aged beyond
typical aging standards. As a result, previously estimated collections
allowances were proven to be in excess of actual collections allowances
required. Accordingly, during the year ended December 31, 2003, we recognized
the reversal of these excess collection allowances, resulting in the net
recoveries reported in our statement of operations for this period.

Provision for Asset Impairment

         In accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", Aquis
periodically prepares cash flow projections in order to evaluate the
recoverability of the net book value of its fixed and intangible assets. These
projections are based on various operating assumptions believed to be
reasonable, as well as operating trends actually experienced. As the result of
this evaluation as of December 31, 2003, a further impairment writedown of our
intangible assets in the amount of $1,520,000 has been recorded based on the
trends, operating plans and assumptions deemed reasonable in our current
operating environment. If trends or operating assumptions change and effect
Aquis' cash flow estimates, we may be required to record additional impairment
charges related to the book value of our long-lived assets in future periods. No
such impairment was indicated by our evaluation as of December 31, 2002.

Recovery of Communications Costs

         During the year ended December 31, 2003, we settled certain claims with
a tower site lessor that involved various sites. The agreement resulted in the
cancellation of accrued site rent obligations and accordingly a gain in the
amount of $173,000 was recorded during the year.

         During the December 31, 2002, we settled certain claims under the
Telecommunications Act of 1996 with two of our communications services
providers. Net of our costs to effect this settlement, we recovered $222,000.
All such claims available to us were settled during 2002 or prior.

Interest Expense

         Net interest expense was $27,000 in 2003 compared to $2,488,000 in
2002. This occurred primarily as the result of our financial restructuring
effected on August 12, 2002. That restructuring effected a reduction of the
carrying value of our interest-accruing debt obligations from over $35 million
to $10 million. It also required the application of SFAS 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings", which required that the
debt recorded in connection with this particular transaction must include all
obligations for future cash payments of both principal and interest. We also
incurred fees of approximately $32,000 as the result of amendments to our loan
agreement with FINOVA early in 2003.

Income Taxes

         No provision for income taxes is reflected in either period as a result
of the Company's net losses in both periods.

                                       18
<PAGE>

RESULTS OF OPERATIONS-YEARS ENDED DECEMBER 31, 2002 AND 2001

Units in Service

         Units in service totaled 170,000 and 221,000 at December 31, 2002 and
2001, respectively. The overall net decline of 51,000 units represented 23.1% of
those on service at the start of the year, compared to the prior year decline of
35.4%. The decline in 2002 included a net reduction of approximately 40,000
low-ARPU reseller units. Approximately 77,000 units were added during the year
through our direct and indirect sales channels. The annual churn rate during the
year ended December 31, 2002 dropped to 57.7% from the 2001 level of 62.3%.
Approximately 52.7% of the units in service at December 31, 2002 were used by
direct customers rather than resellers, compared to 45.2% at December 31, 2001.

Revenues

         Service revenues for the years ended December 31, 2002 and 2001 were
$13,602,000 and $18,416,000, respectively, a decrease of approximately
$4,814,000 or approximately 26.1%. A significant part, or approximately
$2,318,000, of this decline is attributed to the reduction of our reseller
business, primarily due to the aforementioned loss of 40,000 low-ARPU reseller
units. The balance of the revenue decline primarily was the result of the loss
of approximately 11,000 units from the direct customer base and the lower
average ARPU from all such units on service during 2002 resulting from ongoing
price competition in the wireless messaging marketplace. Partially offsetting
these negative influences on overall service revenues was the shift toward a
higher proportion of higher-rate direct customers comprising our overall
customer base and a rate increase during the latter part of 2002. Approximately
95% of the total service revenues recognized in 2002, compared to 94% in 2001,
were derived from fixed periodic fees from wireless messaging services that are
not dependent upon usage. The increased flat rate weighting resulted from lower
usage-sensitive revenues primarily resulting from our sale of the Midwest
wireless messaging operations and lower billings for wireless messaging
overcalls due to competitive pressures and a smaller subscriber base.

         Revenues from sales of wireless messaging equipment declined to
$270,000 in 2002 compared to $447,000 in 2001. Our sales volume has declined, as
has that of the wireless messaging industry in general primarily due to
competition from new technology. Also, lower sales revenues were realized as
consumer demand for less costly equipment continued throughout the year.
Accordingly, Aquis continued to market lower-cost units at reduced sales prices,
continuing its long-term strategy.

Cost of Equipment Sales

         The cost of equipment sold during fiscal year 2002 totaled $108,000
compared to $448,000 in 2001, a decline of $340,000, or 75.9%. Continuing
consumer demand for lower-cost messaging devices and demand for rental units
were the primary factors to the cost reduction. Management believed that these
factors were the consequences of a weak wireless messaging industry. We
continued to resist subsidizing sales of messaging devices to new subscribers in
exchange for market share.

Cost of Wireless Messaging Services

         Cost of service consists of Aquis' technical operating expenses and of
fees paid to third party carriers and message dispatch companies. Total services
costs decreased to $6,238,000 in 2002 compared to $8,164,000 in 2001. Technical
operating expenses include transmission site rentals, telephone interconnect
services and the costs of network maintenance and engineering. These expenses
totaled $4,710,000 and $5,682,000 during the years ended December 31, 2002 and
2001, respectively. In addition to technical cost reductions of about $602,000
realized in connection with the sale of our Midwest wireless messaging
operations, our cost reduction initiatives included ongoing tower site
consolidation which concurrently helped drive down interconnect costs. Our
program of negotiating site lease renewals directly with site owners, rather
than their agents, also helped reduce lease costs during the year.

         Costs of third party wireless messaging carriers and dispatchers
declined by approximately 38.5% to $1,527,000 for 2002. The decreases are the
expected result of the decline of the overall subscriber base and the sales
strategies we utilized that encouraged growth of units serviced by Aquis' owned
and operated wireless messaging networks.

                                       19
<PAGE>

Sales and Marketing

         Selling and marketing expenses decreased from $1,924,000 in 2001 to
$1,526,000 in 2002, or approximately 20.7%. Approximately $55,000 of cost
reductions were effected as the result of our sale of the Midwest wireless
messaging assets. Other cost reductions resulted from a 22% decline in the
average size of the sales staff through attrition and targeted downsizing. Sales
commission costs also declined as the result of our lower sales volume, as did
office rental expenses resulting from the closure or subletting of several of
our remote sales offices during 2001 and 2002.

General and Administrative

         General and administrative expenses decreased from $5,136,000 in 2001
to $3,685,000 in 2002, or approximately 28.3%. Approximately $212,000 of the
expense reduction was effected as the result of our sale of our Midwest wireless
messaging operations.

         Overall costs were reduced 12.8% as the result of employment cost
reductions unrelated to the Midwest operations sale. Targeted staff reductions
and attrition of approximately 26% effected in stages during 2002, along with
management-level salary reductions contributed to these expense reductions that
represented an employment cost reduction of 25.8% excluding effects of the
Midwest operations sale. In addition, total expenses in 2001 included costs to
settle certain employment and other claims made by Aquis' first President and a
founder in the approximate amount of $168,000. Legal costs related to this and
other matters settled prior to 2002 also aided the 2002 cost reduction, as did
elimination of costs for third-party public relations services and business
planning initiatives that concluded in 2001. Lower telephone costs and lower
billing and data processing costs resulting from the smaller subscriber base
requiring less customer support, due in part to the sale of the SourceOne
accounts also provided cost savings.

Depreciation and Amortization

         Depreciation and amortization decreased from $6,889,000 in 2001 to
$2,424,000 in 2002. Amortization of FCC licenses decreased significantly as the
result of the $4,569,000 and $9,500,000 impairment provisions recognized in 2001
and 2000, respectively. Depreciation also declined, primarily as the result of
the disposal of the Midwest region assets and other wireless messaging assets.

Provision for Asset Impairment

         In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of," Aquis periodically prepares cash flow projections in order to
evaluate the recoverability of the net book value of its fixed and intangible
assets. As the result of this evaluation as of December 31, 2002, no further
impairment writedown was deemed to be required based on the trends, operating
plans and assumptions deemed reasonable then.

         As a result of the Company's ongoing losses, its forecast for
continuing losses, and its prior defaults under its loan agreements, Aquis
recognized a provision for impairment of the carrying value of its FCC licenses
and state certificates in the amount of $2,298,000 at December 31, 2001. The
amount of these impairments was based on the excess of the net book value of
those intangible assets over the amount of the estimated annual cash flows
projected through December 31, 2008 discounted to net present value using a
discount rate of 20%. We also recorded an additional provision for the
impairment of the carrying value of our Midwest wireless messaging assets in the
amount of $2,271,000 based on the proceeds received in January 2002 upon
completion of that transaction.

                                       20
<PAGE>

Interest Expense

         Net interest expense was $2,488,000 in 2002 compared to $3,909,000 in
2001. This occurred primarily as the result of our financial restructuring
effected on August 12, 2002. That restructuring effected a reduction of the
carrying value of our interest-accruing debt obligations from over $35 million
to $10 million. It also required the application of SFAS 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings", which required that the
debt recorded in connection with this particular transaction must include all
obligations for future cash payments of both principal and interest. In
addition, interest costs in 2001 were higher due to costs associated with the
debt due to FINOVA, bearing a premium of an added 2% imposed as a result of our
inability to make an optional $2,000,000 principal payment in December 2000. We
also incurred fees of approximately $250,000 as the result of a failure to meet
certain financial covenants with our senior lender.

Income Taxes

         No provision for income taxes is reflected in either period as a result
of the Company's net losses in both periods.



                                       21
<PAGE>

Liquidity and Capital Resources

         We have restructured our operations and our balance sheet. The
operational restructuring continues to evolve with the changes in our regional
marketplaces. The balance sheet restructuring was substantially completed in
August 2002, although that, too, continues to develop.

         Regarding our operational restructuring, operating expenses continue to
be reduced through salary reductions, targeted cutbacks and normal attrition. We
continue to consolidate our communications networks. We sold, and continue to
sell, non-core wireless messaging properties and equipment and have developed
marketing strategies intended to target the marketing opportunities in one-way
wireless messaging resulting from the refocusing of many of our wireless
messaging industry competitors on two-way and other advanced services. In late
2002 and early 2003, we worked with a firm of marketing professionals to help
strengthen our abilities to sell into our very competitive wireless messaging
markets and to develop the Aquis brand and image. Prior to that, we sold our
wireless messaging operations in the Midwest for $1,010,000. We reduced our
workforce to better match the size and needs of our customer base. We also
collected the remaining $625,000 balance due for the sale of our Internet assets
as specified under the discounted payment terms provided in the June 2001
modifications to the related buyer's note, and we settled certain claims in 2001
and 2002 under the Telecommunications Act of 1996 with communications services
suppliers for over $1,000,000. These initiatives allowed us to pay down amounts
due to our general creditors, pay down amounts due to FINOVA under our loan
agreements with them, and to invest in wireless messaging equipment to better
supply our core markets.

         Regarding the restructuring of our balance sheet, effective on August
12, 2002, our debt and equity structure was significantly modified at which time
a change in control of Aquis was also effected. As a result, we recognized a
gain on this restructuring transaction in the amount of $22,071,000, net of
transaction costs, and an improvement in our working capital deficit. This
measure of Aquis' liquidity improved from a deficit of $32,891,000 at December
31, 2001 to a deficit of $844,000 at December 31, 2002, primarily through the
cancellation of our then-existing senior and junior debt obligations. The
financial obligations that were issued to our creditors in connection with our
restructuring transaction also reduced and delayed the required cash outflows
for payments of principal, interest, preferred stock dividends and preferred
stock redemption payments in future periods, enhancing Aquis' ability to meet
such requirements by more closely aligning those requirements with financial
expectations of that time. As the result of defaults under our restructured loan
agreements, further waivers and loan amendments were necessitated, negotiated
and executed. Effective as of December 31, 2003 with execution of the Second
Amendment to the Second Amended and Restated Loan Agreement, our modified
agreements with FINOVA have eliminated financial covenants, eliminated
previously scheduled payments of principal and interest, and have provided,
instead, our agreement to make quarterly payments to FINOVA in the amount of our
total available cash balances less $350,000, which may be retained for use in
our business.

         Our restructuring efforts were necessitated by Aquis' history of
losses, an illiquid financial position, a lack of available funding, and
defaults under our loan agreements. Our defaults included both financial
covenant shortfalls and failures to meet debt repayment requirements. In January
2001 and later periods we were unable to make required quarterly principal
repayments, each in the amount of $514,000, under the senior loan obligation due
to FINOVA. Further, we did not make any required interest payments on this debt
between February 2001 and March 2002, inclusive. We were also in default of our
debt obligation due to AMRO. A $2,000,000 note payable to AMRO was scheduled to
mature in October 2001, unless sooner converted to common stock, or demand made
for payment due to Aquis' default, at AMRO's election. As the result of our
defaults, we negotiated forbearance agreements with these lenders under which we
were able to continue operations while working to complete the restructuring of
our debt and equity that went into effect on August 12, 2002.

         Our business plans for the foreseeable future require capital to be
available to purchase wireless messaging equipment for new and existing
subscribers, to optimize, operate and maintain our communications networks, and
to service our debt to FINOVA, although minimum required periodic payments are
not specified in the existing loan agreements with them, as modified. Our
principal source of liquidity at December 31, 2003 was $671,000 of cash and cash
equivalents, as computed after a $754,000 payment to FINOVA in December. At
December 31, 2003, we had a working capital deficit totaling approximately
$1,050,000 and we have experienced operating losses since our inception,
although we have steadily been producing EBITDA since then. Audit opinions as to
the results reported during our last three fiscal years include going concern
qualifications that suggest that we may be unable to meet obligations as they
become due in the normal course of business. Our common stock was de-listed from
the NASDAQ SmallCap Market which technically and functionally terminated our
equity line of credit provided under a Common Stock Purchase Agreement with
Coxton Limited. These factors have prevented us, and continue to prevent us,
from obtaining any additional significant external funding. Accordingly, we can
provide no assurance that we will be able to meet our reduced debt service
requirements, that we will be able to acquire sufficient messaging devices to
fully meet demand for either new business or retention of existing subscribers
who require replacement units from time to time, that we will be able to
optimize our communications network, or to invest in marketing initiatives for
wireless messaging or other communications services. We believe that our
business plan as a niche one-way wireless messaging carrier in an industry that
is moving toward other communications services is sound, yet our ability to
execute this plan is heavily dependent on the factors noted above which are
largely beyond our unilateral control.

