|UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS
 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13
 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 X

For the Fiscal Year Ended December 31, 2003


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF
 THE SECURITIES EXCHANGE ACT OF 1934
                                              
 For the transition period from to                                                                      
 Commission file number 0-23232


Arch Wireless, Inc.


(Exact name of
Registrant as specified in its Charter)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | DELAWARE(State of incorporation)                                                                  | 31-1358569(I.R.S. Employer Identification No.) | 
| | ------------------------------------------------------------------------------------------------- | ---------------------------------------------- | 
| | 1800 West Park Drive, Suite 250Westborough, Massachusetts(address of principal executive offices) | 01581(Zip Code)                                | 

|(508) 870-6700(Registrants telephone number,
 including area code)


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
 THE SECURITIES EXCHANGE ACT OF 1934: None


SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF
 THE SECURITIES EXCHANGE ACT OF 1934: Class A Common Stock Par Value $0.0001 Per Share
 (Title of class)



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



Indicate by check mark if disclosure of delinquent
 filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
 the best of 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



Indicate by check mark whether the registrant is an
 accelerated filer (as defined in Exchange Act Rule 12b-2). YES  X  NO



The aggregate market value of the voting stock held
 by non-affiliates of the Registrant at June 30, 2003 was approximately $114,027,065.



Indicate by check mark whether the Registrant (1) has
 filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
 Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X  NO



The number of shares of Registrants common stock outstanding
 on February 20, 2004 was 19,483,929.



Portions of the Registrants Definitive Proxy Statement
 for the 2004 Annual Meeting of Stockholders of the Registrant are incorporated by reference into Part
 III.



TABLE OF CONTENTS
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               |                                                                                       |   
|-------------- | ------------------------------------------------------------------------------------- | --
|ITEM 1.        | BUSINESS                                                                              | 3 
|ITEM 2.        | PROPERTIES                                                                            | 7 
|ITEM 3.        | LEGAL PROCEEDINGS                                                                     | 7 
|ITEM 4.        | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   | 8 
|ITEM 5.        | MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERMATTERS                  | 8 
|ITEM 6.        | SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA                                    | 9 
|ITEM 7.        | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 11
|ITEM 7A.       | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            | 29
|ITEM 8.        | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           | 30
|ITEM 9.        | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  | 30
|ITEM 9A.       | CONTROLS AND PROCEDURES                                                               | 30
|ITEM 15.       | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                       | 31
|SIGNATURES     | 32                                                                                   
|CERTIFICATIONS | Exh-1                                                                                





|PART I



ITEM 1.   BUSINESS



General



We
 are a leading provider of wireless messaging and information services in the United States. Currently,
 we provide one and two-way wireless messaging services. One-way messaging consists of numeric and alphanumeric
 messaging services. Numeric messaging services enable subscribers to receive messages that are composed
 entirely of numbers, such as a phone number, while alphanumeric messages may include numbers and letters,
 which enable subscribers to receive text messages. Two-way messaging services enable subscribers to
 send and receive messages to and from other messaging devices, including pagers, personal digital assistants,
 also called PDAs, and personal computers. We also offer wireless information services, such as stock
 quotes, news, weather and sports updates, voice mail, personalized greeting, message storage and retrieval
 and equipment loss and/or maintenance protection for both one and two-way messaging subscribers. Our
 services are commonly referred to as wireless messaging and information services.



Our
 principal office is located at 1800 West Park Drive, Suite 250, Westborough, Massachusetts 01581, and
 our telephone number is (508) 870-6700. Our address on the world wide web is www.arch.com. The
 information on our web site is not incorporated by reference into this Annual Report on Form 10-K and
 should not be considered a part of this report. We make available free of charge through our web site
 our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably
 practicable after we electronically file those reports with the Securities and Exchange Commission.



Industry Overview



The
 mobile wireless telecommunications industry consists of multiple voice and data providers which compete
 among one another, both directly and indirectly, for subscribers. Messaging carriers like us provide
 customers with services such as numeric and alphanumeric messaging. Customers receive these messaging
 services through a small, handheld device. The device, often referred to as a pager, signals a subscriber
 when a message is received through a tone and/or vibration and displays the incoming message on a small
 screen. With numeric messaging services, the device displays numeric messages, such as a telephone number.
 With alphanumeric messaging services, the device displays numeric or text messages.



Some
 messaging carriers also provide two-way messaging services using devices that enable subscribers to
 respond to messages or create and send wireless email messages to other messaging devices, including
 pagers, PDAs and personal computers. These two-way messaging devices, often referred to as two-way pagers,
 are similar to one-way devices except that they have a small QWERTY keyboard that enables subscribers
 to type messages which are sent to other devices as noted above.



In
 addition to messaging services, one and two-way messaging devices may be used to access voice mail,
 personalized greetings and message storage and retrieval services. Voice mail allows a caller to leave
 a recorded message that is stored in the carriers computerized message retrieval center. When a message
 is left, the subscriber can be automatically alerted through the subscribers messaging device and can
 retrieve the stored message by calling a designated telephone number. Personalized greetings allow the
 subscriber to record a message to greet callers who reach the subscribers messaging device or voice
 mailbox. Message storage and retrieval allows a subscriber who leaves his or her designated service
 area to retrieve messages that arrived during the subscribers absence from his or her service area.
 In addition to the services discussed above, both one-way alphanumeric and two-way messaging devices
 may be used to receive other wireless information services such as stock quotes, news, weather and sports
 updates.



Mobile
 telephone service providers such as cellular and broadband personal communications services, known as
 PCS, carriers provide telephone voice services as well as services that are functionally identical to
 the one and two-way messaging services provided by wireless messaging carriers such as Arch. Customers
 subscribing to cellular, broadband PCS or other mobile phone services utilize a wireless handset through
 which they can make and receive voice telephone calls. These handsets are commonly referred to as cellular
 or PCS telephones. These handsets are also capable of receiving numeric, alphanumeric and e-mail messages
 as well as information services, such as stock quotes, news, weather and sports updates, voice mail,
 personalized greeting and message storage and retrieval.



Technological
 improvements have generally contributed to the market for wireless messaging services and the provision
 of better quality services at lower prices to subscribers. These improvements have enhanced the capability
 and capacity of mobile wireless messaging networks and devices while lowering equipment and air time
 costs. These technological improvements, and the degree of similarity in messaging devices, coverage
 and battery life, have resulted in messaging services becoming more of a commodity product.



We
 believe demand for our one and two-way messaging services has declined over the past several years and
 will continue to decline for the foreseeable future. The decline in demand for our messaging services
 has largely been attributable to competition from cellular and broadband PCS carriers and, to a lesser
 extent, the weak economy.



One-way
 messaging subscribers, such as those we serve, typically pay a flat monthly service fee, unlike subscribers
 to cellular telephone or PCS services, which historically have paid a variable usage component. However,
 cellular, PCS and other mobile phone companies now offer bundled service plans which include both local
 and long distance minutes with caller ID, voice mail and numeric and alphanumeric messaging for use
 at no additional charge as well as bundled service plans at fixed monthly rates. The fees and prices
 of these and other plans have fallen so that these services compete directly with one and two-way messaging
 services.



Wireless Messaging Services, Products and Operations



We
 provide one and two-way messaging services and wireless information services throughout the United States,
 including the 100 largest markets, and in the U.S. Virgin Islands and Puerto Rico. These services are
 offered on a local, regional and nationwide basis employing digital networks that cover more than 90%
 of the United States population.



Our
 customers are either businesses with employees who want to be accessible to their offices or customers,
 first responders who need to be accessible in emergencies, individuals who wish to be accessible to
 friends or family members, or third parties, known as resellers, that pay us to use our networks. Our
 customers include proprietors of small businesses, professionals, management personnel, field sales
 personnel and service forces, members of the construction industry and construction trades, real estate
 brokers and developers, medical personnel, sales and service organizations, specialty trade organizations,
 manufacturing organizations and government agencies.



We market and distribute our services through a direct
 sales force and a small indirect sales force.



Direct.Our direct sales force leases or sells devices directly to customers ranging from small and medium-sized
 businesses to Fortune 500 companies, health care and related businesses and government agencies. Our
 direct sales force represents our most significant sales and marketing efforts and we intend to continue
 to market to commercial enterprises utilizing our direct sales force as these commercial enterprises
 have typically disconnected service at a lower rate than individual consumers.



Indirect.Our indirect sales force sells devices and access to our messaging networks to third parties, or
 resellers, who then resell messaging services to consumers or small businesses. Resellers generally
 are not exclusive distributors of our services and often have access to the networks of more than one
 provider. Competition among network providers to attract and maintain resellers is based primarily upon
 price. We intend to continue to provide access to our messaging networks to resellers and to concentrate
 on relationships that are profitable and where longer-term partnerships can be established and maintained.



The
 following tables set forth units in service and revenue associated with our two channels of distribution:
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|         | As of December 31,
|-------- | ------------------
|
|
|Direct   |                   
|Indirect |                   
|         |                   
|Total    |                   
|         |                   

|         | For the Year Ended December 31,
|-------- | -------------------------------
|
|
|Direct   |                                
|Indirect |                                
|         |                                
|Total    |                                
|         |                                

|Our
 customers may subscribe to one or two-way messaging services for a monthly service fee which is generally
 based upon the type of service provided, the geographic area covered, the number of devices provided
 to the customer and the period of commitment. Additional services, such as stock quotes, news, weather
 and sports updates are included, voice mail, personalized greeting and equipment loss and/or maintenance
 protection may be added to either one or two-way messaging services, as applicable, for an additional
 monthly fee. Equipment loss protection allows subscribers who lease devices to limit their cost of replacement
 upon loss or destruction of a messaging device. Maintenance services are offered to subscribers who
 own their device.



A subscriber
 to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet
 his or her messaging needs. Local coverage generally allows the subscriber to receive messages within
 a small geographic area, such as a city. Regional coverage allows a subscriber to receive messages in
 a larger area, which may include a large portion of a state or sometimes groups of states. Nationwide
 coverage allows a subscriber to receive messages in major markets throughout the United States. The
 monthly fee generally increases with coverage area. Two-way messaging is generally offered on a nationwide
 basis.



The
 following table summarizes the coverage areas and service offerings of our units in service at specified
 dates:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | December 31,
|----------------------------- | ------------
|
|
|Local / Regional Numeric      |             
|Local / Regional Alphanumeric |             
|Nationwide Numeric            |             
|Nationwide Alphanumeric       |             
|Two-Way Messaging             |             
|                              |             
|Total                         |             
|                              |             

|We
 provide wireless messaging services to subscribers for a monthly fee, as described above. In addition,
 subscribers either lease a messaging device from us for an additional fixed monthly fee or they own
 a device, having purchased it either from us or from another vendor. We also sell devices to resellers
 who lease or resell devices to their subscribers and then sell messaging services utilizing our networks.



The
 following table summarizes the number of units in service owned by us, our subscribers and our resellers
 at specified dates:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        | December 31,
|--------------------------------------- | ------------
|
|
|Owned and leased by Arch                |             
|Owned by our subscribers                |             
|Owned by resellers or their subscribers |             
|                                        |             
|Total                                   |             
|                                        |             

|Messaging Networks and Licenses



We
 hold licenses to operate at various frequencies in the 150, 450 and 900 Mhz bands of the broadcast band
 frequency spectrum although over 90% of our subscribers are served on networks operated in the 900 Mhz
 range. These licenses are utilized to provide one and two-way messaging services over our networks.



We
 operate local, regional and nationwide one-way networks, which enable our subscribers to receive messages
 over a desired geographic area. Our one-way messaging networks operating in the 150 and 450 Mhz frequency
 bands utilize the POCSAG messaging protocol, developed by Motorola, Inc. This protocol is an older technology
 and is less efficient due to slower transmission speeds. One-way networks operating in 900 Mhz frequency
 bands utilize the FLEX  protocol also developed by Motorola. The FLEX protocol is a newer technology
 having the advantage of functioning at higher network speeds which increases the volume of messages
 that can be transmitted over the network.



Our
 two-way messaging network uses the ReFLEX 25 protocol, also developed by Motorola. ReFLEX 25 promotes
 spectrum efficiency and high network capacity by dividing coverage areas into zones and sub-zones. Messages
 are directed to the zone or sub-zone where the subscriber is located allowing the same frequency to
 be reused to carry different traffic in other zones or sub-zones. As a result, the ReFLEX 25 protocol
 allows the two-way network to transmit substantially more messages than a one-way network using either
 the POCSAG or FLEX protocols. The two-way messaging network operates under a set of licenses, called
 narrowband PCS, which as noted above use 900 Mhz frequencies. These licenses must comply with specified
 minimum build-out requirements. We have satisfied the five-year build-out requirements established by
 the Federal Communications Commission and we are in the process of completing the 10-year build-out
 requirements in accordance with separate construction deadlines for each license, which occur between
 September 29, 2004 and January 25, 2005. We expect the remaining aggregate cost of these minimum build-outs
 will be minimal.



Although
 the capacity of our networks vary by market, we have a significant amount of excess capacity, much of
 which was acquired in conjunction with our Paging Network, Inc. and MobileMedia Communications, Inc.
 acquisitions. We have implemented a plan to manage network capacity and to improve overall network efficiency
 by consolidating subscribers onto fewer, higher capacity networks with increased transmission speeds.
 This plan is referred to as network rationalization. Network rationalization will result in fewer networks
 and therefore fewer transmitter locations which we believe will result in lower operating expenses.



Competition



The
 wireless messaging industry is highly competitive. Companies compete on the basis of price, coverage
 area, services offered, transmission quality, network reliability and customer service.



We
 compete by maintaining competitive pricing for our products and services, by providing broad coverage
 options through high-quality, reliable messaging networks and by providing quality customer service.
 Direct competitors for our messaging services include Metrocall, Verizon Wireless, Skytel (a division
 of MCI, Inc.) and a variety of other regional and local providers. The products and services we offer
 also compete with a broad array of wireless messaging services provided by mobile telephone companies.
 This competition has intensified as prices for these services have declined, and these providers have
 incorporated messaging capability into their mobile phone devices. Many of these companies possess financial,
 technical and other resources greater than ours. Such providers currently competing with us in one or
 more markets include AT&T Wireless, Cingular, Sprint PCS, Verizon Wireless, T-Mobile and Nextel.



While
 cellular, PCS and other mobile telephone services are, on average, more expensive than the one and two-way
 messaging services we provide, such mobile telephone service providers typically provide one and two-way
 messaging service as an element of their basic service package. It is estimated that almost all PCS
 and other mobile phone devices currently sold in the United States are capable of sending and receiving
 one and two-way messages. Subscribers that purchase these services no longer need to subscribe to a
 separate messaging service. As a result, one and two-way messaging subscribers can readily switch to
 cellular, PCS and other mobile telephone services. The decrease in prices for cellular, PCS and other
 mobile telephone services has led many subscribers to select combined voice and messaging services as
 an alternative to stand alone messaging services.



Sources of Equipment



We
 do not manufacture any of the messaging devices our customers need to take advantage of our services
 or any of the network equipment we utilize to provide messaging services. We historically purchased
 messaging devices primarily from Motorola, which discontinued production of messaging devices in 2002.
 Since then, we have developed relationships with several vendors for new equipment, and used equipment
 is available in the secondary market from various sources. We believe that our existing inventory of
 Motorola devices and purchases from other available sources of new and reconditioned devices will be
 sufficient to meet our expected device requirements for the foreseeable future.



In
 addition, we currently have excess network equipment as a result of our efforts to consolidate our networks
 and from prior purchases of network equipment that we believe will be sufficient to meet our equipment
 requirements for the foreseeable future.



Regulation



Federal Regulation



Licenses
 granted to us by the Federal Communications Commission have varying terms of up to 10 years, at which
 time the Federal Communications Commission must approve renewal applications. In the past, Federal Communications
 Commission renewal applications generally have been granted upon showing compliance with Federal Communications
 Commission regulations and adequate service to the public. It is possible that there may be competition
 for radio spectrum associated with licenses as they expire, thereby increasing the chance of third party
 intervention in renewal proceedings. Other than those still pending, the Federal Communications Commission
 has thus far granted each license renewal we have filed.



The
 Communications Act of 1934, as amended, requires radio licensees such as us to obtain prior approval
 from the Federal Communications Commission for the assignment or transfer of control of any construction
 permit or station license or authorization of any rights thereunder. The Federal Communications Commission
 has thus far granted each assignment or transfer request we have made in connection with a change of
 control.


As
 a result of various decisions by the Federal Communications Commission over the last few years, we no
 longer pay fees for the termination of traffic originating on the networks of local exchange carriers
 providing wireline services interconnected with our services and in some instances we received refunds
 for prior payments to certain local exchange carriers. We have entered into a number of interconnection
 agreements with local exchange carriers in order to resolve various issues regarding charges imposed
 by local exchange carriers for interconnection. We may be liable to local exchange carriers for costs
 associated with delivering traffic that does not originate on that local exchange carriers network,
 referred to as transit traffic, resulting in some increased interconnection costs for us, depending
 on further Federal Communications Commission disposition of these issues and the agreements reached
 between us and the local exchange carriers. If these issues are not ultimately decided through settlement
 negotiations or via the Federal Communications Commission in our favor, we may be required to pay past
 due contested transit traffic charges not addressed by existing agreements or offset against payments
 due from local exchange carriers and may also be assessed interest and late charges for amounts withheld.
 Although these requirements have not, to date, had a material adverse effect on our operating results,
 these or similar requirements could have a material adverse effect on our operating results in the future.



State Regulation



As
 a result of the enactment by Congress of the Omnibus Budget Reconciliation Act of 1993 in August 1993,
 states are now generally preempted from exercising rate or entry regulation over any of our operations.
 States are not preempted, however, from regulating other terms and conditions of our operations. States
 that regulate paging services also may require us to obtain prior approval of (1) the acquisition of
 controlling interests in other paging companies and (2) a change of control of Arch. At this time, we
 are not aware of any proposed state legislation or regulations that would have a material adverse impact
 on our existing operations.



Trademarks



We
 own the service marks Arch and Arch Paging, and we hold federal registrations for the service marks
 Arch Wireless and PageNet as well as various other trademarks.



Employees



At
 February 20, 2004, we employed 2,074 persons. None of our employees is represented by a labor union.
 We believe our employee relations are good.



ITEM 2.   PROPERTIES



At
 December 31, 2003, we owned eight office buildings and leased office space, including our executive
 offices, in approximately 117 locations in 38 states. At December 31, 2003, two of the owned office
 buildings were under contract to be sold for estimated net proceeds of $1.1 million.



We
 lease transmitter sites on commercial broadcast towers, buildings and other fixed structures in approximately
 5,750 locations in all 50 states, the U.S. Virgin Islands and Puerto Rico. These leases are for various
 terms and provide for monthly lease payments at various rates.



ITEM 3.   LEGAL PROCEEDINGS



Certain
 holders of 123⁄4% senior notes of Arch Wireless Communications, Inc., a wholly owned subsidiary of Arch
 Wireless, Inc., filed an involuntary petition against it on November 9, 2001 under chapter 11 of the
 bankruptcy code in the United States Bankruptcy Court for the District of Massachusetts, Western Division.
 On December 6, 2001, Arch Wireless Communications, Inc. consented to the involuntary petition and the
 bankruptcy court entered an order for relief under chapter 11. Also on December 6, 2001, Arch and 19
 of its wholly owned domestic subsidiaries filed voluntary petitions for relief under chapter 11 with
 the bankruptcy court. These cases were jointly administered under the docket for Arch Wireless, Inc.,
 et al., Case No. 01-47330-HJB. After the voluntary petition was filed, Arch and its domestic subsidiaries
 operated their businesses and managed their properties as debtors-in-possession under the bankruptcy
 code until May 29, 2002, when we emerged from bankruptcy. Arch and its domestic subsidiaries are
 now operating their businesses and properties as a group of reorganized entities pursuant to the terms
 of the plan of reorganization.



We
 are involved in a number of lawsuits which we do not believe will have a material adverse effect on
 our financial condition, results of operations or cash flows.



ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.


PART II



ITEM 5.   MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER                 MATTERS



Our
 common stock traded on the OTC Bulletin Board from January 1, 2002 until May 29, 2002 under the symbol
 ARCH. When we emerged from our chapter 11 proceedings on May 29, 2002, all of our formerly outstanding
 common stock was cancelled in accordance with our plan of reorganization and our former common stockholders
 ceased to have any ownership interest in us. The shares of our new common stock issued under our plan
 of reorganization now trade on the Nasdaq National Market under the symbol AWIN and on the Boston
 Stock Exchange under the symbol AWL.



Because
 the value of one share of our new common stock bears no relation to the value of one share of our old
 common stock, the trading prices of our new common stock are set forth separately from the trading prices
 of our old common stock. The information regarding the old common stock illustrates trends in our market
 capitalization in prior periods but otherwise is not directly relevant to our current capitalization.



The
 following table sets forth the high and low sales prices per share of our common stock for the quarterly
 periods indicated, which correspond to our quarterly fiscal periods for financial reporting purposes.
 Prices for our old common stock are prices on the OTC Bulletin Board through May 29, 2002. Prices for
 our new common stock are prices on the Nasdaq National Market from May 30, 2002 through June 5, 2002
 and sales prices on the OTC Bulletin Board from June 6, 2002 through July 22, 2003 and on the Nasdaq
 National Market after that date.
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|                                      |  | 
|------------------------------------- |  | 
|Reorganized Company                   |  | 
|2003                                  |  | 
|Fourth Quarter                        |  | 
|Third Quarter                         |  | 
|Second Quarter                        |  | 
|First Quarter                         |  | 
|2002                                  |  | 
|Fourth Quarter                        |  | 
|Third Quarter                         |  | 
|Second Quarter beginning May 30, 2002 |  | 
|Predecessor Company                   |  | 
|Second Quarter through May 29, 2002   |  | 
|First Quarter                         |  | 

|The
 number of common stockholders of record as of February 20, 2004 was 5,421. Arch believes the number
 of beneficial common stockholders is approximately 1,000.



Transfer Restrictions on Common Stock



On
 June 12, 2003, our stockholders approved a merger between Arch and a wholly owned subsidiary. Pursuant
 to the merger, which became effective on June 13, 2003, each issued and outstanding share of our $0.001
 par value common stock was converted into the right to receive one share of Class A common stock, par
 value of $0.0001 per share. The rights of the Class A common stock are identical to those of the common
 stock except for the par value and certain restrictions on the transfer of shares of Class A common
 stock. The transfer restrictions will become effective once a cumulative change in ownership, as defined
 in sections 382 and 383 of the Internal Revenue Code, of 40% has occurred and generally restrict shareholders
 who hold 5% or more of the outstanding Class A common stock from entering into certain transactions
 without our prior approval. Once the transfer restrictions are no longer necessary to protect tax benefits
 associated with our federal income tax attributes, the Class A common stock will be subject to conversion
 back into common stock, without transfer restrictions, on a share-for-share basis.




Dividend Policy



We
 have never declared or paid any cash dividends on our common stock. The indentures for our 12% notes
 prohibit declaration or payment of cash dividends. We anticipate that until our 12% notes are repaid
 substantially all of future earnings will be used to finance our business and repay our 12% notes. Our
 future dividend policy will depend on our earnings, capital requirements and financial condition, our
 financing agreements, if any, and other factors that our board of directors considers relevant.



ITEM 6.   SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA



The
 following table sets forth our selected historical consolidated financial and operating data for each
 of the five years ended December 31, 2003. On May 29, 2002, we emerged from proceedings under chapter
 11 of the bankruptcy code. For financial statement purposes, our results of operations and cash flows
 have been separated as pre and post-May 31, 2002 due to a change in basis of accounting in the underlying
 assets and liabilities. See Note 3 of Notes to Consolidated Financial Statements. For purposes of the
 selected data below, we refer to our results prior to May 31, 2002 as results for our predecessor company
 and we refer to our results after May 31, 2002 as results for our reorganized company. However, for
 the reasons described in Note 3, certain aspects of the predecessor company financial statements for
 the periods before we emerged from bankruptcy are not comparable to the reorganized companys financial
 statements



The
 selected financial and operating data as of December 31, 1999, 2000, 2001, 2002 and 2003 and for each
 of the three years ended December 31, 2001, for the five months ended May 31, 2002, the seven months
 ended December 31, 2002 and the year ended December 31, 2003 have been derived from our audited consolidated
 financial statements. The consolidated financial statements for the years ended 1999 through 2001 were
 audited by Arthur Andersen LLP, which has ceased operations. A copy of the report previously issued
 by Arthur Andersen LLP on our financial statements as of December 31, 2000 and 2001 and for each of
 the three years in the period ended December 31, 2001 is included elsewhere in this annual report. This
 previously issued report has not been reissued by Arthur Andersen LLP.



