<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)
|X|     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2001

                                       OR

|_|     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: 1-13002

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

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

1719A Route 10, Suite 300, Parsippany, NJ              07054
----------------------------------------------         -------------------------
(Address of principal executive offices)               (Zip Code)

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

                                 Not Applicable

     ---------------------------------------------------------------------
     (Former name, former address and former fiscal year, if changed since
     last report)

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 |_|

As of August 2, 2001 there were 18,292,101 shares of the Registrant's Common
Stock outstanding.


<PAGE>

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

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

Part I  Financial Information:

Item 1 - Financial Statements:
         Consolidated Balance Sheets at June 30, 2001 and
          December 31, 2000 ................................................   3
         Consolidated Statements of Operations for the Three and
          Six Month Periods ended June 30, 2001 and 2000....................   4
         Consolidated Statements of Cash Flows for the
          Six Month Periods ended June 30, 2001 and 2000....................   5
         Notes to Consolidated Financial Statements.........................   6

Item 2 - Management's Discussion and Analysis of Financial
          Condition and Results of Operations...............................  12

Item 3 - Quantitative and Qualitative Disclosures About Market Risks........  19


Part II Other Information:

Item 1 - Legal Proceedings..................................................  20

Item 2 - Changes in Securities and Use of Proceeds..........................  20

Item 3 - Default Upon Senior Securities.....................................  20

Item 4 - Submission of Matters to a Vote of Security Holders................  20

Item 5 - Other Information..................................................  20

Item 6 - Exhibits and Reports on Form 8-K...................................  20

Signatures..................................................................  21


                                       2
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                   June 30,    December 31,
                                                                                     2001          2000
                                                                                 ------------  ------------
<S>                                                                              <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents.....................................................   $     643   $       378
  Accounts receivable (net of allowances of $1,490 and $1,929, respectively)....       3,080         4,912
  Inventory, net................................................................         195           228
  Assets held for sale, net.....................................................         885            --
  Prepaid expenses and other current assets.....................................         770           426
                                                                                 -----------   -----------
      Total current assets......................................................       5,573         5,944
Property and equipment, net.....................................................       4,716         9,954
Intangible assets, net..........................................................       5,716         6,976
Deferred charges and other assets...............................................         189           264
                                                                                 -----------   -----------
        Total assets............................................................ $    16,194   $     23,138
                                                                                 ===========   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long term debt.......................................... $    28,269   $    27,857
  Notes payable.................................................................       2,000         2,000
  Accounts payable..............................................................       4,824         5,947
  Accrued expenses..............................................................       2,606         1,081
  Deferred revenue..............................................................         589           846
  Customer deposits.............................................................         321           380
                                                                                 -----------   -----------
      Total current liabilities.................................................      38,609        38,111

Long term debt..................................................................          55            --
                                                                                 -----------   -----------
Total liabilities...............................................................      38,664        38,111
                                                                                 -----------   -----------

Commitments and contingencies

7.5% Redeemable Preferred Stock, $0.01 par value, 100,000 shares authorized,
  15,000 shares issued at June 30, 2001 and December 31, 2000...................       1,659         1,603
                                                                                 -----------   -----------

Stockholders' equity:
  Common stock, $0.01 par value, 75,000,000 shares authorized, 18,292,101 and
  17,611,030 issued and outstanding at June 30, 2001 and December 31, 2000,
  respectively..................................................................         183           176
  Additional paid-in capital....................................................      18,069        18,211
  Accumulated deficit...........................................................    (42,331)      (34,913)
  Note receivable from stockholder..............................................        (50)          (50)
                                                                                 -----------   -----------
  Net stockholders' equity......................................................    (24,129)      (16,576)
                                                                                 -----------   -----------
        Total liabilities and stockholders' equity.............................. $   16,194    $    23,138
                                                                                 ===========   ===========
</TABLE>

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


                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                                Three Months Ended June 30,   Six Months Ended June 30,
                                                                ---------------------------   -------------------------
                                                                   2001           2000             2001        2000
                                                                ------------  -------------   ------------ ------------

<S>                                                             <C>          <C>              <C>         <C>
Revenues:
  Paging services, rent and maintenance........................  $    4,715  $    7,568       $    9,804  $    15,534
  Equipment sales..............................................         205         309              336          454
                                                                -----------  ----------       ----------  -----------
       Total revenues..........................................       4,920       7,877           10,140       15,988
                                                                -----------  ----------       ----------  -----------
Operating expenses:
  Cost of paging services......................................       2,161       3,483            4,416        7,479
  Cost of equipment sold.......................................         170         260              337          416
  Selling and marketing........................................         461         909            1,044        1,955
  General and administrative...................................       1,325       1,821            2,677        3,952
  Depreciation and amortization................................       1,894       2,533            4,112        5,074
  Provision for doubtful accounts..............................         224         308              447          604
  Provision for asset impairment...............................       2,576           _            2,576            _
                                                                -----------  ----------       ----------   ----------
       Total operating expenses................................       8,811       9,314           15,609       19,480
                                                                -----------  ----------       ----------   ----------
Operating loss.................................................      (3,891)     (1,437)          (5,469)      (3,492)
Interest expense, net..........................................        (983)       (919)          (1,949)      (1,725)
Gain on sale of equipment......................................          _            _                _           19
                                                                ----------   ----------       ----------   ----------
Net loss.......................................................     (4,874)      (2,356)          (7,418)      (5,198)
Preferred stock dividends                                              (28)         (28)             (56)         (47)
                                                                ----------   ----------       ----------   ----------
Loss attributable to common stockholders                        $   (4,902)  $   (2,384)      $   (7,474)  $   (5,245)
                                                                ==========   ==========       ==========   ==========

NET LOSS PER COMMON SHARE:
  Basic and diluted............................................     $(0.27)      $(0.14)          $(0.42)     $(0.31)
Weighted average common shares outstanding..................... 17,970,000   17,411,000       17,798,000  17,103,000

</TABLE>


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


                                       4
<PAGE>

AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                       Six Months Ended June 30,
                                                                       -------------------------
                                                                           2001          2000
                                                                       ----------    -----------

<S>                                                                   <C>             <C>
Cash flows from operating activities:
  Net loss........................................................    $   (7,418)    $   (5,198)
  Adjustments to reconcile net loss to net cash
    provided by (used by) operating activities:
  Depreciation and amortization...................................         4,112          5,074
  Amortization of deferred financing costs........................             _            160
  Stock-based compensation........................................             6            693
  Senior loan costs...............................................           425              _
  Provision for assets impairment.................................         2,576              _
  Provision for doubtful accounts.................................           447            604
  Gain on sale of property and equipment..........................             _            (19)
  Changes in assets and liabilities, net of business acquisitions:
    Accounts receivable...........................................           904         (1,841)
    Inventory.....................................................          (456)          (693)
    Prepaid expenses and other current assets.....................          (328)           159
    Accounts payable and accrued expenses.........................           402            295
    Deferred revenues and customer deposits.......................          (196)          (135)
                                                                      ----------     ----------
  Net cash provided by (used by) operating activities.............           474           (901)
                                                                      ----------     ----------
Cash flows from investing activities:
  Business acquisitions...........................................             _         (2,396)
  Acquisition of property, equipment and licenses.................          (275)          (906)
  Deferred business acquisition costs.............................             _             (8)
  Acquisition escrow deposits refunded............................             _            200
  Sale of property and equipment..................................           263            698
                                                                      ----------     ----------
  Net cash used by investing activities...........................          (12)         (2,412)
                                                                      ----------     ----------
Cash flows from financing activities:
  Issuance of long term debt......................................             _          4,450
  Proceeds from stock options exercised, net......................             _            348
  Repayment of long term debt.....................................          (108)        (1,250)
  Repayment of capital lease obligation...........................            (5)          (179)
  Deferred financing and stock registration costs.................           (84)          (556)
                                                                      -----------    ----------
  Net cash (used by) provided by financing activities.............          (197)         2,813
                                                                      ----------     ----------
Net increase (decrease) in cash and cash equivalents..............           265           (500)
Cash and cash equivalents - beginning of period...................           378            973
                                                                      ----------     ----------
Cash and cash equivalents - end of period.........................    $      643     $      473
                                                                      ==========     ==========

</TABLE>

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


                                       5
<PAGE>

AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)

1.  ORGANIZATION AND DESCRIPTION OF THE BUSINESS:

      Aquis Communications Group, Inc. (the "Company") is a holding company,
incorporated in the State of Delaware. Through its operating companies, it
operates three regional paging systems providing one-way wireless alpha and
numeric messaging services in portions of sixteen states principally in the
Northeast and Mid-Atlantic regions of the United States, as well as the District
of Columbia. Aquis also resells nationwide and regional services, offers alpha
dispatch, news and other messaging enhancements, and resell cellular service.
Its customers include individuals, businesses, government agencies, hospitals
and resellers.