                                       22
<PAGE>

         Aquis' operating activities provided approximately $797,000 and
$914,000 of net cash during the years ended December 31, 2003 and 2002,
respectively. Excluding the effects of changes in our working capital accounts,
operations generated $1,332,000 and $200,000 in 2003 and 2002, respectively.
During the respective current and prior reporting periods, we used cash to fund
pager purchases of $478,000 and $1,020,000 and to pay down our debts to vendors
by $430,000 and $1,039,000. The need to reduce outstanding accounts payable to
vendors continued to be influenced by the declining telecommunications markets
and the wireless messaging industry, and the ongoing downsizing of our
operations. The uncertainty caused by these trends continued to influence our
vendors' requirements to keep our accounts with them current.

         During the years ended December 31, 2003 and 2002 we realized proceeds
from sales of assets totaling $403,000 and $1,278,000. The 2002 total resulted
primarily from the January 2002 collection of the remaining proceeds of
$1,010,000 due for the sale of our Midwest wireless messaging assets. The
balance of the proceeds in both periods was realized from sales of transmitters
and other equipment not deemed essential to our core operations. We purchased
communications equipment during these periods to strengthen our signaling
capabilities in targeted areas, and we continued to update our base of leased
messaging devices.

         Financing activities consumed $1,670,000 and $1,461,000 of cash during
the years ended December 31, 2003 and 2002, respectively. Cash was primarily
used in 2003 to make debt service payments to FINOVA, totaling approximately
$1,628,000. Cash was used primarily in 2002 for investment banking, legal and
other costs incurred during the completion of our financial restructuring.
During 2002 and the prior year, we also paid costs incurred in connection with
the Registration on Form S-1 of our common shares pursuant to registration
rights obligations undertaken as part of prior debt and equity offerings.

         Aquis has commitments under operating leases for office, transmitting
and switching sites and office equipment with lease terms ranging from one month
to mid-year 2007. Minimum annual lease payments on such leases having
non-cancelable lease terms in excess of one year total approximately $1,826,000,
$1,446,000, $904,000, $496,000 and $456,000 during 2004 through 2008,
respectively. There are no significant minimum purchase agreements in effect
with wireless messaging device suppliers or other vendors. Current business
plans provide for capital expenditures of approximately $250,000 in 2004 for
subscriber wireless messaging devices, network infrastructure and information
systems upgrades, and will be dependent on actual subscriber growth, actual
demand for wireless messaging device features and actual demand in the
marketplace for network enhancements, as well as availability of cash. Effective
on December 31, 2003, our previous cash requirements for debt service payments
to FINOVA were significantly changed. Previously required were annual principal
repayments of $250,000 through and including 2006, a principal payment of
$6,000,000 due in mid-2006, and interest payments from 2003 through 2006,
respectively, of approximately $620,000, $600,000, $575,000 and $416,000.
Effective with that December 31, 2003 Second Amendment to the Second Amended and
Restated Loan Agreement, that payment schedule was eliminated and was replaced
by the requirement to pay to FINOVA a quarterly cash payment equal to all
available cash balances less $350,000, which is retained for working capital or
other business purposes. The maturity dates of the Tranche A and Tranche B Notes
remained unchanged. In addition, all financial covenants were eliminated from
our loan agreements with FINOVA. In connection with these changes, we paid to
FINOVA in December 2003 the first of the quarterly payments in the amount of
$754,000. We also have a note payable to a vendor consisting of principal of
$500,000 and related unpaid accrued interest that matures in November 2004.
Accrued interest at December 31, 2003 totaled $65,000. There were no material
off-balance sheet obligations as of December 31, 2003 or the date of this
filing.

                                       23
<PAGE>

         Aquis' operating expenditures for employment and occupancy costs have
been subject to normal inflationary pressures. Systems equipment and wireless
messaging device costs have trended downward in recent years, allowing Aquis to
offer lower unit prices to customers who wish to purchase their units.

         Our auditors' opinion on our financial statements as of and for the
years ended December 31, 2003, 2002 and 2001 is qualified and states that there
is substantial doubt about our ability to continue as a going concern. An
auditors' opinion for going concern issues is typically qualified when a
company's history of operating losses is expected to continue and funding of
those losses from outside sources is unlikely to be available. In such
circumstances, a company's liabilities may not be able to be discharged as they
become due in the normal course of business.

         In consideration of our ongoing losses, limited liquid resources, and
the ongoing lack of available additional funding, we can provide no assurance
that the terms and requirements of our financial restructuring, and future
amendments that may be agreed between the parties, if any, will be sufficient to
the extent necessary to execute our current business plan or ensure our ability
to continue as a going concern. Our ability to continue as a going concern and
execute our one-way wireless messaging business plan is dependent on industry
and technological factors that are beyond our unilateral control. Although
completion of the realignment of our debt and equity structure in 2002, along
with subsequent modifications, provides Aquis and its primary lender/equity
holders with an attractive opportunity to maximize the return on invested funds,
it does not guarantee future profitability or cash flows sufficient to ensure
our ability to carry out our business plan.

Seasonality

         Retail sales were subject to seasonal fluctuations that affect retail
sales generally. Otherwise, the results were generally not significantly
affected by seasonal factors.

Quantitative and Qualitative Disclosures about Market Risk

         Our floating rate debt at December 31, 2003 was limited to the Tranche
A Note due to FINOVA in the face amount of $7,000,000, which also carried a rate
floor of 9%. An interest rate increase or decrease of 2% on the remaining
principal balance of approximately $6,151,000 under this floating rate debt
would result in a change in annual interest expenses of approximately $123,000.
Aquis has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. We had no other significant
material exposure to market risk.

Recent Accounting Pronouncements

         In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" and in April 2003 this Standards Board issued
SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities". Neither pronouncement is expected to have a material effect on the
Company's financial position, results of operations or cash flows due to
limited, if any, applicability.

         In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity". SFAS 150 applies to financial
instruments previously treated as part of shareholders' or mezzanine equity and
requires that instruments providing for mandatory redemption under specified
terms must be reclassified and presented as a liability. SFAS 150 also requires
that dividends paid pursuant to the terms of such instruments be treated as a
component of interest expense. Aquis has elected to an early adoption of this
principle and has presented its Series B Redeemable 10% Preferred Stock as a
component of its total liabilities. Aquis has paid no dividends on this issue,
and is not required to do so until certain of its other debts are fully
satisfied.



                                       24
<PAGE>

Critical Accounting Policies

         Management's Discussion and Analysis of Financial Condition and Results
of Operations are based upon the Company's consolidated financial statements.
The preparation of these consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the dates of the
financial statements, and the reported amounts of revenues and expenses during
the reporting periods. On an on-going basis, management evaluates its critical
accounting policies and estimates.

         In December 2001, the Securities and Exchange Commission ("SEC")
requested that all registrants list their three to five critical accounting
policies in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The SEC indicated that a "critical accounting policy" is
one which is both important to the understanding of the financial condition and
results of operations of the Company and requires management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. Management believes
the following accounting policies fit this definition:

Long-Lived Assets

         Our long-lived assets are recorded at historical cost and depreciated
or amortized using the straight-line method over the estimated useful lives of
the assets. We review these assets, including our property and equipment and our
intangible assets periodically, or whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable, in accordance with
SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". If
the sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the
estimated fair value and the carrying value of the asset. Accordingly, during
the years ended December 31, 2003, 2001 and 2000, we recorded provisions for the
impairment of the value of certain tangible and intangible assets.

Inventory

         Inventory consists primarily of messaging devices held for sale or
lease. Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out basis. We recorded an inventory valuation reserve of
approximately $59,000 at December 31, 2003 to reflect our estimate of the market
value attributable to units on hand at that date.

Revenue Recognition

         Wireless messaging service revenues include airtime for wireless
messaging services, rental fees for leased wireless messaging equipment, and
various other fees for such enhanced features as alpha dispatch services, loss
protection and maintenance, and voice mail. These revenues are recognized as the
services are performed or ratably over time in the case of fees that may be
billed quarterly, semi-annually or annually in advance. Revenues related to
pre-billed services are deferred until the service is provided and earned.
Equipment revenue is recognized upon delivery to the customer. In December 1999
the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101
("SAB 101"), Revenue Recognition in Financial Statements, amended in March 2000,
which provides guidance on the application of generally accepted accounting
principles to revenue recognition in financial statements. This Bulletin
requires that revenue is recognized only when persuasive evidence of an
arrangement exists, delivery of merchandise has occurred or services have been
rendered, the fee is established, determinable and collectibility is reasonably
assured. Aquis adopted SAB 101 in the second quarter of 2000; it had no
significant effect on consolidated results of operations or financial position.



Item 8.  Financial Statements

         See Index to Financial Statements, Page F-1.

Item 9.  Changes and Disagreements with Accountants on Accounting and
Financial Disclosure

         None.

                                       25
<PAGE>

Item 9A  Controls and Procedures

         In an effort to ensure that information required in the Company's
filings with the Securities and Exchange Commission is recorded, processed,
summarized and reported on a timely basis, the Company's principal executive
officer and principal financial officer have evaluated the effectiveness of the
Company's disclosure controls and procedures, as defined in Exchange Act Rules
13a-15(e) and 15d-15(e), as of December 31, 2003. Based on such evaluation,
these officers have concluded that, as of December 31, 2003, the Company's
disclosure controls and procedures were effective in timely alerting them to
information relating to the Company required to be disclosed in the Company's
periodic reports filed with the SEC. There has been no change in the Company's
internal control over financial reporting during the quarter ended December 31,
2003 that has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.


                                       26
<PAGE>

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant

Directors

         The following is a brief description of the business experience of each
of the members of the Board of Directors. Except for Richard Gdovic, each of the
following directors has served as a director of the Company since August 12,
2002. Mr. Gdovic has served as a director of the Company since being appointed
to the Board on August 26, 2002.

         John B. Burtchaell, Jr., age 61, is a Senior Vice President of FINOVA's
Special Assets Division and is responsible for overseeing the management of the
largest and most complex workout relationships in FINOVA's portfolio. This
responsibility includes managing the execution of workout strategies for each of
FINOVA's lines of business. Mr. Burtchaell has extensive portfolio workout and
credit experience. He has held senior positions for various lending
institutions. Prior to joining FINOVA in 1998, Mr. Burtchaell worked at First
American National Bank where he was a Senior Vice President and Division Manager
from 1996 to 1998 and a Senior Vice President and Senior Credit Officer from
1992 to 1996. He also held the position of Senior Vice President and Senior
Credit Officer at Dominion Bank from 1988 to 1992. Before joining Dominion Bank
in 1988, Mr. Burtchaell was the President and Chief Executive Officer of a
BancOne affiliate for seven years. Mr. Burtchaell was designated by FINOVA to
serve on the Board.

         Eugene I. Davis, age 48, served on an interim basis as the Company's
President from April 29, 2002 to October 17, 2002 and as its Chief Executive
Officer from July 1, 2002 to October 17, 2002. Since October of 2002, Mr. Davis
has been a director of Metrocall Holdings, Inc., a wireless messaging services
company whose shares are listed on the NASDAQ SmallCap Market. Since August of
2002, he has been the Chairman and Chief Executive Officer of Murdock
Communications Corp., a NASDAQ listed company. In 1999, he became Chairman and
Chief Executive Officer of PIRINATE Consulting Group, L.L.C., a privately held
consulting firm specializing in crisis and turn-around management, merger and
acquisition consulting, hostile and friendly takeovers, proxy contests and
strategic planning advisory services for public and private business entities.
Mr. Davis has been Chairman, Chief Executive Officer and President of RBX
Industries, Inc. since August 2001, after having been appointed Chief
Restructuring Officer in January 2001. RBX is a leading manufacturer of closed
cell foam and custom mixed rubber compounds. From January 2000 through August
2001, Mr. Davis was Chairman and Chief Executive Officer of Murdock
Communications Corp. From May 1999 through June 2001, he was the Chief Executive
Officer of SmarTalk Teleservices, Inc., which had filed a petition under Chapter
11 of the Federal Bankruptcy Code in March 1999. He was Chief Operating Officer
of TotalTel USA Communications, Inc. in 1998. Both SmarTalk Teleservices, Inc.
and TotalTel USA Communications, Inc. are NASDAQ companies. In addition, he is a
director of Coho Energy, Inc., Elder-Beerman Stores Corp., Eagle Geophysical,
Inc., Flag Telecommunications, Inc., Metals USA, Inc., and a member of the Board
of Advisors of PPM America Special Investment Funds. Mr. Davis was designated by
AMRO to serve on the Board.

         Richard Gdovic, age 41, has been the General Manager of ComServe
Corporation, a billing solutions organization designed specifically for the
wireless messaging and cellular industries, since October 1994. Mr. Gdovic
oversees all operations of ComServe and related holding companies. He also
serves as the General Manager of Comsoft Corporation where he oversees all of
its operations and as President of Comserve Service Group, Inc. Mr. Gdovic has
seventeen years experience developing accounting software with the last thirteen
years spent developing software for the communications industry. He serves on
the Board of Directors of Comserve Service Group, Inc., LaserTek Corporation and
LaserTek Holding Corporation.

         Thomas W. Parrish, age 54, has been the President of Parrish Interests,
a real estate and investment firm, since 1999. Prior to that, from 1985 to 1999,
he was the President and Chief Executive Officer of Southwestern Bank & Trust
Company and, from 1979 to 1985, he was the President of Exchange National Bank.
Mr. Parrish has more than twenty years experience in commercial/consumer banking
and real estate development industries and has the proven ability to manage
operations and financial organizations ranging from $30 million to over $1
billion in assets. He has in-depth experience in start-ups, turnarounds,
corporate restructurings, capital sourcing, business development and
sales/marketing. Mr. Parrish serves on the Board of Directors of the Oklahoma
Medical Research Foundation and The First National Bank of Oklahoma. Mr. Parrish
was designated by FINOVA to serve on the Board.