The
 following consolidated financial 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 notes set forth below.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(dollars in thousands except per share amounts)                                                      | Predecessor Company |  | Reorganized Company
|---------------------------------------------------------------------------------------------------- | ------------------- |  | -------------------
|
|
|Statements of Operations Data:                                                                       |                     |  |                    
|Revenues                                                                                             |                     |  | $                  
|Operating expenses:                                                                                  |                     |  |                    
|Cost of products sold                                                                                |                     |  |                    
|Service, rental and maintenance                                                                      |                     |  |                    
|Selling                                                                                              |                     |  |                    
|General and administrative                                                                           |                     |  |                    
|Depreciation and amortization                                                                        |                     |  |                    
|Stock based and other compensation                                                                   |                     |  |                    
|Reorganization expense                                                                               |                     |  |                    
|Restructuring charges                                                                                |                     |  |                    
|                                                                                                     |                     |  |                    
|Operating income (loss)                                                                              |                     |  |                    
|Interest and non-operating expenses, net                                                             |                     |  |                    
|Gain on extinguishment of debt                                                                       |                     |  |                    
|Equity in loss of affiliate                                                                          |                     |  |                    
|Other income                                                                                         |                     |  |                    
|                                                                                                     |                     |  |                    
|Income (loss) before reorganization items, net      and fresh start accounting adjustments           |                     |  |                    
|Reorganization items, net                                                                            |                     |  |                    
|Fresh start accounting adjustments, net                                                              |                     |  |                    
|                                                                                                     |                     |  |                    
|Income (loss) before income taxes and       cumulativeeffect of change in accounting       principle |                     |  |                    
|Income tax benefit (expense)                                                                         |                     |  |                    
|                                                                                                     |                     |  |                    
|Income (loss) before cumulative effect of       change in accounting principle                       |                     |  |                    
|Cumulative effect of change in accounting      principle                                             |                     |  |                    
|                                                                                                     |                     |  |                    
|Net income (loss)                                                                                    |                     |  | $                  
|                                                                                                     |                     |  |                    
|Basic net income (loss) per common share:                                                            |                     |  |                    
|Net income (loss) before accounting change                                                           |                     |  | $                  
|Accounting change                                                                                    |                     |  |                    
|                                                                                                     |                     |  |                    
|Net income (loss)                                                                                    |                     |  | $                  
|                                                                                                     |                     |  |                    
|Diluted net income (loss) per common share:                                                          |                     |  |                    
|Net income (loss) before accounting change                                                           |                     |  | $                  
|Accounting change                                                                                    |                     |  |                    
|                                                                                                     |                     |  |                    
|Net income (loss)                                                                                    |                     |  | $                  
|                                                                                                     |                     |  |                    
|Other Operating Data:                                                                                |                     |  |                    
|Capital expenditures, excluding acquisitions                                                         |                     |  | $                  

|(dollars in thousands)                      | As of December 31,
|------------------------------------------- | ------------------
|
|
|Balance Sheet Data:                         |                   
|Current assets                              |                   
|Total assets                                |                   
|Long-term debt, less current maturities (1) |                   
|Liabilities subject to compromise (1)       |                   
|Redeemable preferred stock (1)              |                   
|Stockholders' equity (deficit)              |                   

| | (1) | In accordance with AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization under theBankruptcy Code, known as SOP 90-7, at December 2001, we classified substantially all of our pre-petition liabilities and redeemable preferred stock as Liabilities Subject to Compromise. See Note 3 to the Consolidated Financial Statements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 7.   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                 RESULTS OF OPERATIONS



Forward-Looking Statements



This
 annual report contains forward-looking statements and information relating to Arch and its subsidiaries
 that are based on managements beliefs as well as assumptions made by and information currently available
 to management. These statements are made pursuant to the safe harbor provisions of the Private Securities
 Litigation Reform Act of 1995. When used herein, words such as anticipate, believe, estimate,
 expect, intend and similar expressions, as they relate to Arch or its management, identify forward-looking
 statements. Such statements reflect our current views with respect to future events and are subject
 to certain risks, uncertainties and assumptions, including but not limited to those factors set forth
 below under the caption Factors Affecting Future Operating Results. Should one or more of these risks
 or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes
 may vary materially from those described herein as anticipated, believed, estimated, expected or intended.
 Investors are cautioned not to place undue reliance on these forward-looking statements, which speak
 only as of their respective dates. We undertake no obligation to update or revise any forward-looking
 statements. All subsequent written or oral forward-looking statements attributable to us or persons
 acting on our behalf are expressly qualified in their entirety by the discussion under Factors Affecting
 Future Operating Results.



Overview



The
 following discussion and analysis should be read in conjunction with our consolidated financial statements
 and related notes and the discussions under Application of Critical Accounting Policies, which describes
 key estimates and assumptions we make in the preparation of our financial statements and Factors Affecting
 Future Operating Results, which describes key risks associated with our operations and industry.



We
 derive the majority of our revenues from fixed monthly or other periodic fees charged to subscribers
 for wireless messaging services. Such fees are not generally dependent on usage. As long as a subscriber
 maintains service, operating results benefit from recurring payment of these fees. Revenues are generally
 dependent on the number of units in service and the monthly charge per unit. The number of units in
 service changes based on subscribers added, referred to as gross placements, less subscriber cancellations,
 or disconnects. The net of gross placements and disconnects is commonly referred to as net gains or
 losses of units in service. The absolute number of gross placements as well as the number of gross placements
 relative to average units in service in a period, referred to as the gross placement rate, is monitored
 on a monthly basis. In addition, the ratio of gross placements for a period to the number of sales representatives
 for the same period, referred to as gross placements per sales representative, is also reviewed. This
 measurement together with the gross placement rate reflects the productivity of our direct sales force.
 Disconnects are also monitored on a monthly basis. The ratio of units disconnected in a period to average
 units in service for the same period, called the disconnect rate, is an indicator of our success retaining
 subscribers which is important in order to maintain recurring revenues and to control operating expenses.



The
 following table sets forth our gross placements and disconnects for the periods stated.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|         | For the Year Ended December 31,
|-------- | -------------------------------
|
|
|Direct   |                                
|Indirect |                                
|         |                                
|Total    |                                
|         |                                

|The
 demand for one-way messaging services declined during the three years ended December 31, 2003, and we
 believe demand will continue to decline for the foreseeable future. During 2001, units in service decreased
 by 3,394,000 units due to subscriber cancellations. During 2002, units in service decreased by an additional
 2,860,000 units, of which 2,584,000 were due to subscriber cancellations and 276,000 were due to the
 partial divestiture of our interest in two Canadian subsidiaries, which resulted in the financial results
 of these subsidiaries no longer being consolidated into our financial statements commencing in December
 2002. During 2003, units in service decreased by 1,452,000 units as a result of operations. This decrease
 does not include the addition of 249,000 units which resulted from reversal of the remaining
 portion of the one-time, 1,000,000 unit reduction recorded in the fourth quarter of 2000 for definitional
 differences and potential unit reductions associated with the conversion and cleanup of accounts acquired
 in the PageNet acquisition. Since Arch has completed the conversion and final review of these accounts,
 the remainder of this prior unit reduction was recorded as a one-time increase in the fourth quarter,
 which increased our units in service at December 31, 2003.



The
 other factor that contributes to revenue, in addition to the number of units in service, is the monthly
 charge per unit. As previously discussed, the monthly charge is dependent on the subscribers service,
 extent of geographic coverage, whether the subscriber leases or owns the messaging device and the number
 of units the customer has on his or her account. The ratio of revenues for a period to the average units
 in service for the same period, commonly referred to as average revenue per unit, is a key revenue measurement
 as it indicates whether monthly charges for similar services and distribution channels are increasing
 or decreasing. Average revenue per unit by distribution channel and messaging service are monitored
 regularly. The following table sets forth our average revenue per unit by distribution channel for the
 periods stated.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|             | For the Year Ended December 31,
|------------ | -------------------------------
|
|Direct       |                                
|Indirect     |                                
|Consolidated |                                

|While
 average revenue per unit for similar services and distribution channels is indicative of changes in
 monthly charges, this measurement on a consolidated basis is affected by several factors, most notably
 the mix of units in service. The increase in our consolidated average revenue per unit for the years
 ended December 31, 2002 and 2003 was due primarily to a change in the mix of units in service between
 the two channels of distribution rather than increases in monthly charges per unit. The number of units
 in the indirect channel, as a percentage of our total number of units in service, decreased to 17% at
 December 31, 2003 from 24% and 30% at December 31, 2002 and, 2001, respectively. This decrease in the
 number of indirect units in service, as a percentage of our total number of units in service, was the
 primary contributor to the overall increase in average revenue per unit for the year ended December
 31, 2003 compared to the same periods in 2002 and 2001. Despite the overall increase in average revenue
 per unit, the decrease in average revenue per unit in our direct distribution channel is the most significant
 indicator of rate-related changes in our revenues. We anticipate that average revenue per unit for our
 direct units in service will decline in future periods and the decline will be primarily due to the
 mix of messaging services demanded by our customers, the percentage of customers with fewer units in
 service and, to a lesser extent, changes in monthly charges.



As
 discussed earlier, customers with more units in service generally have lower monthly charges for similar
 services due to volume discounts and historically have had lower disconnect rates. Therefore, as the
 percentage of our direct units in service becomes more concentrated with customers that have more units
 in service, our average revenue per unit and disconnect rate should decline. The following table sets
 forth our units in service for our direct channel of distribution grouped by the number of units in
 service on customer accounts for 2003. As presented below, average revenue per unit in service differs
 from that disclosed previously as these calculations only include contractual recurring revenues. Several
 revenue items are usage or transaction based and these amounts, which vary from period to period, are
 excluded from this calculation.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(units in thousands)                   | For the Year Ended December 31, 2003
|-------------------------------------- | ------------------------------------
|
|Beginning Units in Service             |                                     
|Customers with 1-10 units in service   |                                     
|Customers with 11-100 units in service |                                     
|Customers with >100 units in service   |                                     
|                                       |                                     
|Total                                  |                                     
|                                       |                                     
|Ending Units in Service                |                                     
|Customers with 1-10 units in service   |                                     
|Customers with 11-100 units in service |                                     
|Customers with >100 units in service   |                                     
|                                       |                                     
|Total                                  |                                     
|                                       |                                     

|The
 total beginning units in service disclosed in the table above differs from the 2002 direct units in
 service disclosed previously as the amount above reflects the 249,000 unit reduction described previously.



The
 following table includes our gross placements, disconnects and net gains (losses) of units in service
 for our direct channel of distribution grouped by the number of units in service on customer accounts
 for 2003. The gross placement, disconnect and net gain (loss) rates set forth below are calculated by
 dividing the relevant measure, gross placements, disconnects or net gains (losses) by average units
 in service and are presented on an average monthly basis.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(units in thousands)                   | For the Year Ended December 31, 2003
|-------------------------------------- | ------------------------------------
|
|Gross Placements                       |                                     
|Customers with 1-10 units in service   |                                     
|Customers with 11-100 units in service |                                     
|Customers with >100 units in service   |                                     
|                                       |                                     
|Total                                  |                                     
|                                       |                                     
|Disconnects                            |                                     
|Customers with 1-10 units in service   |                                     
|Customers with 11-100 units in service |                                     
|Customers with >100 units in service   |                                     
|                                       |                                     
|Total                                  |                                     
|                                       |                                     
|Net Gains (Losses)                     |                                     
|Customers with 1-10 units in service   |                                     
|Customers with 11-100 units in service |                                     
|Customers with >100 units in service   |                                     
|                                       |                                     
|Total                                  |                                     
|                                       |                                     

|The
 tables above illustrate the increasing concentration of customers with more units in service and how
 the net gain (loss) rate decreases as the number of units with a customer increases, thereby resulting
 in lower overall disconnect rates and average revenue per unit. We anticipate this trend to continue
 in future periods, which should result in lower revenues though the rate of revenue decline should decrease.



Our
 revenues were $1.2 billion, $818.7 million and $597.5 million for the years ended December 31, 2001,
 2002 and 2003, respectively. As noted above, the demand for our messaging services has declined over
 this three-year period and, as a result, operating expense management and control are important to our
 financial results. Certain of our operating expenses are especially important to overall expense control,
 these operating expenses are categorized as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Service, rental and maintenance. These are expenses associated with the operation of our networks and the provision of messaging services and consist largely of telephone charges to deliver messages over our networks and lease payments for locations on which we maintain transmitters.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Selling. These are expenses associated with our direct and indirect sales forces. This classification consists primarily of salaries, commissions and advertising expense.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | General and administrative. These are expenses associated with customer service, inventory management, billing, collections, bad debts and other administrative functions.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We
 review the percentages of these operating expenses to revenues on a regular basis. These ratios indicate
 whether operating expenses are decreasing at the same rate as revenues. The ratio of revenues less the
 total of cost of products sold, service, rental and maintenance, selling and general and administrative
 expenses to revenues is referred to as operating margin. Operating margin is a key indicator of our
 operating efficiency. Even though the operating expenses are classified as described above, expense
 controls are also performed on a functional expense basis. In 2003, we incurred approximately 75% of
 our operating expenses in three functional expense categories: payroll and related expenses, lease payments
 for transmitter locations and telephone expense.



Payroll
 and related expenses include wages, commissions, incentives, employee benefits and related taxes. We
 review the number of employees in major functional work groups, such as direct sales, customer service,
 collections and inventory on a monthly basis. The ratio of the number of direct units in service or
 total units in service per employee in each functional work group is reviewed to ensure functional groups,
 that are largely dependent on the number of units in service, maintain or improve this ratio. We also
 review the design and physical locations of functional groups to continuously improve efficiency, to
 simplify organizational structures and to minimize physical locations.



Lease
 payments for transmitter locations are largely dependent on our messaging networks. As described in
 Messaging Networks and Licenses, we operate local, regional and nationwide one-way messaging networks
 and a two-way messaging network. These networks each require locations on which to place transmitters,
 receivers and antennas. Generally, lease payments are incurred for each transmitter location. Therefore,
 lease payments for transmitter locations are highly dependent on the number of transmitters, which in
 turn is dependent on the number of networks. In addition, these expenses generally do not vary directly
 with the number of subscribers or units in service, which is detrimental to our operating margin as
 revenues decline. In order to reduce this expense, we have an active program to consolidate the number
 of networks and thus transmitter locations, which we refer to as network rationalization. In 2002 and
 2003, we removed 3,800 and 4,520 transmitters from various networks, respectively, and plan to remove
 approximately 1,200 additional transmitters in 2004.



Telephone
 expenses are incurred to interconnect our messaging networks and to provide telephone numbers for customer
 use, points of contact for customer service and connectivity among our offices. These expenses are dependent
 on the number of units in service and the number of office and network locations we maintain. The dependence
 on units in service is related to the number of telephone numbers provided to customers and the number
 of telephone calls made to our call centers, though this is not always a direct dependency. For example,
 the number or duration of telephone calls to our call centers may vary from period to period based on
 factors other than the number of units in service, which could cause telephone expense to vary regardless
 of the number of units in service. In addition, certain phone numbers we provide to our customers may
 have a usage component based on the number and duration of calls to the subscribers messaging device.
 Therefore, based on the factors discussed above, absent efforts that are underway to review telephone
 circuit inventories and capacities and to reduce the number of transmitter and office locations at which
 we operate, telephone expenses do not necessarily vary in direct relationship to units in service.



The
 total of our cost of products sold, service, rental and maintenance, selling and general and administrative
 expenses was $875.9 million, $585.6 million and $409.5 million for the years ended December 31, 2001,
 2002 and 2003, respectively, and operating margins in those periods were 24.7%, 28.5%, and 31.5%, respectively.
 The reduction in the total of our cost of products sold, service, rental and maintenance, selling and
 general and administrative expenses for 2002 and 2003 resulted in an increase in operating margin, which
 indicates expense reductions outpaced the decline in revenues for the same periods. Since it is anticipated
 that demand for one and two-way messaging will continue to decline, expense reductions will continue
 to be necessary in order for us to maintain operating margins at current levels.



Results of Operations



On
 May 29, 2002, we emerged from proceedings under chapter 11 of the bankruptcy code. Pursuant to our plan
 of reorganization, all of our former equity securities were cancelled and the holders of approximately
 $1.8 billion of our former indebtedness received securities which represented substantially all of our
 consolidated capitalization, consisting of $200 million aggregate principal amount of 10% senior subordinated
 secured notes (which have been fully repaid), $100 million aggregate principal amount of 12% subordinated
 secured compounding notes and approximately 95% of our new common stock. The remaining shares of new
 common stock have been or will be distributed to certain members of our senior management under the
 terms of our plan of reorganization. All but one of our former directors were replaced by new directors,
 although no material changes have occurred in our senior management.



For
 financial statement purposes, our results of operations and cash flows have been separated as pre and
 post-May 31, 2002 due to a change in basis of accounting in the underlying assets and liabilities. See
 Note 3 of Notes to Consolidated Financial Statements. For purposes of the following discussion we refer
 to our results prior to May 31, 2002 as results for our predecessor company and we refer to our results
 after May 31, 2002 as results for our reorganized company. The results of the reorganized company and
 the predecessor company for the three years ended December 31, 2003 are discussed below. However, for
 the reasons described in Note 3 and due to other non-recurring adjustments, certain aspects of the predecessor
 company financial statements for the periods before we emerged from bankruptcy are not comparable to
 the reorganized companys financial statements. The following items are particularly noteworthy:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a gain of $1.6 billion was recognized in May 2002 from the discharge and termination of debt upon emergence from bankruptcy;
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | o | a gain of $47.9 million was recognized in May 2002 due to fresh start accounting adjustments;
| | - | ---------------------------------------------------------------------------------------------

| | o | reorganization expenses of $22.5 million and $2.8 million were recognized in the five months ended May 31, 2002 and the seven months ended December 31, 2002, respectively, and;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | we did not accrue $76.0 million of contractual interest while we operated in bankruptcy for the five months ended May 31, 2002.
| | - | -------------------------------------------------------------------------------------------------------------------------------

|Comparison of the Results of Operations for the
 Year Ended December 31, 2003 to the Results for the Seven Months Ended December 31, 2002 and for the
 Year Ended December 31, 2001 to the Five Months Ended May 31, 2002



Our
 financial statements present separate operating results and cash flows for the predecessor company for
 periods prior to our emergence from bankruptcy, as well as operating results and cash flows for the
 reorganized company after our emergence from bankruptcy. The predecessor company had no results of operations
 after the effective date of the plan of reorganization, which was May 31, 2002 for accounting purposes,
 and the reorganized company had no results prior to the effective date. The predecessor company results
 reflect the application of fresh-start accounting that resulted from our chapter 11 reorganization.
 Consequently, the predecessor and reorganized company results of operations and cash flows are not comparable.
 The predecessor company had five months of results and the reorganized company had seven months of results
 through December 31, 2002 and the predecessor company had twelve months of operations in 2001.



Comparison
 of the twelve month period ended December 31, 2003 to the seven month period ended December 31, 2002
 for the reorganized company and comparison of the twelve month period ended December 31, 2001 to the
 five month period ended May 31, 2002 for the predecessor company is not meaningful since the primary
 explanation for changes in items is the significant difference in the number of months included in each
 period. Accordingly, a detailed comparison of the results of operations for these periods is not presented.



However,
 discussions regarding certain operating trends in revenues and operating expenses are meaningful to
 an understanding of our fiscal 2003 results. Those discussions have been incorporated into the sections
 Comparison of the Results of Operations for the Years Ended December 31, 2002 and 2003 and Comparison
 of the Results of Operations for the Years Ended December 31, 2001 and 2002, presented below.



Comparison of the Results of Operations for the
 Years Ended December 31, 2002 and 2003
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                | For the Year Ended, | Change Between
|------------------------------- | ------------------- | --------------
|
|
|Revenues                        |                     |               
|Selected operating expenses:    |                     |               
|Cost of products sold           |                     |               
|Service, rental & maintenance . |                     |               
|Selling                         |                     |               
|General and administrative      |                     |               

|Revenues
 consist primarily of recurring fees associated with the provision of messaging services, rental of leased
 units and the sale of devices. Device sales represented less than 10% of total revenues for the years
 ended December 31, 2002 and 2003. We do not differentiate between service and rental revenues. The decrease
 in revenues consisted of a $212.2 million decrease in recurring fees associated with the provision of
 messaging services and a $9.1 million decrease in revenues from device transactions. The table below
 sets forth units in service and recurring fees, the changes in each between 2002 and 2003 and the change
 in revenue associated with differences in the numbers of units in service and the average revenue per
 unit, known as ARPU.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  | Units in Service | Revenue
|----------------- | ---------------- | -------
|
|One-way messaging |                  |        
|Two-way messaging |                  |        
|                  |                  |        
|Total             |                  |        
|                  |                  |        

|As
 previously discussed, demand for messaging services has declined over the past several years and we
 anticipate that it will continue to decline for the foreseeable future, which will result in reductions
 in recurring fees due to the lower volume of subscribers. In addition, as the percentage of customers
 with more than 100 units in service increases, our average revenue per unit and disconnect rate is expected
 to decline. The impact of these events should result in a slowing in the decline in revenues.



Payroll
 and related expenses are our largest expense, representing 37.9% of the total of cost of products sold,
 service, rental and maintenance, selling and general and administrative expenses and 26.0% of revenues
 in 2003. The payroll and related expenses in each significant category of expense are included in the
 following table:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | For the Year Ended, | Change Between
|----------------------------- | ------------------- | --------------
|
|
|Service, rental & maintenance |                     |               
|Selling                       |                     |               
|General and administrative    |                     |               
|                              |                     |               
|Total                         |                     |               
|                              |                     |               

|As discussed earlier, we review the ratio of the number
 of direct units in service per employee in each functional work group to ensure that functional groups,
 which are largely dependent on the number of units in service, maintain or improve this ratio. The number
 of employees and the ratio of direct units in service per employee for each category of expense are
 included in the table below:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | For the Year Ended, | Change Between
|----------------------------- | ------------------- | --------------
|
|
|Service, rental & maintenance |                     |               
|Selling                       |                     |               
|General and administrative    |                     |               
|                              |                     |               
|Total                         |                     |               
|                              |                     |               

|The
 decrease in the number of employees resulted in $74.2 million lower payroll and related expense for
 2003 and the ratio of direct units in service per employee improved in each functional work group except
 service, rental and maintenance. Service, rental and maintenance consists largely of field technicians
 and their managers. Even though the number of employees included in this work group decreased during
 2003, the number of direct units in service declined at a faster rate, resulting in a decrease in the
 number of units per employee and an increase in the percentage of revenue. This functional work group
 does not vary as closely to direct units in service as other work groups since these individuals are
 a function of the number of networks we operate rather than the number of units in service on our networks.
 In 2003 we maintained higher staffing levels as we removed 4,520 transmitters in conjunction with our
 efforts to consolidate our networks. The decrease in payroll expenses related to selling was due primarily
 to a decrease in the number of sales representatives and sales management which resulted from our continuing
 efforts to maintain or improve sales force productivity; therefore, as units in service decline, fewer
 sales personnel are required. The decrease in payroll and related expenses included in general and administrative
 expenses was due to a lower number of employees in this category at December 31, 2003. In particular,
 the 1,141 fewer employees was due primarily to the improvement in the ratio of direct units in service
 per employee, in various work groups, such as customer service, collections and inventory.



Cost
 of products sold consists of the cost basis of devices sold to or lost by our customers, respectively.
 The decrease in this expense in 2003 was due to the revaluation of device basis that occurred upon our
 emergence from chapter 11 in May 2002 and to lower numbers of device transactions due to lower units
 in service in 2003.


Service,
 rental and maintenance expenses consist primarily of the following significant items:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | For the Year Ended, | Change Between
|------------------------------------------ | ------------------- | --------------
|
|
|Lease payments for transmitter   locations |                     |               
|Telephone related expenses                 |                     |               
|Payroll and related expenses               |                     |               
|Fees paid to other network                 |                     |               
|providers                                  |                     |               
|Operator dispatch fees                     |                     |               
|Other                                      |                     |               
|                                           |                     |               
|Total                                      |                     |               
|                                           |                     |               

|As
 illustrated in the table above, service, rental and maintenance expenses decreased $49.1 million from
 2002, however the percentage of these costs to revenues increased, primarily due to lease payments for
 transmitter locations. As discussed earlier, we have reduced the number of transmitters in service in
 conjunction with our plan to consolidate our networks. However, lease payments are subject to underlying
 obligations contained in each lease agreement, some of which do not allow for immediate savings when
 our equipment is removed. Further, leases may consist of payments for multiple sets of transmitters,
 antenna structures or network infrastructures on a particular site. In some cases, we remove only a
 portion of the equipment to which the lease payment relates. Under these circumstances, reduction of
 future rent payments is often subject to negotiation and our success is dependent on many factors, including
 the number of other sites we lease from the lessor, the amount and location of equipment remaining at
 the site and the remaining term of the lease. Therefore, lease payments for transmitter locations are
 generally fixed in the short term, and as a result, to date, we have not been able to reduce these payments
 at the same rate as the rate of decline in units in service and revenues, resulting in an increase in
 these expenses as a percentage of revenues. During the quarter ended December 31, 2003, we recorded
 an $11.5 million restructuring charge associated with a lease agreement for transmitter locations. Under
 the terms of this agreement, we are required to pay certain minimum amounts for a designated number
 of transmitter locations. However, during the quarter, we determined the designated number of transmitter
 locations was in excess of our current and anticipated needs and as a result ceased use of these locations.
 This charge did not affect lease payments for transmitter locations in 2003, but will result in lower
 expense in 2004 of approximately $8 million. The remaining obligation associated with this agreement
 will be paid over the next six quarters.