      On March 31, 1999, Paging Partners Corporation merged with Aquis
Communications, Inc. ("ACI", incorporated in late 1997 and first capitalized in
January 1998) in a transaction accounted for as a reverse acquisition with ACI
as the accounting acquirer. At that time, Paging Partners changed its name to
Aquis Communications Group, Inc. (the "Company"). Prior to that merger, on
December 31, 1998, ACI acquired the net assets of Bell Atlantic Paging, Inc.
("BAPCO" or the "Predecessor Company"), prior to which it had no operating
activities.

      The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries, and reflect the merger with Paging
Partners Corporation ("Paging Partners") for all periods presented. These
statements also include the effects of the acquisition of the net assets of
BAPCO on December 31, 1998, the acquisition of SunStar Communications, Inc. in
June 1999 and its sale in August 2000, and the purchase of paging assets of
SourceOne Wireless in January 2000 and Suburban Paging in May 2000. These
acquisitions have been accounted for under the purchase method of accounting.
These statements also include the effects of Aquis' determination to sell
substantially all of the assets of its Midwest operations that were acquired
from SourceOne Wireless in January 2000. The accompanying statements reflect all
adjustments considered necessary by management to present fairly the
consolidated financial position as of June 30, 2001 and December 31, 2000, and
the consolidated results of operations and the related consolidated cash flows
for the six- and the three-month periods ended June 30, 2001 and 2000. The
balance sheet for the end of the preceding fiscal year has been derived from the
Company's audited balance sheet at December 31, 2000 contained in the Company's
Form 10K and is provided for comparative purposes. All other financial
statements are unaudited. In management's opinion, all adjustments have been
made which include only normal recurring adjustments necessary to fairly present
the financial position, results of operations and changes in cash flows for all
periods presented. All material intercompany accounts and transactions have been
eliminated in consolidation. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for the
full year. Certain prior period amounts have been reclassified to conform to the
current period presentation.

      Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10K for the most recent fiscal year.

      Aquis' consolidated financial statements as of and for the six months
ended June 30, 2001 and as of December 31, 2000 have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. However, Aquis incurred losses
of about $7.4 and $5.2 million for the six months ended June 30, 2001 and 2000,
respectively, and $23.7 and $10.9 million during each of the years ended
December 31, 2000 and 1999, respectively, and these results have caused it to be
in default of its agreement with its senior lender, FINOVA, and its unsecured
lender, AMRO International, SA. In January 2001 the Company failed to make a
required principal repayment of $514 to FINOVA as well as the other scheduled
principal payments due quarterly thereafter. Nor has Aquis made any of the
monthly interest payments due to FINOVA for any period subsequent to December
31, 2000. Accordingly, all debt and accrued interest due to both FINOVA and AMRO
are classified as current obligations in the accompanying balance sheet.
However, the Company has executed forbearance agreements with both lenders,
which are discussed in more detail below. The Company is further obligated to
pay minimum lease payments under non-cancelable leases during 2001 in the
approximate amount of $7,262, and, on January 31, 2002, is required to redeem
its 7.5% Redeemable Preferred Stock under which the total obligation was $1,659
at June 30, 2001. The Company's principal source of liquidity at June 30, 2001
included cash and cash equivalents of about $643. At June 30, 2001, Aquis
reported a working capital deficit of $33,036, primarily the result of the
reclassification of its term debt to currently payable. These factors raise
substantial doubt about the Company's ability to continue as a going concern,
and the auditors' opinion on Aquis' financial statements as of and for the year
ended December 31, 2000 is qualified as the result of these conditions. Such
qualification of the auditor's opinion for going concern issues is typically
made when a company's liabilities are unlikely to be discharged as they become
due in the normal course of business, which likelihood can arise if a company's
history of operating losses is expected to continue and funding of those losses
from outside sources is unlikely to be available.


<PAGE>

      In October 2000, NASDAQ notified Aquis that its securities would be
de-listed from the NASDAQ SmallCap Market. Aquis common stock subsequently began
trading on the OTC Bulletin Board under the symbol AQIS.OB. The effect of this
change in trading markets may have caused or contributed to the reduction of
trading volume and liquidity, may diminish the Company's ability to restructure
its debt or raise additional equity, and has substantially eliminated our
ability to obtain funding under the Coxton agreement as it is currently written.

      Aquis is in default of its original loan agreements with FINOVA and AMRO
International, although neither lender has yet demanded payment of the amounts
due to them. Aquis does not expect that its current cash and equivalents and the
cash it expects to generate from operations will be sufficient to meet its
anticipated debt service, working capital and capital expenditure requirements
under its existing capital and operating structure and for the foreseeable
future. The conditions described above indicate that Aquis may not be able to
continue as a going concern. The Company's ability to continue as a going
concern is dependent on the continued forbearance of its lenders from demanding
immediate payment of their outstanding loans. Aquis' ability to continue as a
going concern is also dependent on its ability to generate sufficient cash from
operations to meet operating obligations, aside from those required under its
debt agreements, continuing supplies of goods and services from its key vendors,
and an ongoing ability to limit or reduce operating costs and capital
requirements. In the event that demand is made for payment of the outstanding
debt, Aquis does not believe that its resources will be sufficient to meet such
a demand, and the Company would consider appropriate responses which could
include filing a request for protection under the US Bankruptcy Code.

      In response to its defaults and lack of liquidity, the Company has signed
forbearance agreements with AMRO and FINOVA. In April, 2001 Aquis and AMRO
agreed that AMRO would refrain from making an immediate demand for payment of
all outstanding amounts due, and would refrain from electing to convert its debt
to common stock, for up to 180 days. In June 2001, that agreement was extended
through December 31, 2001. In exchange for AMRO's forbearance, Aquis has begun
to work with a financial consultant specializing in the management of distressed
businesses. With this arrangement in place, Aquis and FINOVA executed a
forbearance agreement on June 7, 2001 related to Aquis' senior loan. This
agreement is based in part on business plans intended to improve its financial
performance and its ability to pay its lenders. These multi-faceted plans
include staff and salary reductions through targeted cutbacks, normal attrition,
and compensation adjustments. Also included are marketing strategies intended to
exploit the marketing opportunities in one-way paging resulting from the
refocusing of many of its paging industry competitors on two-way and other
advanced services. Technical operations improvement plans include financial
savings available through strategically targeted network consolidations
involving co-locating some of its low- and high-band communications equipment,
and finalization of reciprocal compensation agreements currently being
negotiated with some of Aquis' communications facilities providers. Also planned
are sales of network equipment that becomes non-essential as the result of these
consolidations, as are closure of targeted non-core remote sales offices. In
addition, Aquis has signed a letter of intent related to the sale of its paging
operations in the Midwest. These initiatives, if successful, are expected to
allow Aquis pay down amounts due to its general creditors, to invest in paging
equipment in sufficient amounts to meet the demands of its target markets, and
to resume debt service payments, on a small scale, to its lenders. However, it
is not likely, without receipt of significant proceeds from the note receivable
due from SunStar or without the sale of its Midwest operations, that these
initiatives can be executed as currently planned. Even with collections against
that note due from SunStar and the sale of our Midwest operating assets,
management can offer no assurance that these plans will be successful to the
degree that may be required by its creditors or to the extent necessary to
ensure its ability to continue as a going concern.

2.   MERGERS, ACQUISITIONS AND DISPOSITIONS:

 SunStar Communications, Inc.:

      On June 15, 1999, a wholly-owned subsidiary of Aquis entered into a Stock
Purchase Agreement (the "Agreement") with SunStar Communications, Inc.
("SunStar"), an Arizona corporation and SunStar One, LLC, an Arizona limited
liability company. SunStar provides secure Internet services over an intelligent
private network, provides dial-up Internet access services to corporate and
individual subscribers and can provide enhanced security standards for user
authentication. Total consideration paid for all of the outstanding stock of
SunStar was $275 cash and 1,150,000 shares of the Company's common stock valued
at their fair market value based on the average daily closing prices a few days
before and a few days after the terms of the acquisition were agreed upon and
announced. The aggregate purchase price totaled approximately $2,130 including
transaction costs and assumed liabilities and has been allocated to the net
assets acquired based on their estimated fair market values on the closing date
of this transaction, June 30, 1999, based on the purchase method of accounting.
Intangible assets of approximately $2,066 were amortized on a straight-line
basis over three to 10 years until August 31, 2000, at which time Aquis sold
these operations.