                                       27
<PAGE>

         David A. Sands, age 46, is the Vice President of The FINOVA Group. Mr.
Sands is responsible for workout management/ recovery of a variety of distressed
companies. He has proven success in corporate finance, workouts and mergers and
acquisitions. Prior to joining FINOVA in May 2001, Mr. Sands served as the Chief
Executive Officer from September 1999 to July 2001 of PCT Automation Systems
Corporation where he developed and executed business and financial plans that
enabled the reorganized and restructured company to prosper and be sold to a
corporate buyer. Prior to that, he served as an independent consultant, with
assignments including Interim President, board of directors member and
acquisition consultant, from September 1997 to March 2001. From April 1996 to
July 1997, Mr. Sands served as the President and Chief Executive Officer of
Process Control Technologies, Inc., a manufacturer of specially continuous flow
equipment, and in such capacity he led the company through a successful
emergence from bankruptcy in seven months and sold this enterprise six months
later to a public company. Mr. Sands was designated by FINOVA to serve on the
Board. Mr. Sands is a Certified Public Accountant.

         Brian M. Bobeck, age 36, was appointed to the Board on November 11,
2003 in conjunction with the resignation of Mr. Alex E. Stillwell from the Board
at that time. He has also succeeded Mr. Stillwell as Chief Executive Officer
effective September 1, 2003. Mr. Bobeck has served as President and Chief
Operating Officer of the Company since December 11, 2002. Prior to that time,
Mr. Bobeck served as Vice-President Engineering of the Company and its
predecessor from January 1999. During 1998, Mr. Bobeck was Director of Technical
Services for Vanguard Cellular. From 1996 to 1998, Mr. Bobeck was Director of
Engineering for NationPage Inc. Prior thereto Mr. Bobeck was Operations Manager
for C-TEC Corporation, an independent local exchange carrier.

         Alex E. Stillwell, age 57, served as the Company's Chief Executive
Officer from October 17, 2002 to August 31, 2003. Mr. Stillwell resigned from
his position on the Board effective November 11, 2003. Mr. Stillwell was elected
to the Board pursuant to the Restructuring.

Executive Officers of the Company

         The following information sets forth the age, business experience and
certain other information for each of the current executive officers of the
Company:

<TABLE>
<CAPTION>
Name                                   Age      Position
----                                   ---      --------

<S>                                    <C>      <C>
Brian M. Bobeck    ..............      36       President and Chief Operating Officer
D. Brian Plunkett  ..............      48       Vice President and Chief Financial Officer
</TABLE>

         Information about Mr. Bobeck is included under the caption "Directors",
above.

         D. Brian Plunkett served as the Chief Financial Officer, Vice
President, Treasurer and Assistant Secretary of Aquis Communications, Inc. from
January 1, 1999 until its merger with the Company, and as Vice-President and
Chief Financial Officer of the Company since that time. Prior thereto, he had
been the Chief Financial Officer for NationPage, Inc., from January 1995. For
more than ten years prior to his employment with NationPage, Mr. Plunkett was
employed by PageAmerica Group, Inc., a publicly traded, FCC licensed
facilities-based wireless provider where he served as Vice President of Finance
and Principal Accounting Officer. Mr. Plunkett is a Certified Public Accountant.



                                       28
<PAGE>

Terms of Officers

         All officers of the Company serve for terms expiring at the next annual
meeting of stockholders following the date of their appointment. Officers' terms
are without prejudice to the terms of their employment agreements. Each of the
Aquis officers devotes his full time to the affairs of Aquis.

Board Composition

         The directors all serve one-year terms until their successors are
elected and qualify or until their earlier resignation, removal or death. All
directors are elected at every annual stockholder meeting.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than ten-percent stockholders are required to furnish the Company with
copies of Section 16(a) forms they file. Based solely on the review of the
copies of such forms furnished to the Company, or written representations of the
reporting persons, the Company has determined that all required reports were
timely filed during fiscal year 2003.

Audit Committee Financial Expert

         The Company has a separately-designated standing audit committee that
is established in accordance with Section 3(a)(58)(A) of the Exchange Act (15
U.S.C. 78c(a)(58)(A)) and this committee has adopted a written charter. The
audit committee supervises matters relating to the audit function, reviews the
Company's quarterly reports, and reviews and approves the annual report of the
Company's independent auditors. The audit committee also has oversight
responsibilities with respect to the Company's financial reporting, including
the annual and other reports to the Securities and Exchange Commission and the
annual report to the shareholders. Current members of the audit committee are:
John B. Burtchaell, Jr., Tom Parrish, Chairman of the Audit Committee, and
Richard Gdovic. Except for Mr. Burtchaell who is not independent since he is an
officer of FINOVA Capital Corporation, each of the audit committee members is an
independent director both under the NASD general independence rule (Rule
4200(a)(15)) and under NASD Rule 4350(d)(2)(A) regarding heightened independence
standards for audit committee members. Mr. Parrish qualifies an "audit committee
financial expert" as described in NASD Rule 4350(d)(2)(A). There were six
meetings of the audit committee during 2003.

Code of Ethics

         The Company has a code of ethics for our executive officers, a copy of
which can be provided to any person without charge, upon written request. Any
such request should be addressed to: Aquis Communications Group, Inc., 1719A
Route 10, Suite 300, Parsippany, New Jersey 07054, Attention: Corporate
Secretary.



                                       29
<PAGE>

Item 11.  Executive Compensation

         The following table summarizes the compensation paid or accrued for the
fiscal years ended December 31, 2003, 2002, and 2001, by the Company to or for
the benefit of each person who served as the Company's Chief Executive Officer
at any time during fiscal year 2003 and by the Company's four most highly
compensated executive officers (other than the Chief Executive Officer) employed
as of December 31, 2003 (the "Named Executive Officers"):

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                            Annual Compensation                       Long Term Compensation
                                     -------------------------------     -------------------------------------------------
                                                                                      Awards                    Payouts
                                                                         -------------------------------------------------
                                                                          Restricted
                                                                             Stock          Options/SARS       All Other
Name and Principal Position            Year       Salary       Bonus     Awards(s)($)            (#)          Compensation
---------------------------            ----       ------       -----     ------------       ------------      ------------
<S>               <C>                  <C>       <C>           <C>       <C>                <C>               <C>
Alex E. Stillwell (1)............      2003      $108,750       -0-           -0-              -0-             $55,000
Former Chief Executive Officer         2002       $30,096       -0-           -0-              -0-             $49,126
                                       2001         -0-         -0-           -0-              -0-               -0-

Brian M. Bobeck. ................      2003      $155,083       -0-           -0-              -0-              $6,000
Chief Executive Officer                2002      $135,958       -0-           -0-              -0-              $5,425
                                       2001      $153,150     $35,000         -0-            100,000            $4,060

D. Brian Plunkett (2) ..............   2003      $155,383       -0-           -0-              -0-               -0-
Vice President and Chief Financial     2002      $137,500       -0-           -0-              -0-              $4,000
Officer                                2001      $152,917     $10,000         -0-            100,000             -0-

John P. Alexander (3)...........       2003       $33,333       -0-           -0-              -0-               -0-
Vice President Sales                   2002         -0-         -0-           -0-              -0-               -0-
                                       2001         -0-         -0-           -0-              -0-               -0-
</TABLE>


(1)    Mr. Stillwell was paid $49,126 by the Company for consulting
       services prior to serving as Chief Executive Officer, and
       $55,000 for consulting services following his resignation as
       CEO effective August 31, 2003.

(2)    The Company loaned Mr. Plunkett $4,000 in June 2002 in
       connection with the Restructuring. See "Certain Relationships
       and Related Party Transactions."

(3)    Mr. Alexander served as the Company's Vice President Sales from
       September 1, 2003 through March 2004.



                                       30
<PAGE>

Option Grants, Exercises, and Fiscal Year-End Option Values

         The Company did not grant options during fiscal years 2003 or 2002.
Furthermore, none of the Named Executive Officers exercised options during
fiscal year 2003. The following table sets forth information relating to the
year-end value of unexercised options by each of the Named Executive Officers.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                          # of Securities Underlying        Value of Unexercised
                             # Shares                        Unexercised Options at     in-the-money Options at Fiscal
                            Acquired on      Value            Fiscal Year End (#)                Year End ($)
Name                         Exercise      Realized ($)     Exercisable/Unexercisable     Exercisable/Unexercisable
----------------------------------------------------------------------------------------------------------------------
<S>                         <C>            <C>            <C>                           <C>
Alex E. Stillwell               -0-            -0-                   0/0                          0/0
----------------------------------------------------------------------------------------------------------------------
Brian M. Bobeck                 -0-            -0-             303,500 / 25,000                   0/0
----------------------------------------------------------------------------------------------------------------------
D. Brian Plunkett               -0-            -0-             466,762 / 25,000                   0/0
----------------------------------------------------------------------------------------------------------------------
John P. Alexander               -0-            -0-                   0/0                          0/0
----------------------------------------------------------------------------------------------------------------------
</TABLE>

Employment Agreements

         The Company does not have any employment agreements with its Named
Executive Officers.

Director Compensation

         During much of fiscal year 2002, directors that were not officers of or
employed by the Company were not compensated under any standard policy or
arrangement with the Company. Such directors were generally compensated only
through the issuance of stock options. By resolution of the Board, dated August
26, 2002, the Board determined that in light of the substantial contribution of
time that was being asked of all members of the Board without exception, the
compensation for members of the Board going forward will be (1) an annual
retainer of $15,000, payable quarterly, (2) a per meeting fee of $1,000 for each
in-person meeting and $500 for each telephonic meeting and (3) the reimbursement
of expenses. Such payments were made to each Board member during 2003, as
applicable.


                                       31
<PAGE>

COMPENSATION COMMITTEE REPORT

         The Compensation Committee reviews and approves compensation levels and
benefit plans and policies applicable to senior management of the Company,
including the Chief Executive Officer and other executive officers of the
Company, and submits its recommendations to the Board for ratification. The
Company's compensation policies are designed (1) to attract and retain
individuals of the best quality available in the messaging services industry,
(2) to motivate and reward these individuals based on corporate and individual
performance and (3) to align the interests of these individuals with the
interests of the stockholders of the Company through stock-based incentives when
appropriate. However, in light of the current state of operations of the
Company, the Compensation Committee has limited or suspended bonus and option
awards. Consistent with the above-stated philosophy, senior management
compensation currently consists solely of base salary. The Compensation
Committee's current members are John B. Burtchaell, Jr., Eugene I. Davis, and
David A. Sands.

         In fiscal year 2003, compensation of Brian M. Bobeck, the Company's
Chief Executive Officer and D. Brian Plunkett, the Company's Chief Financial
Officer, was determined by the Compensation Committee based upon arms length
negotiations. Each of these individuals is employed by the Company on an at will
basis. The Company has agreed, however, to provide each with salary continuation
benefits for a period of six months in the event of their termination without
cause.



         Respectfully submitted by the members of the Compensation Committee,

                  John B. Burtchaell, Jr., Chairman
                  Eugene I. Davis
                  David A. Sands


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Mr. Frieling resigned as a member of the Company's Compensation
Committee in 2001. During 2002, the Company paid investment banking fees
totaling $67,674 to Deerfield Capital, L.P. and Deerfield Partners, LLC. Mr.
Frieling serves as managing director of Deerfield Partners, LLC, which in turn
serves as general partner of Deerfield Capital, L.P.



                                       32
<PAGE>

Performance Graph

         The following chart compares for the five-year period ended December
31, 2003, the cumulative total stockholder returns (assuming reinvestment of
dividends, if any) on $100 invested on December 31, 1998 in the Company's Common
Stock, the NASDAQ Stock Market (U.S. Companies) and the NASDAQ Stocks (SIC Codes
4810-4819 U.S. Companies) of Telephone Communications. The stock price
performance shown in the chart is not necessarily indicative of future price
performance.

                  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
     AMONG AQUIS COMMUNICATIONS GROUP, THE NASDAQ STOCK MARKET (U.S.) INDEX
                     AND THE NASDAQ TELECOMMUNICATIONS INDEX

                                  [LINE GRAPH}

<TABLE>
<CAPTION>
                                           ---------------------------------------------------------------------
                                                                  Cumulative Total Return
                                           ---------------------------------------------------------------------
                                             12/98       12/99      12/00      12/01       12/02       12/03
                                           ---------------------------------------------------------------------
<S>                                          <C>        <C>         <C>         <C>        <C>         <C>
----------------------------------------------------------------------------------------------------------------
        Aquis Communications Group           100.00     154.34       11.89      1.65        0.18        1.83
----------------------------------------------------------------------------------------------------------------
        NASDAQ Stock Market (U.S.)           100.00     192.96      128.98     67.61       62.17       87.61
----------------------------------------------------------------------------------------------------------------
        NASDAQ Telecommunications            100.00     246.46      111.68     70.94       47.87       84.77
----------------------------------------------------------------------------------------------------------------
</TABLE>

* $100 invested on 12/31/98 in stock or index-including reinvestment of
dividends; fiscal years ending 12/31.


Item 12. Security Ownership of Certain Beneficial Owners, Management and Related
Stockholder Matters

Equity Compensation Plan Information

<TABLE>
<CAPTION>
                                      (a)                         (b)                               (c)
                                                                                       Number of securities remaining
                           Number of securities to be    Weighted-average exercise     available for future issuance
                            issued upon exercise of        price of outstanding          under equity compensation
                              outstanding options,         options, warrants and        plans (excluding securities
Plan Category                 warrants and rights.                rights.                 reflected in column (a)
---------------------     ----------------------------  --------------------------   --------------------------------
<S>                                <C>                             <C>                           <C>
Equity compensation
plans approved by
security holders                   1,500,000                       $0.93                           none

Equity compensation
plans not approved by
security holders                   1,477,762                       $0.29                         905,000

Total                              2,977,762                       $0.62                         905,000
</TABLE>

Stock Option Plans

         The Company assumed a stock option plan in connection with its merger
with Paging Partners Corporation on March 31, 1999 (the "Plan"). Under the Plan,
options to purchase shares of Aquis common stock, intended to qualify as
incentive stock options, may be granted to employees of the Company. A total of
1,500,000 shares of Common Stock have been reserved for issuance under the Plan.
A total of 382,762 options have been issued under the Plan in excess of the
1,500,000 shares that have been reserved for issuance. These excess options have
been included in the total number of securities to be issued under equity
compensation plans not approved by security holders. Options granted under the
Plan are exercisable for terms of six months to ten years from the date of
grant.