The
 decrease in telephone expenses resulted from savings associated with the consolidation of network facilities,
 lower usage-based charges due to declining units in service and rationalization of telephone trunk capacities.
 The decrease in fees paid to other network providers was due primarily to our efforts to migrate customers
 from other network providers to our networks and, to a lesser extent, lower units in service. The decrease
 in operator dispatch fees was due primarily to lower units in service and, to a lesser extent, the utilization
 of other means to contact alphanumeric subscribers, such as the Internet.



Service,
 rental and maintenance expenses related to two-way messaging were $38.9 million for the year ended December
 31, 2003, compared to $46 million for the same period in 2002. The reduction in these expenses in 2003
 was due primarily to lower fees paid to third party network providers which resulted from our efforts
 to migrate customers to our network.



We
 believe the primary service, rental and maintenance expense reduction in 2004 will relate to lease payments
 for transmitter locations. In 2003, we recognized a beneficial trend in these payments as a result of
 our ongoing program to reduce the number of networks we operate. We expect this trend to continue in
 future periods, but we cannot guarantee the level and specific timing of savings as these expenses are
 based on underlying contracts which, depending on the particular contract, may or may not result in
 immediate expense savings.


General
 and administrative expenses consist of the following significant items:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             | For the Year Ended, | Change Between
|---------------------------- | ------------------- | --------------
|
|
|Payroll and related expenses |                     |               
|Bad debt                     |                     |               
|Facility expenses            |                     |               
|Telephone                    |                     |               
|Outside services             |                     |               
|Taxes and permits            |                     |               
|Other                        |                     |               
|                             |                     |               
|Total                        |                     |               
|                             |                     |               

|The
 decrease in bad debt expense was due to improved collections and lower levels of overall accounts receivable
 which resulted from decreases in revenues as described above. The $4.2 million decrease in facilities
 expense was due to the closure of various office facilities in conjunction with our efforts to reduce
 the number of physical locations at which we operate. The decrease in telephone expense was due primarily
 to fewer calls to our call centers due to less units in service and the reduction of physical locations
 at which we operate. Taxes and permits consists primarily of property, franchise and gross receipts
 taxes. The increase in 2003 was due primarily to 2002 including approximately $14.9 million of items
 (see Comparison of the Results of Operations for the Years Ended December 31, 2001 and 2002 below)
 which either did not recur or occurred at lower rates in 2003. During the fourth quarter of 2003 we
 reduced our estimates for future sales and property tax liabilities by $1.1 million and $2.0 million,
 respectively, which resulted in lower taxes and permits expense for the quarterly and annual results.
 We anticipate taxes and permits expense to increase in 2004 as we do not expect similar adjustments
 in future periods.



Depreciation
 and amortization expenses decreased to $118.9 million for the year ended December 31, 2003 from $186.6
 million for the same period in 2002. This decrease was due primarily to the revaluation of our long-lived
 assets which occurred in conjunction with fresh-start accounting on May 31, 2002. The revaluation resulted
 in a different basis of accounting for the reorganized company and the predecessor company, and therefore,
 comparison of the results for the years ended December 31, 2002 and 2003, is not meaningful or appropriate.



Stock
 based and other compensation consists primarily of severance payments to persons we previously employed,
 amortization of compensation expense associated with common stock and options issued to certain members
 of management and the board of directors and compensation cost associated with a long-term management
 incentive plan. The increase in this expense in the year ended December 31, 2003 was due primarily to
 the recognition of approximately $1.3 million of compensation expense associated with the issuance of
 options to purchase 249,996 shares of common stock to certain members of our board of directors and
 the recognition of approximately $3.1 million related to the adoption of a long-term incentive plan.



Interest
 expense decreased to $19.2 million for the year ended December 31, 2003 from $20.5 million for the same
 period in 2002. Due to our filing for protection under chapter 11, we did not record interest expense
 on our debt from December 6, 2001 through May 31, 2002. Contractual interest that was neither accrued
 nor recorded on debt incurred before emerging from bankruptcy was $76.0 million for the five months
 ended May 31, 2002. Our current outstanding notes are at fixed rates, therefore interest expense is
 dependent only on outstanding balances. During the year ended December 31, 2003, we completed the redemption
 of our 10% notes and entered into several transactions to reduce the balance of our 12% notes, including:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | in October 2003, the repurchase and retirement of notes with $22.4 million aggregate compounded value
| | - | -----------------------------------------------------------------------------------------------------

| | o | the mandatory redemption of $2.7 million compounded value on November 15, 2003
| | - | ------------------------------------------------------------------------------

| | o | the optional redemption of $11.8 million and $15 million compounded value on November 20 and December 31, 2003, respectively
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | o | the announcement on December 31, 2003 of the optional redemption of $10 million compounded value which was made on January 30, 2004, and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| | o | subsequent to December 31, 2003, announced the optional redemption of an additional $10 million compounded value to be made in March 2004.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

|The
 completion of the repayment of our 10% notes and the transactions described above resulted in lower
 average debt during 2003 and will result in lower average outstanding debt in 2004 which in turn will
 result in lower interest expense in future periods.



Reorganization
 items were $25.3 million and $425,000 for the years ended December 31, 2002 and 2003, respectively.
 These expenses consisted of professional and other fees associated with our bankruptcy proceedings.
 We did not incur significant reorganization items in the year ended December 31, 2003 due to our emergence
 from chapter 11 in May 2002.



For
 the year ended December 31, 2003, we recognized a $10.8 million deferred income tax provision based
 on an effective tax rate of approximately 40%. The provision for the seven months ended December 31,
 2002 was recorded an effective tax rate of approximately 70% due to the timing difference of certain
 reorganization items expensed during that period. The increase in the provision for the current year
 is primarily due to the current year having five additional months of operations. We anticipate recognition
 of provisions for income taxes to be required for the foreseeable future, but we do not anticipate these
 provisions to result in current tax liabilities. See Factors Affecting Future Operating Results Deductions for tax purposes from future activities and from retained tax attributes may be insufficient
 to offset future federal taxable income and/or significant changes in the ownership of our common stock
 may increase income tax payment for further discussion.



Comparison of the Results of Operations for the
 Years Ended December 31, 2001 and 2002
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | For the Year Ended, | Change Between
|----------------------------- | ------------------- | --------------
|
|
|Revenues                      |                     |               
|Selected operating expenses:  |                     |               
|Cost of products sold         |                     |               
|Service, rental & maintenance |                     |               
|Selling                       |                     |               
|General and administrative    |                     |               

|Revenues
 consist primarily of recurring fees associated with the provision of messaging services, and for the
 lease and sale of devices. Device sales represented less than 10% of total revenues for the years ended
 December 31, 2001 and 2002. We do not differentiate between service and lease revenues.



The
 decrease in revenues consisted of a $317.6 million decrease in recurring fees associated with the provision
 of messaging services and a $27.2 million decrease in revenues from device transactions. The table below
 sets forth units in service and recurring fees, the changes in each between 2001 and 2002 and the change
 in revenue associated with differences in the numbers of units in service and the average revenue per
 unit.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  | Units in Service | Revenue
|----------------- | ---------------- | -------
|
|One-way messaging |                  |        
|Two-way messaging |                  |        
|                  |                  |        
|Total             |                  |        
|                  |                  |        

|As
 previously discussed, demand for messaging services has declined over the past several years and we
 anticipate that it will continue to decline for the foreseeable future, which will result in continued
 volume-related reductions in recurring fees.



Payroll
 and related expenses are our largest expense, representing 39.0% of the total of cost of products sold,
 service, rental and maintenance, selling and general and administrative expenses and 27.8% of revenues
 in 2002. These expenses are included in each of the significant categories of expense as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | For the Year Ended, | Change Between
|----------------------------- | ------------------- | --------------
|
|
|Service, rental & maintenance |                     |               
|Selling                       |                     |               
|General and administrative    |                     |               
|                              |                     |               
|Total                         |                     |               
|                              |                     |               

|We
 review the ratio of the number of direct units in service per employee in each functional work group
 to ensure that functional groups, that are largely dependent on the number of units in service, maintain
 or improve this ratio. The number of employees and the ratio of direct units in service per employee
 for each category of expense are included in the table below:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | For the Year Ended, | Change Between
|----------------------------- | ------------------- | --------------
|
|
|Service, rental & maintenance |                     |               
|Selling                       |                     |               
|General and administrative    |                     |               
|                              |                     |               
|Total                         |                     |               
|                              |                     |               

|The decrease in the number of employees resulted in
 $95.4 million lower payroll and related expense for 2002 and the ratio of direct units in service per
 employee improved in each functional work group. The decrease in payroll expenses from 2001 and 2002
 is due to the same conditions discussed in the comparison of 2002 and 2003 results.



Service,
 rental and maintenance expenses consist primarily of the following significant items:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | For the Year Ended, | Change Between
|------------------------------ | ------------------- | --------------
|
|
|Lease payments for transmitter |                     |               
|locations                      |                     |               
|Telephone related expenses     |                     |               
|Payroll and related expenses   |                     |               
|Fees paid to other network     |                     |               
|providers                      |                     |               
|Operator dispatch fees         |                     |               
|Other                          |                     |               
|                               |                     |               
|Total                          |                     |               
|                               |                     |               

|Service,
 rental and maintenance expenses decreased $65.0 million from 2001, however the percentage of these costs
 to revenue increased, primarily due to lease payments for transmitter locations remaining consistent
 from 2001 to 2002. We began reducing the number of transmitters in service in conjunction with our plan
 to consolidate our networks in 2002, however the timing of the removals was generally in the latter
 half of the year. The timing of the 2002 equipment removals and other factors discussed earlier were
 the primary reasons that lease payments for transmitter locations decreased moderately in 2002. The
 decrease in telephone expense resulted from (i) permanent savings due to consolidation of network facilities,
 favorable rate adjustments and lower usage-based charges due to declining units in service and (ii)
 a $4.4 million accrual adjustment due to favorable settlement of certain contract disputes. The decrease
 in fees paid to other network providers was due primarily to our efforts to migrate customers from other
 network providers to our networks and to a lesser extent lower units in service. The decrease in operator
 dispatch fees was due primarily to lower units in service and to a lesser extent the utilization of
 other means to contact alphanumeric subscribers, such as the Internet.



General
 and administrative expenses consist of the following significant items:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             | For the Year Ended, | Change Between
|---------------------------- | ------------------- | --------------
|
|
|Payroll and related expenses |                     |               
|Bad debt                     |                     |               
|Facility expenses            |                     |               
|Outside services             |                     |               
|Taxes and permits            |                     |               
|Telephone                    |                     |               
|Other                        |                     |               
|                             |                     |               
|Total                        |                     |               
|                             |                     |               

|Bad
 debt decreased due primarily to improved collections and lower levels of overall accounts receivable
 which resulted from the decreases in revenues described above. Facilities costs were lower in 2002 due
 to the closure of facilities in conjunction with the PageNet integration and to a lesser extent the
 consolidation of operating divisions. The decrease in outside services was due primarily to lower consulting
 and temporary employee expenses in 2002 which were necessary in 2001 to complete the conversion of PageNets
 billing systems to our billing system. The decrease in telephone expense was due to fewer calls to our
 call centers due to less units in service and the reduction of physical locations at which we operate.
 Taxes and permits were lower during 2002 due to the following:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | adjustments based on changes in estimates of future liabilities of $4.7 million and $3.6 million in the quarters ended June 30, 2002 and December 31, 2002, respectively
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a refund of approximately $3.7 million in the quarter ended December 31, 2002, which had not been previously recorded, and
| | - | --------------------------------------------------------------------------------------------------------------------------

| | o | recognition of $2.9 million of various state tax receivables in the quarter ended September 30, 2002.
| | - | -----------------------------------------------------------------------------------------------------

|Depreciation
 and amortization expenses decreased to $186.6 million in the year ended December 31, 2002 from $1.6
 billion in 2001. The decrease was principally due to a $976.2 million impairment charge, recorded in
 June 2001, related to certain one-way messaging equipment, computer equipment and intangible assets
 and the associated reduction in the carrying value of fixed and intangible assets. Depreciation and
 amortization expense for the seven months ended December 31, 2002 included $12.1 million of additional
 depreciation on certain types of one-way transmitters. The estimated useful life of these transmitters
 was reduced to be consistent with their removal from service in connection with our program to reduce
 the number of networks we operate. Approximately $9.3 million of this additional depreciation was the
 result of reducing the carrying value of transmitters to scrap value as such transmitters had been removed
 from service.



Stock
 based and other compensation consists primarily of severance payments to persons we previously employed
 and amortization of compensation expense associated with common stock issued to certain members of management
 at the time of our emergence from chapter 11. The increase in the seven months ended December 31, 2002
 was due primarily to severance payments in prior periods being charged to restructuring reserves which
 had been established in conjunction with the integration of our operations with those of PageNet and
 MobileMedia.



In
 2001, reorganization costs consisted of the accretion of $133.8 million of debt discounts, the write
 off of $11.4 million of deferred financing fees and $9.3 million of professional and other fees associated
 with the bankruptcy filing. Restructuring charges in 2001 included $5.9 million associated with our
 prior recapitalization plan which was withdrawn and $2.0 million of restructuring charges associated
 with the integration of PageNet operations.



Interest
 expense decreased to $21.0 million for the year ended December 31, 2002 from $226.9 million in 2001.
 Due to our filing for protection under chapter 11, we stopped recording interest expense on our bank
 debt and senior notes from December 6, 2001 through May 31, 2002. Contractual interest that was neither
 accrued nor recorded on debt incurred before the bankruptcy filing was approximately $76.0 million and
 $13.0 million for the five months ended May 31, 2002 and year ended December 31, 2001, respectively.
 The notes outstanding at December 31, 2002 were at fixed rates. During the seven months ended December
 31, 2002, we redeemed $90 million of the 10% notes.



In
 May 2002, upon emergence from chapter 11, we recognized a gain of $1.6 billion resulting from the discharge
 and termination of debt incurred before the bankruptcy filing. For the year ended December 31, 2001,
 we recognized a gain of $34.2 million on the retirement of debt exchanged for predecessor company stock.



Other
 expense was $1.0 million for the year ended December 31, 2002, compared to other expense of $31.9 million
 for the year ended December 31, 2001. In 2001, other expense included a $15.0 million charge resulting
 from the application of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
 known as SFAS No. 133, and a $7.5 million charge resulting from the write-off of a note receivable from
 Vast Solutions, Inc., which filed for bankruptcy in April 2001.



For
 the seven months ended December 31, 2002, we recognized a $2.3 million deferred income tax provision
 based on an effective tax rate of approximately 70%. This rate is higher than the statutory income tax
 rates primarily due to non-deductible reorganization items recognized in the seven-month period. We
 recognized an income tax benefit of $122.0 million for the year ended December 31, 2001. This amount
 represented the tax benefit of operating losses incurred subsequent to the acquisition of PageNet, which
 was available to offset deferred tax liabilities arising from the PageNet acquisition.



On
 January 1, 2001, we adopted SFAS No. 133, which required that every derivative instrument be recorded
 on the balance sheet as either an asset or liability measured at its fair value and that changes in
 the derivatives fair value be recognized in earnings. Initial application of SFAS No. 133 resulted
 in a $6.8 million charge in the quarter ended March 31, 2001, which was reported as the cumulative effect
 of a change in accounting principle. This charge represented the impact of initially recording the derivatives
 at fair value as of January 1, 2001.



Net
 income was $1.7 billion for the year ended December 31, 2002 as a result of the factors outlined above,
 including a $1.6 billion gain on extinguishment of debt recorded in May 2002. Net loss was $1.6 billion
 for the year ended December 31, 2001 as a result of the factors outlined above, including the $976.2
 million impairment charge recorded in June 2001.



Liquidity and Capital Resources



Overview



Based
 on current and anticipated levels of operations, we anticipate net cash provided by operating activities,
 together with $34.6 million of cash on hand at December 31, 2003, will be adequate to meet our anticipated
 cash requirements for the foreseeable future.



In
 the event that net cash provided by operating activities and cash on hand is not sufficient to meet
 future cash requirements, we may be required to reduce planned capital expenditures, sell assets or
 seek additional financing. We can provide no assurance that reductions in planned capital expenditures
 or proceeds from asset sales would be sufficient to cover shortfalls in available cash or that additional
 financing would be available on acceptable terms.



Sources of Funds



Our
 principal sources of cash are net cash provided by operating activities plus cash on hand.



Cash
 Flow.Our net cash flows from operating, investing and financing activities for the periods indicated
 in the table below were as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    | Year Ended December 31,
|--------------------------------------------------- | -----------------------
|
|
|Net cash provided by operating activities           |                        
|Net cash (used in) provided by investing activities |                        
|Net cash used in financing activities               |                        

|Investing
 activities in 2003 consisted primarily of capital expenditures net of proceeds from the sale of several
 buildings and other assets of approximately $3.2 million. Financing activities in 2003 consisted solely
 of repayment of debt.



Investing
 activities in 2002 consisted primarily of capital expenditures. Financing activities in 2002 consisted
 solely of the repayment of debt.



Investing
 activities of the predecessor company in 2001 included a cash inflow of $175.0 million from the sale
 of FCC licenses offset by $109.4 million of capital expenditures. Financing activities of the predecessor
 company in 2001 included repayments of debt of $178.1 million offset by proceeds from the sale of series
 F preferred stock of $75 million and borrowings by two of our Canadian subsidiaries of approximately
 $7.9 million. As discussed above, as a result of our chapter 11 reorganization, all of the predecessor
 companys equity interests were cancelled.



Borrowings.       
 The following table describes our principal borrowings at December 31, 2003 and associated debt service
 requirements.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Compounded Value | Interest | Maturity Date | Required Amortization             
|---------------- | -------- | ------------- | ----------------------------------
|$60.0 million    |          |               | 12%, payable in cash semi-annually

|
|

|(1) | Excess cash payments are required:
|--- | ----------------------------------

| | o | on each November 15 and May 15, the payment dates, to the extent cash at the prior quarter end exceeds $45 million ($35 million subsequent to September 30, 2004), after taking into account required interest and principal payments due on the payment date and certain working capital adjustments;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | out of the proceeds of asset sales in excess of $2 million; and
| | - | ---------------------------------------------------------------

| | o | out of specified kinds of insurance and condemnation proceeds.
| | - | --------------------------------------------------------------

|We
 have fully redeemed our previously issued 10% senior notes totaling $200 million principal amount, plus
 accrued interest, and as a result of the transactions that took place in 2003, the balance of our 12%
 notes was reduced from $111.9 million to $60.0 million at December 31, 2003. Upon completion of the
 announced redemptions for 2004 the balance of our 12% notes will be $40 million.



If
 a change in control (as defined in the indenture) occurs, we will be required to make an offer to purchase
 the 12% notes at 101% of the outstanding principal amount plus accrued and unpaid interest through the
 purchase date.



The
 indentures for the 12% notes impose restrictions, including the following:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | prohibition on restricted payments, including cash dividends, redemptions of stock or stock equivalents and optional payments on debt subordinated to the notes;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | prohibition on incurring additional indebtedness;
| | - | -------------------------------------------------

| | o | prohibition on liens on our assets;
| | - | -----------------------------------

| | o | prohibition on making or maintaining investments except for permitted cash-equivalent type instruments;
| | - | -------------------------------------------------------------------------------------------------------

| | o | prohibition on consolidations, mergers or sale of assets outside the ordinary course of business;
| | - | -------------------------------------------------------------------------------------------------

| | o | prohibition on transactions with affiliates; and
| | - | ------------------------------------------------

| | o | compliance with certain quarterly financial covenants including, but not limited to, (1) minimum earnings before interest, income taxes, depreciation and amortization, (2) minimum number of direct units in service, (3) minimum total consolidated service, rental and maintenance revenues and (4) maximum capital expenditures.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We
 were in compliance with our financial covenants at December 31, 2003.



In
 February 2004, we entered into a supplemental indenture to waive the financial covenants associated
 with (1) minimum earnings before interest, income taxes, depreciation and amortization, (2) minimum
 number of direct units in service and (3) minimum total consolidated service, rental and maintenance
 revenues for the quarters ended June 30, 2004 through March 31, 2005.



Without
 this supplemental indenture, we may not have been in compliance with certain financial covenants on
 various future dates.



Capital Expenditures and Commitments



Our
 business requires funds to finance capital expenditures for subscriber equipment and network system
 equipment.



Our
 capital expenditures decreased from $84.4 million for the year ended December 31, 2002 to $25.4 million
 for the year ended December 31, 2003. Capital expenditures primarily include the purchase and repair
 of wireless messaging devices, system and transmission equipment and information systems. We funded
 our 2003 capital expenditures with net cash provided by operating activities. Messaging device purchases
 were lower in the first two quarters of 2003 than levels experienced during the third and fourth quarters
 of 2003, as we had been utilizing inventory purchased in conjunction with a purchase arrangement we
 had with Motorola, Inc. that expired on September 30, 2002.



We
 estimate that capital expenditures for 2004 will be approximately $23 million. These expenditures will
 be used primarily for messaging devices. However, the actual amount of capital we require will depend
 on a number of factors, including the number of existing subscriber devices to be replaced, the number
 of new gross placements, technological developments, competitive conditions and the nature and timing
 of our strategy to consolidate our networks.



Contractual
 Obligations. As of December 31, 2003, our contractual payment obligations under our long-term debt
 agreements and operating leases for office and transmitter locations are indicated in the table below.
 For purposes of the table below, purchase obligations are defined as agreements to purchase goods or
 services that are enforceable and legally binding and that specify all significant terms, including:
 fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the
 approximate timing of transactions. These obligations primarily relate to devices and certain telephone
 expenses. The amounts are based on our contractual commitments; however, it is possible we may be able
 to negotiate lower payments if we choose to exit these contracts earlier.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            | Payments Due by Period
|--------------------------- | ----------------------
|
|
|Long-term debt obligations  |                       
|Operating lease obligations |                       
|Purchase obligations        |                       
|Other long-term liabilities |                       
|                            |                       
|Total                       |                       
|                            |                       

|Off-Balance
 Sheet Arrangements. We do not have any relationships with unconsolidated entities or financial partnerships,
 such as entities often referred to as structured finance or special purpose entities, which would have
 been established for the purpose of facilitating off-balance sheet arrangements or other contractually
 narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit
 risk that could arise if we had engaged in such relationships.



Application of Critical Accounting Policies



The
 preceding discussion and analysis of financial condition and results of operations are based on our
 consolidated financial statements, which have been prepared in conformity with accounting principles
 generally accepted in the United States of America. The preparation of these financial statements requires
 management to make estimates and judgments that affect the reported amounts of assets, liabilities,
 revenues, expenses and related disclosures. On an on-going basis, we evaluate estimates and assumptions,
 including but not limited to those related to the impairment of long-lived assets, reserves for doubtful
 accounts and service credits, revenue recognition, capitalization of device refurbishment costs, asset
 retirement obligations, restructuring reserves and income taxes. We base our estimates on historical
 experience and various other assumptions that are believed to be reasonable under the circumstances,
 the results of which form the basis for making judgments about the carrying values of assets and liabilities.
 Actual results may differ from these estimates under different assumptions or conditions.



Impairment of Long-Lived Assets



In
 accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
 Impairment or Disposal of Long-Lived Assets, known as SFAS No. 144, we are required to evaluate
 the carrying value of our long-lived assets and certain intangible assets. SFAS No. 144 first requires
 an assessment of whether circumstances currently exist which suggest the carrying value of long-lived
 assets may not be recoverable. At December 31, 2003, we did not believe any such conditions existed.
 Had these conditions existed, we would assess the recoverability of the carrying value of our long-lived
 assets and certain intangible assets based on estimated undiscounted cash flows to be generated from
 such assets. In assessing the recoverability of these assets, we would have projected estimated enterprise-level
 cash flows based on various operating assumptions such as average revenue per unit, disconnect rates,
 and sales and workforce productivity ratios. If the projection of undiscounted cash flows did not exceed
 the carrying value of the long-lived assets, we would be required to record an impairment charge to
 the extent the carrying value exceeded the fair value of such assets.



In
 conjunction with the application of SOP 90-7, our assets were recorded at their fair values based principally
 on a third-party appraisal as of May 29, 2002. However, if the assessment of the criteria above were
 to change and the projected undiscounted cash flows were lower than the carrying value of the assets,
 we would be required to record impairment charges related to our long-lived assets.



Reserves for Doubtful Accounts and Service Credits



We
 record two reserves against our gross accounts receivable balance: an allowance for doubtful accounts
 and an allowance for service credits. Provisions for these allowances are recorded on a monthly basis
 and are included as a component of general and administrative expense and a reduction of revenue, respectively.