      Effective on August 31, 2000 Aquis sold its Internet operations to a
private group headed by the CEO and a Director of Aquis, along with the
President of that operating subsidiary. At that time, the net assets totaled
$1,400 net of $650 of current liabilities and included licenses, other
intangibles and customer receivables. Including those assumed current
liabilities, the purchase price was $2,966. Cash of $987 was received along with
a 10% note maturing on December 31, 2000 in the face amount of $1,329 in
consideration of the non-cash portion of the purchase price. The note principal
was paid down to $830 by December 31, 2001, the maturity date of this note was
extended by the parties to March 31, 2001, and extended again to December 31,
2001.


<PAGE>

As a result of the agreement to extend this note due from this related
party to December 31, 2001, Aquis is currently in discussions with FINOVA
concerning the possible impact, if any, on the covenants contained in their
forbearance agreement. A payment of $25 was received on May 8, 2001 and another
payment of $50 was received on July 2, 2001 in connection with this outstanding
balance. Revenues and expenses realized from Internet operations totaled $335
and $884, respectively, during the six months ended June 30, 2000, and those
losses contributed to the decision to sell this operation.

SourceOne Wireless:

      On January 31, 2000, the Company completed the acquisition of certain
assets of SouceOne Wireless, a facilities-based provider of one-way paging
services to subscribers in several Midwestern states. Previously, on August 2,
1999, the Company entered into an Asset Purchase Agreement (the "Purchase
Agreement") and Agreement Pending Purchase Closing (the "Agreement") with
SourceOne Wireless, Inc. and two of its affiliates ("SOWI"). SOWI and its
affiliates filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Court in the Northern District of Illinois between April 29
and July 2, 1999. Pursuant to the Agreement, the Company managed the day-to-day
operations of certain SOWI businesses pending the closing of the associated
Purchase Agreement. This closing was subject to various approvals, including
that of the Bankruptcy Court and the FCC. During the management period, a
reduction of the purchase price to $3,750 was negotiated, and resulted in a
reduced price of $2,250 in cash and 15,000 shares of the Company's 7.5%
cumulative preferred stock valued at $1,500 as agreed among the parties.
Acquisition costs totaling about $502 were deferred at December 31, 1999, and is
treated as a cost of the assets acquired on January 31, 2000. The aggregate
purchase price, including transaction costs, totaled approximately $4,500, and
this purchase was accounted for under the purchase method of accounting. Costs
to acquire the assets of SourceOne Wireless were capitalized at December 31,
1999, including an escrow deposit of $200, since this transaction was closed on
January 31, 2000. The revenues and expenses realized from the operations of
these net assets are included in the Company's results of operations from the
date of acquisition.

      If the acquisition of SourceOne assets had occurred on January 1, 2000,
the pro-forma results for the six months ended June 30, 2000 would have included
total revenue approximating $16,406, a net loss attributable to common
shareholders of $5,329 and a net loss per common share of $0.31. These pro-forma
results are based on various assumptions and are not necessarily indicative of
what would have occurred had these transactions been consummated on January 1,
2000.

      As part of the business plan developed in conjunction with the
requirements of its lenders, Aquis signed a letter of intent dated June 7, 2001
for the sale of its Midwest paging operations. This letter of intent, which
expired by its terms on July 31, 2001, provided for a purchase price of $1.1
million in cash to be paid in exchange for the customer receivables, the
customer lists, all equipment and FCC licenses used in that operation and
specified contract rights under leases and other operating agreements. The
parties are currently in advanced negotiations related to the purchase agreement
and interim asset management terms. The completion of this sale is expected to
be subject to certain contingencies that are beyond the Company's control, most
significantly including the buyer's financing contingency, FINOVA's agreement to
release the liens it holds on these assets and the FCC's approval of the
transfer of the underlying communications licenses. If the contingencies are
satisfied as anticipated, the transaction is expected to close in escrow during
the third quarter this year with the proceeds of sale becoming available during
the fourth quarter.

      In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of", Aquis evaluates the recoverability of the carrying value of its
long-lived real and intangible assets based on related estimated undiscounted
cash flows. In connection with these negotiations, Aquis has written down the
related net assets by $2,576 during its second fiscal quarter to their estimated
realizable value of $885, net of estimated transaction costs. During the six
months ended June 30, 2001, results of operations of these assets included
revenues of about $796 and a net loss of $330 after depreciation and
amortization charges of approximately $300.


3. INTANGIBLE ASSETS

      Aquis reviews its assets for impairment when events or changes in
circumstances indicate that such costs may not be recoverable in the normal
course of business. Accordingly, as a result of the Company's ongoing losses,
its forecast for continuing losses, and its default under its loan agreements as
described in more detail elsewhere herein, Aquis recognized a charge for
impairment of the carrying value of its FCC licenses and State certificates in
the amount of $9,500,000 at December 31, 2000. The amount of the loss was based
on the amount of the estimated annual cash flows through December 31, 2008
discounted to net present value using a discount rate of 20%. The resulting
adjusted carrying value is believed by management to approximate the realizable
value of these assets. Amortization expenses for the six months ended June 30,
2001, as a result of this write down, have declined accordingly.

4.  DEFERRED CHARGES:


<PAGE>

      Deferred financing costs of $1,648 were written off during the year ended
December 31, 2000 as the result of the Company's default under its loan
agreements and its lenders' rights to make demand for payment of outstanding
balances due to them. As the result, amortization of such charges during the
current periods has declined.

5.  LONG-TERM DEBT:

      On October 23, 1998, ACI entered into a five-year term loan agreement (the
"Senior Loan Agreement") with FINOVA Capital Corporation ("FINOVA") structured
to provide a $30,000 credit facility. That agreement specified a term of five
years, and required graduated increasing quarterly principal repayments ranging
from .5% to 3.5% of outstanding principal beginning on July 1, 2000, with the
balance due on December 31, 2003. Loan interest was set at a rate based on
Citibank, N.A.'s corporate base rate plus 175 basis points. The Company may also
elect to have interest on a part of the FINOVA loan based on a London Inter-Bank
Official Overnight Rate plus 450 basis points. This term loan is collateralized
by all of the Company's assets, presently owned and acquired subsequently, and
all issued and outstanding equity interests in the Company's operating
subsidiaries. The loan agreement also contains various covenants, including
restrictions on capital expenditures and compliance with certain financial
ratios. At December 31, 2000 and 1999, the Company was not in compliance with
certain ratios under this loan agreement.

      In November 1999, in connection with the termination of negotiations
related to various potential mergers, costs that were previously capitalized
were written off in 1999. During the third quarter of 1999, FINOVA modified
certain financial covenants contained in the loan agreement to exclude the costs
written off in connection with these abandoned business acquisitions and other
specified charges when computing "Net Income" as defined in the amended loan
agreement.

      On January 26, 2000, the FINOVA loan was amended in connection with the
SourceOne Wireless acquisition. The Company borrowed an additional $2,450 from
FINOVA on January 31, 2000 to consummate the acquisition (the "SourceOne
Portion"). The effect of the amendment was to limit the facility to the amount
outstanding after the SourceOne transaction, or a total of $27,765, to modify
certain financial ratios and to set the interest rate on the SourceOne Portion
to Citibank, N.A.'s corporate base rate plus 400 basis points. Aquis and FINOVA
further amended this agreement on April 12, 2000 in order to waive the Company's
covenant non-compliance at December 31, 1999, to reduce the financial ratio
requirements through the third quarter of 2001, and to encourage Aquis to make a
Special Prepayment of principal. That "Special Prepayment" in the amount of
$1,250 was defined and directed to be specifically applied to the SourceOne
Portion. In order to avoid an interest rate increase that was to take effect if
the Special Prepayment was not made, Aquis made this prepayment in April 2000,
using some of the proceeds of the convertible debenture acquired by AMRO
International.