                                       33
<PAGE>

         The Company also established the Aquis Communications Group, Inc. 2001
Stock Incentive Plan (the "2001 Plan") in November 2001. Both incentive stock
options and non-qualified stock options may be granted under the 2001 Plan,
which has not been approved by security holders. Employees, directors and
consultants are eligible for grants under the 2001 Plan. A total of 2,000,000
shares of Common Stock have been reserved for issuance under the 2001 Plan, of
which options for 1,095,000 Common Shares were issued and have not been
cancelled.

Security Ownership of Certain Beneficial Owners

         The following table sets forth information regarding beneficial
ownership of the Common Stock as of March 26, 2004, with respect to: (1) each
person known by the Company to beneficially own 5% or more of the outstanding
shares of Common Stock, (2) each of the Company's directors, (3) each of the
Company's Named Executive Officers and (4) all directors and officers as a
group. Except as noted, each person set forth below has sole voting and
investment control over the shares reported.

<TABLE>
<CAPTION>
                                                                 Shares Beneficially        Percent of Outstanding
Name and Address (1)                                                  Owned (2)                   Shares (2)
----------------------------------------------------------     ------------------------   --------------------------
<S>                                                            <C>                        <C>
FINOVA Capital Corporation                                           139,030,998                    77.32%
and Desert Communications I, LLC (3)
500 Church Street, Suite 200
Nashville, TN 37219

AMRO International, S.A. (4)                                          17,781,582                     9.9%
c/o Ultra Finance
Grossmuenster Platz 6
Zurich CH-8022, Switzerland

John B. Burtchaell, Jr.                                                  -0-                          *

Eugene I. Davis                                                          -0-                          *

Richard Gdovic                                                           -0-                          *

Thomas W. Parrish                                                        -0-                          *

David A. Sands                                                           -0-                          *

Brian M. Bobeck (5)                                                    303,500                        *

D. Brian Plunkett (6)                                                  466,762                        *

All directors and officers as a group (7 persons)                      770,262                        *
</TABLE>

-----------

         (1)      Unless otherwise indicated, the address for all persons listed
                  above is c/o Aquis Communications Group, Inc., 1719A Route 10,
                  Suite 300, Parsippany, New Jersey 07054.

         (2)      Based upon 179,611,939 shares of Common Stock outstanding at
                  March 26, 2004. The securities "beneficially owned" by an
                  individual are determined in accordance with the definition of
                  "beneficial ownership" set forth in the regulations
                  promulgated under the Exchange Act, and, accordingly, may
                  include securities owned by or for, among others, the spouse
                  and/or minor children of an individual and any other relative
                  who has the same home as such individual, as well as, other
                  securities as to which the individual has or shares voting or
                  investment power or which each person has the right to acquire
                  within 60 days through the exercise of options or otherwise.
                  Beneficial ownership may be disclaimed as to certain of the
                  securities. Any securities not outstanding which are subject
                  to options, warrants, rights or conversion privileges (such as
                  those held by FINOVA and AMRO and reflected in this table) are
                  deemed to be outstanding for the purpose of computing the
                  percentage of outstanding securities of the class owned by
                  such person but are not deemed to be outstanding for the
                  purpose of computing the percentage of the class owned by any
                  other person. Therefore, the percent of all outstanding shares
                  reflected in the table is greater than 100%.

                                       34
<PAGE>

         (3)      FINOVA and Desert filed a Schedule 13D dated August 12, 2002.
                  The beneficial ownership information presented and the
                  remainder of the information contained in this footnote is
                  based on the Schedule 13D and information provided concerning
                  a recent settlement with Deutsche Bank, a lending partner of
                  FINOVA. The ownership information includes 139,030,998 shares
                  of Common Stock that were issued upon conversion of 143,671.59
                  shares of Series A Convertible Preferred Stock, $0.01 par
                  value per share, owned by Desert and FINOVA in December 2002,
                  net of Deutsche Bank's interests acquired through that
                  settlement consisting of 4,640,592 shares. FINOVA is the sole
                  member of Desert. Does not include warrants, as adjusted to
                  reflect Deutsche Bank's interests, to purchase 185,997,996
                  shares of Common Stock which expire August 12, 2012, or
                  warrants to purchase 21,671,489 shares of Common Stock which
                  expire upon the occurrence of a Trigger Event (as defined in
                  such Warrant) and before the earlier of August 12, 2012 or the
                  repayment by the Company of its obligations under the Tranche
                  A Note (as defined in the Amended and Restated Loan Agreement
                  between FINOVA and Aquis Wireless Communications, Inc., dated
                  as of August 12, 2002) to FINOVA prior to the Trigger Event
                  (as defined in such Warrant). These warrants may not be
                  exercised to the extent that such exercise would result in
                  FINOVA's ownership of more than 79.99% of Aquis' Common Stock.

         (4)      Includes 17,781,582 shares of Common Stock issued upon
                  conversion of 17,781.582 shares of Series A Convertible
                  Preferred Stock, $0.01 par value per share, in December 2002.
                  Also includes warrants to purchase 26,560,206 shares of Common
                  Stock, which expire August 12, 2012, pursuant to the terms of
                  the Restructuring. These warrants may not be exercised to the
                  extent that such exercise would result in AMRO's ownership of
                  more than 9.9% of Aquis' Common Stock.

         (5)      Includes options to purchase 303,500 shares of Common Stock.

         (6)      Includes options to purchase 466,762 shares of Common Stock.

         (*)      Less than 1%.

Item 13. Certain Relationships and Related Party Transactions

         During 2003, the Company paid FINOVA, its primary creditor and
principal shareholder certain debt service payments totaling $1,628,000 pursuant
to the terms of the loan agreements, as amended, between the parties, and a fee
of $32,500 in connection with the modification of those agreements.

         Prior to the Restructuring, 442.22 shares of Aquis' Series A
Convertible Preferred Stock were held by CIT Group Inc. ("CIT"). CIT refused to
participate in the Restructuring and requested that their Series A Convertible
Preferred Stock be purchased. Mr. Plunkett offered to purchase such shares. On
June 27, 2002, the Company loaned Mr. Plunkett $4,000 in order to purchase CIT's
Series A Convertible Preferred Stock. Mr. Plunkett completed the subsequent
purchase of CIT's 442.22 Series A Convertible Preferred Stock in early July
2002. Upon consummation of the Restructuring, Mr. Plunkett received 8.85 shares
of Aquis' non-convertible Redeemable Preferred Stock with a face value of
$44,222. In January 2003, the Company paid Mr. Plunkett a bonus of $6,424.40,
resulting in a net payment of $4,000, which Mr. Plunkett used to repay his loan
from the Company.

                                       35
<PAGE>

         On August 12, 2002, the Company closed the Restructuring with FINOVA
and AMRO. This closing and the terms of the Restructuring were reported in the
Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 27, 2002.

         Effective on December 31, 2003, Aquis and FINOVA, the Company's primary
lender and equity holder, entered into a Second Amendment to the Second Amended
and Restated Loan Agreement, further amending the loan agreements negotiated as
part of the Restructuring, as subsequently amended. The effect of this most
recent amendment was to provide to FINOVA quarterly payments of debt service in
amounts that may exceed those previously required, and to eliminate all prior
financial covenants. The maturity dates of the related notes remained unchanged.
The quarterly payment is to be determined based on the Company's cash balances
in excess of $350,000, and is due on the first day of each calendar quarter. The
initial payment in connection with these modifications was made in December 2003
in the amount of $754,000. Aquis paid approximately $105,000 to FINOVA in April
2004 based on its cash position as of March 31, 2004.

Item 14. Principal Accountant Fees and Services

Audit Fees

         Aquis was billed a total of $60,385 of progress billings by Wiss &
Company, LLP ("Wiss") for services rendered in connection with the audit of the
financial statements of Aquis Communications Group, Inc. and its consolidated
subsidiaries for the year ended December 31, 2003 and $36,238 for the reviews of
the interim financial statements. The total cost of the audit of the 2003
financial statements is not expected to exceed $95,000. The Company was billed a
total of $86,966 by Wiss for services rendered in connection with the audit of
the financial statements of Aquis Communications Group, Inc. and its
consolidated subsidiaries for the year ended December 31, 2002 and $35,318 for
the reviews of the interim financial statements.

All Other Fees

         There were no fees billed by Wiss in connection with assurance and
related services, tax planning, tax advice or compliance services, or financial
information systems design and implementation during either the year ended
December 31, 2003 or 2002. There were no fees billed by Wiss for any other
services during either of those periods.

         Beginning in fiscal year 2003, all audit and non-audit services
provided by Wiss & Company, LLP were required to be pre-approved by the audit
committee. Non-audit services specified in Section 10A(g) of the Securities
Exchange Act of 1934, should the Company require these, may not be provided by
Wiss. All of the audit services provided by Wiss during fiscal year 2003 and in
connection with the audit as of and for the period ended December 31, 2003 were
authorized and approved by the audit committee in compliance with these
pre-approval policies and procedures. The audit services provided by Wiss
during, as of and for the year ended December 31, 2002 were authorized and
approved by the audit committee in compliance with the Company's then existing
audit committee charter, which did not require pre-approval of such services.


                                       36
<PAGE>

                                     Part IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

         A. FINANCIAL STATEMENTS

         See page F-1.

         B. FINANCIAL STATEMENT SCHEDULES

All schedules have been omitted since they are either not applicable or not
required, or because the information required is included in the financial
statements and notes thereto.

         C. EXHIBITS

         The following documents are filed as part of this report:

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

3.1               Certificate of Amendment to Restated Certificate of
                  Incorporation of the Registrant (incorporated by reference to
                  Aquis' Proxy Statement dated March 11, 1999).
3.2               Bylaws of the Registrant (incorporated by reference to Aquis'
                  Registration Statement on Form SB-2, Registration No.
                  33-76744).
3.3               Certificate of Amendment of the Amended and Restated
                  Certificate of Incorporation of Aquis Communications Group,
                  Inc. dated as of December 11, 2002 (incorporated by reference
                  to Aquis' Annual Report on Form 10K for the year ended
                  December 31, 2002 filed with the Commission as Exhibit 3.3).
4.1               Form of Common Stock Certificate (incorporated by reference to
                  Aquis' Registration Statement on Form SB-2, Registration No.
                  33-76744).
4.2               Form of Warrant Certificate (incorporated by reference to
                  Aquis' Registration Statement on Form SB-2, Registration No.
                  33-76744).
4.3               Certificate of Designation, Preferences and Rights of 7 1/2%
                  Redeemable Preferred Stock of Aquis Communications Group, Inc.
                  (incorporated by reference to Aquis' Current Report on Form
                  8-K dated February 15, 2000).
4.4               Form of Series A Common Stock Purchase Warrant of Aquis
                  Communications Group, Inc. issued to Desert Communications I,
                  LLC 2002 (incorporated by reference to Aquis' Annual Report on
                  Form 10K for the year ended December 31, 2002 filed with the
                  Commission as Exhibit 4.4).
4.5               Form of Series B Common Stock Purchase Warrant of Aquis
                  Communications Group, Inc. issued to Desert Communications I,
                  LLC 2002 (incorporated by reference to Aquis' Annual Report on
                  Form 10K for the year ended December 31, 2002 filed with the
                  Commission as Exhibit 4.5).
4.6               Form of Common Stock Purchase Warrant of Aquis Communications
                  Group, Inc. issued to AMRO International, S.A. 2002
                  (incorporated by reference to Aquis' Annual Report on Form 10K
                  for the year ended December 31, 2002 filed with the Commission
                  as Exhibit 4.6).
4.7               Certificate of Designation, Preferences and Rights of Series A
                  Convertible Preferred Stock and Series B Redeemable Preferred
                  Stock of Aquis Communications Group, Inc. dated August 6, 2002
                  2002 (incorporated by reference to Aquis' Annual Report on
                  Form 10K for the year ended December 31, 2002 filed with the
                  Commission as Exhibit 4.7).
10.1              Amended and Restated 1994 Incentive Stock Option Plan, as
                  amended (incorporated by reference to Aquis' Annual Report on
                  Form 10-K for the year ended December 31, 1999, as amended,
                  filed with the Commission as Exhibit 10.9).
10.2              Reseller Agreement dated as of February 10, 1997 between Bell
                  Atlantic Wireless messaging, Inc. and Metrocall, Inc.
                  (incorporated by reference to Aquis' Annual Report on Form
                  10-K for the year ended December 31, 2001, filed with the
                  Commission as Exhibit 10.36).


                                       37
<PAGE>

10.3              Reseller Agreement dated as of March 19, 1997 between Bell
                  Atlantic Wireless messaging, Inc. and Destineer Corporation
                  (incorporated by reference to Aquis' Annual Report on Form
                  10-K for the year ended December 31, 2001, filed with the
                  Commission as Exhibit 10.37).
10.4              Aquis Communications Group, Inc. 2001 Stock Incentive Plan
                  adopted by resolution of the Board on November 21, 2001
                  (incorporated by reference to Aquis' Annual Report on Form
                  10-K for the year ended December 31, 2001, filed with the
                  Commission as Exhibit 10.66).
10.5              Second Amendment to Asset Purchase Agreement By and Between
                  Alert Communications, LLC and Aquis Wireless Communications,
                  Inc. dated January 16, 2002 (incorporated by reference to
                  Aquis' Annual Report on Form 10-K for the year ended December
                  31, 2001, filed with the Commission as Exhibit 10.68).
10.6              Restructuring Agreement by and among Aquis, Desert
                  Communications I, LLC and FINOVA dated July 1, 2002
                  (incorporated by reference to Aquis' Form 8-K, dated July 16,
                  2002, filed with the Commission as Exhibit 10.71).
10.7              Second Amended and Restated Loan Agreement between Aquis
                  Wireless Communications, Inc. and FINOVA (incorporated by
                  reference to Aquis' Form 8-K, dated August 12, 2002, filed
                  with the Commission as Exhibit 10.2).
10.8              Form of Preferred Share Exchange Agreement by and among Aquis
                  and each holder of Aquis' 7.5% Redeemable Preferred Stock
                  (incorporated by reference to Aquis' Form 8-K, dated July 16,
                  2002, filed with the Commission as Exhibit 10.73).
10.9              Securities Exchange Agreement dated as of July 1, 2002 by and
                  between Aquis and AMRO (incorporated by reference to Aquis'
                  Form 8-K, dated July 16, 2002, filed with the Commission as
                  Exhibit 10.74).
10.10             Second Amended and Restated Loan Agreement dated as of August
                  12, 2002 between Aquis Wireless Communications, Inc. and
                  FINOVA Capital Corporation (incorporated by reference to
                  Aquis' Form 8-K, dated August 12, 2002 filed with the
                  Commission as Exhibit 10.2).
10.11             First Amendment to Second Amended and Restated Loan Agreement
                  effective March 29, 2003 between Aquis Wireless
                  Communications, Inc. and FINOVA Capital Corporation
                  (incorporated by reference to Aquis' Quarterly Report on Form
                  10-Q for the quarterly period ended March 31, 2003 filed with
                  the Commission as Exhibit 10.17).
10.12             Second Amendment to Second Amended and Restated Loan Agreement
                  effective as of December 31, 2003 by and among Aquis
                  Communications Group, Inc. and FINOVA Capital Corporation
                  (filed herewith).
21.1              Subsidiaries of Registrant (incorporated by reference to
                  Aquis' Registration Statement on Form S-1, Amendment No. 2,
                  filed with the Commission on August 24, 2001 as Exhibit 21.1
                  (Commission File number 333-46892)).
23.1              Consent of Wiss & Co, LLP dated March 25, 2004 (filed
                  herewith).
31.1              Certification pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002 - Chief Executive Officer (filed herewith).
31.2              Certification pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002 - Chief Financial Officer (filed herewith).
32.1              Certification pursuant to 18 U.S.C. Section 1350 as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
                  Chief Executive Officer (filed herewith).
32.2              Certification pursuant to 18 U.S.C. Section 1350 as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
                  Chief Executive Officer (filed herewith).