Estimates
 are used in determining the allowance for doubtful accounts and are based on historical collection experience,
 current trends and a percentage of the accounts receivable aging categories. In determining these percentages
 we review historical write-offs, including comparisons of write-offs to provisions for doubtful accounts
 and as a percentage of revenues. We compare the ratio of the reserve to gross receivables to historical
 levels and we monitor amounts collected and related statistics. Our allowance for doubtful accounts
 was $12.8 million and $5.0 million at December 31, 2002 and 2003, respectively. While write-offs of
 customer accounts have historically been within our expectations and the provisions established, we
 cannot guarantee that future write-off experience will be consistent with historical experience, which
 could result in material differences in the allowance for doubtful accounts and related provisions.



The
 allowance for service credits and related provisions are based on historical credit percentages, current
 credit and aging trends and days billings outstanding. Days billings outstanding is determined by dividing
 the daily average of amounts billed to customers into the accounts receivable balance. This approach
 is used because it more accurately represents the amounts included in accounts receivable and minimizes
 fluctuations that occur in days sales outstanding due to the billing of quarterly, semi-annual and annual
 contracts and the associated revenue that is deferred. A range is developed and an allowance is recorded
 within that range based on our assessment of trends in days billings outstanding, aging characteristics
 and other operating factors. Our allowance for service credits was $9.7 million and $3.6 million at
 December 31, 2002 and 2003, respectively. While credits issued have been within our expectations and
 the provisions established, we cannot guarantee that future credit experience will be consistent with
 historical experience, which could result in material differences in the allowance for service credits
 and related provisions.



Revenue Recognition



Our
 revenue consists primarily of monthly service and lease fees charged to customers on a monthly, quarterly,
 semi-annual or annual basis. Revenue also includes the sale of messaging devices directly to customers
 and other companies that resell our services. In accordance with the provisions of Emerging Issues Task
 Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables , known as EITF No. 00-21,
 we evaluated these revenue arrangements and determined that two separate units of accounting exist,
 messaging service revenue and device sale revenue. Accordingly, we recognize messaging service revenue
 over the period the service is performed and revenue from device sales is recognized at the time of
 shipment. We recognize revenue when four basic criteria have been met: (1) persuasive evidence of an
 arrangement exists, (2) delivery has occurred or services rendered, (3) the fee is fixed or determinable
 and (4) collectibility is reasonably assured. The adoption of EITF No. 00-21, on July 1, 2003, resulted
 in approximately $945,000 of additional revenue being recognized in the year ended December 31, 2003.



Prior
 to July 1, 2003, in accordance with SAB 101, Revenue Recognition in Financial Statements,known
 as SAB 101, we bundled the sale of two-way messaging devices with the related service, since we had
 determined the sale of the service was essential to the functionality of the device. Therefore, revenue
 from two-way device sales and the related cost of sales were recognized over the expected customer relationship,
 which was estimated to be two years. In accordance with the transition provisions of EITF No. 00-21,
 we will continue to recognize previously deferred revenue and expense from the sale of two-way devices
 based upon the amortization schedules in place at the time of deferral. At December 31, 2003, we had
 approximately $2.1 million of deferred revenue and $610,000 of deferred expense that will be recognized
 in future periods, principally over the next five fiscal quarters.



Capitalization of Device Refurbishment Costs



We
 incur significant costs associated with messaging devices, including the purchase of new devices as
 well as the refurbishment of devices leased to customers. Device refurbishment falls into two general
 categories: (1) cosmetic cleaning and repair of external components (such as lenses, clips or plastic
 cases) and (2) significant refurbishment or replacement of internal components, including component
 level repair and changes, which allow the device to function on different messaging networks and on
 different frequencies. The costs associated with cosmetic cleaning and repair of external components
 are expensed in the period incurred. The costs associated with significant refurbishment extend the
 useful life of the device and allow us to forego the purchase of a new messaging device. Therefore,
 these costs are capitalized to fixed assets and depreciated over a one year estimated life.



We
 had approximately 3.3 million leased units in service as of December 31, 2003, which are subject to
 customer return primarily for cancellation of service or exchanges for different devices. We process
 several hundred thousand such returns on a quarterly basis and most devices returned require either
 cosmetic or significant refurbishment. Due to the high volume of devices processed, specific identification
 of repairs to specific pieces of equipment is not practical; therefore, we capitalize a majority of
 the significant refurbishment costs incurred. These costs consist of both internal costs, primarily
 payroll and related expenses, parts consumed in the repair process, and third party subcontracted repair
 services. The capitalization rate was determined based on an internal product flow and cost analysis
 of our in-house repair facility. The capitalization of these expenses results in lower operating expenses,
 but higher capital expenditures in each period. For the years ended December 31, 2002 and 2003, $14.4
 million and $1.9 million, respectively, were capitalized. If the capitalization rate were different
 from the rate currently used, service, rental and maintenance expense and capital expenditures would
 be affected in equal but opposite amounts and depreciation expense would differ on a prospective basis.



Asset Retirement Obligations



We
 adopted the provisions of SFAS No. 143, Accounting for Asset Retirement Obligations, known as
 SFAS No. 143, in 2002 in accordance with the requirements of SOP 90-7. SFAS No. 143 requires the recognition
 of liabilities and corresponding assets for future obligations associated with the retirement of assets.
 We have network assets that are located on leased transmitter locations. The underlying leases generally
 require the removal of our equipment at the end of the lease term, therefore a future obligation exists.
 We have recognized cumulative asset retirement obligation assets of $4.7 million through December 31,
 2003, $991,000 of which was recorded in 2003. Network assets have been increased to reflect these costs
 and depreciation is being recognized over their estimated lives, which range between one and ten years.
 Depreciation and amortization expense in 2003 includes $3.6 million related to depreciation of these
 assets. The asset retirement obligation assets, and their corresponding liabilities, recorded to date
 relate to either our current plans to consolidate our networks or to the removal of assets at an estimated
 future terminal date.



At
 December 31, 2002 and 2003, accrued expenses included $1.7 million and $1.0 million, respectively, of
 asset retirement liabilities related to our efforts to reduce the number of networks we operate. The
 primary variables associated with this estimate are the number and types of equipment to be removed
 and an estimate of the outside contractor fees to remove each asset. The costs associated with the 2003
 network consolidations exceeded the original removal cost estimate by $790,000, which is included in
 the cumulative asset discussed above. In addition, we recorded a $202,000 adjustment to the original
 asset retirement obligation related to the 2004 network consolidation. This estimate was based on our
 2004 operating plan. Since this is a short-term liability, the present value of the estimated retirement
 obligations is not materially different from the gross liability.



At
 December 31, 2002 and 2003, other long-term liabilities included $788,000 and $815,000 related primarily
 to an estimate of assets to be removed at an estimated terminal date and was recorded at its present
 value assuming a 24% credit adjusted risk free rate, which was derived based upon the yield of our 12%
 notes at the time we adopted SFAS No. 143. The undiscounted future obligation of approximately $5.6
 million is being accreted to operating expense over a ten-year period using the interest method. This
 estimate is based on the transmitter locations remaining after we have consolidated the number of networks
 we operate and assumes the underlying leases continue to be renewed to that future date. The fees charged
 by outside contractors were assumed to increase by 3% per year.



We
 believe these estimates are reasonable at the present time, but we can give no assurance that changes
 in technology, our financial condition, the economy or other factors would not result in higher or lower
 asset retirement obligations. Any variations from our estimates would generally result in a change in
 the assets and liabilities in equal amounts and our operating results would differ in the future by
 any difference in depreciation expense and accreted operating expense.



Restructuring Charges



From
 time to time, we cease to use certain facilities, such as office buildings and transmitter locations,
 including available capacity under certain agreements, prior to expiration of the underlying lease agreements.
 We review exit costs in each of these circumstances on a case-by-case basis to determine whether a restructuring
 charge is required to be recorded in accordance with SFAS No. 146, Accounting for Costs Associated
 with Exit or Disposal Activities, known as SFAS No. 146. The provisions of SFAS No. 146 require
 us to record an estimate of the fair value of the exit costs based on certain facts, circumstances and
 assumptions, including remaining minimum lease payments, potential sublease income and specific provisions
 included in the underlying lease agreements. Subsequent to recording a reserve, changes in market or
 other conditions may result in changes to assumptions upon which the original reserve was recorded that
 could result in an adjustment to the reserve and, depending on the circumstances, such adjustment could
 be material.




Income Taxes



The
 preparation of consolidated financial statements in conformity with generally accepted accounting principles
 requires us to make estimates and assumptions that affect the reported amount of tax-related assets
 and liabilities and income tax provisions. We assess the recoverability of our deferred tax assets on
 an ongoing basis.  In making this assessment we are required to consider all available positive
 and negative evidence to determine whether, based on such evidence, it is more likely than not that
 some portion or all of our net deferred assets will be realized in future periods.  This assessment
 requires significant judgement.  In addition, we have made significant estimates involving current
 and deferred income taxes, tax attributes relating to the interpretation of various tax laws, historical
 bases of tax attributes associated with certain tangible and intangible assets and limitations surrounding
 the realizability of our deferred tax assets. We do not recognize current and future tax benefits until
 it is deemed probable that certain tax positions will be sustained.



We
 established a valuation allowance against our net deferred tax assets upon emergence from bankruptcy
 since, based on information available at that time, it was deemed more likely than not that the deferred
 tax assets would not be realized. During the quarter ended December 31, 2003, we determined, based on
 operating income for the past two years, repayment of our notes well ahead of schedule and anticipated
 operating income and cash flows for future periods that it is more likely than not that certain deferred
 tax assets will be realized in the future and accordingly, it was appropriate to release the valuation
 allowance recorded against those deferred tax assets.



Under
 the provisions of SFAS No. 109, Accounting for Income Taxes, and related interpretations, reductions
 in a deferred tax asset valuation allowance that existed as of the date of fresh start accounting are
 first credited against an asset established for reorganization value in excess of amounts allocable
 to identifiable assets, then to other identifiable intangible assets existing at the date of fresh start
 accounting and then, once these assets have been reduced to zero, credited directly to additional paid
 in capital. The release of the valuation allowance reduced the carrying value of intangible assets by
 $2.3 million and $13.4 million for the seven month period ended December 31, 2002 and the year ended
 December 31, 2003, respectively. After reduction of our intangibles recorded in conjunction with fresh
 start accounting, the remaining reduction of the valuation allowance of $217.0 million was recorded
 as an increase to stockholders equity as of December 31, 2003.



In
 accordance with provisions of the Internal Revenue Code, we were required to apply the cancellation
 of debt income arising in conjunction with the provisions of our plan of reorganization against tax
 attributes existing as of December 31, 2002. The method utilized to allocate the cancellation of debt
 income is subject to varied interpretations of various tax laws and regulations and it has a material
 effect on the tax attributes remaining after allocation, and thus our future tax position. As a result
 of the method used to allocate cancellation of debt income for financial reporting purposes as of December
 31, 2002, we had no net operating losses remaining and the tax basis of certain other tax assets were
 reduced. Other methods of allocating the cancellation of debt income are possible based on different
 interpretations of various tax laws. In August 2003, the IRS issued additional regulations regarding
 the allocation of cancellation of debt income. We evaluated these regulations and determined that an
 alternative method of allocation was more probable than the method utilized at December 31, 2002. This
 method resulted in approximately $19.0 million of additional deferred tax assets and stockholders equity
 being recognized than would have been recognized using the December 31, 2002 allocation method. Had
 this method been utilized at December 31, 2002, the only effect on our consolidated financial statements
 would have been the amounts disclosed in the footnotes to the financial statements as we would have,
 at that point in time, concluded that a full valuation allowance was appropriate on the additional deferred
 tax assets.



We
 believe that we are more likely than not to recover our net deferred tax assets of $219.6 million through
 reductions in tax liabilities in future periods. However, recovery is dependent on achieving our forecast
 of future operating income over a protracted period of time. As of December 31, 2003, we would require
 approximately $550 million in cumulative future operating income to be generated at various times over
 approximately the next twenty years to realize our net deferred tax assets. We will review our forecast
 in relation to actual results and expected trends on an ongoing basis. Failure to achieve our operating
 income targets may change our assessment regarding the recoverability of our net deferred tax assets
 and such change could result in a valuation allowance being recorded against some or all of our deferred
 tax assets. Any increase in a valuation allowance would result in additional income tax expense, lower
 stockholders equity and could have a significant impact on our earnings in future periods.



Inflation



Inflation
 has not had a material effect on our operations to date. System equipment and operating costs have not
 increased in price and the price of wireless messaging devices have tended to decline in recent years.
 This reduction in costs has generally been reflected in lower prices charged to subscribers who purchase
 their wireless messaging devices. Our general operating expenses, such as salaries, lease payments for
 transmitter locations, employee benefits and occupancy costs, are subject to normal inflationary pressures.



Factors Affecting Future Operating Results



The
 following important factors, among others, could cause our actual operating results to differ materially
 from those indicated or suggested by forward-looking statements made in this Form 10-K or presented
 elsewhere by management from time to time.



Declines in our units in service will likely continue
 or could accelerate, causing decreases in revenues. Operating expenses may not decline at a rate that
 matches the decline in revenues.



Reductions
 in the number of units in service significantly affects the results of operations of wireless messaging
 service providers since operations no longer benefit from the recurring revenue generated from the units
 in service. In addition, the sales and marketing costs associated with attracting new subscribers are
 substantial compared to the costs of providing service to existing customers. Our units in service have
 declined for the past several years and we believe they will continue to decline for the foreseeable
 future. These reductions in units in service have resulted in substantial decreases in revenues. We
 expect to continue to experience significant declines in units in service and revenues for the foreseeable
 future.



In
 order to continue to generate net cash provided by operating activities, given the anticipated decreases
 in revenues described above, reductions in operating expenses have been, and will continue to be, necessary.
 In particular, lease payments on transmitter locations and telephone expenses are the most significant
 costs associated with the operation of our messaging networks, accounting for 37.0% of our service,
 rental and maintenance, selling and general and administrative expenses in 2003. Reductions in these
 expenses are dependent on our ability to successfully consolidate the number of messaging networks we
 operate, ultimately resulting in fewer locations on which we are required to pay monthly lease and telephone
 interconnection costs. Due to the nature of the underlying contractual agreements for our transmitter
 locations, there can be no assurance that the consolidation of the transmitter locations will result
 in immediate, proportionate savings in lease payments. Furthermore, our efforts to consolidate the number
 of transmitter locations could lead to further unit cancellations as some subscribers may experience
 a reduction in, or possible disruptions of, service.



We
 are dependent on net cash provided by operating activities as our principal source of liquidity. If
 our assumed reductions in operating expenses are not met, or if revenues decline at a more rapid rate
 than anticipated and that decline cannot be offset with additional expense reductions, net cash provided
 by operating activities would be adversely affected. If we are not able to achieve anticipated levels
 of net cash provided by operating activities, we may be required to reduce desired capital expenditures,
 which could result in higher losses of units in service.



We
 believe that future fluctuations in revenues, operating expenses and operating results may occur due
 to many factors, particularly the decreased demand for one and two-way messaging services, and fluctuations
 could be material. These fluctuations, if material, could have a significant impact on our net cash
 provided by operating activities, which could impair the value of our securities.



Competition from mobile, cellular and PCS telephone
 companies is intense. Many companies have introduced phones and services with substantially the same
 features and functions as the one and two-way messaging products and services provided by us, and have
 priced such devices and services competitively.



We
 face competition from other messaging providers in all markets in which we operate, as well as from
 cellular, PCS and other mobile wireless telephone companies. Competitors providing wireless messaging
 and information services continue to create significant competition for a depleting customer base, and
 providers of mobile wireless phone services such as AT&T Wireless, Cingular, WorldCom, Sprint PCS,
 Verizon, T-Mobile and Nextel now include wireless messaging as an adjunct service to voice services.
 In addition, the availability of coverage for mobile phone services has increased, making the two types
 of service and product offerings more comparable. Cellular and PCS companies seeking to provide wireless
 messaging services have been able to bring their products to market faster, at lower prices or in packages
 of products that consumers and businesses find more valuable than those we provide. In addition, many
 of these competitors, particularly cellular and PCS phone companies, possess greater financial, technical
 and other resources than those available to us.



Deductions for tax purposes from future activities
 and from retained tax attributes may be insufficient to offset future federal taxable income and/or
 significant changes in the ownership of our common stock may increase income tax payments.



We
 currently anticipate that we will have sufficient tax deductions from our operations, including from
 the federal income tax attributes that we retained after our emergence from chapter 11, to offset future
 federal taxable income (before these deductions) for the next several years. The extent to which these
 tax attributes will be available to offset future federal taxable income depends on factual and legal
 matters that are subject to varying interpretations. Therefore, despite our expectations, it is possible
 that we may not have sufficient tax attributes to offset future federal taxable income.



If
 we experience a change in ownership, as defined in sections 382 and 383 of the Internal Revenue Code,
 we could have significant limits on the amounts and timing of the use of various tax attributes. Generally,
 a change in ownership will occur if a cumulative change in ownership of more than 50% occurs. The cumulative
 change in ownership is a measurement of the change in ownership of our stock held by stockholders that
 own 5% or more of our stock. In general terms, it will equal the aggregate of any increase in the percentage
 of stock owned by stockholders that own 5% or more of our stock over the lowest percentage of stock
 owned by each of them during the prior three years, but not prior to May 29, 2002, the day we emerged
 from bankruptcy.



For
 example, if a stockholder owned 5.5% of our outstanding stock on May 29, 2002 and subsequently purchased
 additional shares so that it now owns 9.5% of our outstanding stock, that stockholders subsequent acquisitions
 of our shares would contribute to a change in ownership of 9.5% minus 5.5%, or 4.0%. We would combine
 the change in ownership calculations for all of our 5% or more stockholders whose interests have increased
 to calculate the cumulative change in ownership. If the aggregate increase in the ownership percentage
 of all of these stockholders exceeds 50%, then a change in ownership will have occurred. In making these
 calculations, all holders of less than 5% of our outstanding stock are combined and treated as one stockholder
 with more than 5% of our stock.




We
 believe that since our emergence from chapter 11 we have undergone a cumulative change in ownership
 of approximately 18.0%. The determination of our percentage ownership change is dependent on provisions
 of the tax law that are subject to varying interpretations and on facts that are not precisely determinable
 by us at this time. Therefore, our cumulative change in ownership may be more or less than 18.0% and,
 in any event, will increase by reason of any subsequent transactions in our stock by stockholders who
 own 5% or more of our stock.



If
 the deductions associated with our tax attributes are insufficient to offset future federal taxable
 income, or if a change in ownership occurs and our deductions are limited, we would likely generate
 taxable income and would be required to make current income tax payments. Any such payments could impair
 the value of our securities.



To
 help protect these tax benefits, our board of directors and stockholders approved the merger of our
 company with a wholly-owned subsidiary. In the merger, which became effective on June 13, 2003, each
 issued and outstanding share of our common stock was converted into the right to receive one new share
 of our Class A common stock, which is subject to the following restrictions on transfer. After a cumulative
 change in ownership of our stock of more than 40%, any transfer of Class A common stock by or to a holder
 of 5% or more of our outstanding stock will be prohibited unless the transferee or transferor provides
 notice of the transfer to us and our board of directors approves the transfer. Our board of directors
 will approve a transfer of Class A common stock if it determines in good faith that the transfer (1)
 would not result in a cumulative change in ownership of our stock of more than 42% or (2) would not
 increase the cumulative change in ownership of our stock. Prior to a cumulative change in ownership
 of our stock of more than 40%, transfers of Class A common stock will not be prohibited except to the
 extent that they result in a cumulative change in ownership of more than 42%, but any transfer by or
 to a holder of 5% or more of our outstanding stock requires a notice to us. Similar restrictions apply
 to the issuance or transfer of an option to purchase Class A common stock if the exercise of the option
 would result in a transfer that would be prohibited pursuant to the restrictions described above. Transfers
 by or to us and any transfer pursuant to a merger approved by the board of directors or any tender offer
 to acquire all of our outstanding stock where a majority of the shares have been tendered will be exempt
 from these restrictions. Once the transfer restrictions are no longer necessary to protect the tax benefits
 associated with our federal income tax attributes, the Class A common stock will be subject to conversion
 back into common stock without transfer restrictions on a share-for-share basis.



We
 cannot guarantee that the merger and the transfer restrictions on the Class A common stock will prevent
 a change in ownership or otherwise enable us to avoid significant limitations on the amounts and timing
 of the use of our tax attributes.



Loss of our key personnel could adversely impact
 our operations



Our
 success will depend, to a significant extent, upon the continued service of a relatively small group
 of key executive and management personnel. We have employment agreements with our chairman of the board
 and chief executive officer, our president and chief operating officer and our executive vice president
 and chief financial officer, and we have issued restricted stock, vesting over three years, to ten members
 of our senior management.



The
 loss or unavailability of one or more of our executive officers or the inability to attract or retain
 key employees in the future could have a material adverse effect on our future operating results, financial
 position and cash flows.




Recent and Pending Accounting Pronouncements



In
 November 2002, the FASB issued FIN No. 45, Guarantors Accounting and Disclosure Requirements for
 Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 clarifies that a
 guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value
 of the obligation undertaken in issuing the guarantee. We adopted FIN No. 45 on January 1, 2003. In
 February 2003, as permitted under Delaware law, we entered into indemnification agreements with 18 persons,
 including each of our directors and certain members of management, for certain events or occurrences
 while the director or member of management is, or was serving, at our request in that capacity. The
 maximum potential amount of future payments we could be required to make under these indemnification
 agreements is unlimited; however, we have a director and officer insurance policy that limits our exposure
 and enables us to recover a portion of any future amounts paid under the terms of the policy. As a result
 of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements
 is minimal. Therefore, in accordance with FIN No. 45, we have not recorded a liability for these agreements
 as of December 31, 2003.



In
 November 2002, the Emerging Issues Task Force, known as EITF, issued No. 00-21, Accounting for Revenue
 Arrangements with Multiple Deliverables. EITF No. 00-21 addresses certain aspects of accounting
 by a vendor for arrangements under which it will perform multiple revenue-generating activities. The
 effects of EITF No. 00-21 on our revenue recognition policies is discussed above in Application of
 Critical Accounting Policies.



In
 January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities, an interpretation
 of ARB 51and issued a revision to that guidance, FIN No. 46-R, in December 2003. FIN No. 46 and
 FIN No 46-R provide guidance on the identification of entities for which control is achieved through
 means other than through voting rights called variable interest entities or VIEs and how to determine
 when and which business enterprise should consolidate the VIE (the primary beneficiary). This model
 for consolidation applies to an entity in which either (1) the equity investors (if any) do not have
 a controlling financial interest or (2) the equity investment at risk is insufficient to finance that
 entitys activities without receiving additional subordinated financial support from other parties.
 In addition, these interpretations require both the primary beneficiary and all other enterprises with
 a significant variable interest in a VIE to make additional disclosures. The provisions of FIN No. 46
 are applicable to us for any interests entered into after January 31, 2003 and the provisions of FIN
 No. 46-R will be effective in the quarter ended March 31, 2004. We do not have any interests that would
 change our current reporting entity or require additional disclosures outlined in FIN No. 46 or FIN
 No. 46-R.



In
 April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
 Hedging Activities, known as SFAS No. 149. This statement amends SFAS No. 133 to provide clarification
 on the financial accounting and reporting of derivative instruments and hedging activities and requires
 contracts with similar characteristics to be accounted for on a comparable basis. We adopted SFAS No.
 149 on July 1, 2003 and the adoption did not have a material effect on our financial condition or results
 of operations.



In
 May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
 of both Liabilities and Equity, known as SFAS No. 150. SFAS No. 150 establishes standards for the
 classification and measurement of certain financial instruments with characteristics of both liabilities
 and equity. It requires the classification of a financial instrument that is within its scope as a liability
 (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into
 or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period
 beginning after June 15, 2003. We adopted SFAS No. 150 on July 1, 2003 and the adoption did not have
 a material effect on our financial statements or results of operations.



In
 December 2003, the SEC issued SAB No. 104, Revenue Recognition, known as SAB 104, which supercedes
 portions of SAB 101. The primary purpose of SAB 104 is to rescind accounting guidance contained in SAB
 101 related to multiple element revenue arrangements, which was superceded as a result of the issuance
 of EITF 00-21. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue
 recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption
 of SAB 104 did not have a material impact on our financial statements.




ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Our
 debt financing consists of fixed rate secured notes, which are secured by substantially all of our assets.



Subordinated Secured Compounding Notes, Fixed Rate Debt:



Our
 fixed rate secured notes are traded publicly and are subject to market risk. The fair values of our
 fixed rate notes were based on market quotes as of December 31, 2003.
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|                  |  |  |               
|----------------- |  |  | --------------
|Principal Balance |  |  | Fair Value    
|$60.0 million     |  |  | $ 63.6 million

|ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



The
 financial statements and schedules listed in Item 15(a)(1) and (2) are included in this Report beginning
 on Page F-1.



ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



On
 June 27, 2002, our board of directors and our audit committee dismissed Arthur Andersen LLP as our independent
 auditors and engaged PricewaterhouseCoopers LLP to serve as our independent auditors for the fiscal
 year ending December 31, 2002, effective June 27, 2002. Arthur Andersen LLPs audit report on our consolidated
 financial statements for each of the fiscal years ended December 31, 2000 and 2001, respectively, contained
 an explanatory paragraph regarding our ability to continue as a going concern. Except as stated above,
 Arthur Andersen LLPs reports on our consolidated financial statements for each of the fiscal years
 ended December 31, 2000 and 2001 did not contain any adverse opinion or disclaimer of opinion, nor were
 they qualified or modified as to uncertainty, audit scope or accounting principles.



During
 the fiscal years ended December 31, 2000 and 2001 and through June 2002, there were no disagreements
 with Arthur Andersen LLP on any matter of accounting principle or practice, financial statement disclosure,
 or auditing scope or procedure which, if not resolved to Arthur Andersen LLPs satisfaction, would have
 caused them to make reference to the subject matter in conjunction with their report on our consolidated
 financial statements for such years; and there were no reportable events as defined in Item 304(a)(1)(v)
 of Regulation S-K.



We
 requested Arthur Andersen LLP to furnish us with a letter addressed to the Securities and Exchange Commission
 stating whether or not it agrees with the above statements. A copy of that letter, dated June 28, 2002,
 was included with our current report on Form 8-K, filed with the Securities and Exchange Commission
 on June 27, 2002.



Prior
 to their engagement, neither we, nor anyone acting on our behalf, consulted PricewaterhouseCoopers LLP
 with respect to the application of accounting principles to a specified transaction, either completed
 or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements,
 or any other matters or reportable events as set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.



For
 the fiscal years ended December 31, 2002 and 2003, there were no disagreements with PricewaterhouseCoopers
 LLP on any matter of accounting principle or practice, financial statement disclosure, or auditing scope
 or procedure.



ITEM 9A.   CONTROLS AND PROCEDURES



Our
 companys management, with the participation of our chief executive officer and chief financial officer,
 evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e)
 and 15d-15(e) under the Exchange Act) as of December 31, 2003. Based on this evaluation, our chief executive
 officer and chief financial officer concluded that, as of December 31, 2003, our disclosure controls
 and procedures were (1) designed to ensure that material information relating to our company, including
 our consolidated subsidiaries, is made known to our chief executive officer and chief financial officer
 by others within those entities, particularly during the period in which this report was being prepared
 and (2) effective, in that they provide reasonable assurance that information required to be disclosed
 by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized
 and reported within the time periods specified in the SECs rules and forms.



No
 change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
 under the Exchange Act) occurred during the fiscal quarter ended December 31, 2003 that has materially
 affected, or is reasonably likely to materially affect, the Companys internal controls over financial
 reporting.



PART III



The
 information required by Items 10 through 14 are incorporated by reference to the Registrants definitive
 Proxy Statement for its 2004 annual meeting of stockholders.



PART IV



ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
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|    |  | 
|--- |  | 
|(a) |  | 
|    |  | 
|    |  | 
|    |  | 
|    |  | 
|    |  | 
|    |  | 
|(a) |  | 
|    |  | 
|(b) |  | 
|    |  | 
|(c) |  | 
|    |  | 

|SIGNATURES



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

|March 1, 2004 |  | ARCH WIRELESS, INC.BY: /s/ C. Edward Baker, Jr.C. Edward Baker, Jr.Chairman of the Board and Chief Executive 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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           |  | 
|-------------------------- |  | 
|/s/ C. Edward Baker, Jr    |  | 
|C. Edward Baker, Jr        |  | 
|/s/ J. Roy Pottle          |  | 
|J. Roy Pottle              |  | 
|/s/ James V. Continenza    |  | 
|James V. Continenza        |  | 
|/s/ Eric Gold              |  | 
|Eric Gold                  |  | 
|/s/ Carroll D. McHenry     |  | 
|Carroll D. McHenry         |  | 
|/s/ Matthew Oristano       |  | 
|Matthew Oristano           |  | 
|/s/ William E. Redmond, Jr |  | 
|William E. Redmond, Jr     |  | 
|/s/ Richard A. Rubin       |  | 
|Richard A. Rubin           |  | 
|/s/ Samme L. Thompson      |  | 
|Samme L. Thompson          |  | 

|INDEX TO FINANCIAL STATEMENTS
|-----------------------------

|                                                                                          | Page
|----------------------------------------------------------------------------------------- | ----
|Reports of Independent Auditors                                                           |     
|Consolidated Balance Sheets as of December 31, 2002 and 2003 (Reorganized Company)        |     
|Consolidated Statements of Operations for the Year Ended December 31, 2001, the Five      |     
|Months Ended May 31, 2002 (Predecessor Company), the Seven Months Ended December 31,      |     
|2002 and the Year Ended December 31, 2003 (Reorganized Company)                           |     
|Consolidated Statements of Stockholders' Equity (Deficit) for the Year Ended December 31, |     
|2001, the Five Months Ended May 31, 2002 (Predecessor Company), the Seven Months Ended    |     
|December 31, 2002 and the Year Ended December 31, 2003 (Reorganized Company)              |     
|Consolidated Statements of Cash Flows for the Year Ended December 31, 2001, the Five      |     
|Months Ended May 31, 2002 (Predecessor Company), the Seven Months Ended December 31,      |     
|2002 and the Year Ended December 31, 2003 (Reorganized Company)                           |     
|Notes to Consolidated Financial Statements                                                |     

|REPORT OF INDEPENDENT AUDITORS



To the Board of Directors and Stockholders of Arch
 Wireless, Inc.:



In our opinion, the accompanying consolidated statements
 of operations, of cash flows and of changes in stockholders equity for the period from January 1, 2002
 to May 31, 2002 present fairly, in all material respects, the results of operations and cash flows of
 Arch Wireless, Inc. and its subsidiaries (Predecessor Company) for the period from January 1, 2002 to
 May 31, 2002 in conformity with accounting principles generally accepted in the United States of America.
 These financial statements are the responsibility of the Companys management; our responsibility is
 to express an opinion on these financial statements based on our audit. We conducted our audit of these
 statements in accordance with auditing standards generally accepted in the United States of America,
 which require that we plan and perform the audit to obtain reasonable assurance about whether the financial
 statements are free of material misstatement. An audit includes examining, on a test basis, evidence
 supporting the amounts and disclosures in the financial statements, assessing the accounting principles
 used and significant estimates made by management, and evaluating the overall financial statement presentation.
 We believe that our audit provides a reasonable basis for our opinion. The consolidated financial statements
 of Arch Wireless, Inc. and its subsidiaries for the year ended December 31 2001, prior to the adjustments
 discussed in Note 1, were audited by other independent accountants who have ceased operations. Those
 independent accountants expressed an unqualified opinion on those financial statements in their report
 dated March 7, 2002 (except for the matter discussed in Note 15 to the 2001 financial statements as
 to which the date is May 29, 2002).



As discussed in Note 3 to the consolidated financial
 statements, the Company emerged from Chapter 11 bankruptcy on May 29, 2002. Upon emergence from bankruptcy,
 the Company changed its basis of financial statement presentation to reflect the adoption of fresh start
 accounting in accordance with American Institute of Certified Public Accountants Statement of Position
 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code.



As discussed above, the consolidated financial statements
 of Arch Wireless, Inc. for the year ended December 31, 2001, were audited by other independent accountants
 who have ceased operations. As described in Note 1 to the consolidated financial statements, these consolidated
 financial statements have been restated to reclassify gains on the extinguishment of debt in compliance
 with Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of SFAS Nos. 4, 44
 and 64, Amendment of SFAS 13, and Technical Corrections as of April 2002, which was adopted by the
 Reorganized Company as of June 1, 2002. We audited the adjustments described in Note 1 to the consolidated
 financial statements that were applied to restate the 2001 consolidated financial statements. In our
 opinion, such adjustments are appropriate and have been properly applied. However, we were not engaged
 to audit, review, or apply any procedures to the 2001 consolidated financial statements of Arch Wireless,
 Inc. other than with respect to such adjustments and, accordingly, we do not express an opinion or any
 other form of assurance on the 2001 consolidated financial statements taken as a whole.



/s/ PRICEWATERHOUSECOOPERS LLP



Boston, Massachusetts February 26, 2004

REPORT OF INDEPENDENT AUDITORS



To the Board of Directors and Stockholders of Arch
 Wireless, Inc.:



In our opinion, the accompanying consolidated balance
 sheets and the related consolidated statements of operations, of cash flows and of changes in stockholders
 equity present fairly, in all material respects, the financial position of Arch Wireless, Inc. and its
 subsidiaries (Reorganized Company) at December 31, 2003 and 2002, and the results of their operations
 and their cash flows for the year ended December 31, 2003 and for the period from June 1, 2002 to December
 31, 2002 in conformity with accounting principles generally accepted in the United States of America.
 These financial statements are the responsibility of the Companys management; our responsibility is
 to express an opinion on these financial statements based on our audits. We conducted our audits of
 these statements in accordance with auditing standards generally accepted in the United States of America,
 which require that we plan and perform the audits to obtain reasonable assurance about whether the financial
 statements are free of material misstatement. An audit includes examining, on a test basis, evidence
 supporting the amounts and disclosures in the financial statements, assessing the accounting principles
 used and significant estimates made by management, and evaluating the overall financial statement presentation.
 We believe that our audits provide a reasonable basis for our opinion.



As discussed in Note 3 to the consolidated financial
 statements, the Company emerged from Chapter 11 bankruptcy on May 29, 2002. Upon emergence from bankruptcy,
 the Company changed its basis of financial statement presentation to reflect the adoption of fresh start
 accounting in accordance with American Institute of Certified Public Accountants Statement of Position
 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code.



/s/ PRICEWATERHOUSECOOPERS LLP



Boston, Massachusetts February 26, 2004
The Report of Independent Public Accountants below
 is a copy of a report previously issued by Arthur Andersen LLP, which has not been reissued by Arthur
 Andersen LLP. The consolidated balance sheet at December 31, 2001 and the consolidated statements of
 operations, cash flows and stockholders equity for the year ended December 31, 2000 are not required
 to be presented in this Form 10-K. The note references in the opinion below are to the financial statements
 included in our Form 10-K/A for the year ended December 31, 2001 filed June 13, 2002. As discussed in
 Note 1 in the consolidated financial statements, the Company has revised its consolidated financial
 statements for the year ended December 31, 2001 to reclassify gains on the extinguishment of debt in
 compliance with Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of SFAS Nos.
 4, 44 and 64, Amendment of SFAS 13, and Technical Corrections as of April 2002", which was adopted by
 the Reorganized Company as of June 1, 2002. The Arthur Andersen LLP report does not extend to these
 revisions. The revisions related to these reclassifications were reported on by PricewaterhouseCoopers
 LLP, as stated in their report appearing herein



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Arch Wireless, Inc.:



We have audited the accompanying consolidated balance
 sheets of Arch Wireless, Inc. (a Delaware corporation) (the Company) and subsidiaries as of December
 31, 2000, as restated (see Note 14), and 2001, and the related consolidated statements of operations,
 stockholders equity (deficit), as restated (see Note 14), and cash flows for each of the three years
 in the period ended December 31, 2001. 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. Those standards require that we plan and perform
 the audit to obtain reasonable assurance about whether the financial statements are free of material
 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
 in the financial statements. An audit also includes assessing the accounting principles used and significant
 estimates made by management, as well as evaluating the overall financial statement presentation. We
 believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements
 referred to above present fairly, in all material respects, the consolidated financial position of Arch
 Wireless, Inc. and subsidiaries as of December 31, 2000, as restated (see Note 14), and 2001, and the
 results of their operations and their cash flows for each of the three years in the period ended December
 31, 2001, in conformity with accounting principles generally accepted in the United States.



The accompanying financial statements have been prepared
 assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial
 statements, on December 6, 2001, the Company and substantially all of its domestic subsidiaries voluntarily
 filed for protection under Chapter 11 of the United States Bankruptcy Code, which raises substantial
 doubt about the Companys ability to continue as a going concern in its present form. Managements plans
 in regard to these matters are also described in Note 2. The financial statements do not include any
 adjustments that might result from the outcome of this uncertainty.



As explained in Note 1 to the financial statements,
 effective January 1, 2001, the Company changed its method of accounting for derivative instrument and
 hedging activities in accordance with Statement of Financial Accounting Standards No. 133 Accounting
 for Derivative Instruments and Hedging Activities.


/s/ ARTHUR ANDERSEN LLP



Boston, Massachusetts March 7, 2002 (except for
 the matter discussed in Note 15 as to which the date is May 29, 2002)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ARCH WIRELESS, INC.CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)

|                                                                     | December 31,
|-------------------------------------------------------------------- | ------------
|
|ASSETS                                                               |             
|Current assets:                                                      |             
|Cash and cash equivalents                                            |             
|Accounts receivable (less reserves of $22,492 and $8,645 in 2002 and |             
|2003, respectively)                                                  |             
|Deposits                                                             |             
|Prepaid rent                                                         |             
|Prepaid expenses and other                                           |             
|Deferred income taxes                                                |             
|                                                                     |             
|Total current assets                                                 |             
|                                                                     |             
|Property and equipment:                                              |             
|Land, buildings and improvements                                     |             
|Messaging and computer equipment                                     |             
|Furniture, fixtures and vehicles                                     |             
|                                                                     |             
|                                                                     |             
|Less accumulated depreciation and amortization                       |             
|                                                                     |             
|Property and equipment, net                                          |             
|                                                                     |             
|Assets held for sale                                                 |             
|                                                                     |             
|Intangible and other assets (less accumulated amortization of $3,510 |             
|and $5,666 in 2002 and 2003, respectively)                           |             
|                                                                     |             
|Deferred income taxes                                                |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|LIABILITIES AND STOCKHOLDERS' EQUITY                                 |             
|Current maturities of long-term debt                                 |             
|Accounts payable                                                     |             
|Accrued compensation and benefits                                    |             
|Accrued network costs                                                |             
|Accrued property and sales taxes                                     |             
|Accrued interest                                                     |             
|Accrued restructuring charges                                        |             
|Accrued other expenses                                               |             
|Customer deposits                                                    |             
|Deferred revenue                                                     |             
|                                                                     |             
|Total current liabilities                                            |             
|                                                                     |             
|Long-term debt, less current maturities                              |             
|                                                                     |             
|Other long-term liabilities                                          |             
|                                                                     |             
|Stockholders' equity:                                                |             
|Common stock50,000,000 shares authorized, 20,000,000 shares         |             
|issued and outstanding                                               |             
|Additional paid-in capital                                           |             
|Deferred stock compensation                                          |             
|Retained earnings                                                    |             
|                                                                     |             
|Total stockholders' equity                                           |             
|                                                                     |             
|                                                                     |             
|                                                                     |             

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



ARCH WIRELESS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                       | Predecessor Company(Note 3) |  | Reorganized Company(Note 3)
|------------------------------------------------------ | --------------------------- |  | ---------------------------
|
|Revenues                                               |                             |  | $                          
|Operating expenses:                                    |                             |  |                            
|Cost of products sold(exclusive of depreciation,       |                             |  |                            
|amortization and stock based and other compensation    |                             |  |                            
|shown separately below)                                |                             |  |                            
|Service, rental and maintenance (exclusive of          |                             |  |                            
|depreciation, amortization and stock based and other   |                             |  |                            
|compensation shown separately below)                   |                             |  |                            
|Selling(exclusive of stock based and other             |                             |  |                            
|compensation shown separately below)                   |                             |  |                            
|General and administrative (exclusive of depreciation, |                             |  |                            
|amortization and stock based and other compensation    |                             |  |                            
|shown separately below)                                |                             |  |                            
|Depreciation and amortization                          |                             |  |                            
|Stock based and other compensation                     |                             |  |                            
|Reorganization expenses                                |                             |  |                            
|Restructuring charges                                  |                             |  |                            
|                                                       |                             |  |                            
|Total operating expenses                               |                             |  |                            
|                                                       |                             |  |                            
|Operating income (loss)                                |                             |  |                            
|Interest expense                                       |                             |  |                            
|Interest income                                        |                             |  |                            
|Gain on extinguishment of debt                         |                             |  |                            
|Other income (expense)                                 |                             |  |                            
|                                                       |                             |  |                            
|Income (loss) before reorganization items, net and     |                             |  |                            
|fresh start accounting adjustments                     |                             |  |                            
|Reorganization items, net                              |                             |  |                            
|Fresh start accounting adjustments                     |                             |  |                            
|                                                       |                             |  |                            
|Income (loss) before income tax benefit (expense) and  |                             |  |                            
|cumulative effect of change in accounting principle    |                             |  |                            
|Income tax benefit (expense)                           |                             |  |                            
|                                                       |                             |  |                            
|Income (loss) before cumulative effect of change in    |                             |  |                            
|accounting principle                                   |                             |  |                            
|Cumulative effect of change in accounting principle    |                             |  |                            
|                                                       |                             |  |                            
|Net income (loss)                                      |                             |  |                            
|Preferred stock dividend                               |                             |  |                            
|                                                       |                             |  |                            
|Net income (loss) applicable to common stockholders    |                             |  | $                          
|                                                       |                             |  |                            
|Basic net income (loss) per common share:              |                             |  |                            
|Net income (loss) before accounting change             |                             |  | $                          
|Accounting change                                      |                             |  |                            
|                                                       |                             |  |                            
|Net income (loss)                                      |                             |  | $                          
|                                                       |                             |  |                            
|Diluted net income (loss) per common share:            |                             |  |                            
|Net income (loss) before accounting change             |                             |  | $                          
|Accounting change                                      |                             |  |                            
|                                                       |                             |  |                            
|Net income (loss)                                      |                             |  | $                          
|                                                       |                             |  |                            
|Basic weighted average common shares outstanding       |                             |  |                            
|                                                       |                             |  |                            
|Diluted weighted average common shares outstanding     |                             |  |                            
|                                                       |                             |  |                            

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



ARCH WIRELESS, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) (in thousands, except share amounts)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | CommonStock | Class BCommonStock | AdditionalPaid-inCapital | DeferredStockCompensation | AccumulatedOtherComprehensiveIncome (loss) | RetainedEarnings(AccumulatedDeficit) | TotalStockholders'Equity(Deficit) |  
|------------------------------------ | ----------- | ------------------ | ------------------------ | ------------------------- | ------------------------------------------ | ------------------------------------ | --------------------------------- | -
|Predecessor Company                  |             |                    |                          |                           |                                            |                                      |                                   |  
|Balance, December 31, 2000           |             |                    | $                        | 1,615                     |                                            | $                                    | 20                                |  
|Net loss                             |             |                    |                          |                          |                                            |                                      |                                  |  
|Foreign currency translation         |             |                   
|adjustments                          |             |                    |                          |                          |                                            |                                      |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|Total comprehensive loss             |             |                    |                          |                           |                                            |                                      |                                   |  
|Issuance of 18,905,989 shares of     |             |                   
|common stock in exchange for debt    |             |                    |                          | 189                       |                                            |                                      |                                  |  
|Conversion of Class B common stock   |             |                   
|into common stock                    |             |                    |                          | 20                        |                                            |                                      | (20                               | )
|Preferred stock dividend             |             |                    |                          |                          |                                            |                                      |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|Balance, December 31, 2001           |             |                    |                          | 1,824                     |                                            |                                      |                                  |  
|Net income                           |             |                    |                          |                          |                                            |                                      |                                  |  
|Foreign currency translation         |             |                   
|adjustments                          |             |                    |                          |                          |                                            |                                      |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|Total comprehensive income           |             |                    |                          |                           |                                            |                                      |                                   |  
|Cancellation of predecessor equity   |             |                   
|interests upon emergence from        |             |                   
|bankruptcy                           |             |                    |                          | (1,824                    | )                                          |                                      |                                  |  
|Issuance of 20,000,000 shares of     |             |                   
|Reorganized Company common stock     |             |                   
|upon emergence from bankruptcy       |             |                    |                          | 20                        |                                            |                                      |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|Balance, May 31, 2002                |             |                    | $                        | 20                        |                                            | $                                    |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|                                    
|Reorganized Company                  |             |                   
|Balance, June 1, 2002                |             |                    | $                        | 20                        |                                            | $                                    |                                  |  
|Net income                           |             |                    |                          |                          |                                            |                                      |                                  |  
|Foreign currency translation         |             |                   
|adjustments                          |             |                    |                          |                          |                                            |                                      |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|Total comprehensive income           |             |                    |                          |                           |                                            |                                      |                                   |  
|Partial divestiture of Canadian      |             |                   
|subsidiaries                         |             |                    |                          |                          |                                            |                                      |                                  |  
|Amortization of deferred stock       |             |                   
|compensation                         |             |                    |                          |                          |                                            |                                      |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|Balance, December 31, 2002           |             |                    |                          | 20                        |                                            |                                      |                                  |  
|Net income                           |             |                    |                          |                          |                                            |                                      |                                  |  
|Change in par value of common stock  |             |                    |                          | (18                       | )                                          |                                      |                                  |  
|Issuance of common shares to         |             |                   
|management pursuant to plan of       |             |                   
|reorganization                       |             |                    |                          |                          |                                            |                                      |                                  |  
|Amortization of compensation expense |             |                   
|associated with stock options issued |             |                   
|to the board of directors            |             |                    |                          |                          |                                            |                                      |                                  |  
|Amortization of deferred stock       |             |                   
|compensation                         |             |                    |                          |                          |                                            |                                      |                                  |  
|Reversal of valuation allowance      |             |                   
|previously recorded against          |             |                   
|deferred income tax assets           |             |                    |                          |                          |                                            |                                      |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  
|Balance, December 31, 2003           |             |                    | $                        | 2                         |                                            | $                                    |                                  |  
|                                     |             |                    |                          |                           |                                            |                                      |                                   |  

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



ARCH WIRELESS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                       | Predecessor Company(Note 3) |  | Reorganized Company(Note 3)
|------------------------------------------------------ | --------------------------- |  | ---------------------------
|
|Cash flows from operating activities:                  |                             |  |                            
|Net income (loss)                                      |                             |  | $                          
|Adjustments to reconcile net income (loss) to net cash |                             |  |                            
|provided by operating activities:                      |                             |  |                            
|Depreciation and amortization                          |                             |  |                            
|Fresh start accounting adjustments                     |                             |  |                            
|Non-cash reorganization costs                          |                             |  |                            
|Deferred income tax (benefit) expense                  |                             |  |                            
|Gain on extinguishment of debt                         |                             |  |                            
|Cumulative effect of accounting change                 |                             |  |                            
|Accretion of long-term debt and other non-cash         |                             |  |                            
|interest expense                                       |                             |  |                            
|Deferred stock compensation                            |                             |  |                            
|Gain on tower site sale                                |                             |  |                            
|Write-off of note receivable                           |                             |  |                            
|Loss on sale of FCC licenses                           |                             |  |                            
|Provisions for doubtful accounts and service           |                             |  |                            
|adjustments                                            |                             |  |                            
|Gain on disposals of property and equipment            |                             |  |                            
|Other income                                           |                             |  |                            
|Changes in assets and liabilities:                     |                             |  |                            
|Accounts receivable                                    |                             |  |                            
|Prepaid expenses and other                             |                             |  |                            
|Accounts payable and accrued expenses                  |                             |  |                            
|Customer deposits and deferred revenue                 |                             |  |                            
|Other long-term liabilities                            |                             |  |                            
|                                                       |                             |  |                            
|Net cash provided by operating activities              |                             |  |                            
|                                                       |                             |  |                            
|Cash flows from investing activities:                  |                             |  |                            
|Additions to property and equipment, net               |                             |  |                            
|Additions to intangible and other assets               |                             |  |                            
|Proceeds from disposals of property and equipment      |                             |  |                            
|Issuance of long-term note receivable                  |                             |  |                            
|Receipts of long-term note receivable                  |                             |  |                            
|Cash balance related to partial divestiture of         |                             |  |                            
|Canadian Subsidiaries                                  |                             |  |                            
|Sale of FCC licenses                                   |                             |  |                            
|Acquisition of companies, net of cash acquired         |                             |  |                            
|                                                       |                             |  |                            
|Net cash (used for) provided by investing activities   |                             |  |                            
|                                                       |                             |  |                            
|Cash flows from financing activities:                  |                             |  |                            
|Issuance of long-term debt                             |                             |  |                            
|Repayment of long-term debt                            |                             |  |                            
|Net proceeds from sale of preferred stock              |                             |  |                            
|                                                       |                             |  |                            
|Net cash used in financing activities                  |                             |  |                            
|                                                       |                             |  |                            
|Effect of exchange rate changes on cash                |                             |  |                            
|                                                       |                             |  |                            
|Net (decrease) increase in cash and cash equivalents   |                             |  |                            
|Cash and cash equivalents, beginning of period         |                             |  |                            
|                                                       |                             |  |                            
|Cash and cash equivalents, end of period               |                             |  | $                          
|                                                       |                             |  |                            
|Supplemental disclosure:                               |                             |  |                            
|Interest paid                                          |                             |  | $                          
|                                                       |                             |  |                            
|Asset retirement obligations                           |                             |  | $                          
|                                                       |                             |  |                            
|Repayment of debt with restricted cash                 |                             |  | $                          
|                                                       |                             |  |                            
|Issuance of new debt and common stock in exchange for  |                             |  |                            
|liabilities                                            |                             |  | $                          
|                                                       |                             |  |                            
|Reorganization expenses paid                           |                             |  | $                          
|                                                       |                             |  |                            
|Issuance of Predecessor stock for debt                 |                             |  | $                          
|                                                       |                             |  |                            
|Preferred stock dividend                               |                             |  | $                          
|                                                       |                             |  |                            

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



ARCH WIRELESS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Restated Financial Statements



During
 2002, the consolidated financial statements have been restated to reclassify gains on the extinguishment
 of debt for the year ended December 31, 2001 from extraordinary to operating income in compliance with
 SFAS No. 145, Rescission of FAS Nos. 4, 44 and 64, Amendment of FAS 13, and Technical Corrections
 as of April 2002, which was adopted as of June 1, 2002.