      On April 10, 2000, Aquis entered into an agreement to obtain a $2 million
bridge loan with AMRO International as interim funding pending completion of
additional prospective financing. The debt is subordinate to the Company's
senior debt and is unsecured. This agreement provides for an interest rate of
11%, a scheduled maturity date on October 12, 2001 and also provides for
quarterly interest accruals and payments until the earlier of its maturity date
or conversion. At the lender's election not earlier than 120 days from the date
of funding, this loan is convertible into the Company's common stock at 90% of
the then-current market value. The cost of this beneficial conversion feature or
discount to market price, estimated at $222, was charged against results of
operations for the year ended December 31, 2000. At the Company's election,
after the initial 118 days subsequent to funding, the loan is redeemable at 115%
of face value.

      Proceeds from this loan were used during April 2000 to make the Special
Prepayment of $1,250 to FINOVA. The balance was used to pay certain fees
incurred in connection with the FINOVA loan modifications arranged during 2000,
to pay certain costs incurred in connection with this bridge loan, and for
general corporate purposes.

      On September 27, 2000, the Company and FINOVA agreed to modify the terms
of its Senior Loan Agreement, as amended. These modifications enabled Aquis to
retain all proceeds from the sale of its Internet operations and gave Aquis an
option to reduce the scheduled principal payment due on July 1, 2001 from $514
to $200 in exchange for payment of a fee of $75. Financial ratio covenants
related to the amount of senior and total debt outstanding and to its debt
service coverage were also relaxed from original levels through September 30,
2001. The maximum permitted leverage ratios were increased by amounts ranging
from 33% to 75% of original limits. Minimum required coverage ratios were
relaxed by 34% to 54% of original requirements. In exchange, Aquis has agreed to
pay quarterly fees of $75 if original financial ratios are not maintained.
Further, additional contingent fees of up to $250 per quarter will be added to
the principal balance due at final maturity if Aquis is unable to meet the
financial ratios as amended in April, 2000. The Company paid a fee of $100 in
order to secure these modifications. Finally, a principal payment of $2,000 was
required on or before December 31, 2000 in order to avoid the assessment of a
$500 fee and an interest rate increase of 2%. The Company did not make that
specified principal repayment of $2,000 and the related fee of $500 was added to
the principal balance otherwise payable at the maturity date of this loan. In
addition, Aquis has not made the scheduled quarterly principal payment due on
January 2, 2001 of $514, nor any subsequently required principal payments, nor
has it made any interest payments for any period subsequent to December 31,
2000. As the result of the defaults under the FINOVA and AMRO agreements, all
debt has been classified as currently payable.


<PAGE>

      As of December 31, 2000, Aquis was in default of its agreements with
FINOVA and AMRO. Aquis executed forbearance agreements with both lenders under
which FINOVA and AMRO have agreed not to demand payment of outstanding amounts
due until December 31, 2001, or if earlier, until re-established financial
targets are not met. In April 2001 as part of its forbearance agreement, AMRO
also agreed to refrain from converting its debenture into shares of Aquis common
stock, and subsequently extended that term of forbearance to December 31, 2001.
Under certain circumstances specified in that agreement with AMRO, such as the
enforcement of any other party's rights against Aquis in the event of default
under another material contract, and certain other circumstances, the
termination date of that forbearance agreement may be accelerated. In connection
with that agreement with AMRO, Aquis is working with a financial consultant
specializing in the management of distressed businesses. In May 2001, AMRO
revoked its April 2, 2001 written election to waive the provisions contained in
the debenture that limited its right to acquire a number of Aquis shares that
might cause its beneficial ownership of Aquis common stock to exceed 9.9%. With
an agreement in place with AMRO, Aquis and FINOVA executed a forbearance
agreement on June 7, 2001 related to Aquis' senior loan. This agreement is based
in part on business plans intended to improve its financial performance and its
ability to pay its lenders. These goals are expected to be achieved through
salary reductions, targeted cutbacks and normal attrition, along with
consolidation of its communications networks, sales of non-core paging
properties and equipment and marketing strategies intended to exploit the
marketing opportunities in one-way paging resulting from the refocusing of many
of its paging industry competitors on two-way and other advanced services. These
plans are discussed in further detail in Note 1. In this regard, Aquis has
signed a letter of intent related to the sale of its paging operations in the
Midwest and has reduced its workforce by about 37% since December 31, 2000.
These initiatives, if successful, are expected to allow Aquis pay down amounts
due to its general creditors, to invest in paging equipment in sufficient
amounts to meet the demands of its target markets, and to resume debt service
payments, on a small scale, to its lenders. However, it is not likely, without
receipt of significant proceeds from the note receivable due from SunStar or
without the sale of its Midwest operations, that these initiatives can be
executed as currently planned. Even with collections against that note,
management can offer no assurance that these plans will be successful to the
degree that may be required by its creditors or to the extent necessary to
ensure its ability to continue as a going concern. Aquis is discussing various
alternatives with these lenders, including restructuring its debt and equity
structure.

      At June 30, 2001 the balance of the Senior Loan outstanding, including
accrued interest and fees, was $28,903 and is subject to interest rates amended
with the June 7, 2001 Forbearance Agreement set at Citibank, N.A.'s published
base rate plus 6%. At June 30, 2001, that rate approximated 12.75%. The
remaining balance of long term debt outstanding consisted principally of
borrowings made pursuant to the bridge loan of April 2000 and to the Installment
Loan, discussed below.

      During the second quarter of 1999, the Company refinanced the capital
lease obligations that were assumed as a result of the merger with Paging
Partners. Terms of the new obligation (the "Installment Loan") include a
principal amount of $1,300, a 60-month repayment schedule, an interest rate
indexed to the yield for five year Treasury Notes, and is collateralized by the
underlying equipment. As the result of its default under its senior term loan,
Aquis is also in default of this debt agreement.

6.    COMMON STOCK ISSUED

      During the six months ended June 30, 2001, Aquis issued 36,000 shares of
its common stock, valued at about $.016 per share in connection with consulting
services related to its business planning efforts that were provided by an
independent business consultant. In addition, in connection with the price
adjustment requirements of the agreement under which the paging assets of
Suburban Connect were purchased, 645,071 shares have been reflected as issued in
the accompanying financial statements.

7.   NET LOSS PER COMMON SHARE:

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

8.  SUPPLEMENTAL CASH FLOW DATA:


<PAGE>

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

                                                                  June 30,
                                                                  --------
                                                             2001         2000
                                                          ----------  ----------

Cash paid for interest.................................      $ 279     $ 1,511
Cash paid for taxes....................................      $   _     $     _
Note receivable accepted as partial consideration......      $   _     $     _

Business Acquisitions

      During the six months ended June 30, 2001, Aquis completed no additional
business combinations. During the six months ended June 30, 2000, Aquis
purchased targeted paging assets of SourceOne Wireless and Suburban Connect and
expended cash as depicted below:


                                                                 June 30, 2000
                                                                 ---------------

     Fair value of assets acquired.........................      $       8,116
     Liabilities assumed...................................             (1,807)
     Exchange of common stock..............................             (1,598)
     Exchange of preferred stock...........................             (1,500)
     Transaction costs paid or accrued.....................               (575)
     Less: cash acquired ..................................               (240)
                                                                 --------------
     Net cash paid ........................................      $        2,396
                                                                 ==============


<PAGE>

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations

Forward-Looking Statements

Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors that are inherently uncertain and difficult to
predict. Therefore, no assurance can be given that financing for such
investments will be available. In addition, no assurance can be given that the
Company's operations will generate positive cash flows.

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements made by the Company's management
that are based on current expectations, estimates and projections about the
industries in which the Company operates and management's beliefs and
assumptions. In addition, other written or oral statements that constitute
forward-looking statements may be made by or on behalf of the Company. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," or various of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Organization and Basis of Presentation

      Aquis Communications Group, Inc. is a holding company, incorporated in the
State of Delaware. Through our operating companies, we operate three regional
paging systems providing one-way wireless alpha and numeric messaging services
in portions of sixteen states principally in the Northeast, the Midwest and the
Mid-Atlantic regions of the United States, as well as the District of Columbia.
We also resell nationwide and regional services, offer alpha dispatch, news and
other messaging enhancements, and resell cellular service. Our customers include
individuals, businesses, government agencies, hospitals and resellers.