D. REPORTS ON FORM 8-K

                  None


                                       38
<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: April 12, 2004

                            AQUIS COMMUNICATIONS GROUP, INC.
                            (Registrant)

                            By: /s/ D. Brian Plunkett
                            --------------------------
                            D. Brian Plunkett, Vice President
                            and Chief Financial Officer


         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.


<TABLE>
<CAPTION>
Name                               Title                                       Date
----                               -----                                       ----
<S>                                <C>                                        <C>
/s/ Brian M. Bobeck
---------------------------
  Brian M. Bobeck                  Chief Executive Officer, Director           April 12, 2004

/s/ D. Brian Plunkett
---------------------------
  D. Brian Plunkett                Chief Financial Officer, Vice President     April 12, 2004

/s/ John B. Burtchaell, Jr.
---------------------------
  John B. Burtchaell, Jr.          Director                                    April 12, 2004

/s/ Eugene I. Davis
---------------------------
  Eugene I. Davis                  Director                                    April 12, 2004

/s/ Richard Gdovic
---------------------------
  Richard Gdovic                   Director                                    April 12, 2004

/s/ Thomas W. Parrish
---------------------------
  Thomas W. Parrish                Director                                    April 12, 2004

/s/ David A. Sands
---------------------------
  David A. Sands                   Director                                    April 12, 2004
</TABLE>



                                       39
<PAGE>




INDEX TO FINANCIAL STATEMENTS
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES


<TABLE>
<S>                                                                                                                             <C>
Report of Independent Accountants...........................................................................................     F-2
Consolidated Balance Sheets at December 31, 2003 and 2002...................................................................     F-3
Consolidated Statements of Operations for the three years ended December 31, 2003, 2002 and 2001............................     F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001.............     F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 2003,  2002 and  2001..........................     F-6
Notes to Consolidated Financial Statements..................................................................................     F-7
</TABLE>















                                       F-1

<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Audit Committee of Aquis Communications Group, Inc:

         We have audited the accompanying consolidated balance sheets of Aquis
Communications Group, Inc. and Subsidiaries as of December 31, 2003 and 2002 and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2003. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Aquis Communications Group, Inc. and Subsidiaries as of December 31, 2003 and
2002, and the consolidated results of their operations and their consolidated
cash flows for each of the three years in the period ended December 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America.

         As discussed in note 2 to the financial statements, the Company changed
its method of accounting for its outstanding redeemable preferred stock during
the year ended December 31, 2003 as required by the provisions of Statement of
Financial Accounting Standards number 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity".

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company incurred substantial losses from operations
during each of the three years in the period ended December 31, 2003 and had a
working capital deficiency of $1,050,000 as of December 31, 2003. The Company's
historical losses and illiquid financial position raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.



/s/ Wiss & Company LLP

Livingston, New Jersey
March 25, 2004


                                       F-2


<PAGE>




AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                                 ------------
                                                                                              2003          2002
                                                                                              ----          ----
<S>                                                                                       <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents..............................................................         $671        $1,259
  Accounts receivable (net of allowances of $266 and $686, respectively).................          271           610
  Inventory, net.........................................................................          355           356
  Prepaid expenses and other current assets..............................................          247           196
                                                                                          ------------- -------------
      Total current assets...............................................................        1,544         2,421
Property and equipment, net..............................................................        2,238         3,392
Intangible assets, net...................................................................            _         1,759
Deferred charges and other assets........................................................            _            55
                                                                                          ------------- -------------
        Total assets.....................................................................       $3,782        $7,627
                                                                                          ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long term debt...................................................        $ 133         $ 912
  Notes payable..........................................................................          565             _
  Accounts payable and accrued expenses..................................................        1,421         1,811
  Deferred revenue.......................................................................          302           331
  Customer deposits......................................................................          173           211
                                                                                          ------------- -------------
      Total current liabilities..........................................................        2,594         3,265

Long term debt...........................................................................       12,309        13,708

Series B Redeemable 10% Preferred Stock, $0.01 par value, 301 shares authorized, 300.01
  shares issued and outstanding at December 31, 2003 and 2002............................          540           540
                                                                                          ------------- -------------
Total liabilities........................................................................       15,443        17,513
                                                                                          ------------- -------------

Commitments and contingencies

Stockholders' equity:
  Series A Convertible Preferred Stock, $0.01 par value, 200,000 shares authorized,
  none issued and outstanding at December 31, 2003 and 2002..............................            _             _
  Common stock, $0.01 par value, 451,000,000 shares authorized, 179,611,939 issued and
  outstanding at December 31, 2003 and 2002..............................................          184           184
  Additional paid-in capital.............................................................       17,883        17,883
  Accumulated deficit....................................................................     (29,728)      (27,953)
                                                                                          ------------- -------------
  Total stockholders' equity.............................................................     (11,661)       (9,886)
                                                                                          ------------- -------------
          Total liabilities and stockholders' equity.....................................       $3,782        $7,627
                                                                                          ============= =============
</TABLE>


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

                                       F-3

<PAGE>



AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                       2003             2002             2001
                                                                                       ----             ----             ----
<S>                                                                               <C>               <C>              <C>
Revenues:
  Wireless messaging services, rent and maintenance............................           $11,197         $13,602          $18,416
  Equipment sales..............................................................               434             270              447
                                                                                  ----------------  --------------   --------------
       Total revenues..........................................................            11,631          13,872           18,863
                                                                                  ----------------  --------------   --------------
Operating expenses:
  Cost of wireless messaging services exclusive of depreciation................             5,084           6,238            8,164
  Cost of equipment sold exclusive of depreciation.............................               203             108              448
  Selling and marketing........................................................             1,640           1,526            1,924
  General and administrative...................................................             3,471           3,685            5,136
  Depreciation and amortization................................................             1,720           2,424            6,889
  Provision for doubtful accounts..............................................              (58)             832              883
  Provision for asset impairment...............................................             1,520               _            4,569
  Recovery of communications and facilities costs..............................             (173)           (237)            (765)
                                                                                  ----------------  --------------   --------------
       Total operating expenses................................................            13,407          14,576           27,248
                                                                                  ----------------  --------------   --------------
Operating loss ................................................................           (1,776)           (704)          (8,385)

Interest expense, net..........................................................              (27)         (2,488)          (3,909)
Gain(loss) on disposal of assets...............................................                28            (82)              457
                                                                                  ----------------  --------------   --------------
Loss before provision for income taxes and extraordinary item..................           (1,775)         (3,274)         (11,837)
Provision for income taxes ....................................................                 _               _                _
                                                                                  ----------------  --------------   --------------
Loss before extraordinary item.................................................           (1,775)         (3,274)         (11,837)
Extraordinary item: gain on troubled debt restructuring........................                 _          22,071                _
                                                                                  ----------------  --------------   --------------
NET INCOME(LOSS)...............................................................           (1,775)          18,797         (11,837)
Preferred stock dividends......................................................                 _            (69)            (113)
                                                                                  ----------------  --------------   --------------
Income(loss) attributable to common stockholders                                         $(1,775)         $18,728        $(11,950)
                                                                                  ================  ==============   ==============

NET INCOME(LOSS) PER COMMON SHARE, basic and diluted:
  Loss before extraordinary item...............................................           $(0.01)         $(0.12)          $(0.66)
  Extraordinary item...........................................................                 _           $0.82                _
  Attributed to common stockholders............................................           $(0.01)           $0.69          $(0.66)



Weighted average common shares outstanding.....................................       179,611,939      27,005,516       18,014,608
</TABLE>


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


                                       F-4

<PAGE>



AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                                Additional Accumulated      Notes         Total
                                                                                  Paid-in    Deficit     Receivable-  Stockholders'
                                             Common Stock      Preferred Stock   Capital   -----------   Stockholder     Equity
                                             ------------      ---------------   -------                 -----------     ------
                                          Shares     Amounts   Shares  Amounts
                                          ------     -------   ------  -------
<S>                                     <C>          <C>       <C>     <C>       <C>          <C>        <C>            <C>
Balance at December 31, 2000            17,611,030    $176         -         -   $18,211      $(34,913)      $(50)        $(16,576)
  Shares issued in connection with
  third party professional services
  rendered........................          36,000       -         -         -         5             -          -                5
Value ascribed to the issuance of
  shares for purchase of wireless
  messaging assets from Suburban..         645,071       6         -         -        (6)            -          -                -
Dividends accrued on 7.5% Redeemable
  Preferred Stock.................               -       -         -         -      (113)            -          -             (113)
Costs incurred in connection with
  registration of common stock..                 -       -         -         -      (160)            -          -             (160)
Shares and note retired in connection
  with settlement with former
  President.......................        (133,334)      -         -         -         -             -         50               50
Net loss..........................               -       -         -         -         -       (11,837)         -          (11,837)

                                       ---------------------------------------------------------------------------------------------
Balance at December 31, 2001            18,158,767     182         _         _    17,937       (46,750)         _          (28,631)
Dividends accrued on 7.5% Redeemable
  Preferred Stock.................               _       _         _         _       (69)            _          _              (69)
Costs incurred in connection with
  registration of common stock..                 _       _         _         _      (164)            _          _             (164)
Value ascribed to the issuance of
  preferred shares in connection with
  restructuring...................               _       _   161,453         2       179             _          _              181
Conversion of preferred shares into
  common stock..................       161,453,172       2  (161,453)       (2)        _             -          _                -
Net income........................               _       _         _         _         _        18,797          _           18,797
                                       ---------------------------------------------------------------------------------------------
Balance at December 31, 2002           179,611,939     184         -         -    17,883       (27,953)         -           (9,886)
Net loss..........................               -       -         -         -         -        (1,775)         -           (1,775)
                                       ---------------------------------------------------------------------------------------------
Balance at December 31, 2003           179,611,939    $184         -      $  -   $17,883      $(29,728)       $ -         $(11,661)
                                       -----------    ----                 ---   -------      ---------       ----        ---------
</TABLE>


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

                                       F-5


<PAGE>



AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                             Years Ended December 31,
                                                                                        ---------------------------------
                                                                                        2003          2002           2001
                                                                                        ----          ----           ----
<S>                                                                                    <C>             <C>          <C>
Cash flows from operating activities:
  Net income(loss)..............................................................       $(1,775)        $18,797      $(11,837)
  Adjustments to reconcile net income(loss) to net cash (used by)/provided by
  operating activities:
  Extraordinary gain on troubled debt restructuring.............................              _       (22,071)              _
  Provision for asset impairment................................................          1,520              _          4,569
  Depreciation and amortization.................................................          1,719          2,424          6,889
  Inventory valuation allowance.................................................           (77)            136              _
  Capitalized interest on note payable..........................................             30              _              _
  Senior loan costs and amortization of deferred financing costs................              _              _            425
  Stock-based compensation......................................................              _              _              6
  Reduction of note due from stockholder........................................              _              _             50
  Provision for doubtful accounts...............................................           (58)            832            883
  (Gain)loss on disposal of assets..............................................           (28)             82          (457)
  Changes in assets and liabilities, net of business acquisitions:
     Accounts receivable........................................................            397            616          1,121
     Inventory..................................................................          (478)        (1,020)        (1,109)
     Prepaid expenses and other current assets..................................              4             77          (219)
     Accounts payable and accrued expenses......................................          (390)          1,247            866
     Deferred revenues and customer deposits....................................           (67)          (206)          (384)
                                                                                     -----------   ------------   ------------
  Net cash (used by) provided by operating activities...........................            797            914            803
                                                                                     -----------   ------------   ------------
Cash flows from investing activities:
  Acquisition of property, equipment and licenses...............................          (118)          (556)          (537)
  Sale of property and equipment................................................            403          1,278            928
                                                                                     -----------   ------------   ------------
  Net cash used by investing activities.........................................            285            722            391
                                                                                     -----------   ------------   ------------
Cash flows from financing activities:
  Repayment of long term debt...................................................        (1,640)            (6)          (182)
  Repayment of capital lease obligation.........................................           (30)           (24)           (18)
  Deferred financing costs......................................................              _        (1,267)          (127)
  Common stock registration costs...............................................              _          (164)          (161)
                                                                                     -----------   ------------   ------------
  Net cash provided by financing activities.....................................        (1,670)        (1,461)          (488)
                                                                                     -----------   ------------   ------------
Net increase (decrease) in cash and cash equivalents............................          (588)            175            706
Cash and cash equivalents - beginning of year...................................          1,259          1,084            378
                                                                                     -----------   ------------   ------------
Cash and cash equivalents - end of year.........................................           $671         $1,259         $1,084
                                                                                     ===========   ============   ============
</TABLE>


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

                                      F-6


<PAGE>



AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS:

         Aquis Communications Group, Inc. ("Aquis" or the "Company") is a
holding company, incorporated in the State of Delaware. Through its operating
companies, Aquis provides traditional one-way wireless alpha and numeric
messaging services in portions of nine states in the Northeast and Mid-Atlantic
regions of the United States, from Boston to Virginia, as well as the District
of Columbia. The Company also resells nationwide and regional messaging
services, offers alpha dispatch, news and other messaging enhancements. Its
customers include businesses, government agencies, hospitals, individuals and
resellers.