2. Organization and Significant Accounting Policies



BusinessArch
 Wireless, Inc. (Arch or the Company) is a leading provider of wireless messaging and information
 services in the United States. Currently, Arch provides one and two-way messaging services. One-way
 messaging consists of numeric and alphanumeric messaging services. Numeric messaging services enable
 subscribers to receive messages that are composed entirely of numbers, such as a phone number, while
 alphanumeric messages may include numbers and letters, which enable subscribers to receive text messages.
 Two-way messaging services enable subscribers to send and receive messages to and from other wireless
 messaging devices, including pagers, personal digital assistants or PDAs and personal computers. Arch
 also offers wireless information services, such as stock quotes, news, weather and sports updates, voice
 mail, personalized greeting, message storage and retrieval and equipment loss and/or maintenance protection
 to both one and two-way messaging subscribers. These services are commonly referred to as wireless messaging
 and information services.



Bankruptcy-Related
 Financial ReportingThe consolidated financial statements of Arch, prior to its emergence from chapter
 11 on May 29, 2002 (the Predecessor Company), have been prepared in accordance with the American Institute
 of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization
 under the Bankruptcy Code (SOP 90-7). Substantially all of the Predecessor Companys pre-petition
 debt was in default. As required by SOP 90-7, the Predecessor Company recorded the pre-petition debt
 instruments at the allowed amount, as defined by SOP 90-7. Accordingly, the Predecessor Company accelerated
 the accretion of its debt discounts and recorded an expense of approximately $133.8 million during December
 2001, which is included in reorganization expense in the Consolidated Statement of Operations. Reorganization
 expense in 2001 also includes the write-off of $11.8 million of deferred financing costs and $9.3 million
 of professional fees and other expenses directly related to the bankruptcy filing.



Arch
 has prepared the consolidated financial statements on a going-concern basis of accounting. This basis
 of accounting contemplates continuity of operations, realization of assets and liquidation of liabilities
 (with the exception of pre-petition liabilities as described above) in the normal course of business.
 Upon emergence from chapter 11, Arch (the Reorganized Company) restated its assets and liabilities,
 in accordance with SOP 90-7, on the fresh start basis of accounting which requires recording the assets
 on a fair value basis similar to those required by SFAS No. 141 Business Combinations.



Risks
 and Other Important FactorsBased on current and anticipated levels of operations, Archs management
 believes that Archs net cash provided by operating activities, together with cash on hand, will be
 adequate to meet its cash requirements for the foreseeable future.



In
 the event that net cash provided by operating activities and cash on hand are not sufficient to meet
 future cash requirements, Arch may be required to reduce planned capital expenditures, sell assets or
 seek additional financing. Arch can provide no assurance that reductions in planned capital expenditures
 or proceeds from asset sales would be sufficient to cover shortfalls in available cash or that additional
 financing would be available or, if available, offered on acceptable terms.



Arch
 believes that future fluctuations in its revenues and operating results may occur due to many factors,
 particularly the decreased demand for our messaging services. If the rate of decline for our messaging
 services exceeds our expectations, revenues will be negatively impacted, and such impact could be material.
 Archs plan to consolidate its networks may also negatively impact revenues as customers experience
 a reduction in, and possible disruptions of, service in certain areas. Under these circumstances, Arch
 may be unable to adjust spending in a timely manner to compensate for any future revenue shortfall.
 It is possible that, due to these fluctuations, Archs revenue or operating results may not meet the
 expectations of investors and creditors, which could impair the value of Archs securities.



Organization
 and Principles of ConsolidationThe accompanying consolidated financial statements include the accounts
 of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions
 have been eliminated in consolidation. Investments in affiliated companies that are 20%  50% owned
 entities are accounted for under the equity method of accounting.



Use
 of EstimatesThe preparation of financial statements in conformity with accounting principles generally
 accepted in the United States of America requires management to make estimates and judgments that affect
 the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going
 basis, Arch evaluates its estimates and assumptions, including but not limited to those related to the
 impairment of long-lived assets, reserves for doubtful accounts and service credits, revenue recognition,
 asset retirement obligations, income taxes and restructuring charges. Arch bases its estimates on historical
 experience and various other assumptions that are believed to be reasonable under the circumstances,
 the results of which form the basis for making judgments about the carrying values of assets and liabilities
 that are not readily apparent from other sources. Actual results may differ from these estimates under
 different assumptions or conditions.



ReclassificationsCertain
 amounts from the prior years have been reclassified to conform to current year presentation.



Long-Lived
 AssetsLeased messaging devices sold or otherwise retired are removed from the accounts at their
 net book value using the weighted-average method. Property and equipment is depreciated using the straight-line
 method over the following estimated useful lives:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Asset Classification             | EstimatedUseful Life
|-------------------------------- | --------------------
|Buildings and improvements       |                     
|Leasehold improvements           |                     
|Messaging devices                |                     
|Messaging and computer equipment |                     
|Furniture and fixtures           |                     
|Vehicles                         |                     

|In
 accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
 Arch is required to evaluate the carrying value of its long-lived assets and certain intangible assets.
 SFAS No. 144 first requires an assessment of whether circumstances currently exist which suggest the
 carrying value of long-lived assets may not be recoverable. At December 31, 2003, Arch did not believe
 any such conditions existed. Had these conditions existed, Arch would have assessed the recoverability
 of the carrying value of the Companys long-lived assets and certain intangible assets based on estimated
 undiscounted cash flows to be generated from such assets. In assessing the recoverability of these assets,
 Arch would have projected estimated cash flows based on various operating assumptions such as average
 revenue per unit, disconnect rates, and sales and workforce productivity ratios. If the projection of
 undiscounted cash flows did not exceed the carrying value of the long-lived assets, Arch would have
 been required to record an impairment charge to the extent the carrying value exceeded the fair value
 of such assets. Arch recorded an impairment charge of $976.2 million in the second quarter of 2001 (see
 Note 4).



In
 conjunction with the application of SOP 90-7, assets were recorded at their fair values based principally
 on a third-party appraisal as of May 29, 2002. However, if the assessment of the criteria above were
 to change and the projected undiscounted cash flows were lower than the carrying value of assets, Arch
 would be required to record impairment charges related to the Companys long-lived assets (see Note
 3).



Revenue
 RecognitionArchs revenue consists primarily of monthly service and lease fees charged to customers
 on a monthly, quarterly, semi-annual or annual basis. Revenue also includes the sale of messaging devices
 directly to customers and other companies that resell the Companys services. In accordance with the
 provisions of Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple
 Deliverables, (EITF No. 00-21), Arch evaluated these revenue arrangements and determined that
 two separate units of accounting exist, messaging service revenue and device sale revenue. Accordingly,
 effective July 1, 2003, Arch recognizes messaging service revenue over the period the service is performed
 and revenue from device sales is recognized at the time of shipment. Arch recognizes revenue when these
 four basic criteria have been met: (1) persuasive evidence of an arrangement exists, (2) delivery has
 occurred or services rendered, (3) the fee is fixed or determinable and (4) collectibility is reasonably
 assured. The adoption of EITF No. 00-21, on July 1, 2003, resulted in approximately $945,000 of
 additional revenue being recognized in the year ended December 31, 2003.



Prior
 to July 1, 2003, in accordance with SAB 101, Revenue Recognition in Financial Statements (SAB
 101), Arch bundled the sale of two-way messaging devices with the related service, since the
 Company had determined the sale of the service was essential to the functionality of the device. Therefore,
 revenue from two-way device sales and the related cost of sales were recognized over the expected customer
 relationship, which was estimated to be two years. In accordance with the transition provisions of EITF
 No. 00-21, Arch will continue to recognize previously deferred revenue and expense from the sale of
 two-way devices based upon the amortization schedules in place at the time of deferral. At December
 31, 2003, Arch had approximately $2.1 million of deferred revenue and $610,000 of deferred expense that
 will be recognized in future periods, principally over the next five fiscal quarters.



Cash
 EquivalentsCash equivalents include short-term, interest-bearing instruments purchased with remaining
 maturities of three months or less.



Fair
 Value of Financial InstrumentsArchs financial instruments, as defined under SFAS No. 107 Disclosures
 about Fair Value of Financial Instruments, include its cash, accounts receivable and accounts payable
 and debt financing. The fair value of cash, accounts receivable and accounts payable are equal to their
 carrying values at December 31, 2002 and 2003. The fair value of the debt is included in Note 6.



Derivative
 Instruments and Hedging ActivitiesIn June 1998, the Financial Accounting Standards Board issued
 SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires
 that every derivative instrument be recorded on the balance sheet as either an asset or liability measured
 at its fair value and that changes in the derivatives fair value be recognized in earnings. Arch adopted
 this standard effective January 1, 2001. Arch has not designated any outstanding derivatives as a hedge
 under SFAS No. 133. The initial application of SFAS No. 133 resulted in a $6.8 million charge, which
 was reported as the cumulative effect of a change in accounting principle. This charge represents the
 impact of initially recording the derivatives at fair value as of January 1, 2001. The changes in fair
 value of the derivative instruments during 2001 of approximately $15.0 million were recognized in other
 expense. All of these derivative instruments were terminated during 2001.



In
 April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
 Hedging Activities. This statement amends SFAS No. 133 to provide clarification on the financial
 accounting and reporting of derivative instruments and hedging activities and requires contracts with
 similar characteristics to be accounted for on a comparable basis. Arch adopted SFAS No. 149 on July
 1, 2003 and the adoption did not have any effect on its financial condition or results of operations.



Stock-Based
 CompensationEffective January 1, 2003, compensation expense associated with options is being recognized
 in accordance with the fair value provisions of SFAS No. 123, Stock Based Compensation, over
 the options vesting period. The transition to these provisions was accounted for and disclosed in accordance
 with the provisions of SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure,
 utilizing the prospective method.



Prior
 to December 2002, Arch accounted for its stock option and stock purchase plans under the recognition
 and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees. Since
 all options were issued at a grant price equal to fair market value, no compensation cost was recognized
 in the statements of operations. In December 2002, the FASB released SFAS No. 148, which Arch adopted
 at that time. The following table illustrates the effect on net income and earnings per share if Arch
 had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation
 for the year ended December 31, 2001.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                 | 2001
|---------------------------------------------------------------- | ----
|(in thousands, except per share amounts)                         |     
|Net income (loss), as reported                                   |     
|Deduct: Total stock option based fair value compensation expense |     
|                                                                 |     
|Pro forma net income                                             |     
|                                                                 |     
|Basic net income (loss) per common share:                        |     
|As reported                                                      |     
|Pro forma                                                        |     

|Income
 TaxesArch accounts for income taxes under the provisions of SFAS No. 109, Accounting for Income
 Taxes. Deferred tax assets and liabilities are determined based on the difference between the financial
 statement and tax bases of assets and liabilities, given the provisions of enacted laws. The Company
 would provide a valuation allowance against net deferred tax assets if, based on available evidence,
 it is more likely than not the deferred tax assets would not be realized (see Note 7).



New
 Accounting PronouncementsIn January 2003, the FASB issued FIN No. 46, Consolidation of Variable
 Interest Entities, an interpretation of ARB 51 and issued a revision to that guidance, FIN No. 46-R,
 in December 2003. FIN No. 46 and FIN No 46-R provide guidance on the identification of entities for
 which control is achieved through means other than through voting rights called variable interest entities
 or VIEs and how to determine when and which business enterprise should consolidate the VIE (the primary
 beneficiary). This model for consolidation applies to an entity in which either (1) the equity investors
 (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient
 to finance that entitys activities without receiving additional subordinated financial support from
 other parties. In addition, these interpretations require both the primary beneficiary and all other
 enterprises with a significant variable interest in a VIE to make additional disclosures. The provisions
 of FIN No. 46 are applicable to Arch for any interests entered into after January 31, 2003 and the provisions
 of FIN No. 46-R will be effective in the quarter ended March 31, 2004. Arch does not have any interests
 that would change its current reporting entity or require additional disclosures outlined in FIN No.
 46 or FIN No. 46-R.



In
 May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
 of both Liabilities and Equity. SFAS No. 150 establishes standards for the classification and measurement
 of certain financial instruments with characteristics of both liabilities and equity. It requires the
 classification of a financial instrument that is within its scope as a liability (or an asset in some
 circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May
 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June
 15, 2003. Arch adopted SFAF No. 150 on July 1, 2003 and the adoption did not have any effect on its
 financial statements or results of operations.



In
 May 2003, the EITF issued No. 01-08, Determining Whether an Arrangement Contains a Lease. EITF
 No. 01-08 provides guidance on how to determine whether an arrangement contains a lease that is within
 the scope of SFAS No. 13, Accounting for Leases. The guidance in EITF No. 01-08 is based on whether
 the arrangement conveys to the purchaser (lessee) the right to use a specific asset. Arch adopted EITF
 No. 01-08 on July 1, 2003 and the adoption did not have any effect on its financial condition or results
 of operations.



In
 December 2003, the SEC issued SAB 104, Revenue Recognition, which supercedes portions of SAB
 101. The primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to
 multiple element revenue arrangements, which was superceded as a result of the issuance of EITF 00-21.
 While the wording of SAB 104 changed to reflect the issuance of EITF 00-21, the revenue recognition
 principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did
 not have a material impact on Archs financial statements.



3. Petition for Relief Under Chapter 11 and Fresh Start Accounting



Certain
 holders of 123⁄4% Senior Notes due 2007 of Arch Wireless Communications, Inc. (AWCI), a wholly-owned
 subsidiary of Arch, filed an involuntary petition against AWCI on November 9, 2001 under chapter 11
 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Massachusetts,
 Western Division. On December 6, 2001, AWCI consented to the involuntary petition and the bankruptcy
 court entered an order for relief with respect to AWCI under chapter 11 of the Bankruptcy Code. Also
 on December 6, 2001, Arch and its other wholly-owned, domestic subsidiaries, including Arch Wireless
 Holdings, Inc. (AWHI), filed voluntary petitions for relief, under chapter 11, with the bankruptcy
 court. These cases are being jointly administered under the docket for Arch Wireless, Inc., et al.,
 Case No. 01-47330-HJB. From December 6, 2001 through May 28, 2002, Arch and its domestic subsidiaries
 (collectively, the Debtors) operated their businesses and managed their property as debtors-in-possession
 under the Bankruptcy Code. On May 15, 2002, the bankruptcy court entered an order confirming the Debtors
 First Amended Joint Plan of Reorganization, as modified, and the plan became effective on May 29, 2002.
 As a result of the bankruptcy courts order confirming the plan of reorganization, Arch and its domestic
 subsidiaries now operate as reorganized entities.



Pursuant
 to Archs plan of reorganization, all of its former equity securities were cancelled and the holders
 of approximately $1.8 billion of its former indebtedness received securities which represented substantially
 all of Archs consolidated capitalization, consisting of $200 million aggregate principal amount of
 10% senior subordinated secured notes (which have been fully repaid), $100 million aggregate principal
 amount of 12% subordinated secured compounding notes and approximately 95% of Archs currently outstanding
 common stock. The remaining common stock of approximately 5% has been or will be distributed pursuant
 to the terms of the 2002 Stock Incentive Plan to certain members of senior management. All but one of
 Archs former directors have been replaced by new directors, although no material changes have occurred
 in its senior management.



The
 plan provided that 20,000,000 shares be issued; however, the number of shares of new common stock to
 be distributed to individual former unsecured creditors, and the actual distribution of such shares,
 is contingent upon the resolution of their individual claims. As of December 31, 2003, a total of 19,483,477
 shares had been issued to former secured and unsecured creditors and senior management. The remaining
 shares will be distributed upon resolution of various claims. All 20,000,000 shares were deemed issued
 and outstanding for accounting purposes at December 31, 2002 and 2003.



The
 accompanying Predecessor Company Consolidated Financial Statements have been prepared in accordance
 with SOP 90-7 and on a going concern basis, which contemplates continuity of operations, realization
 of assets and liquidation of liabilities in the ordinary course of business. Substantially all of the
 Predecessor Companys pre-petition debt was in default at December 31, 2001. As required by SOP 90-7,
 the Predecessor Company recorded Debtors pre-petition debt instruments at the allowed amount, as defined
 by SOP 90-7. Accordingly, the Predecessor Company accelerated the accretion of its debt discounts and
 recorded an expense of approximately $133.8 million during December 2001, which is included in reorganization
 expense in the Consolidated Statement of Operations. Reorganization expenses in 2001 also includes the
 write off of $11.8 million of deferred financing costs and $9.3 million of professional fees and other
 expenses directly related to the bankruptcy filing.



Contractual
 interest expense not accrued or recorded on pre-petition debt was $13.0 million for 2001.



The
 condensed statements of operations and cash flows of the Debtors for the year ended December 31, 2001
 are presented as follows:



ARCH WIRELESS, INC.DEBTOR-IN-POSSESSION STATEMENT OF OPERATIONS For the Year Ended December 31, 2001 (in thousands)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                            | 
|--------------------------------------------------------------------------- | 
|Revenues                                                                    | 
|Operating expenses:                                                         | 
|Cost of products sold (exclusive of items shown separately below)           | 
|Service, rental and maintenance (exclusive of items shown separately below) | 
|Selling                                                                     | 
|General and administrative (exclusive of items shown separately below)      | 
|Depreciation and amortization                                               | 
|Reorganization expense                                                      | 
|Other operating expenses                                                    | 
|                                                                            | 
|Total operating expenses                                                    | 
|                                                                            | 
|Operating loss                                                              | 
|Interest expense, net (unrecorded contractual interest expense $12,963)     | 
|Gain on extinguishment of debt                                              | 
|Other expense                                                               | 
|                                                                            | 
|Loss before income tax benefit and accounting change                        | 
|Income tax benefit                                                          | 
|                                                                            | 
|Loss before accounting change                                               | 
|Cumulative effect of accounting change                                      | 
|                                                                            | 
|Net loss                                                                    | 
|                                                                            | 

|ARCH WIRELESS, INC.DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS For the Year Ended December 31, 2001(in thousands)
|------------------------------------------------------------------------------------------------------------------

|                                               | 
|---------------------------------------------- | 
|Net cash provided by operating activities      | 
|                                               | 
|Cash flows from investing activities:          | 
|Additions to property and equipment, net       | 
|Additions to intangible and other assets       | 
|Sale of FCC licenses                           | 
|Acquisition of companies, net of cash acquired | 
|                                               | 
|Net cash provided by investing activities      | 
|                                               | 
|Cash flows from financing activities:          | 
|Repayment of long-term debt                    | 
|Net proceeds from sale of preferred stock      | 
|                                               | 
|Net cash used in financing activities          | 
|                                               | 
|Net increase in cash and cash equivalents      | 
|Cash and cash equivalents, beginning of period | 
|                                               | 
|Cash and cash equivalents, end of period       | 
|                                               | 
|Supplemental disclosure:                       | 
|Interest paid                                  | 
|                                               | 
|Reorganization expenses paid                   | 
|                                               | 
|Issuance of common stock for debt              | 
|                                               | 
|Issuance of preferred stock for debt           | 
|                                               | 
|Preferred stock dividend                       | 
|                                               | 

|Although
 May 29, 2002 was the effective date of Archs emergence from bankruptcy, for financial reporting convenience,
 Arch accounted for consummation of the plan as of May 31, 2002.



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



During
 the five months ended May 31, 2002, the Predecessor Company recorded reorganization expense of $22.5
 million consisting of $15.3 million of professional fees, $3.1 million of retention costs and $4.1 million
 paid or accrued to settle specific pre-petition liabilities in conjunction with assumed contracts. Contractual
 interest expense not accrued or recorded on pre-petition debt totaled $76.0 million for the five months
 ended May 31, 2002.



The
 fair value of the Reorganized Companys long-term debt and equity on the effective date of the plan
 was determined to be $422.0 million ($416.1 million and $5.9 million related to domestic and Canadian
 operations, respectively). A third party financial advisor determined the value related to domestic
 operations based on a discounted cash flow analysis utilizing Archs projections for 2002 through 2006,
 discounted at rates ranging from 20% to 24%, and included the estimated effects of Archs net operating
 loss carry-forwards. To approximate the value of all future cash flows after the projection period,
 terminal multiples ranging from 4.0 to 5.0 were applied to 2006 forecasted net cash provided by operating
 activities less net cash used by investing activities. Management determined the value of the Canadian
 operations.



The
 reorganization value of Arch was determined to be $535.2 million, which includes the fair value of the
 Reorganized Companys long-term debt and equity plus the fair value of current liabilities of $113.2
 million at the date of emergence. Under SOP 90-7, the reorganization value was allocated to tangible
 and identifiable intangible assets in accordance with SFAS No. 141, Business Combinations, and
 liabilities, including debt, were recorded at their net present values. The net effect of all fresh
 start accounting adjustments resulted in a gain of $47.9 million, which is reflected in the Predecessor
 Company financial statements for the five months ended May 31, 2002.



The
 effects of the plan and the application of fresh start accounting on the Predecessor Companys consolidated
 balance sheet were as follows:



ARCH WIRELESS, INC.REORGANIZED CONSOLIDATED
 CONDENSED BALANCE SHEET(unaudited and in thousands)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        | PredecessorCompanyMay 31,2002 | DebtDischarge | Fresh StartAdjustments | ReorganizedCompanyMay 31,2002
|--------------------------------------- | ----------------------------- | ------------- | ---------------------- | -----------------------------
|ASSETS                                  |                               |               |                        |                              
|Current assets:                         |                               |              
|Cash and cash equivalents               |                               |               | $                      | 39,527                       
|Accounts receivable, net                |                               |               |                        | 58,679                       
|Prepaid expenses and other              |                               |               |                        | 62,452                       
|                                        |                               |               |                        |                              
|Total current assets                    |                               |               |                        | 160,658                      
|Property and equipment, net             |                               |               |                        | 369,022                      
|Intangible and other assets, net        |                               |               |                        | 265                          
|                                        |                               |               |                        |                              
|                                        |                               |               | $                      | 529,945                      
|                                        |                               |               |                        |                              
|LIABILITIES AND STOCKHOLDERS' EQUITY    |                               |              
|Current liabilities:                    |                               |              
|Current maturities of long-term debt    |                               |               | $                      | 30,190                       
|Accounts payable                        |                               |               |                        | 8,945                        
|Accrued expenses                        |                               |               |                        | 61,835                       
|Customer deposits and deferred revenue  |                               |               |                        | 58,879                       
|                                        |                               |               |                        |                              
|Total current liabilities               |                               |               |                        | 159,849                      
|Liabilities subject to compromise       |                               |               |                        | 2,037,509                    
|Long-term debt, less current maturities |                               |               |                        |                             
|Other long-term liabilities             |                               |               |                        | 1,836                        
|Stockholders' equity (deficit)          |                               |               |                        | (1,669,249                   
|                                        |                               |               |                        |                              
|                                        |                               |               | $                      | 529,945                      
|                                        |                               |               |                        |                              

|
|

| | (A) | Discharge of pre-petition obligations including deferred gain on a sale leaseback and the write-off of associated fixed assets since the underlying lease agreement was rejected in conjunction with the reorganization.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (B) | Record new long-term debt issued pursuant to the plan of reorganization.
| | --- | ------------------------------------------------------------------------

| | (C) | Record new common stock issued pursuant to the plan of reorganization valued at $116.1 million and the net gain on extinguishment of debt resulting from notes (A) and (B) above.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (D) | Eliminate the deferred cost and related deferred revenue associated with SAB 101 revenue recognition as the asset has no value and no payment or service obligation exists for the Reorganized Company.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (E) | Adjust property and equipment to the fair value of the assets based on an independent appraisal.
| | --- | ------------------------------------------------------------------------------------------------

| | (F) | Adjust certain Canadian subsidiaries debt to fair value. Management determined the value of the bank debt in a manner consistent with the methodology used to value and restructure Archs domestic subsidiaries. Management believes this method was reasonable since no market existed for this debt and the operations of these subsidiaries are largely identical to the operations of Archs domestic subsidiaries. The valuation was based on projected cash flows of these subsidiaries.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. Long Lived Assets



Property
 and EquipmentDepreciation and amortization expense related to property and equipment totaled $696.8
 million (including $447.4 million of the impairment charge  discussed below), $81.8 million, $100.4
 million and $116.8 million for the year ended December 31, 2001, the five months ended May 31, 2002,
 the seven months ended December 31, 2002 and the year ended December 31, 2003, respectively.