      On December 31, 1998, we began business operations with the purchase of
certain paging assets, licenses and other assets and the assumption of certain
liabilities of Bell Atlantic Paging, our predecessor company. On March 31, 1999,
Paging Partners Corporation (incorporated in 1994), merged with our operating
company, Aquis Communications, Inc. ("ACI", incorporated in late 1997 and first
capitalized in January 1998) in a transaction accounted for as a reverse
acquisition with ACI as the accounting acquirer. At that time, Paging Partners
changed its name to Aquis Communications Group, Inc. On June 30, 1999, a wholly
owned subsidiary of Aquis acquired SunStar Communications, Inc. On January 31,
2000, we completed the acquisition of selected paging assets of SourceOne, a
Chicago-based radio common carrier. In May 2000 we acquired certain paging
assets of Suburban Paging, a regional paging services reseller headquartered in
Pennsylvania. On August 31, 2000, we sold the net assets of our Internet
services operations in order to focus our resources on our paging operations. In
June 2001, we signed a letter of intent related to the sale of certain paging
assets and the assumption of certain liabilities of our Midwest operations.
These matters are also discussed in our consolidated financial statements and
the notes thereto.

      As noted above, the Bell Atlantic paging business was acquired on December
31, 1998, for approximately $29,200,000, including transaction costs. The
business acquired in this transaction included Bell Atlantic Paging's sales and
marketing operation and the paging network operating infrastructure owned and
operated by the Bell Atlantic Operating Telephone Companies. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations." This transaction was financed primarily
through a $20,000,000 loan from FINOVA Capital Corporation, a $4,150,000 note
retained by the seller, and cash proceeds of $5,661,000 from a sale of preferred
stock. Aquis satisfied all its obligations under the note received by the seller
on June 30, 1999.

      Aquis' consolidated financial statements as of and for the six months
ended June 30, 2001 and for the year ended December 31, 2000 have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. We incurred a
losses of about $7.5 million for the six months period ended June 30, 2001 and
$23.7 million during the year ended December 31, 2000. Our history of losses
have caused us to be in default of our agreements with our senior lender, and in
January 2001 and later periods we were unable to make required quarterly
principal repayments, each in the amount of $514,000, under that loan. Further,
we have not made any required interest payments on this debt since January 11,
2001. We are also in default of our debt obligation due to our unsecured lender,
AMRO International, S.A. A $2,000,000 note payable to AMRO International was
scheduled to mature in October 2001, unless sooner converted to common stock, or
demand made for payment due to Aquis' default, at AMRO's election. Aquis is
further obligated to pay minimum lease payments under non-cancelable leases
during 2001 in the approximate amount of $7,262,000. Our principal source of
liquidity at June 30, 2001 included cash and cash equivalents of about $643,000.
At June 30, 2001, our working capital deficit totaled more than $33 million,
primarily the result of the classification of its term debt to currently payable
as a consequence of its defaults. These factors raise substantial doubt about
the Company's ability to continue as a going concern, and the auditors' opinion
on Aquis' financial statements as of and for the year ended December 31, 2000 is
qualified as the result of these conditions. Such


<PAGE>

qualification of the auditor's opinion for going concern issues is typically
made when a company's history of operating losses is expected to continue and
funding of those losses from outside sources is unlikely to be available. In
such circumstances, a company's liabilities are unlikely to be discharged as
they become due in the normal course of business.

      In October 2000, NASDAQ notified us that our securities would be de-listed
from the NASDAQ SmallCap Market. Aquis common stock subsequently began trading
on the OTC Bulletin Board under the symbol AQIS.OB. The effect of this change in
trading markets may have caused or contributed to the reduction in trading
volume and liquidity of our shares, may diminish our ability to restructure our
debt or raise additional equity, and has substantially eliminated our ability to
obtain funding under the Coxton agreement as it is currently written.

      We are in default of our original and amended loan agreements with FINOVA,
our senior secured lender, and AMRO International, an unsecured creditor. During
the second quarter of 2001, we executed forbearance agreements with both lenders
that specify that no payments of interest or principal are required until
December 31, 2001, that all amounts outstanding are due and payable on December
31, 2001, and further provide that demand for payment of their loans to us will
not be made before December 31, 2001 unless we fail to meet conditions and
covenants specified in those forbearance agreements. AMRO has also agreed to
refrain from electing to convert its debenture into common stock during the same
time period, subject to the same conditions. The defaults under these loan
agreements also cause violations of the terms of some of our operating
agreements for services provided by others to our customers. Further, Aquis does
not expect that its current cash and equivalents and the cash it expects to
generate from operations will be sufficient to meet our anticipated debt
service, working capital and capital expenditure requirements under our existing
debt, equity and operating structure for the foreseeable future. We will be
unable to pay the loans due to FINOVA and AMRO on December 31, 2001 with our
current financial and other resources. The conditions described above indicate
that Aquis may not be able to continue as a going concern. Our ability to
continue as a going concern is dependent on the continued forbearance of FINOVA
and AMRO from demanding immediate payment of their outstanding loans, our
ability to generate sufficient cash to meet operating requirements, continuing
supplies of goods and services from our key vendors, and an ongoing ability to
limit or reduce operating costs and capital requirements. In the event that
neither FINOVA nor AMRO agrees to further extend the maturity date of
substantially all of the balances due to them beyond December 31, 2001, we would
consider appropriate responses, including the filing of a request for protection
under the US Bankruptcy Code.

      In connection with these forbearance agreements, Aquis has developed
business plans intended to improve its financial performance and its ability to
pay its lenders. We have also begun to work with a financial consultant
specializing in the management of distressed businesses. Our multi-faceted
business plans include staff and salary reductions through targeted cutbacks,
normal attrition, and compensation adjustments. Also included are marketing
strategies intended to exploit the marketing opportunities in one-way paging
resulting from the refocusing of many of our paging industry competitors on
two-way and other advanced services. Technical operations improvement plans
include financial savings available through strategically targeted network
consolidations involving co-locating some of its low- and high-band
communications equipment, and finalization of reciprocal compensation agreements
currently being negotiated with some of Aquis' communications facilities
providers. Also planned are sales of network equipment that becomes
non-essential as the result of these consolidations, as are closure of targeted
non-core remote sales offices. In addition, Aquis has signed a letter of intent
and is in the advanced stages of negotiations related to the sale of its paging
operations in the Midwest. This transaction is expected to be subject to certain
contingencies that are beyond the Company's control, most significantly
including the buyer's financing contingency, FINOVA's agreement to release the
liens it holds on these assets and the FCC's approval of the transfer of the
underlying communications licenses. If these initiatives can be successfully
completed, it is expected that Aquis will be enabled to pay down amounts due to
its general creditors, to invest in paging equipment in sufficient amounts to
meet the demands of its target markets, and to resume debt service payments, on
a small scale, to its lenders. However, it is not likely, without receipt of
significant proceeds from the note receivable due from SunStar or without the
sale of its Midwest operations, that these initiatives can be executed as
currently planned. Even with collections against that note due from SunStar and
with the sale of its Midwest operating assets, management can offer no assurance
that these plans will be successful to the degree that may be required by our
creditors or to the extent necessary to ensure our ability to continue as a
going concern.

General

      Aquis is a leading provider of paging and other wireless messaging
services and markets one-way paging service and equipment to customers directly
and through resellers. We offer our customers both customer owned and maintained
equipment or lease options for equipment.

      We generate a substantial majority of our revenue from fixed periodic fees
for paging services that are not generally dependent on usage. Usage sensitive
charges consist primarily of charges for messages exceeding the number included
in a customer's fixed monthly rate plan, fees charged to resellers for messages
sent to the resellers' subscribers over Aquis' communication network on a
per-character basis under a Telocator Networking Paging Protocol ("TNPP"), and
fees charged to a


<PAGE>

party sending a message to an Aquis-enabled pager, primarily
on a flat fee-per-message basis (referred to as "Calling Party Pays" or ("CPP").

      Our ability to recover initial operating, selling and marketing costs and
to achieve profitability is dependent on the average duration of each customer's
subscription period. For as long as a subscriber continues to utilize the
service, operating results benefit from the recurring fixed fee payments without
the requirement of any incremental selling expenses. Conversely, customer
disconnections adversely affect operating results. Each month a percentage of
existing customers have their service terminated for reasons including failure
to pay, dissatisfaction with service or coverage limitations, or switching to
competing service providers.