         The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries, and reflect, for all periods presented, the
purchase of the net assets of Bell Atlantic Wireless messaging, Inc. ("BAPCO"),
the subsequent merger with Paging Partners Corporation ("Paging Partners"), the
purchases of the wireless messaging assets of Suburban Wireless Paging, the
acquisition of SunStar Communications, Inc., an internet services provider and
later sale of these assets, and the purchase of wireless messaging assets of
SourceOne Wireless. The results of operating the SourceOne Wireless assets are
reflected in the accompanying financial statements from their dates of
acquisition through their dates of disposition in January 2002 when remaining
escrowed proceeds were released upon settlement of all remaining contingencies.
These acquisitions have been accounted for under the purchase method of
accounting. All material intercompany accounts and transactions have been
eliminated in consolidation.

         On August 12, 2002, after receiving FCC approval, agreements took
effect resulting in the restructuring of Aquis' debt and equity and a change in
control of the Company. These agreements were the culmination of negotiations
necessitated by defaults under Aquis' loan agreements. Accordingly, FINOVA
Capital Corporation, a senior secured lender, acquired control of Aquis through
the issuance of convertible preferred stock and warrants to them as part of this
restructuring transaction. In addition, AMRO International, S.A., an unsecured
lender, acquired a non-controlling equity interest, and holders of Aquis' 7.5%
Redeemable Preferred Stock exchanged those shares for shares of Aquis' Series B
10% Redeemable Preferred Stock. FINOVA and AMRO also received notes in the
combined face amount of $10 million. In exchange, all previously existing Aquis
obligations to these parties, including accrued interest and dividends, were
cancelled, resulting in the recognition during 2002 of an extraordinary gain on
this troubled debt restructuring of $22,071,000. The debt agreement with FINOVA
was again modified effective on December 31, 2003, as discussed subsequently in
these notes.

         Aquis' consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. However, Aquis incurred losses
before extraordinary items of $1,775,000, $3,274,000, and $11,837,000 million,
respectively, during the years ended December 31, 2003, 2002 and 2001. The
Company's common stock was de-listed from the NASDAQ SmallCap Market and began
trading on the OTC Bulletin Board under the symbol AQIS.OB late in the year
ended December 31, 2000. The effect of the change in trading markets caused or
contributed to the reduction in trading volume and liquidity of Aquis shares.
This, coupled with the Company's history of losses and continuing working
capital deficits, diminished the ability to raise additional funding through
debt or equity offerings, impaired Aquis' liquidity, resulted in the technical
and functional termination of the right or ability of Aquis to obtain funding
under its Common Stock Purchase Agreement with Coxton, and led to the Company's
past defaults under the loan agreements with FINOVA and AMRO. With these
characteristics, it is not presently expected that additional significant third
party funding will be available in the foreseeable future.

         Aquis operates in a highly competitive wireless messaging marketplace
in which at least three of the industry's largest wireless messaging operators
have sought bankruptcy protection as a result of a shrinking market and intense
price competition. The size of the wireless messaging industry continues to
decline, and some of Aquis' primary competitors have effected business
combinations to realize economies of scale and other business synergies to gain
or maintain competitive advantages. Aquis can provide no assurance that its
ability to effectively gain market share in a declining wireless messaging
marketplace at sufficiently profitable margins, its ability to generate
sufficient cash from operations to meet operating obligations in a timely
manner, its ability to ensure continuing supplies of goods and services from key
vendors, or its ongoing ability to limit or reduce operating costs and capital
requirements will be adequate to ensure an ability to continue as a going
concern. In the event that cash flow needs cannot be met or that future defaults
under any of its key operating agreements, if any, cannot be cured, or if any of
its outstanding debt cannot be satisfied when due, the Company would consider
appropriate responses, which could include filing a request for legal protection
from its creditors.


<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


Revenue Recognition

         Wireless messaging service revenues include airtime for messaging
services, rental fees for leased wireless messaging equipment, and various other
fees for such enhanced features as alpha dispatch services, loss protection,
equipment maintenance, and voice mail. These revenues are recognized as the
services are performed, or ratably over time in the case of fees that may be
billed quarterly, semi-annually or annually in advance. Revenues related to
pre-billed services are deferred until the service is provided and thereby
earned. Equipment revenue is recognized when the equipment is delivered to the
customer. In December 1999 the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements, amended in March 2000, which provides guidance on the application of
generally accepted accounting principles to revenue recognition in financial
statements. This Bulletin requires that revenue is recognized only when
persuasive evidence of an arrangement exists, when delivery of merchandise has
occurred or services have been rendered, the fee is established and is
determinable and collectibility is reasonably assured. Aquis adopted SAB 101 in
the second quarter of 2000 and that adoption had no significant effect on its
consolidated results of operations or its financial position.

Use of Estimates

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

Cash and Cash Equivalents

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

Inventory

         Inventory consists primarily of messaging devices held for sale or
lease. Inventories are stated at the lower of cost or market, with cost
determined on a first-in, first-out basis. Inventory valuation reserves of
approximately $59,000 and $135,000 were recorded at December 31, 2003 and 2002,
respectively, to reflect management's estimate of the market value attributable
to units on hand at that date.

Property and Equipment

         Property and equipment is stated at cost, net of depreciation and
amortization, and includes the Company's rental messaging devices,
communications network assets, data processing equipment, office furniture and
equipment, and leasehold improvements. The property and equipment acquired
through merger or business combination is recorded at estimated fair value at
the time of the transaction. These assets are depreciated over their estimated
useful lives using the straight-line method. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the term of the
related lease. Costs to repair or maintain assets without adding to their lives
or improving their value are expensed as incurred. Upon the sale or other
disposal of property or equipment, the cost and related accumulated depreciation
or amortization is eliminated from the accounts and any related gain or loss is
reflected in the Company's results of operations.

         Aquis presents depreciation and amortization expenses as a separate
charge in its Statement of Operations. During the years ended December 31, 2003,
2002 and 2001 respectively, depreciation expenses totaling $1,189, $1,549 and
$3,614 relating to communications infrastructure and leased messaging devices
were so included, declining as Midwest assets were sold and as certain
infrastructure equipment acquired from Bell Atlantic Wireless messaging in 1998
became fully depreciated during 2002.

Deferred Charges

         Certain costs directly related to pending business acquisitions are
deferred until the acquisition is completed or abandoned. If completed, such
costs are considered part of the cost to acquire the business. Costs associated
with abandoned acquisition efforts are written off. Costs and fees related to
financing activities were amortized over the term of the related loan. Costs
associated with the financial restructuring totaling $1,394 were charged against
the gain recognized as the result of this transaction in August 2002.

Capitalized Software

         The cost to acquire computer software used in the Company's operations
is capitalized and amortized over three years. Accumulated amortization totaled
$459 and $306 at December 31, 2002 and 2001, respectively. The remaining net
book value of these intangible assets at December 31, 2003 of $55 was written
off in connection with the provision for asset impairment required under SFAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets".

<PAGE>

Income Taxes

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

Fair Value of Financial Instruments

         The Company's financial instruments include cash and cash equivalents,
accounts and notes receivable and payable. The fair value of these instruments
approximate their carrying values due to their short-term nature.

Concentration of Risk

         The Company utilizes two providers of nationwide wireless messaging
services to fulfill the majority of its requirements for this service. Although
there are a limited number of other nationwide carriers, management believes
that other carriers could provide similar services under comparable terms.
However, a change in vendor or carrier could cause a delay in service
provisioning or a possible loss of revenue, which could adversely affect
operating results. Finally, combined revenues from Aquis' two largest customers
approximated 9.8% of the Company's total revenues for 2003.

         The Company maintains its cash and cash equivalents in one commercial
bank and one money market fund that invests primarily in high quality money
market instruments, including securities issued by the U.S. government. From
time to time, such balances may exceed FDIC-insured limits.

Advertising Costs

         Costs associated with advertising in telephone or other directories and
other costs for such items as direct mail ads or promotional items are expensed
when the ad is first published and circulated or when the expense is incurred
for the direct mailing or promotional item. Total advertising expenses totaled
$78, $8 and $4 in 2003, 2002 and 2001 respectively.

Long-Lived Assets

         Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows is less
than the carrying amount of the asset, a loss is recognized for the difference
between the estimated fair value and the carrying value of the asset. During the
years ended December 31, 2003 and 2001, Aquis recorded provisions for the
impairment of the value of certain tangible and intangible assets. See note 5
for further discussion.

         In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" ("SFAS 141"), and SFAS 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001
and prohibits use of the pooling of interests method for such transactions. SFAS
142 requires that goodwill and intangible assets with indefinite lives,
including those recorded in past business combinations, no longer be amortized
against earnings, but should instead be tested annually for impairment.
Continued amortization is required for intangibles with finite lives, as is
review for impairment in accordance with SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." Implementation of SFAS 142 was
required on January 1, 2002. Since the Company has no recorded goodwill or other
assets with indefinite lives, there is no impact on its consolidated financial
position or results of operations as the result of adoption of this standard.

         In October 2001, SFAS 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" was issued by the Financial Accounting Standards Board.
SFAS 144 establishes a single accounting model for the impairment or disposal of
long-lived assets, including discontinued operations. SFAS 144 superceded SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for Long-lived
Assets to Be Disposed Of". It also superceded APB Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". The provisions of SFAS 144 became effective for fiscal years
beginning after December 15, 2001. The adoption of this Standard did not have a
material impact on Aquis' consolidated results of operations or financial
position.

Stock-Based Compensation

         The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations in
accounting for its stock plans. Accordingly, no compensation expense has been
recognized under its stock-based compensation plans. Equity securities issued to
non-employees are accounted for at fair market value. Further, the Company has
adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation."
<PAGE>

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation- Transition and Disclosure", amending SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation and amends prior disclosure guidance. SFAS 148
also requires prominent disclosures in both annual and interim financial
statements about the method of accounting for such compensation and the effects
of the method used on reported results. The provisions of SFAS 148 are generally
effective for fiscal years ending after December 15, 2002. No such employee
compensation was issued during 2003 or 2002 and Aquis intends to implement these
provisions prospectively, if and when applicable.

Earnings per Share

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

Recent Accounting Pronouncements

         In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" and in April 2003 this Standards Board issued
SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities". Neither pronouncement is expected to have a material effect on the
Company's financial position, results of operations or cash flows due to
limited, if any, applicability.

         In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity". SFAS 150 applies to financial
instruments previously treated as part of shareholders' or mezzanine equity and
requires that instruments providing for mandatory redemption under specified
terms must be reclassified and presented as a liability. SFAS 150 also requires
that dividends paid pursuant to the terms of such instruments be treated as a
component of interest expense. Aquis has elected to an early adoption of this
principle and has presented its Series B Redeemable 10% Preferred Stock as a
component of its total liabilities. Aquis has paid no dividends on this issue,
and is not required to do so until certain of its other debts are fully
satisfied, and accordingly there is no effect, current or cumulative, on the
reported results of operations.

Reclassifications

         Certain amounts reported in prior years have been reclassified to
conform to the current year's presentation, including the characterization of
Aquis' Series B Redeemable 10% Preferred Stock as a component of total
liabilities.


3. MERGERS, ACQUISITIONS AND DISPOSITIONS:

SourceOne Wireless:

         On January 31, 2000, the Company completed the acquisition of certain
assets of SourceOne Wireless, a facilities-based provider of one-way wireless
messaging services to subscribers in several Midwestern states. The aggregate
purchase price, including transaction costs, totaled approximately $4,500, and
this purchase was accounted for under the purchase method of accounting. As part
of Aquis' business plan developed to address its lack of liquidity and the
requirements of its lenders, on August 31, 2001 Aquis contracted to sell these
Midwestern wireless messaging assets and executed an Asset Purchase Agreement
that provided a purchase price of $1.1 million in cash. Also effective on that
date the parties executed an Agreement Pending Purchase Consummation under which
the buyer, on the closing date, assumed operational management of the business
while Aquis continued to maintain the licensed communications facilities. A
related Escrow Agreement was funded on October 18, 2001. The FCC authorized
release from escrow of the proceeds in January 2002. FINOVA released the liens
it held on these assets and the proceeds were used in accordance with Aquis'
business plan.

         Aquis currently evaluates the recoverability of the carrying value of
its long-lived real and intangible assets based on related estimated
undiscounted cash flows, pursuant to Statement of Financial Accounting Standards
No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" and
previously pursuant to SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-lived Assets to Be Disposed Of". In connection with this
sale of assets, Aquis wrote down the related net assets by $2,271 during the
year ended December 31, 2001 to their estimated realizable value of $1,010, net
of transaction costs. During the year ended December 31, 2001, results of
operations of these assets included revenues of about $1,171, a net loss in 2001
(before asset impairment charges) of $550 net of depreciation and amortization
charges of approximately $610.

<PAGE>

4. PROPERTY AND EQUIPMENT:

         As of December 31, 2003 and 2002, property and equipment consists of
the following:

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                             ------------
                                                                                          2003         2002
                                                                                          ----         ----

<S>                      <C>                                                              <C>         <C>
Rental messaging devices (3 years).................................................       $10,318     $10,571
Wireless network equipment (7 years)...............................................         6,920       7,232
Data processing equipment (2-5 years)..............................................         1,144       1,133
Furniture, fixtures and office equipment (5 years).................................           331         327
Leasehold improvements (various)...................................................           439         439
Other..............................................................................            99          75
                                                                                     -------------  ----------
                                                                                           19,251      19,777
Less accumulated depreciation......................................................        17,013      16,385
                                                                                     -------------  ----------
                                                                                           $2,238      $3,392
                                                                                     =============  ==========
</TABLE>


<PAGE>


5. INTANGIBLE ASSETS:

         Intangible assets consist of the following as of December 31, 2003 and
2002:

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                            ------------
                                                                                         2003          2002
                                                                                         ----          ----
<S>                                                                                  <C>            <C>
FCC licenses and State certificates (10 years).....................................          $  _       $2,058
Customer lists (3 years)...........................................................             _        6,252
                                                                                     -------------  -----------
                                                                                                _        8,310
Less accumulated amortization......................................................             _        6,551
                                                                                     -------------  -----------
                                                                                             $  _       $1,759
                                                                                     =============  ===========
</TABLE>

         Aquis reviews its assets for impairment when events or changes in
circumstances indicate that such costs may not be recoverable in the normal
course of business. Accordingly, as a result of the Company's ongoing losses,
its forecast for continuing losses, and its default under its loan agreements as
described in more detail elsewhere herein, Aquis recognized charges for
impairment of the carrying value of its FCC licenses and State certificates in
the amount of $1,465 and $2,298 at December 31, 2003 and 2001, respectively, in
order to adjust their carrying value to their expected realizable values. The
amount of these impairments was based on the excess of the net book value of
those intangible assets over the amount of the estimated annual cash flows
during their estimated remaining useful lives discounted to net present value
using discount rates of 18% and 20%, respectively.