Arch
 adopted the provisions of SFAS No. 143, Accounting for Asset Retirement Obligations, in 2002.
 SFAS No. 143 requires the recognition of liabilities and corresponding assets for future obligations
 associated with the retirement of assets. Arch has network assets that are located on leased transmitter
 locations. The underlying leases generally require the removal of equipment at the end of the lease
 term, therefore a future obligation exists. Arch has recognized cumulative asset retirement obligation
 assets of $4.7 million through December 31, 2003, $991,000 of which was recorded in 2003. Network assets
 have been increased to reflect these costs and depreciation is being recognized over their estimated
 lives, which range between one and ten years. Depreciation and amortization expense in 2003 includes
 $3.6 million related to depreciation of these assets. The asset retirement obligation, and the corresponding
 liabilities, that have been recorded to date generally relate to either Archs current plans to consolidate
 its networks or to the removal of assets at an estimated future terminal date.



At
 December 31, 2002 and 2003, accrued expenses included $1.7 million and $1.0 million, respectively, of
 asset retirement liabilities related to Archs efforts to reduce the number of networks it operates.
 The primary variables associated with this estimate are the number and types of equipment to be removed
 and an estimate of the outside contractor fees to remove each asset. The costs associated with 2003
 network consolidations exceeded the original removal cost estimate by $790,000 which is included in
 the cumulative asset discussed above. An additional adjustment to the original asset retirement obligation
 totaling $201,000 related to 2004 network consolidation was also recorded in 2003. This estimate was
 based on Archs 2004 operating plan. Since this is a short-term liability, the present value of the
 estimated retirement obligations is not materially different from the gross liability.



At
 December 31, 2002 and 2003, other long-term liabilities included $788,000 and $815,000, respectively,
 related primarily to an estimate of the assets to be removed at an estimated terminal date and was recorded
 at its present value assuming a 24% credit adjusted risk free rate, which was derived based upon the
 yield of the 12% notes at the time Arch adopted SFAS No. 143. The undiscounted future obligation of
 approximately $5.6 million is being accreted to operating expense over a ten-year period using the interest
 method. This estimate is based on the transmitter locations remaining after Arch has consolidated the
 number of networks Arch operates and assumes the underlying leases continue to be renewed to that future
 date. The fees charged by outside contractors were assumed to increase by 3% per year.



Effective
 October 1, 2002, Arch revised the estimated depreciable life of certain of its messaging equipment from
 5 years to 1.25 years. This change in useful life resulted from the timing of Archs network rationalization
 program in order to align the useful lives of these assets with their planned removal from service.
 As a result of this change, depreciation expense increased approximately $12.1 million in the fourth
 quarter of 2002, approximately $9.3 million of which was due to adjusting the carrying value of certain
 pieces of this equipment to scrap value as they were removed from service at December 31, 2002.



On
 July 1, 2001, Arch revised the estimated depreciable life of certain of its messaging and computer equipment
 from eight to five years. This change in useful life resulted from Archs expectations regarding future
 usage periods for this equipment considering current and future technological advances. As a result
 of this change, depreciation expense increased approximately $12.4 million in the second half of 2001.



Assets
 Held for SaleArch currently owns eight office buildings. At December 31, 2003 two of these buildings
 had been listed for sale whereas at December 31, 2002 three had been listed for sale. One of the buildings
 included in assets held for sale at December 31, 2003 was also included at December 31, 2002. This building
 was on the market and had purchase offers that were not consummated for various reasons during the first
 half of 2003. During the fourth quarter of 2003, Arch accepted an offer for this building and the closing
 is contemplated in the second quarter of 2004. Since this offer was less than Archs carrying value
 of the building, Arch reduced the carrying value to the amount of the offer, less estimated costs to
 sell, resulting in an impairment loss of $317,000 recorded in the fourth quarter of 2003. Arch recognized
 an impairment loss of $788,000 in 2002. The impairment losses are included as a component of depreciation
 and amortization expense.



The
 impairments were based upon estimated contractual sales price of the respective buildings less estimated
 costs to sell. The assets have been classified as Assets held for Sale at December 31, 2002 and 2003.



Intangible
 and Other AssetsIntangible and other assets are comprised of the following at December 31, 2003
 (in thousands):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | UsefulLife | Gross CarryingAmount | AccumulatedAmortization | Net Balance
|---------------------------------------------------- | ---------- | -------------------- | ----------------------- | -----------
|Purchased subscriber lists                           |            |                      | 3 yrs                   |            
|Purchased Federal Communications Commission licenses |            |                      | 5 yrs                   |            
|Other                                                |            |                      |                         |            
|                                                     |            |                      |                         |            
|                                                     |            |                      |                         |            
|                                                     |            |                      |                         |            

|Intangible
 and other assets are comprised of the following at December 31, 2002 (in thousands):
|------------------------------------------------------------------------------------------------

|                                                     | UsefulLife | Gross CarryingAmount | AccumulatedAmortization | Net Balance
|---------------------------------------------------- | ---------- | -------------------- | ----------------------- | -----------
|Purchased subscriber lists                           |            |                      | 3 yrs                   |            
|Purchased Federal Communications Commission licenses |            |                      | 5 yrs                   |            
|Other                                                |            |                      |                         |            
|                                                     |            |                      |                         |            
|                                                     |            |                      |                         |            
|                                                     |            |                      |                         |            

|Aggregate
 amortization expense for intangible assets for the year ended December 31, 2001, the five months ended
 May 31, 2002, the seven months ended December 31, 2002 and the year ended December 31, 2003 was $887.7
 million (including $528.7 million of the impairment charge referred to below), $0.9 million, $3.5 million
 and $2.2 million, respectively. Estimated amortization expense for intangible assets for fiscal years
 is zero.



In
 conjunction with the adoption of SOP 90-7, the assets were recorded at their fair values based principally
 on a third-party appraisal.



In
 July 2001, Arch developed projections in order to assess the carrying value of its long-lived assets.
 These projections were managements best estimate, at the time, of future results based on lower than
 expected operating results for the quarter ended June 30, 2001 and potential year end liquidity constraints
 that could arise. The aggregate undiscounted cash flows from these projections was compared to the carrying
 value of the long-lived assets. Since the carrying value exceeded the aggregate undiscounted cash flows,
 fair value of the assets was determined based on a discounted cash flow analysis. As a result, Arch
 recorded an impairment charge of $976.2 million in the second quarter of 2001, which is included in
 depreciation and amortization expense in the statement of operations, and reduced the carrying value
 of certain one-way messaging equipment, computer equipment and intangible assets.



In
 January 2001, Arch agreed to sell SMR licenses to Nextel Communications, Inc. Nextel acquired the SMR
 licenses for an aggregate purchase price of $175 million and invested approximately $75 million in a
 new equity issue, Arch series F 12% redeemable cumulative junior preferred stock. The transaction was
 completed in two stages. In February 2001, Nextel advanced $250 million in the form of a secured loan
 in the principal amount of $175 million and an unsecured loan in the principal amount of $75 million
 to a newly created, stand-alone Arch subsidiary that held the SMR licenses pending FCC regulatory approval
 of their transfer. The new Arch subsidiary was not permitted to engage in any business other than ownership
 and maintenance of the SMR licenses and did not have any liability or obligation with respect to any
 of the debt obligations of Arch or its subsidiaries. In May 2001, upon transfer of the SMR licenses
 to Nextel, the principal amount of the secured loan was offset against the $175.0 million aggregate
 purchase price for the SMR licenses, and the principal amount of the unsecured loan was exchanged for
 shares of series F preferred stock. Accrued interest on the secured and unsecured loans was also paid
 in series F preferred stock.




5. Debt



Debt
 consisted of the following (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    | December 31,
|--------------------------------------------------- | ------------
|
|
|10% Senior Subordinated Secured Notes due 2007      |             
|12% Subordinated Secured Compounding Notes due 2009 |             
|                                                    |             
|                                                    |             
|Less--Current maturities                            |             
|                                                    |             
|Long-term debt                                      |             
|                                                    |             

|Archs
 debt consists of fixed rate senior notes, which are publicly traded. The fair values of the fixed rate
 senior notes were based on market quotes as of December 31, 2002 and 2003. There is often limited trading
 in our notes and therefore quoted prices may not be an indication of the value of the notes.



Upon
 the effective date of the plan of reorganization, all of Archs pre-petition bank debt and senior notes,
 except debt issued by two of Archs Canadian subsidiaries, were discharged and terminated and a $50
 million debtor-in-possession credit facility obtained by the Debtors in connection with the chapter
 11 filing was terminated. No borrowings were outstanding on the debtor-in-possession credit facility.



On
 the effective date of the plan of reorganization, AWHI issued $200 million of its 10% Senior Subordinated
 Secured Notes due 2007 and $100 million of its 12% Subordinated Secured Compounding Notes due 2009.
 The 10% notes accrued interest at 10% per annum payable semi-annually in arrears. The 10% notes were
 secured by a lien on substantially all the assets of Arch. Arch completed the repayment of these notes
 during 2003.



Interest
 compounded semi-annually on the 12% notes at 12% per annum from May 29, 2002 through May 15, 2003 resulting
 in the 12% notes having an aggregate compounded value of $111.9 million. Upon repayment of the 10% notes,
 interest on the 12% notes became due semi-annually in cash on May 15 and November 15 which commenced
 November 15, 2003. The 12% notes are secured by a lien on substantially all the assets of Arch. AWHI
 is required to redeem the 12% notes semi-annually to the extent AWHIs cash balance exceeds certain
 levels. AWHI must also redeem the 12% notes from the net cash proceeds from: (1) the sale of assets
 in excess of $2 million and (2) certain amounts from insurance or condemnation proceeds. In addition
 to required redemptions, AWHI may redeem the 12% notes at a redemption price equal to the following
 percentage of the outstanding compounded value plus accrued and unpaid interest through the purchase
 date:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Prior to May 15, 2007  106%;
| | - | -----------------------------

| | o | May 15, 2007 to May 14, 2008  104%;
| | - | ------------------------------------

| | o | May 15, 2008 to May 14, 2009  102%;
| | - | ------------------------------------

| | o | on maturity date of May 15, 2009  100%.
| | - | ----------------------------------------

|During
 2003, Arch entered into several transactions to reduce the balance of its 12% notes, including:
|-------------------------------------------------------------------------------------------------------

| | o | in October 2003, the repurchase and retirement of notes with $22.4 million aggregate compounded value
| | - | -----------------------------------------------------------------------------------------------------

| | o | the mandatory redemption of $2.7 million compounded value on November 15, 2003
| | - | ------------------------------------------------------------------------------

| | o | the optional redemption of $11.8 million and $15 million compounded value on November 20 and December 31, 2003, respectively
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | o | the announcement on December 31, 2003 of the optional redemption of $10 million compounded value which was made on January 30, 2004, and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| | o | subsequent to December 31, 2003, announced the optional redemption of an additional $10 million compounded value to be made in March 2004.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

|If
 a change in control (as defined in the indenture) occurs, AWHI will be required to make an offer to
 purchase the 12% notes at 101% of the outstanding principal amount plus accrued and unpaid interest
 through the purchase date.



The
 indentures for the 12% notes impose restrictions on Arch and its subsidiaries, including the following:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | prohibition on restricted payments, including cash dividends, redemptions of stock or stock equivalents and optional payments on debt subordinated to the notes;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | prohibition on incurring additional indebtedness;
| | - | -------------------------------------------------

| | o | prohibition on liens on its assets;
| | - | -----------------------------------

| | o | prohibition on making or maintaining investments except for permitted cash-equivalent type instruments;
| | - | -------------------------------------------------------------------------------------------------------

| | o | prohibition on consolidations, mergers or sale of assets outside the ordinary course of business;
| | - | -------------------------------------------------------------------------------------------------

| | o | prohibition on transactions with affiliates; and
| | - | ------------------------------------------------

| | o | compliance with certain quarterly financial covenants including, but not limited to, (i) minimum earnings before interest, income taxes, depreciation and amortization, (ii) minimum number of direct units in service, (iii) minimum total consolidated service, rental and maintenance revenues and (iv) maximum capital expenditures.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Arch
 was in compliance with its financial covenants at December 31, 2003.



In
 March 2003, Arch entered into a supplemental indenture for the 12% notes to amend certain provisions
 of the indentures, including certain financial covenants through March 31, 2004. In February 2004, Arch
 entered into an additional supplemental indenture to waive the financial covenants associated with (1)
 minimum earnings before interest, income taxes, depreciation and amortization, (2) minimum number of
 direct units in service and (3) minimum total consolidated service, rental and maintenance revenues
 for the quarters ended June 30, 2004 through March 31, 2005.



Without
 these supplemental indentures, Arch may not have been in compliance with certain financial covenants
 on various future dates.



Maturities
 of DebtScheduled long-term debt maturities at December 31, 2003 are as follows (in thousands):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         | 
|------------------------ | 
|Year Ending December 31, | 
|2004                     | 
|2005                     | 
|2006                     | 
|2007                     | 
|2008                     | 
|Thereafter               | 
|                         | 
|                         | 
|                         | 

|Canadian
 Subsidiaries Bank DebtPageNet Canada, Inc. and Madison Telecommunications, Inc. (collectively
 the Canadian Subsidiaries) were in default under their credit agreements at December 31, 2001 and
 were operating in accordance with forbearance agreements dated April 5, 2002. The forbearance agreements
 outlined the conditions under which the Canadian Subsidiaries could continue operations and included
 a specific timeline for management to arrange for a strategic alliance or a merger or acquisition. Since
 these conditions were not met, on October 2, 2002 the creditors issued demand letters to the Canadian
 Subsidiaries. These letters demanded payment of all outstanding obligations and terminated the April
 5, 2002 forbearance agreements. Subsequent to receipt of the demand letters, the Canadian Subsidiaries
 requested and received approval for a subsequent forbearance. The subsequent forbearance agreements
 require management of the Canadian Subsidiaries to arrange and complete a transaction, on terms acceptable
 to the creditors, involving the sale or assignment of the indebtedness or a sale of the Canadian Subsidiaries
 or all of their assets.



On
 December 9, 2002, the Canadian Subsidiaries and a group of investors, including Arch, entered into an
 agreement to purchase and restructure the credit facilities of the Canadian Subsidiaries. The group
 purchased the rights of the bank creditors under the credit agreements for CDN$7,000,000 (inclusive
 of CDN$829,250 in broker fees and service taxes), including Archs share of CDN$700,000. The group purchased
 a 90% economic interest in the Canadian Subsidiaries in conjunction with the purchase and assumption
 of the bank credit facilities. The remaining 10% equity interest was split evenly between Arch, the
 minority shareholder of the Canadian Subsidiaries and management of the Canadian Subsidiaries. Therefore,
 on a post-restructuring basis, Arch owns 12.33% of the Canadian Subsidiaries. Effective with this transaction
 Arch discontinued the consolidation of the Canadian Subsidiaries. Since Arch will have a representative
 on the board of directors of the restructured Canadian Subsidiaries, Arch will account for this investment
 utilizing the equity method of accounting. The carrying value of the investment in the Canadian Subsidiaries
 is currently zero, therefore Arch will not recognize its share of losses from these subsidiaries.



Debt
 Exchanged for EquityIn 2001, Arch issued 18,905,989 shares of Arch common stock in exchange for
 $50.8 million accreted value ($51.0 million maturity value) of its senior discount notes. Arch recorded
 a gain of $34.2 million on the extinguishment of debt as a result of these transactions.




6. Stockholders Equity



New
 Common StockUpon the effective date of the plan of reorganization all of the Predecessor Companys
 preferred and common stock, and all stock options were cancelled. The Reorganized Companys authorized
 capital stock consists of 50,000,000 shares of common stock. Each share of common stock has a par value
 of $0.001 per share. As of December 31, 2003, Arch had issued and outstanding 19,483,477 shares of common
 stock and the remaining 516,523 shares will be issued pursuant to the plan of reorganization from time
 to time as unsecured claims are resolved. The plan provides that exactly 20,000,000 shares will be issued,
 however, the number of shares of new common stock to be distributed to individual former unsecured creditors
 is contingent upon the resolution of their individual claims. All 20,000,000 shares were deemed issued
 and outstanding for accounting purposes at December 31, 2002 and 2003.



As
 provided in the plan of reorganization, Arch adopted the 2002 Stock Incentive Plan which authorizes
 the grant of up to 950,000 shares of common stock of the Reorganized Company to be issued pursuant to
 the plan which was subsequently increased to 1,200,000 shares as described in the discussion of stock
 options below. On May 29, 2002, November 5, 2002 and June 27, 2003, 882,200, 17,800 and 29,257 shares,
 respectively, were issued, at $0.001 per share, to certain members of continuing management. On May
 29, 2003, 316,998 shares vested and 316,998 and 295,261 shares will vest on May 29, 2004 and May 29,
 2005, respectively, subject to adjustment. Any unvested shares granted under the 2002 Stock Incentive
 Plan are subject to repurchase by Arch at the issue price of $0.001 per share if the employment of an
 employee entitled to such grant is terminated for any reason other than, in the case of Archs chief
 executive officer, its president and chief operating officer and its executive vice president and chief
 financial officer, a change of control. The fair value of the shares was deemed to be $6.09 per share
 at the date of emergence from bankruptcy, therefore, compensation expense associated with the shares
 issued at that time was approximately $5.4 million. Archs share price on November 5, 2002 was $0.53
 per share, which resulted in additional total compensation expense of $9,000. These amounts are being
 recognized ratably over the three-year vesting period, $1.8 million of which was included in stock based
 and other compensation for the year ended December 31, 2003. The remaining shares authorized under the
 2002 Stock Incentive Plan will become issuable to management at $0.001 per share upon resolution of
 unsecured claims to the extent allowable under the plan of reorganization.



Additional
 Paid in CapitalDuring the quarter ended December 31, 2003, additional paid in capital increased
 by $217.0 million as a result of the reduction in the valuation allowance previously recorded against
 Archs deferred tax assets (see Note 7).



Earning
 Per ShareBasic earnings per share is computed on the basis of the weighted average common shares
 outstanding. Diluted earnings per share is computed on the basis of the weighted average common shares
 outstanding plus the effect of outstanding stock options using the treasury stock method. The components
 of basic and diluted earnings per share were as follows (in thousands, except share and per share amounts):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    | Predecessor Company |  | Reorganized Company
|--------------------------------------------------- | ------------------- |  | -------------------
|
|Net income (loss)                                   |                     |  | $                  
|                                                    |                     |  |                    
|Weighted average shares of common stock outstanding |                     |  |                    
|Dilutive effect of:                                 |                     |  |                    
|Options to purchase common stock                    |                     |  |                    
|                                                    |                     |  |                    
|Weighted average shares of common stock and common  |                     |  |                    
|stock equivalents                                   |                     |  |                    
|                                                    |                     |  |                    
|Earnings per share:                                 |                     |  |                    
|Basic                                               |                     |  | $                  
|Diluted                                             |                     |  | $                  

|For
 the year ended December 31, 2001, the dilutive effect of 6,166,000, 19,000 and 2,005,000 potential common
 shares for Predecessor Company stock issuable upon exercise or conversion of Predecessor Company stock
 options and warrants, subordinated debentures and Series C Preferred Stock, respectively, were not considered
 in the calculation of diluted net income (loss) per common share, as their effect would have been anti-dilutive.
 Therefore, diluted net income (loss) per common share is the same as basic net income (loss) per common
 share. The Reorganized Company had no outstanding stock options, warrants or other convertible securities
 in 2002.



Redeemable
 Series C Cumulative Convertible Preferred StockThe Predecessor Companys Series C Preferred Stock
 was convertible into common stock at a conversion price of $16.38 per share and bore dividends at an
 annual rate of 8.0%. The balance of $32.8 million, which included accrued dividends through December
 5, 2001, was included in liabilities subject to compromise at December 31, 2001.



Series
 F Redeemable Cumulative Junior Preferred StockIn May 2001, Predecessor Company issued 793,219
 shares of series F preferred stock. The series F preferred stock was convertible into common stock at
 a conversion price equal to the then prevailing market price of the common stock per share and bore
 dividends at an annual rate of 12.0%. The balance of $86.9 million, which included accrued dividends
 through December 5, 2001, was included in liabilities subject to compromise at December 31, 2001.



Stock
 OptionsOn June 12, 2003, Archs stockholders approved an amendment to the 2002 Stock Incentive
 Plan that increased the number of shares of common stock authorized for issuance under the plan from
 950,000 to 1,200,000. In connection with the amendment to the plan, options to purchase 249,996 shares
 of common stock at an exercise price of $0.001 per share and 10 year term were issued to certain members
 of the board of directors. The options vested 50% upon issuance and the remaining 50% will vest on May
 29, 2004. The compensation expense associated with these options of $1.7 million is being recognized
 in accordance with the fair value provisions of SFAS No. 123 over the vesting period of the options,
 $1.3 million of which was recognized in 2003 and $358,000 of which has been deferred. The compensation
 expense was calculated utilizing the Black-Scholes option valuation model assuming: a risk-free interest
 rate of 1%, an expected life of 1.5 years, an expected dividend yield of zero and an expected volatility
 of 79% which resulted in a fair value per option granted of $6.65.



The
 Predecessor Company had stock option plans, which provided for the grant of incentive and nonqualified
 stock options to key employees, directors and consultants to purchase common stock. Incentive stock
 options were granted at exercise prices not less than the fair market value on the date of grant. Options
 generally vested over a five-year period from the date of grant. However, in certain circumstances,
 options were immediately exercisable in full. Options generally had a duration of 10 years. All outstanding
 options under these plans were terminated in accordance with Archs plan of reorganization.



The
 following table summarizes the activity under Archs stock option plans for the periods presented:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | NumberOfOptions | WeightedAverageExercisePrice
|---------------------------------------- | --------------- | ----------------------------
|Options outstanding at December 31, 2000 |                 |                             
|Granted                                  |                 |                             
|Exercised                                |                 |                             
|Terminated                               |                 |                             
|                                         |                 |                             
|Options outstanding at December 31, 2001 |                 |                             
|Terminated                               |                 |                             
|Options outstanding at December 31, 2002 |                 |                             
|                                         |                 |                             
|Granted                                  |                 |                             
|Exercised                                |                 |                             
|                                         |                 |                             
|Options outstanding at December 31, 2003 |                 |                             
|                                         |                 |                             
|Options exercisable at December 31, 2003 |                 |                             
|                                         |                 |                             

|Prior
 to 2003, Arch accounted for its stock option plans under the recognition and measurement principles
 of APB Opinion No. 25 and related interpretations. No stock-based employee compensation cost was reflected
 in net income, as all options granted under the plans had an exercise price equal to the market value
 of the underlying common stock on the date of grant.



The
 fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing
 model. In computing the pro forma amounts, Arch assumed risk-free interest rates of 4.5%  6%, an expected
 life of 5 years, an expected dividend yield of zero and an expected volatility of 0%  93%.



The
 weighted average fair values (computed consistent with SFAS No. 123) of options granted under all plans
 in 2001 were $0.19.




7. Income Taxes



Arch
 accounts for income taxes under the provisions of SFAS No. 109. Deferred tax assets and liabilities
 are determined based on the difference between the financial statement and tax bases of assets and liabilities,
 given the provisions of enacted laws.



The
 components of Archs net deferred tax asset (liability) at December 31, 2002 and 2003 are as follows
 (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         | 2002 | 2003
|------------------------ | ---- | ----
|Deferred tax assets      |      |     
|Deferred tax liabilities |      |     
|                         |      |     
|                         |      |     
|Valuation allowance      |      |     
|                         |      |     
|                         |      |     
|                         |      |     

|The
 approximate effect of each type of temporary difference and carryforward at December 31, 2002 and 2003
 is summarized as follows (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------

|                             | 2002 | 2003
|---------------------------- | ---- | ----
|Net operating losses         |      |     
|Intangibles and other assets |      |     
|Property and equipment       |      |     
|Contributions carryover      |      |     
|Accruals and reserves        |      |     
|                             |      |     
|                             |      |     
|Valuation allowance          |      |     
|                             |      |     
|                             |      |     
|                             |      |     

|SFAS
 No. 109 requires Arch to evaluate the recoverability of its deferred tax assets on an ongoing basis.
 The assessment is required to consider all available positive and negative evidence to determine whether,
 based on such evidence, it is more likely than not that some portion or all of Archs net deferred assets
 will be realized in future periods. Upon emergence from bankruptcy, the Company had not generated income
 before tax expense for any prior year, projections indicated losses before tax expense for early future
 periods and the Company had just reorganized under chapter 11. Since significant positive
 evidence of realizability did not exist, Arch established a valuation allowance against its net deferred
 tax assets at that time. For the year ended December 31, 2002, Arch generated income before tax expense
 and bankruptcy-related gains and charges of $18 million. While income before tax was positive evidence,
 management did not believe it was sufficient to overcome the negative evidence discussed above, therefore
 the full valuation allowance was retained at December 31, 2002.  Arch reclassified certain elements
 of its deferred tax attributes as of December 31, 2002 to conform to the 2003 presentation.  The
 reclassifications had no impact on the carrying value of the net deferred tax asset as of December
 31, 2002 or on the tax provision as reported for fiscal year 2002.