      This discussion should be read in conjunction with Aquis' consolidated
financial statements and the notes thereto.

RESULTS OF OPERATIONS FOR THE PERIODS ENDED JUNE 30, 2001 AND 2000

      Some of the following financial data is presented on a per subscriber or
unit basis. Management believes that such a presentation is useful in
understanding comparative results by providing a meaningful basis for
comparison, given the differences in business management and in the number of
subscribers of other paging companies.

Units in Service

      Units in service totaled 312,000 at June 30, 2001 and 389,000 at June 30,
2000. Including approximately 70,000 units added through the acquisitions of
SourceOne and Suburban Paging, we added a total of about 120,000 units during
the 6 months ended June 30, 2000. We made no bulk acquisitions of paging
customers during the six months ended June 30, 2001. Our average monthly churn
rates during the six months ended June 30, 2001 and 2000, were 5.2% and 2.6%,
respectively. The increase in these rates are influenced by industry trends in
the shrinking nationwide paging market and our own limited ability to procure
paging units to replace those for our customers who have lost or damaged their
paging units. Also impacting the increased churn rate was the increase in
disconnections that typically accompanies acquisitions of customer bases in
bulk, such as those acquired from SourceOne and Suburban in 2000.

Revenues

      Service revenues for the six months ended June 30, 2001 and 2000, were
$9,804,000 and $15,534,000, respectively, a decrease of approximately $5,730,000
or about 36.9%. Service revenues for the three months ended June 30, 2001 and
2000, respectively, declined $2,853,000, or about 37.7%. The declines were
attributable to three factors: the churn described above, continuing
industry-wide pricing pressures, and a change in the mix of direct subscriber
and reseller units. Average monthly revenue per unit during the three month
periods ended June 30 was about $4.84 in 2001 and $6.12 in 2000. During the
current three month period as compared to the corresponding period in 2000, the
portion of our subscriber base represented by reseller units increased from
about 59% to nearly 65%. Resellers purchase Aquis' services in bulk and are
therefore provided rates lower than those made available to Aquis' direct
subscribers. The revenue decline was also effected by the 30,000 units returned
to Bell Atlantic Mobile in April 2000.

      Revenues from Internet operations were $335,000 and $201,000 during the
six and three month periods ended June 30, 2000, respectively. Due to the sale
of those operations in August 2000, no such revenues were booked during the
current periods. We sold this business due to ongoing losses from Internet
operations that reached about $665,000 for our period of ownership in 2000.

      Revenues from sales of paging equipment declined to $336,000 from $454,000
for the six months ended June 30, 2001 and 2000, respectively. For the
respective three month periods sales revenues also declined, from $309,000 to
$205,000. We continued to market lower-cost units at reduced sales prices in
2001 in response to competition from other paging providers and competing
communications services.

Cost of Equipment Sales

      The cost of equipment sold during the six months ended June 30, 2001 and
2000, respectively, was $337,000 and $416,000. During those respective three
month periods, such costs totaled $170,000 and $260,000. The
previously-described move toward lower-cost pagers and sales of fewer units
during the three months ended June 30, 2001 as compared to the corresponding
period in 2000 combined to cause these cost reductions.

Cost of Paging Services


<PAGE>

      Cost of service consists principally of fees paid to third party carriers,
and, to a lesser extent, to message dispatch companies. Also included are Aquis'
technical operating expenses. For the six months ended June 30, 2001 and 2000,
respectively, total services costs decreased to $4,416,000 from $7,479,000. For
the corresponding three month periods, such costs declined to $2,161,000 from
$3,483,000. Contributing to these cost reductions were declines in units
serviced by third party carriers, including a majority of the units returned to
Bell Atlantic Mobile, now Verizon Wireless, in April 2000. Also contributing to
the cost reductions during all periods were costs incurred to provide Internet
services during 2000, which totaled $288,000 and $170,000 during the six and
three month periods in 2000, respectively. We also lowered our total costs of
providing paging services in 2001 by eliminating and consolidating some paging
communications facilities that were considered to be outside our more profitable
core paging areas, particularly those related to our Midwest operations.

      Third party carriers are utilized when a customer requires service outside
of Aquis' service area, and are most commonly used to provide nationwide
coverage. During the six and three month periods ended June 30, 2001 and 2000,
respectively, the costs of such paging services decreased from $3,238,000 to
$1,396,000 and from $1,465,000 to $654,000. The decreases are primarily
attributable to the decline of the subscriber base and a refocusing of our sales
efforts on higher utilization of our own paging infrastructure through
commission plan incentives.

      Technical operating expenses include transmission site rentals, telephone
interconnect services and the costs of network maintenance and engineering.
These expenses totaled $3,020,000 and $3,953,000 during the six month periods
ended June 30, 2001 and 2000 respectively. During the three month periods ended
June 30, 2000 and 2001, respectively, these costs were reduced to $1,507,000
from $1,848,000. The aforementioned elimination and consolidation of
communications facilities, including trunking and other communications
facilities provided by third party suppliers, was the primary contributor to
these cost reductions. Also contributing were lower salary costs and elimination
of targeted non-core leased communications tower sites.

Sales and Marketing

      Selling and marketing expenses include the cost to acquire and retain
subscribers, operating costs associated with the sales and marketing
organization, and other advertising and marketing expenses. These year-to-date
costs decreased from $1,955,000 in 2000 to $1,044,000 in 2001, or approximately
46.6%. Similar reductions on a percentage basis were effected for the three
months periods ended June 30, 2001 and 2000. These cost reductions resulted from
staffing cutbacks in the sales organization, from elimination of yellow page and
other non-core advertising media and from rent reductions effected through the
closure of certain sales offices. Reduced commissions resulting from a revised
commission plan implemented late in 1999 and from fewer new units placed in
service through sales channels during 2001 also lowered overall selling
expenses.

 General and Administrative

      General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. These costs decreased
to approximately $2,677,000 during the six months ended June 30, 2001 from about
$3,952,000 for the corresponding period in 2000. For the three month periods
ended June 30, 2001 and 2000, respectively, such costs were reduced to
$1,325,000 from $1,821,000. Total costs for the six months ended June 30, 2000
included $693,000 resulting from the issuance of options pursuant an employment
agreement with a former President of Aquis. No similar costs were incurred in
2001. Other cost reductions during the current year six month period were
realized through elimination of outside customer call center activities and
lower billing and data processing expenses, which were enabled upon completion
of the integration of the SourceOne and Suburban customer bases. Also
contributing to the expense reductions were lower costs of employment arising
from staffing cutbacks and un-replaced attrition. Partially offsetting these
savings were fees incurred with a consultant who assisted in development and
negotiation of our forbearance agreements, and another consultant who assisted
with development of our business plans.

Depreciation and Amortization

      Depreciation and amortization decreased to $4,112,000 for the six months
ended June 30, 2001 from $5,074,000 in the prior year six month period.
Amortization of intangible assets decreased significantly as a result of the
asset impairment write down recorded at December 31, 2000. This write down was
made as the result of our ongoing losses, our forecast for continuing losses,
and our defaults under our loan agreements. Accordingly, we recognized a
provision for impairment of the carrying value of our FCC licenses and State
certificates in the amount of $9,500,000 at December 31, 2000. Also contributing
was amortization charges associated with our Internet assets, which were sold in
August 2000, and depreciation of certain excess paging infrastructure that was
sold as part of our ongoing efforts to consolidate our communications networks
and focus on our core paging markets.

Provision for Asset Impairment


<PAGE>

      In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of", Aquis evaluates the recoverability of the carrying value of its
long-lived real and intangible assets based on related estimated undiscounted
cash flows. As a result of our need to raise cash and our business plans
formulated in connection with the forbearance agreements with our senior and
junior lenders, we determined to sell the operating assets of our Midwest paging
operations. The marketing of those operations to interested and qualified
potential buyers produced offers to purchase those assets, and a letter of
intent to purchase those assets was executed in June 2001. The terms of that
agreement specified a purchase price of $1,100,000 and the assumption of
specified obligations to provide future paging services to specific subscribers.
The transaction is subject to FCC approval, the buyer's financing and other
contingencies. Accordingly, the assets of our Midwest operations were written
down to their estimated net realizable value of $885,000, net of estimated
transaction costs. Accordingly, in connection with these negotiations, Aquis has
written down the related net assets by $2,576,000 during its second fiscal
quarter.