6.  DEFERRED CHARGES:

         At December 31, 2003 and 2002, deferred charges consisted of the
following:

<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                                  ------------
                                                                                                 2003      2002
                                                                                                 ----      ----
<S>                                                                                              <C>       <C>
Deferred financing costs................................................................         $  _      $  _
Unamortized software and other costs....................................................            _        55
                                                                                                 ----       ---
                                                                                                 $  _       $55
                                                                                                 ====       ===
</TABLE>

         Deferred financing costs of $1,267 and $127 were capitalized during the
years ended December 31, 2002 and 2001, respectively, in connection with
investment banking services rendered in the Company's financial restructuring
that was effected on August 12, 2002. Upon completion, total financing costs of
$1,394 were charged against the gain that was recognized as the result of this
transaction.


7. COMMITMENTS AND CONTINGENCIES:

         The Company leases facilities and equipment used in its operations.
Many lease agreements include renewal options with Consumer Price Index related
rent escalations. At December 31, 2002, the aggregate future minimum rental
commitments under non-cancelable operating leases were as follows:

<TABLE>
<CAPTION>
Years
-----
<C>                                                                                                     <C>
2004............................................................................................       $1,826
2005............................................................................................        1,446
2006............................................................................................          904
2007............................................................................................          496
2008............................................................................................          456
Thereafter......................................................................................           24
                                                                                                       -------
                                                                                                       $5,152
                                                                                                       ======
</TABLE>

         Rent expense was $2,377, $2,487 and $3,069 for 2003, 2002 and 2001,
respectively.

         Various legal proceedings, claims and investigations related to
services, contracts and other matters involving the Company are discussed below:
<PAGE>

Fone Zone Communication Corp

         In April 2002, Aquis settled its dispute with Fone Zone Communication
Corp. ("Fone") with a payment of $32. On February 18, 2000, Fone filed a lawsuit
in the Supreme Court of the State of New York in Queens County, the venue of
which was subsequently moved to the U.S. District Court for the Eastern District
of New York. Fone was a former Paging Partners and Aquis reseller and had sought
$1,000 in alleged damages as a result of the termination of its service and
solicitation of its customers by Aquis. The Company discontinued service to Fone
as the result of Fone's severe delinquency and ultimate failure to pay for such
services.

 Arbitration of Employment and Other Claims

         In August 2000, Aquis received correspondence from legal counsel to Mr.
Adiletta, a former President of Aquis, in which Mr. Adiletta claimed that Aquis
was in breach of its obligation under the Securities Act of 1933 to register the
shares underlying certain options granted to him previously as contemplated by
the terms of the settlement agreement described above. Mr. Adiletta also
requested that he be permitted to submit a bid for the purchase of certain of
the assets of Aquis' Internet related business operations conducted by Aquis IP
Communications, Inc., which assets were at the time of the letter from Mr.
Adiletta the subject of a signed Asset Purchase Agreement with the investment
group headed by Mr. John Hobko, then President of Aquis IP Communications, Inc.,
and Mr. John B. Frieling, a director of Aquis. Aquis commenced an action to
collect the proceeds due under a promissory note due to the Company for the
purchase of certain Aquis securities issued to Mr. Adiletta. Mr. Adiletta, on or
about March 27, 2001, filed a counterclaim and third-party complaint against
Aquis, its Board of Directors, CEO and CFO in which unspecified damages were
sought for the alleged breach of the terms of a Settlement Agreement between
himself and Aquis, alleged fraud in connection with that settlement, alleged
breach of fiduciary duties and negligence arising out of the governance of
Aquis. On October 16, 2001 Aquis and Adiletta executed a new settlement
agreement under which each agreed to release and waive all claims that were or
could have been asserted against one another. In addition, Aquis paid Mr.
Adiletta $118 and forgave all outstanding amounts due under the promissory note
due to Aquis, and, Mr. Adiletta surrendered all common shares and options to
purchase Aquis shares owned by him and agreed to refrain from acquiring any
direct equity holdings in Aquis.


8. LONG-TERM DEBT:

         Effective on December 31, 2003, Aquis and FINOVA, the Company's primary
lender and equity holder, entered into a Second Amendment to the Second Amended
and Restated Loan Agreement, further amending their loan agreements. The effect
of this amendment was to provide to FINOVA quarterly payments of debt service in
amounts that may exceed those specified under the prior agreement, and to
eliminate all prior financial covenants. The maturity dates of the related notes
remained unchanged. The quarterly payment is to be determined based on the
Company's cash balances in excess of $350, and is due on the first day of each
calendar quarter. The initial payment in connection with these modifications was
made in December 2003 in the amount of $754. Aquis paid approximately $105 to
FINOVA in April 2004 based on its cash position as of March 31, 2004.

         For periods prior to the effective date of Aquis' restructuring and the
aforementioned second amendment, debt due to Aquis' institutional lenders was
classified primarily as currently payable due to defaults under loan agreements
with FINOVA and AMRO. In August 2002, the required FCC approval for the change
in control of Aquis' FCC licenses was granted, the restructuring transaction
closed on August 12, 2002, and control of Aquis was transferred to FINOVA.
Accordingly, an extraordinary gain on Aquis' troubled debt restructuring was
recognized in the amount of $22,071, net of income taxes that were calculated to
be zero, primarily due to Aquis' insolvency.

         Under the terms of the restructuring agreements and effective upon
receipt of FCC approval in early August 2002, Aquis' Senior and Subordinated
Lenders exchanged their debt and accrued unpaid interest due to them for
warrants and preferred stock that could convert into a combined equity position
of 89.89%. FINOVA received two interest-bearing notes; one in the amount of
$7,000, payable over four years, and the other in the amount of $2,000 payable
following the maturity date of the $7,000 Senior Secured Promissory Note. This
$7,000 Secured Note requires that interest is paid quarterly in arrears at an
interest rate set at the greater of Citibank's Corporate Base Rate plus 3.5% or
9%, and also requires principal repayments of $250 in January or each year. The
$2,000 Subordinated Note requires that interest is accrued at a rate of 15%, but
is not required to be paid until maturity. The Senior Secured Subordinated Note
of $2,000 may be cancelled if the $7,000 note is paid in full by March 31, 2006.
FINOVA also received Aquis Series A Convertible Preferred Stock and Common Stock
Purchase Warrants that could provide an equity interest of 79.99%. Warrants for
the purchase of 5% would expire if the $7,000 note is paid in full by March 31,
2006, reducing FINOVA's equity interest to 74.99%. A minor portion approximating
2.5% of the debt and equity provided to FINOVA under the restructuring has been
transferred to an unaffiliated lending partner of FINOVA.

         In exchange for its prior-issued warrants and its convertible debenture
in the principal amount of $2,000, AMRO was issued Aquis Series A Convertible
Preferred Stock and warrants that provide a 9.9% equity interest and a new note
in the principal amount of $1,000 that will accrue interest at 10% until the
FINOVA debt is paid in full, at which time quarterly cash payments of current
interest will be made. The principal balance of $1,000 and interest accrued
through the date of full payment of FINOVA will become due and payable two years
after maturity of the FINOVA note. Finally, the holders of the prior-outstanding
7.5% redeemable preferred stock exchanged those shares for shares of a new
issue, Series B Redeemable Preferred Stock, without conversion rights, valued at
$300, and accruing dividends at 10% through the date that the AMRO note is paid
in full. This issue will become redeemable at its face value plus accrued unpaid
dividends two years following repayment of the AMRO debt, with current cash
dividends payable during that two year period leading to the redemption date.
<PAGE>

         Aquis' obligations for principal and interest are summarized at
December 31 as follows:

<TABLE>
<CAPTION>
                                                 Interest    Scheduled    Original Face    Recorded         Recorded
                                                   Rate      Maturity      Amount 2002   Liability 2003  Liability 2002
                                                   ----      ---------     -----------   --------------  --------------
<S>                                              <C>         <C>          <C>            <C>             <C>
Senior secured promissory note (the Tranche A    P + 3.5%    June 2006       $7,000          $7,586         $9,213
  note)
Senior secured promissory note (the Tranche B       15%      June 2006       $2,000           3,183           3,183
  note) ................................
Junior unsecured note payable                       10%      June 2008       $1,000           1,597          1,597
Unsecured note payable                              6%        Nov 2004        $500              565             535
Vehicle loans                                       0%       Sept 2007         $54                65             50
Other installment obligations                     various     various        various              11             42
                                                                                         ------------------------------
                                                                                             13,007         14,620
Classified as currently payable                                                                 (698)         (912)
                                                                                         ------------------------------
Long-term maturities, net of current portion                                                $12,309        $13,708
                                                                                         ==============================
</TABLE>

         Aquis has recorded the debt issued pursuant to the restructuring in
accordance with the requirements of SFAS 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructurings." Accordingly, the debt recorded in
connection with this transaction included obligations for future cash payments
of principal and interest to the extent that the total of such cash flows did
not exceed the principal amount of the debt cancelled. All of the Company's
assets continue to serve as collateral for the secured notes under the
restructuring.

         Pursuant to the terms of the Second Amended and Restated Loan Agreement
with FINOVA dated August 12, 2002, Aquis was subject to specified financial
performance and expenditure-limiting covenants. Aquis' capital expenditures
exceeded the covenant limit of $1,062 for 2002. As a result, Aquis was in
default of that covenant until FINOVA provided a waiver of that covenant
violation in late March 2003. During 2003, as noted above, Aquis and FINOVA
agreed to eliminate all financial covenants and to provide an opportunity for
FINOVA to receive accelerated cash payments to be applied against the debt
outstanding.


9. RELATED PARTY TRANSACTIONS:

         Aquis received FCC approval and completed the restructuring of its debt
to FINOVA Capital Corporation and other creditors on August 12, 2002. The FINOVA
interests acquired rights to acquire 79.99% of Aquis' equity as a result. During
2003, Aquis paid cash to FINOVA totaling $1,628, including principal of
approximately $850. During 2002, Aquis paid FINOVA a total of $283, including
$88 of interest subsequent to the date on which it obtained its equity
interests.

         The Company was provided with various investment banking services by a
firm with which a certain former member of the Board of Directors was
affiliated. Deerfield Capital, LP, of which Mr. Frieling is a principal, and
Deerfield Partners, LLC, of which Mr. Frieling is Managing Director, provided
investment banking services to Aquis in connection with certain of its completed
and proposed acquisitions and other activities. During the years ended December
31, 2002 and 2001, respectively, Deerfield Capital and Deerfield Partners were
paid $3 and $67 in fees and expenses for such services.


10. NOTES RECEIVABLE FROM STOCKHOLDERS:

         One of ACI's founding shareholders and a former President acquired
shares of the Company's Series A Preferred Stock. As part of that purchase, a
note for $240 was executed that was to be repaid in four equal annual
installments commencing on May 15, 2000. The note provided interest at a rate of
8%, and all interest was due with the final payment on May 15, 2003. On April 4,
2000, in connection with the settlement of certain claims made by this officer
in relation to the end of his relationship with the Company, an agreement was
reached under which the face amount of this $240 note was reduced to $125, and
later to $50 as of December 31, 2000. Subsequently, as further discussed in note
7 above, this note was forgiven as part of the settlement of various matters
involving Aquis and this former officer.


11. INCOME TAXES:

         Aquis' restructuring resulted in an extraordinary gain of approximately
$22,071, net of income taxes that were calculated to be zero. IRC section
108(a)(1)(B) excludes income from discharge of indebtedness to the extent of
Aquis' insolvency. Net operating loss carryforwards are reduced by the income
excluded as of the first day of the following year.

         At December 31, 2003, the Company had Federal net operating loss
carryforwards for tax purposes of approximately $12,000 that expire between 2016
and 2017. Approximately $8,550 of this total consists of pre-acquisition losses
that are subject to restrictions imposed by Section 382 of the Internal Revenue
Code that limit utilization of such carryforwards to about $300 annually.
<PAGE>

         The provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
                                                                                 2003         2002        2001
                                                                                 ----         ----        ----
<S>                                                                            <C>        <C>          <C>
Federal:
  Current...............................................................             $_         $_           $_
  Deferred (benefit), net...............................................          (596)    (1,110)      (3,998)
  Valuation allowance...................................................            596      1,110        3,998
                                                                          --------------------------------------
  Total Federal.........................................................              _          _            _
                                                                          --------------------------------------
State:
  Current...............................................................             $_         $_           $_
  Deferred (benefit), net...............................................          (157)      (294)      (1,118)
  Valuation allowance...................................................            157        294        1,118
                                                                          --------------------------------------
  Total State...........................................................              _          _            _
                                                                          --------------------------------------
Total provision for income taxes........................................             $_         $_           $_
                                                                          ======================================
</TABLE>

         Significant components of deferred tax assets and liabilities as of
December 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                                                             2003         2002
                                                                                             ----         ----
<S>                                                                                          <C>        <C>
Deferred tax assets:
  Allowance for doubtful accounts..................................................           $114       $294
  Depreciation and impairment provisions...........................................          2,123      1,578
  Net operating loss carryforwards.................................................          5,971      5,583
                                                                                     -------------------------
  Total deferred tax assets........................................................          8,208      7,455
Deferred tax liabilities-amortization of intangibles...............................          (951)      (951)
                                                                                     -------------------------
  Net deferred tax assets before valuation allowance...............................          7,257      6,505
  Valuation allowance..............................................................        (7,257)    (6,505)
                                                                                     -------------------------
Net deferred tax asset.............................................................             $_         $_
                                                                                     =========================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                      2003       2002       2001
                                                                                      ----       ----       ----
<S>                                                                                  <C>        <C>        <C>
Tax (benefit) at Federal statutory rate.........................................     (34.0)%    (34.0)%    (34.0)%
State income taxes, net of Federal tax benefit..................................           _          _          _
Permanent differences...........................................................         .1%        .1%        .3%
Valuation allowance.............................................................       33.9%      33.9%      33.7%
Effective tax rate..............................................................           _          _          _
</TABLE>




         As of December 31, 2003, the Company recorded no deferred tax asset.
The future expected benefit from the realization of the remaining net operating
losses was fully offset by a related valuation allowance. A full valuation
allowance was recorded due to management's uncertainty about the realizability
of the related tax benefits as of December 31, 2003. However, the amount of the
deferred tax assets considered realizable could be adjusted in the future if
estimates of taxable income are revised.