During
 the quarter ended December 31, 2003, management determined the available positive evidence carried more
 weight than the historical negative evidence and concluded it was more likely than not that the net
 deferred tax assets would be realized in future periods. Therefore, the $219.6 million valuation allowance
 was released in the quarter ended December 31, 2003. The positive evidence management considered included
 operating income and cash flows for 2002 and 2003, Archs repayment of debt well ahead of scheduled
 maturities and anticipated operating income and cash flows for future periods in sufficient amounts
 to realize the net deferred tax assets.


Under
 the provisions of SFAS No. 109, reductions in a deferred tax asset valuation allowance that existed
 at the date of fresh start accounting are first credited against an asset established for reorganization
 value in excess of amounts allocable to identifiable assets, then to other identifiable intangible assets
 existing at the date of fresh start accounting and then, once these assets have been reduced to zero,
 credited directly to additional paid in capital. The release of the valuation allowance described above
 reduced the carrying value of intangible assets by $2.3 million and $13.4 million for the seven month
 period ended December 31, 2002 and the year ended December 31, 2003, respectively, and the remaining
 reduction of the valuation allowance of $217.0 million was recorded as an increase to stockholders
 equity.



In
 accordance with provisions of the Internal Revenue Code, Arch was required to apply the cancellation
 of debt income arising in conjunction with the provisions of its plan of reorganization against tax
 attributes existing as of December 31, 2002. The method utilized to allocate the cancellation of debt
 income is subject to varied interpretations of various tax laws and regulations which have a material
 effect on the tax attributes remaining after allocation and thus, the future tax position of Arch. As
 a result of the method used to allocate cancellation of debt income for financial reporting purposes
 as of December 31, 2002, Arch had no net operating losses remaining and the tax basis of certain other
 tax assets were reduced. In August 2003, the IRS issued additional regulations regarding the allocation
 of cancellation of debt income. Arch evaluated these regulations and determined that an alternative
 method of allocation was more probable than the method utilized at December 31, 2002. This method resulted
 in approximately $19.0 million of additional deferred tax assets and stockholders equity being recognized
 in 2003 than would have been recognized using the allocation method applied for financial reporting
 purposes as of December 31, 2002. Had this revised method been utilized at December 31, 2002, the only
 effect on the Companys consolidated financial statements would have been the gross amounts disclosed
 in the tables above as Arch had concluded at that point in time, that a full valuation allowance was
 appropriate.



The
 following is a reconciliation of the United States federal statutory rate of 35% to the Companys effective
 tax rate for each of the periods indicated:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               | Seven MonthsEndedDecember 31,2002 | YearEndedDecember 31,2003
|---------------------------------------------- | --------------------------------- | -------------------------
|Federal income tax at statutory rate           |                                   |                          
|Increase/(decrease) in taxes resulting from:   |                                   |                          
|State income taxes, net of federal tax benefit |                                   |                          
|Non-deductible bankruptcy related expenses     |                                   |                          
|Other                                          |                                   |                          
|                                               |                                   |                          
|Effective tax rate                             |                                   |                          
|                                               |                                   |                          

|8. Commitments and Contingencies



Arch,
 from time to time is involved in lawsuits arising in the normal course of business. Arch believes that
 its pending lawsuits will not have a material adverse effect on its financial position or results of
 operations.



Arch
 has operating leases for office and transmitter locations with lease terms ranging from one month to
 approximately eighteen years. In most cases, Arch expects that, in the normal course of business, leases
 will be renewed or replaced by other leases.



Future
 minimum lease payments under noncancellable operating leases at December 31, 2003 are as follows (in
 thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         | 
|------------------------ | 
|Year Ending December 31, | 
|2004                     | 
|2005                     | 
|2006                     | 
|2007                     | 
|2008                     | 
|Thereafter               | 
|                         | 
|Total                    | 
|                         | 

|Total
 rent expense under operating leases for the year ended December 31, 2001, the five months ended May
 31, 2002, the seven months ended December 31, 2002 and the year ended December 31, 2003 approximated
 $150.7 million, $59.8 million, $76.2 million and $121.9 million respectively.



As
 a result of various decisions by the Federal Communications Commission, over the last few years, Arch
 no longer pays fees for the termination of traffic originating on the networks of local exchange carriers
 providing wireline services interconnected with the Companys services and in some instances Arch received
 refunds for prior payments to certain local exchange carriers. Arch had entered into a number of interconnection
 agreements with local exchange carriers in order to resolve various issues regarding charges imposed
 by local exchange carriers for interconnection. Arch may be liable to local exchange carriers for the
 costs associated with delivering traffic that does not originate on that local exchange carriers network,
 referred to as transit traffic, resulting in some increased interconnection costs for the Company, depending
 on further Federal Communications Commission disposition of these issues and the agreements reached
 between Arch and the local exchange carriers. If these issues are not ultimately decided through settlement
 negotiations or via the Federal Communications Commission in Archs favor, the Company may be required
 to pay past due contested transit traffic charges not addressed by existing agreements or offset against
 payments due from local exchange carriers and may also be assessed interest and late charges for amounts
 withheld. Although these requirements have not, to date, had a material adverse effect on Archs operating
 results, these or similar requirements could, in the future, have a material adverse effect on the Companys
 operating results.



In
 November 2002, the FASB issued FIN No. 45, Guarantors Accounting and Disclosure Requirements for
 Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 clarifies that a
 guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value
 of the obligation undertaken in issuing the guarantee. Arch adopted FIN No. 45 on January 1, 2003. In
 February 2003, as permitted under Delaware law, Arch entered into indemnification agreements with 18
 persons, including each of its directors and certain members of management, for certain events or occurrences
 while the director or member of management is, or was serving, at its request in such capacity. The
 maximum potential amount of future payments Arch could be required to make under these indemnification
 agreements is unlimited; however, Arch has a director and officer insurance policy that limits its exposure
 and enables it to recover a portion of any future amounts paid under the terms of the policy. As a result
 of Archs insurance policy coverage, Arch believes the estimated fair value of these indemnification
 agreements is immaterial. Therefore in accordance with FIN No. 45, Arch has not recorded a liability
 for these agreements as of December 31, 2003.



9. Employee Benefit Plans



Retirement
 Savings PlansArch has had multiple retirement savings plans since its acquisitions of MobileMedia
 and PageNet in 1999 and 2000, respectively, qualifying under Section 401(k) of the Internal Revenue
 Code covering eligible employees, as defined. During 2002, Arch completed the consolidation of these
 plans into one plan. Under the plan, a participant may elect to defer receipt of a stated percentage
 of the compensation which would otherwise be payable to the participant for any plan year (the deferred
 amount) provided, however, that the deferred amount shall not exceed the maximum amount permitted under
 Section 401(k) of the Internal Revenue Code. Each of the current and former plans provide for employer
 matching contributions. Aggregate matching contributions for the year ended December 31, 2001, the five
 months ended May 31, 2002, the seven months ended December 31, 2002 and the year ended December 31,
 2003 approximated $1.6 million, $0.7 million, $0.6 million and $0.8 million, respectively.




10. Other Long-Term Liabilities



In
 June 2003, Archs board of directors approved a long-term incentive plan to retain and attract key members
 of management and to align their interests with those of Archs shareholders. Payments under this plan
 will be based on the annual management incentive payment for 2003, which will be paid in the first quarter
 of 2004. At that time, the amount of the annual incentive payment will be converted into a number of
 units, which will be derived based on the average price of Archs common stock for ten days prior to
 the annual incentive payment. Payment under the long-term incentive plan will occur on the second anniversary
 following the 2003 annual incentive payment. The amount of the payment will be determined by multiplying
 the number of units for each participant by the average price of Archs common stock at that point in
 time. Therefore, the liability associated with the long-term incentive plan will fluctuate in each reporting
 period based on the price of Archs common stock in each reporting period. Each participants units
 vest as follows: 1/3 upon the 2003 annual incentive payment date and 1/3 on each subsequent anniversary.
 The plan includes provisions that require payment prior to the second anniversary following the 2003
 annual incentive payment under certain circumstances, such as the involuntary termination of a participant
 without cause or a change in control of Arch. At December 31, 2003 and for the year then ended, other
 long-term liabilities and stock based and other compensation include $3.1 million associated with this
 plan.



During
 1998 and 1999, Arch sold communications towers, real estate, site management contracts and/or leasehold
 interests involving 133 sites in 22 states and leased space on the towers on which it maintained transmitters
 and related equipment to service its messaging network. Net proceeds from the sales were approximately
 $33.4 million, Arch used the net proceeds to repay indebtedness under its then existing credit facility.
 Arch entered into options to repurchase each tower and until the continuing involvement ended the gain
 on the sale of the tower sites was deferred and included in other long-term liabilities. Approximately
 $3.1 million and $1.3 million of this gain was recognized in the statement of operations and was included
 in operating income for the year ended December 31, 2001 and for the five months ended May 31, 2002,
 respectively. The remaining balance of $13.5 million was recorded as a gain on extinguishment of debt
 upon Archs emergence from bankruptcy.



11. Restructuring Reserves



At
 December 31, 2003, Arch recorded an $11.5 million restructuring charge associated with a lease agreement
 for transmitter locations. Under the terms of this agreement Arch is required to pay certain minimum
 amounts for a designated number of transmitter locations, however, during the quarter, Arch determined
 the designated number of transmitter locations was in excess of the Companys current and anticipated
 needs. The remaining obligation associated with this agreement will be paid over the next six quarters.



At
 December 31, 2001, the Predecessor Company had restructuring reserves, which primarily represented lease
 cancellation costs totaling $17.5 million. Arch rejected the underlying leases pursuant to the Companys
 chapter 11 bankruptcy proceedings, therefore the reserve balances were recognized in the statement of
 operations and are included in gain on extinguishment of debt in the five months ended May 31, 2002.



12. Segment Reporting




In
 conjunction with its emergence from chapter 11 during the quarter ended June 30, 2002, Arch reassessed
 the segment disclosure requirements of SFAS No. 131, Disclosures about Segments of an Enterprise
 and Related Information. Due to various operational changes which occurred before and during the
 bankruptcy proceedings, such as the elimination of dedicated sales and management resources for two-way
 messaging. Arch no longer believes that its one and two-way messaging operations meet the disclosure
 standards of separate operating segments as set forth in SFAS No. 131. Therefore, Arch believes it currently
 has two operating segments: domestic operations and international operations, but no reportable segments,
 as international operations are immaterial to the consolidated entity. As of December 2002, Arch no
 longer consolidates the results of two of its Canadian Subsidiaries, therefore the disclosures below
 reflect the subsidiaries results up to that date (see Note 5).




Geographic Information
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              | Predecessor Company |  | Reorganized Company
|------------- | ------------------- |  | -------------------
|
|Revenues:     |                     |  |                    
|United States |                     |  | $                  
|Canada        |                     |  |                    
|              |                     |  |                    
|Total         |                     |  | $                  
|              |                     |  |                    

|                   | Reorganized CompanyDecember 31, 2002 | Reorganized CompanyDecember 31, 2003
|------------------ | ------------------------------------ | ------------------------------------
|Long-lived assets: |                                      |                                     
|United States      |                                      |                                     
|Canada             |                                      |                                     
|                   |                                      |                                     
|Total              |                                      |                                     
|                   |                                      |                                     

|Prior
 to emergence from chapter 11, Arch had determined that it had three reportable segments; one-way messaging
 operations, two-way messaging operations and international operations. Management made operating decisions
 and assessed individual performances based on these segments. One-way messaging operations consisted
 of the provision of paging and other one-way messaging services to Archs U.S. customers. Two-way messaging
 operations consisted of the provision of two-way messaging services to Archs U.S. customers. International
 operations consisted of the operations of Archs Canadian Subsidiaries.



Each
 of these segments incurred, and were charged, direct costs associated with their separate operations.
 Common costs shared by one and two-way messaging operations were allocated based on the estimated utilization
 of resources using various factors that attempted to mirror the true economic cost of operating each
 segment.



The
 following table presents financial information related to Archs segments as of and for the year ended
 December 31, 2001 and as of and for the five months ended May 31, 2002 (in thousands):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | One-wayMessagingOperations | Two-wayMessagingOperations | InternationalOperations | Consolidated
|------------------------------------- | -------------------------- | -------------------------- | ----------------------- | ------------
|Year Ended December 31, 2001:         |                            |                            |                         |             
|Revenues                              |                            |                            | $                       | 1,042,767   
|Depreciation and amortization expense |                            |                            |                         | 1,467,864   
|Operating income (loss)               |                            |                            |                         | (1,338,525  
|Total assets                          |                            |                            |                         | 375,558     
|Capital expenditures                  |                            |                            |                         | 50,823      
|Five Months Ended May 31, 2002:       |                            |                           
|Revenues                              |                            |                            | $                       | 303,773     
|Depreciation and amortization expense |                            |                            |                         | 42,231      
|Operating income (loss)               |                            |                            |                         | 43,622      
|Capital expenditures                  |                            |                            |                         | 19,995      

|13. Quarterly Financial Results (Unaudited)



Quarterly
 financial information for the years ended December 31, 2002 and 2003 is summarized below (in thousands,
 except per share amounts):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    | Predecessor Company |  | Reorganized Company
|----------------------------------- | ------------------- |  | -------------------
|
|Year Ended December 31, 2002:       |                     |  |                    
|Revenues                            |                     |  | $                  
|Operating income                    |                     |  |                    
|Net income (loss)                   |                     |  |                    
|Basic/diluted net income (loss) per |                     |  |                    
|common share                        |                     |  |                    

|
|

|                                    | FirstQuarter | SecondQuarter | ThirdQuarter | FourthQuarter (3)
|----------------------------------- | ------------ | ------------- | ------------ | -----------------
|Year Ended December 31, 2003:       |              |               |              |                  
|Revenues                            |              |               | $            | 164,753          
|Operating income                    |              |               |              | 15,956           
|Net income (loss)                   |              |               |              | 6,071            
|Basic/diluted net income (loss) per |              |              
|common share                        |              |               |              | 0.30             

| | (1) | Upon emergence from bankruptcy, Arch recorded a gain of $1.6 billion from the discharge and termination of debt, a gain of $47.9 million due to fresh start accounting adjustments and recognized $16.3 million of reorganization expenses during the two months ended May 31, 2002 (see Note 3).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | In the fourth quarter of 2002, Arch recorded additional depreciation expense of $12.1 million on certain types of one-way transmitters. The useful life of these transmitters was reduced to be consistent with their removal from service in connection with our program to reduce the number of networks we operate.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | In the fourth quarter of 2003, Arch recorded an $11.5 million restructuring charge associated with a lease agreement (see Note 11). In addition, general and administrative expenses for the fourth quarter of 2003 include approximately $3.6 million related to changes in estimates resulting in accrual reductions for various sales and property related taxes.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES



To the Board of Directors and Stockholders of Arch
 Wireless, Inc.:



Our audit of the consolidated financial statements
 of Arch Wireless, Inc. and its subsidiaries (Predecessor Company) referred to in our report dated February
 26, 2004 appearing in this Annual Report on Form 10-K also included an audit of the financial statement
 schedule for the five months ended May 31, 2002 listed in Item 15a(2) of this Form 10-K. In our opinion,
 the financial statement schedule presents fairly, in all material respects, the information set forth
 therein when read in conjunction with the related consolidated financial statements. The financial statement
 schedules of Arch Wireless, Inc. for the year ended December 31, 2001 were audited by other independent
 accountants who have ceased operations. Those independent accountants expressed an unqualified opinion
 on those financial statement schedules in their report dated March 7, 2002.



/s/ PRICEWATERHOUSECOOPERS LLP



Boston, Massachusetts February 26, 2004























REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES



To the Board of Directors and Stockholders of Arch
 Wireless, Inc.:



Our audits of the consolidated financial statements
 of Arch Wireless, Inc. and its subsidiaries (Reorganized Company) referred to in our report dated February
 26, 2004 appearing in this Annual Report on Form 10-K also included an audit of the financial statement
 schedules for the year ended December 31, 2003 and the seven months ended December 31, 2002 listed in
 Item 15a(2) of this Form 10-K. In our opinion, these financial statement schedules presents fairly,
 in all material respects, the information set forth therein when read in conjunction with the related
 consolidated financial statements.





/s/ PRICEWATERHOUSECOOPERS LLP



Boston, MassachusettsFebruary 26, 2004

















The Report of Independent Public Accountants below
 is a copy of a report previously issued by Arthur Andersen LLP, whichhas not been reissued by
 Arthur Andersen LLP.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Arch Wireless, Inc.:



We have audited in accordance with auditing standards
 generally accepted in the United States, the consolidated financial statements of Arch Wireless, Inc.
 included in this Form 10-K and have issued our report thereon dated March 7, 2002. Our audit was made
 for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole.
 Schedule II is the responsibility of the Companys management and is presented for purposes of complying
 with the Securities and Exchange Commissions rules and is not part of the basic consolidated financial
 statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic
 consolidated financial statements and, in our opinion, fairly states in all material respects the financial
 data required to be set forth therein in relation to the basic consolidated financial statements taken
 as a whole.


/s/ ARTHUR ANDERSEN LLP



Boston, MassachusettsMarch 7, 2002



SCHEDULE II



ARCH WIRELESS, INC.VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2001, 2002 and 2003(in thousands)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Reserve for Doubtful Accounts and Service Credits | Balance atBeginning ofPeriod | Charged toOperations | Write-Offs | Balance atEnd of Period
|------------------------------------------------- | ---------------------------- | -------------------- | ---------- | -----------------------
|Year ended December 31, 2001                      |                              |                      | $          | 62,918                 
|                                                  |                              |                      |            |                        
|Five Months ended May 31, 2002                    |                              |                      | $          | 41,987                 
|                                                  |                              |                      |            |                        
|Seven Months ended December 31, 2002              |                              |                      | $          | 36,987                 
|                                                  |                              |                      |            |                        
|Year ended December 31, 2003                      |                              |                      | $          | 22,492                 
|                                                  |                              |                      |            |                        



|Accrued Restructuring Charge         | Balance atBeginning ofPeriod | Charged toExpense | Deductions | Balanceat End ofPeriod
|------------------------------------ | ---------------------------- | ----------------- | ---------- | ----------------------
|Year ended December 31, 2001         |                              |                   | $          | 60,424                
|                                     |                              |                   |            |                       
|Five Months ended May 31, 2002       |                              |                   | $          | 17,496                
|                                     |                              |                   |            |                       
|Seven Months ended December 31, 2002 |                              |                   | $          |                      
|                                     |                              |                   |            |                       
|Year ended December 31, 2003         |                              |                   | $          |                      
|                                     |                              |                   |            |                       





|EXHIBIT INDEX
|-------------

|      |                                                                                                                                                                                                                                                                        
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1   | Debtor's Final Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, dated March      8, 2002. (1)                                                                                                                                                     
|3.1   | Restated Certificate of Incorporation. (2)                                                                                                                                                                                                                             
|3.2   | By-laws, as amended. (2)                                                                                                                                                                                                                                               
|4.1   | Indenture, dated May 29, 2002, among Arch Wireless Holdings, Inc. the guarantors listed therein      and The Bank of New York, as Trustee, relating to the 10% Senior Subordinated Secured Notes      due 2007 of Arch Wireless Holdings, Inc. (3)                     
|4.2   | Indenture, dated May 29, 2002, among Arch Wireless Holdings, Inc. the guarantors listed therein      and The Bank of New York, as Trustee, relating to the 12% Subordinated Secured Compounding       Notes due 2009 of Arch Wireless Holdings, Inc. (4)               
|4.3   | Supplemental Indenture, dated August 14, 2002, among Arch Wireless Holdings, Inc. the guarantors      listed therein and The Bank of New York, as Trustee, relating to the 10% Senior Subordinated      Secured Notes due 2007 of Arch Wireless Holdings, Inc. (5)     
|4.4   | Supplemental Indenture, dated August 14, 2002, among Arch Wireless Holdings, Inc. the guarantors      listed therein and The Bank of New York, as Trustee, relating to the 12% Subordinated Secured      Compounding Notes due 2009 of Arch Wireless Holdings, Inc. (5)
|4.5   | Supplemental Indenture, dated March 6, 2003, among Arch Wireless Holdings, Inc. the guarantors      listed therein and The Bank of New York, as Trustee, relating to the 10% Senior Subordinated      Secured Notes due 2007 of Arch Wireless Holdings, Inc. (5)       
|4.6   | Supplemental Indenture, dated March 6, 2003, among Arch Wireless Holdings, Inc. the guarantors      listed therein and The Bank of New York, as Trustee, relating to the 12% Subordinated Secured      Compounding Notes due 2009 of Arch Wireless Holdings, Inc. (5)  
|4.7*  | Supplemental Indenture, dated February 26, 2004, among Arch Wireless Holdings, Inc. the      guarantors listed therein and The Bank of New York, as Trustee, relating to the 12% Subordinated      Secured Compounding Notes due 2009 of Arch Wireless Holdings, Inc.  
|+10.1 | 2002 Stock Incentive Plan. (2)                                                                                                                                                                                                                                         
|10.2  | Registration Rights Agreement, dated May 29, 2002, among Arch Wireless, Inc., Arch Wireless      Holdings, Inc. and the parties listed therein. (2)                                                                                                                    
|+10.3 | First Amendment and Restatement to Executive Employment Agreement, dated May 29, 2002,      among Arch Wireless, Inc., Arch Wireless Holdings, Inc., MobileMedia Communications, Inc.,      Mobile Communications of America and C. Edward Baker, Jr. (2)              
|+10.4 | First Amendment and Restatement to Executive Employment Agreement, dated May 29, 2002,     among Arch Wireless, Inc., Arch Wireless Holdings, Inc., MobileMedia Communications, Inc.,      Mobile Communications of America and Lyndon R. Daniels. (2)                 
|+10.5 | First Amendment and Restatement to Executive Employment Agreement, dated May 29, 2002,     among Arch Wireless, Inc., Arch Wireless Holdings, Inc., MobileMedia Communications, Inc.,      Mobile Communications of America and J. Roy Pottle. (2)                     
|+10.6 | Arch Wireless Holdings, Inc. Severance Benefits Plan (5)                                                                                                                                                                                                               
|+10.7 | Arch Wireless Holdings, Inc. Retention Plan (5)                                                                                                                                                                                                                        
|10.8  | Form of Indemnification Plan by and between Arch Wireless, Inc., Arch Wireless Communications,      Inc., Arch Wireless Holdings, Inc., MobileMedia Communications, Inc. and Arch Wireless     Operating Company, Inc. and their officers and directors. (5)           
|21.1* | Subsidiaries of the Registrant.                                                                                                                                                                                                                                        
|23.1* | Consent of Independent Accountants                                                                                                                                                                                                                                     
|31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14/Rule 15d-14 of the Securities      Exchange Act of 1934, as amended, dated March 1, 2004.                                                                                                             
|31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14/Rule 15d-14 of the Securities      Exchange Act of 1934, as amended, dated March 1, 2004.                                                                                                             
|32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 dated March 1,      2004.                                                                                                                                                                  
|32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 dated March 1,      2004.                                                                                                                                                                  

|
|

| | * | Filed herewith.
| | - | ---------------

| | + | Identifies exhibits constituting a management contract or compensation plan.
| | - | ----------------------------------------------------------------------------

| | (1) | Incorporated by reference from the Current Report on Form 8-K of Arch Wireless, Inc. dated March 11, 2002 and filed on March 12, 2002.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Incorporated by reference from the Current Report on Form 8-K of Arch Wireless, Inc. dated May 15, 2002 and filed on May 30, 2002.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------

| | (3) | Incorporated by reference from the Application for Qualification of Indentures under the Trust Indenture Act of 1939 on Form T-3 of Arch Wireless Holdings, Inc. (File No. 022-28581).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Incorporated by reference from the Application for Qualification of Indentures under the Trust Indenture Act of 1939 on Form T-3 of Arch Wireless Holdings, Inc. (File No. 022-28580).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Incorporated by reference from the Annual Report on Form 10-K of Arch Wireless, Inc. for the year ended December 31, 2002.
| | --- | --------------------------------------------------------------------------------------------------------------------------