Interest Expense

      Net interest expense totaled $1,949,000 and $1,725,000 for the six months
ended June 30, 2001 and 2000, respectively. For the respective three month
periods, net interest expense totaled $983,000 and $919,000. Gross interest
expenses increased as the result of the costs of funds borrowed to complete the
SourceOne purchase on January 31, 2000 and due to higher interest rates on our
floating rate loans attributable to higher rates resulting from our defaults.
Also, $500,000 was accrued as the result of the inability to meet specified debt
leverage and coverage ratios required in our agreements with FINOVA. Those
increased costs were partially offset by additional financial income derived
from the imposition during mid-2000 of late fees and interest assessments on
non-current billings due from our subscribers.

Income Taxes

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

Liquidity and Capital Resources

      Aquis' business plan and financial requirements call for capital to be
available to service our debt, to purchase paging equipment for new and existing
subscribers, and to operate, maintain and optimize the use of our communications
networks. However, at June 30, 2001, we had a working capital deficit totaling
more than $33 million, resulting primarily from the reclassification of our term
debt to currently payable status, and our principle source of liquidity was
$643,000 of cash and cash equivalents. We have experienced operating losses
since our inception, although we have steadily been producing EBITDA since then.
Our audit opinion as of and for the year ended December 31, 2000 included a
going concern qualification that is indicative of an inability to meet
obligations as they become due during the ensuing 12 months. We are not in
compliance with debt covenants or debt service requirements related to our
senior secured debt or our unsecured debt at June 30, 2001, and our lenders have
not waived our defaults. We are currently operating under limited-duration
forbearance agreements with both lenders, but if our lenders made demand for
repayment of all amounts due to them, we would be unable to meet that demand
with existing resources. Our forbearance agreements with these two lenders
expire on December 31, 2001, or on the date of any further default if sooner, at
which time either lender may demand payment in full of all amounts due.
Alternatively, AMRO may elect to convert its debenture into common stock, which
at current market values could result in a change in control of Aquis. We are
required to redeem all of the outstanding 7.5% Redeemable Preferred Stock by
January 31, 2002; at June 30, 2001, the balance required for such redemption was
approximately $1,659,000. Our resources are insufficient at this time to enable
us to meet our obligation to make this redemption. If we are unable to redeem
this preferred stock in January 2002, two seats on our Board of Directors may be
appointed by the holders of these shares. Our common stock was de-listed from
the NASDAQ SmallCap Market in October 2000, at which time our stock began to
trade on the OTC Bulletin Board. This de-listing technically and functionally
terminated our equity line of credit provided under a Common Stock Purchase
Agreement with Coxton Limited, eliminating this as a potential source of
capital. These factors have prevented us from obtaining any additional
significant funding that would enable us to meet our debt service requirements,
to acquire sufficient pagers to fully meet demand for either new business or
retention of existing subscribers who require replacement units from time to
time, or to invest in marketing initiatives for paging or other communications
services.

      In response to these conditions, Aquis is discussing debt restructuring
alternatives with its lenders, but no assurance can be given that these efforts
will be successful to the extent required in order to obtain a waiver of its
defaults under any existing, or future revised, debt or forbearance agreements.
In order to conserve cash and devote that resource to support our existing and
potential customer base, we have agreed with our lenders that no further debt
service payments will be made until the forbearance agreements expire. We have
developed business plans that are expected to allow us to service our debt on a
small scale and to increase the value of our business. Our forbearance
agreements with FINOVA and AMRO, our senior secured and our junior unsecured
lenders, respectively, are based on this business plan. Accordingly, FINOVA and
AMRO have both agreed not to demand immediate payment of outstanding amounts due
and have postponed our requirement to make any interim debt service payments,
and AMRO has agreed to refrain from converting its debenture into shares of
Aquis common stock. The term of those


<PAGE>

forbearance agreements expire on December 31, 2001, or if sooner, at the time
that an event of default exists under the terms of either such agreement. Events
of default under the AMRO forbearance agreement include the enforcement of any
other party's rights against Aquis in the event of default under another
material contract and Aquis' failure to continue to work and cooperate with its
recently-contracted financial and business restructuring consultant. Events of
default under the FINOVA forbearance agreement include, but are not limited to,
(1) failure to maintain a cash balance of $300,000 or more, (2) failure to
realize minimum monthly operating revenue of $1.615 million through September
30, 2001 and $1.71 million thereafter, (3) failure to raise at least $750,000 of
funding from sources other than operations before September 30, 2001, and (4)
the payment of any value to stockholders in the form of dividends, stock
redemptions or any other distributions. In connection with its forbearance
agreement, FINOVA has re-established the applicable interest rate at the base
rate plus 6%, and in the event of default, a default rate of the base rate plus
8% would apply. We are currently discussing with our senior lender the possible
impact on their ongoing forbearance, if any, of our extension to December 31,
2001 of the note receivable due from SunStar, which involved related party
approvals.

      Our business plans upon which the forbearance agreements were based
include staff and salary reductions through targeted cutbacks, normal attrition,
and compensation adjustments. Also included are marketing strategies intended to
exploit the marketing opportunities in one-way paging resulting from the
refocusing of many of its paging industry competitors on two-way and other
advanced services. Technical operations improvement plans include financial
savings available through strategically targeted network consolidations
involving co-locating some of its low- and high-band communications equipment,
and finalization of reciprocal compensation agreements currently being
negotiated with some of Aquis' communications facilities providers. With these
consolidations, sales of network equipment that becomes non-essential are also
planned, as are closure of targeted non-core remote sales offices. Another
milestone contained in this plan is the sale of Aquis' Midwest operations, and
management executed a letter of intent for such sale on June 7, 2001, specifying
a cash purchase price of $1.1 million and the assumption of certain limited
liabilities. This transaction is subject to certain contingencies that are
beyond our control, including FCC approval, buyer financing and FINOVA's
willingness to release its existing liens on the underlying assets. Finally,
collection of the proceeds of the note due to Aquis for the sale of its Internet
assets may also be a key element of the plan. The maturity date for payment of
this note has been extended from December 31, 2000 to March 31, 2001 and most
recently extended again to December 31, 2001, and provides for full satisfaction
of this note at graduated discounted payment amounts through December 31 at
which date the undiscounted amount is due. Although Aquis has earmarked a
significant portion of the proceeds from the sale of its Midwest assets and its
note receivable for payments to our creditors, there can be no assurance that
the expected proceeds will be collected within timeframes acceptable to Aquis'
creditors. These initiatives, if successful, are expected to allow Aquis to pay
down amounts due to its general creditors, to invest in paging equipment in
sufficient amounts to meet the demands of its target markets, and to resume debt
service payments, on a small scale, to its lenders. However, it is not likely,
without receipt of significant proceeds from the note receivable due from
SunStar or the sale of the Midwest assets, that these initiatives can be
executed as currently planned. Even with those proceeds, management can offer no
assurance that these plans will be successful to the degree that may be required
by its creditors or to the extent necessary to ensure its ability to continue as
a going concern. We believe that our business plan as a niche one-way paging
carrier in an industry that is moving toward other communications services is
sound, yet our ability to execute this plan is heavily dependent on the factors
noted above which are largely beyond our unilateral control.

      Our debt service requirements for the foreseeable future are significant.
Substantially all of our term debt totaling about $28.3 million, including
$27,250,000 due to FINOVA under our senior loan agreement, exclusive of accrued
interest of almost $1.7 million, is classified as currently payable as a result
of the defaults under our loan agreements. That reclassification includes the
$17.6 million balloon payment due to FINOVA, originally scheduled for payment on
December 31, 2003, and the other principal installments due quarterly until that
date. Under our existing forbearance agreement, we are required to pay FINOVA
all outstanding principal, accrued interest and any fees that may be due on
December 31, 2001. Similarly, our forbearance agreement with AMRO requires that
we be prepared to pay AMRO in full on that date, unless AMRO elects to convert
its debt into Aquis common stock. Interest costs associated with our senior debt
and our bridge loan alone reached almost $3,200,000 during the year ended
December 31, 2000 and such costs are expected to exceed that total in 2001. We
are also obligated to pay aggregate future minimum rental commitments under
non-cancelable leases in an amount of about $7 million through 2005. We must
redeem all of the outstanding 7.5% Redeemable Preferred Stock on January 31,
2002 at 100% of its stated value plus accrued cumulative unpaid dividends; those
totaled $1,659,000 at June 30, 2001. Cash provided by operations during 2001 is
not expected to be sufficient to satisfy these requirements as we are currently
structured.