12. STOCK OPTIONS:

         Through the merger with Paging Partners, Aquis acquired and assumed a
stock option plan (the "Assumed Plan"), as amended. Under this assumed plan,
options to purchase shares of the Company's common stock, intended to qualify as
incentive stock options, may be granted to employees. In November 2001, Aquis
established an Aquis Communications Group, Inc. 2001 Stock Incentive Plan (the
"2001 Plan") for purposes similar to those of the assumed plan. Under the 2001
Plan, either Incentive Stock Options or Non-Qualified Stock Options may be
granted, under which the number of shares that may be issued is 2,000,000.
Employees, directors and consultants are eligible for grants under this 2001
Plan. A total of 1,500,000 shares of common stock had been reserved for issuance
under the Assumed Plan. Under either plan, options may be exercisable for terms
ranging from four months to ten years from the date granted.
<PAGE>

         Details, including option grants on November 21, 2001 to purchase
1,080,000 shares under the 2001 Plan, are as follows (shares and prices are
stated at original amounts before effect of the share conversion effected
through the merger):

<TABLE>
<CAPTION>
                                                                                   Number           Option
                                                                                 of Shares        Price Range
                                                                                 ---------        -----------
<S>                                                                              <C>             <C>
2001
Outstanding, January 1....................................................        2,309,612       $0.2344-3.00
Granted...................................................................        1,580,000        $0.03-0.125
Exercised.................................................................               --                 --
Cancelled.................................................................        (160,850)         $0.03-3.00


Outstanding, December 31..................................................        3,728,762        $0.03-1.625


Exercisable, December 31..................................................        2,168,760        $0.03-1.625
2002
Outstanding, January 1....................................................        3,728,762        $0.03-1.625
Granted...................................................................                _                  _
Exercised.................................................................                _                  _
Cancelled.................................................................        (365,000)      $0.125-0.4375


Outstanding, December 31..................................................        3,363,762        $0.03-1.625


Exercisable, December 31..................................................        2,901,262        $0.03-1.625
2003
Outstanding, January 1....................................................        3,363,762        $0.03-1.625
Granted...................................................................                _                  _
Exercised.................................................................                _                  _
Cancelled.................................................................        (321,000)       $0.03-1.2812


Outstanding, December 31..................................................        2,977,762        $0.03-1.625


Exercisable, December 31..................................................        2,666,512        $0.03-1.625
</TABLE>

         As the result of the change in control arising in connection with the
restructuring of Aquis' debt and equity effective August 12, 2002, options that
were issued under the Plan prior to the adoption of the Aquis Communications
Group, Inc. 2001 Stock Incentive Plan became fully vested. This change in
control did not alter the ratable four year vesting schedule specified for the
option grants on November 21, 2001 for employees continuing in the employ of
Aquis.

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

         In the following table, the fair value of stock options issued to
Employees during 2001 is based on the Black-Scholes pricing model with the
following assumptions: the price of the stock at the time of grant, risk free
interest rates ranging from 4.57% to 5.81%, no dividend yield, 100% volatility
and a weighted average expected life of the options of nine to ten years. Had
compensation cost been determined on the basis of FASB Statement No. 123, net
loss and loss per share would have been reduced as follows:

<TABLE>
<CAPTION>
                                                                                                     2001
                                                                                                     ----
<S>                                                                                              <C>
Net Loss Attributed to Common Stockholders:
  As reported...............................................................................       $(11,950)
  Pro forma.................................................................................       $(11,987)
Net Loss per Common Share:
  As reported...............................................................................         $(0.66)
  Pro Forma.................................................................................         $(0.67)
</TABLE>


         In connection with the employment of one of the Company's former
Presidents, 200,000 options were granted on January 15, 2001 providing an
exercise price of $0.125 and an expiration date of January 11, 2011. These
options were cancelled as the result of a separation from service of Aquis
during 2002.



13. PREFERRED STOCK:

Series A Convertible Preferred Stock, par value $0.01

         In connection with the debt and equity restructuring effected on August
12, 2002, Aquis issued certain equity rights securities to the interests of its
senior lender and to its junior lender. Accordingly, FINOVA Capital Corporation
and one of its funding partners, through FINOVA's affiliate Desert
Communications I, LLC ("Desert"), acquired rights to a 79.99% equity interest
and voting control of Aquis on a fully diluted basis, along with certain debt
instruments described in the preceding footnotes. Its equity interest was
provided via the issuance of Aquis convertible preferred stock and common stock
purchase warrants. Also in connection with this restructuring, AMRO
International, S.A. acquired rights to a 9.9% equity interest on a fully diluted
basis in Aquis via preferred stock and warrants and the previously described
unsecured note in exchange for cancellation of all obligations due under the 11%
Convertible Debenture and the cancellation of all previously-outstanding
warrants issued to AMRO. See the immediately subsequent footnote for a summary
of the warrants issued in this transaction.
<PAGE>

         The rights and preferences of this Convertible Preferred Stock include
ranking on parity with Aquis' Common Stock as to dividends and distributions,
conversion into 1,000 shares of Aquis Common Stock at the effective date of an
amendment to the Company's Certificate of Incorporation authorizing issuance of
sufficient Common Stock to permit conversion of all Series A Convertible
Preferred Stock, and voting rights on an as-if-converted basis. FINOVA's
affiliate Desert was issued 143,671.59 shares of Series A Convertible Preferred
Stock convertible into 143,671,590 shares of Aquis Common Stock. AMRO was issued
17,781.582 shares of this convertible issue that is convertible into 17,781,582
shares of Aquis Common Stock. Both holders converted their holdings into Aquis
Common Stock effective on December 11, 2002. This resulted in a greater number
of weighted average shares outstanding at December 31, 2002 and lowered the 2002
net income attributed to common stockholders from $1.03 to $0.69.

Series B 10% Redeemable Preferred Stock, par value $0.01

         Another component of the restructuring effected on August 12, 2002
included the exchange of all previously outstanding shares of Aquis' 7.5%
Redeemable Preferred Stock for shares of Series B 10% Redeemable Preferred
Stock. The rights and preferences of this 10% Redeemable Preferred Stock include
ranking that is senior to Aquis' Common Stock and Series A Convertible Stock as
to dividends and distributions, cumulative cash dividends at the annual rate of
$75.00 (seventy five dollars) per share, no voting rights unless required by
law, a liquidation preference of $300 (three hundred thousand dollars) and a
redemption date of December 31, 2007 provided that the restructured notes due to
FINOVA and AMRO have previously been retired. The Company's redemption under
this latter provision will be at the liquidation preference amount and will also
include accrued but unpaid cumulative dividends. As provided by SFAS 15, the
liability for the redemption of these shares is recorded at the amount of the
related cash flow obligation at redemption and is presented as a component of
total liabilities in accordance with SFAS 150.


14. WARRANTS:

         In connection with the debt and equity restructuring effected on August
12, 2002 and described in foregoing footnotes, Aquis issued warrants to the
interests of its senior lender and to its junior lender. A summary of the Common
Stock Purchase Warrants issued to Desert and AMRO in connection with Aquis'
restructuring is as follows:

<TABLE>
<CAPTION>
                                                             Warrants to
                                                              Purchase         Date Warrants     Date of Expiration    Exercise
                                                 Series    Shares of Stock   First Exercisable       of Warrants         Price
                                                 ------    ---------------   -----------------       -----------         -----

<S>                                              <C>       <C>               <C>                 <C>                   <C>
Desert Communications I, LLC                       A         192,206,258      August 12, 2002      August 12, 2012       $0.01
Desert Communications I, LLC                       B         22,394,842       August 12, 2002    August 12, 2012 (a)     $0.01
AMRO International, S.A                            --        26,560,206       August 12, 2002      August 12, 2012       $0.01
</TABLE>

(a)      These warrants will expire on the date shown or, if earlier, on the
         date that the Tranche A note is paid in full provided that such date is
         prior to the maturity date of that Tranche A note.


         During the year ended December 31, 2000, Aquis issued warrants to AMRO,
Coxton and Ladenburg, Thalmann & Co. in connection with obtaining the bridge
loan from AMRO and the equity line of credit from Coxton. In exchange for the
funding and agreements gained in those transactions, and in addition to other
compensation, those parties received the following warrants:

<TABLE>
<CAPTION>
                                             Options to      Date Options       Date of
                                              Purchase          First        Expiration of
                                           Shares of Stock   Exercisable        Options      Exercise Price
                                           ---------------   -----------        -------      --------------
<S>                                        <C>             <C>               <C>             <C>
AMRO International, S.A                        357,942      April 12, 2000   April 12, 2003      $3.163
Coxton, Limited                                600,000       May 3, 2000      May 3, 2003        $2.300
Ladenburg, Thalmann & Co.                      300,000       May 3, 2000      May 3, 2003        $2.300
</TABLE>


         Valued on their dates of issuance using the Black-Scholes pricing model
under assumptions similar to those described in Note 12, above, the non-cash
cost to Aquis of these securities was $1,553,000 and was included as a component
of the Company's cost of financing, or interest expense, for the year ended
December 31, 2000. As a result of the restructuring transaction that was
completed in 2002, the warrants issued to AMRO were exchanged for new securities
and were cancelled.


<PAGE>

15. SUPPLEMENTAL CASH FLOW DATA:

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

<TABLE>
<CAPTION>
                                                                                      2003       2002      2001
                                                                                      ----       ----      ----

<S>                                                                                   <C>       <C>       <C>
Cash paid for interest expense...............................................          $38       $171      $290
Cash paid for taxes..........................................................           $9         $7       $--
Liability assumed in connection with purchase of assets......................         $ --        $54       $79
</TABLE>

In addition to the cash paid for interest expense noted above, the Company paid
to FINOVA amounts that were capitalized as debt under SFAS 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings." Accordingly, the debt
recorded in connection with this transaction included obligations for future
cash payments of principal and interest to the extent that the total of such
cash flows did not exceed the principal amount of the debt cancelled. During
2003 and 2002, respectively, FINOVA was paid $778 and $88 representing interest
as defined by the related loan agreements.


16. QUARTERLY FINANCIAL RESULTS (UNAUDITED):

         Quarterly financial information for the years ended December 31, 2003
and 2002 is summarized below:

<TABLE>
<CAPTION>
                                                                   First       Second        Third        Fourth
                                                                  Quarter      Quarter      Quarter       Quarter
                                                                  -------      -------      -------       -------
<S>                                                              <C>           <C>          <C>           <C>
Year ended December 31, 2003:
  Total revenues.....................................              $3,088        $3,056       $2,799        $2,688
  Operating income (loss)............................               (228)            83        (101)    (1,530)(a)
  Net income (loss) attributed to common shareholders               (110)            45        (180)       (1,530)
  Net income (loss) per share (basic and diluted)....             (0.001)         0.000     (0.0001)   (0.0089)(b)

Year ended December 31, 2002:
  Total revenues.....................................              $3,745        $3,461       $3,326        $3,340
  Operating loss.....................................               (225)         (271)      (81)(b)         (127)
  Extraordinary item: restructuring gain.............                 _             _      22,071(c)           _
  Net income (loss) attributed to common shareholders             (1,156)       (1,232)       21,238         (122)
  Net income (loss) per share (basic and diluted)....              (0.06)        (0.07)         1.17     (0.00)(d)
</TABLE>

-----------

(a)      Operating loss for the fourth quarter of 2003 includes a charge for the
         impairment in the carrying value of the Company's assets in the amount
         of $1,520 as also discussed in footnote 2 above
(b)      Operating loss for the third quarter of 2002 includes net non-recurring
         items of income of $222 received primarily in settlement of Aquis'
         claims against a communications services vendor under the
         Telecommunications Act of 1996.
(c)      A gain on the restructuring of Aquis' debt and equity was recognized in
         August 2002 when final contingencies were satisfied and the Company's
         debt to its major creditors was cancelled in exchange for equity and
         debt securities, as described in more detail in the preceding
         footnotes.
(d)      Based on 53,257,283 weighted average shares outstanding resulting from
         conversion of all shares of Series A Convertible Preferred Stock into
         Aquis Common Stock on December 11, 2002. See also Note 13.

17. VALUATION AND QUALIFYING ACCOUNTS:

         The allowance for doubtful accounts in 2001 was reduced in connection
with collections of receivables from customers and as the result of the
reclassification of the receivables and related allowance from Midwest wireless
messaging operations to their status as held for sale at December 31, 2001. This
allowance was further reduced in 2003 as the result of better-than-expected
collections.

         Aquis recognized an inventory allowance in 2002. Certain
intermittently-functional units returned in exchange transactions in late 2002
and other older models on hand that were returned or exchanged throughout the
year led to this valuation adjustment. No allowance for inventory obsolescence
was recognized in 2000 or 2001 as the result of the Company's policy to exclude
obsolete messaging devices from its periodic inventory valuations.
<PAGE>

<TABLE>
<CAPTION>
                                               Balance at   Charges to   Deductions   Balance at
                                                Beginning   Costs and     and Other       End
                                                 of Year     Expenses    Adjustments    of Year
                                                 -------     --------    -----------    -------
<S>                                            <C>          <C>          <C>          <C>
Allowance for doubtful accounts:
  2001..................................           1,929          883         1,804       1,008
  2002..................................           1,008          832         1,154         686
  2003..................................             686          488           908         266

Allowance for inventory obsolescence:
  2001..................................               _            _             _           _
  2002..................................               _          150            14         136
  2003..................................               _            _            77          59
</TABLE>