      Our auditors' opinion on our financial statements as of and for the year
ended December 31, 2000 is qualified and states that there is substantial doubt
about our ability to continue as a going concern. This qualified opinion results
from our defaults under our loan agreements with FINOVA and AMRO, our history of
operating losses and our illiquid financial condition. These defaults result in
violations of the terms of several of our other operating agreements. If either
of our lenders elected to demand repayment of their loans, we would be unable to
meet those requirements with the financial resources currently available to us.
Accordingly, we would then consider appropriate responses, including the filing
of a voluntary petition for protection under the U.S. Bankruptcy Code.


<PAGE>

      Aquis' operations provided about $474,000 of net cash during the six
months ended June 30, 2001, while operating activities used net cash of $901,000
for the same period of 2000. This was largely the result of the need in 2000 to
fund the growth of accounts receivable in connection with the purchases of the
paging businesses of SourceOne Wireless and Suburban paging. Cash generated by
operations during both periods was used to fund pager purchases of $456,000 in
2001 and $693,000 in 2000.

      During the six months ended June 30, 2001, the proceeds realized from the
sale of non-core assets was used to fund communications and paging systems
capital needs, resulting in a net use of cash of $12,000. No business
combinations were effected in 2001. During the six month period of the prior
year, we used net cash of $2,396,000 in connection with the acquisition of
assets from SourceOne. An additional $906,000 of expenditures were made for the
purchase of network, data processing and paging equipment.

      During the six months ended June 30, 2001, cash totaling $197,000 was used
for financing activities, primarily to pay down certain installment debt and
notes. During the year-earlier period, $2,813,000 of net cash was provided by
financing activities. We borrowed $2,450,000 to complete the SourceOne
transaction and $2,000,000 was borrowed from AMRO that was used primarily to pay
down the FINVOA senior debt by $1,250,000.

      We do not expect that our current cash and equivalents and the cash we
expect to generate from operations will be sufficient to meet our debt service,
working capital or capital expenditure requirements under our existing debt and
forbearance agreements or our current capital and operating structure. The
conditions described above indicate that Aquis may not be able to continue as a
going concern. Our ability to continue as a going concern and successfully
execute our one-way paging business plan is dependent on the continued
forbearance of our lenders from demanding immediate payment of their outstanding
loans, our continuing ability to generate sufficient cash from operations to
meet operating costs and obligations in a timely manner, continuing supplies of
goods and services from our key vendors, and an ongoing ability to limit or
reduce operating costs and capital requirements. Our ability to succeed in our
efforts will also be largely dependent upon the ability of the buyers to pay off
the remaining balance of the note receivable that is due to us for the sale of
our Internet assets to them in August 2000, and our pending sale for cash of the
assets of our Midwest paging operations. Even if both these transactions are
successfully completed, in the event that demand is made for payment of our
outstanding debt our resources will be insufficient to fully meet such a demand,
and we would consider appropriate responses, including the filing a request for
protection under the U.S. Bankruptcy Code. Accordingly, we are continuing
discussions with our lenders for the purpose of improving our existing debt and
equity structure. However, no assurance can be provided that our efforts to
execute the transactions that may be required in order to affect our plans can
be successfully completed.

Seasonality

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


<PAGE>

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

      As of June 30, 2001, substantially all of our debt carried floating
interest rates. At June 30, 2001, we had approximately $32,088,000 of
floating-rate debt outstanding, including fees and interest due to FINOVA that
have been added to principal as required under the Forbearance Agreement with
them. As of December 31, 2000, total floating-rate debt was $27,668,000. An
interest rate increase or decrease of 2% on this floating rate debt would result
in a change in annual interest expenses of about $642,000, or about $0.035 per
share. Aquis has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. As of June 30, 2001, Aquis had
no other significant material exposure to market risk.


<PAGE>

Part II Other Information

Item 1  Legal Proceedings.

The Company is a party to legal proceedings that were reported in its Annual
Report on Form 10-K for the year ended December 31, 2000. There were no other
significant developments related to legal proceedings involving the Company at
August 10, 2001.

Item 2  Changes in Securities and Use of Proceeds.

In February 2001, Aquis issued 36,000 shares of its common stock to Michael
Branson in exchange for consulting services rendered to Aquis in connection with
development of its business plans and ongoing business development strategies.
Similarly, in May 2001 as provided under the terms of the asset purchase
agreement with Suburban Connect, 645,071 shares of Aquis common stock were
determined to be issued to Suburban Connect LP. This issuance was required as a
result of a purchase price adjustment related to the change in the market price
of Aquis common stock from the time of closing to a date about a year later. The
forgoing shares were offered without registration under the Securities Act of
1933 under the exemption provided by Section 4(2) of the Securities Act on the
basis that no public offering was involved. In addition, no brokerage
commissions were incurred as the result of either issuance.

Item 3  Defaults Upon Senior Securities.

Aquis is in default of the provisions of its Amended and Restated Loan Agreement
with FINOVA Capital Corporation dated as of January 31, 2000 as amended by a
First Amendment to Loan Instruments dated as of April 10, 2000 and as further
amended by a Second Amendment to Loan Instruments dated as of September 27,
2000. Principal payments of approximately $514,000 each were due quarterly in
2001, and interest payments were due monthly and were not paid. Aquis has also
not met two financial covenants related to debt service coverage and debt
leverage ratios. Aquis is indebted to FINOVA under its senior loan agreement and
an installment obligation in amounts approximating $27,249,000 and $919,000,
respectively. Related unpaid interest due under these obligations totaled
approximately $1,654,000. Under the terms of a Forbearance Agreement dated June
7, 2001, FINOVA has agreed not to require payment of these debts until December
31, 2001 unless a further event of default occurs.

Aquis is also in default of a Loan Agreement dated as of March 31, 2000 with
AMRO International, S.A. as a result of its failure to make interest payments
when due. The balance outstanding under the debt to AMRO at June 30, 2001 was
approximately $2,267,000 including accrued interest of about $267,000. Principal
and accrued but unpaid interest was payable to AMRO in October 2001 unless
demand for payment is accelerated or conversion into Aquis' common stock is
sooner elected by AMRO. Under the terms of a Forbearance Agreement dated April
13, 2001 that was subsequently amended, the debt due to AMRO will not be called
due or converted into Aquis common stock until December 31, 2001 unless a
further event of default occurs.

Item 4  Submission of Matters to a Vote of Security Holders.  None

Item 5  Other Information.

The Company has postponed its annual meeting, originally expected to be held in
July, 2001. Although Aquis does anticipate that meeting to be held during the
current year, an alternate date has not yet been scheduled.

Item 6  Exhibits and Reports on Form 8-K.

        (a) Exhibits

Exhibit No.:

10.53   Forbearance Agreement and Third Amendment to Loan Instruments Dated as
        of June 7, 2001 between Aquis Wireless Communications, Inc. and Finova
        Capital Corporation (1)
10.54   Second Note Modification Agreement entered into on June 29, 2001 by
        and between Cuna Network Services, LLC (formerly SunStar IP
        Communcations, LLC) and Aquis IP Communications, Inc.

(1)     Filed herewith

        (b) Reports on Form 8-K

        No reports on Form 8-K were required to be filed by Aquis during the
current quarter.


<PAGE>

                                   SIGNATURES

         Pursuant to the requirements 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:

           Name                       Title                         Date
           ----                       -----                         ----

-------------------------
     John B. Frieling    Chief Executive Officer and Director   August 10, 2001

-------------------------
     D. Brian Plunkett   Chief Financial Officer                August 10, 2001


<PAGE>

                                  Exhibit Index


Exhibit Number
--------------
(Referenced to                                                  Page Number in
 Item 601 of                                                    Rule 0-3(b)
Regulation S-K)                    Description                  Sequential
                                  -------------                 Numbering System
                                                                Where Exhibit
                                                                can be Found



10.53   Forbearance Agreement and Third Amendment to Loan Instruments Dated
        as of June 7, 2001 between Aquis Wireless Communications, Inc. and
        Finova Capital Corporation (1)

10.54   Second Note Modification Agreement entered into on June 29, 2001 by and
        between Cuna Network Services, LLC (formerly SunStar IP Communcations,
        LLC) and Aquis IP Communications, Inc.