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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FIRST AVENUE NETWORKS, INC.

(formerly known as Advanced Radio Telecom Corp.)

(Exact name of registrant as specified in its charter)

230 Court Square, Suite 202, Charlottesville, VA 22902

(Address of principal executive offices)

(434) 220-4988

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  ¨.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934):    Yes  ¨     No x.

The aggregate market value of the registrant’s voting stock held by non-affiliates was approximately $1.7 million on March 7, 2003. As of March 7, 2003, non-affiliates held 4.9 million shares of the common stock which had been distributed.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date: Pursuant to its plan of reorganization, the registrant has 20,000,000 shares of its common stock outstanding as of March 7, 2003. As of such date, 18,512,064 shares have been distributed pursuant to the plan of reorganization.

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DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated herein by reference: Part III:

Portions of the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Registrant’s 2003 Annual Meeting of Stockholders.

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FIRST AVENUE NETWORKS, INC.

INDEX

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PART I

ITEM 1.    BUSINESS

Overview

We hold over 750 39 GHz licenses granted by the Federal Communications Commission (“FCC”) and provide wireless, high-speed, point-to-point telecommunications services. Our licenses cover nearly all of the area and population of the contiguous United States. Over 170 of our licenses cover the top 50 Basic Economic Areas (“BEA”) by population and result in our holding nearly 350 MHz of spectrum on average in these most populous areas. In total, our spectrum portfolio represents over 980 million channel pops, calculated as number of channels in a given area multiplied by the population covered by these channels.

Our strategy is to utilize our FCC licenses to provide telecommunications services in a capital efficient manner. In the short-term, we will seek to identify, contact and serve existing telecommunications carriers in a manner that does not require significant sales and marketing, operating and capital expenditures. Our long-term objective is to develop our business plan in response to carrier, business and other customer demands for wireless, high-speed services.

We currently have 14 fixed transmission links that our customers incorporate into their telecommunication networks and utilize to provide a primary telecommunication link or, in other cases, redundancy, back up or diversity to other telecommunication services. The data transmission capacity of these links ranges from T-1 (1.5 Mbps, or 24 simultaneous phone calls) to OC-3 (155 Mbps). We own all of the equipment serving our customers and contract for whatever property rights (such as roof rights) are required to provide our service.

We emerged from bankruptcy in December 2001. We currently have three employees and limited operations. At December 31, 2002, our FCC licenses represented 79% of our assets. Our focus is on pursuing business development opportunities that utilize our 39 GHz licenses.

We are a Delaware corporation organized in 1993. In February 2002, our shareholders approved an amendment to the Certificate of Incorporation to change our name from Advanced Radio Telecom Corp. to First Avenue Networks, Inc.

Pre-Reorganization Activities

From our inception in 1993 through the first quarter of 2001, we acquired spectrum rights through FCC auctions and purchase transactions, raised capital through public and private offerings of securities, acquired equipment and roof rights, and developed operating and support systems and networks. In 1998, we began to sell a variety of Internet services to end-users in Seattle, WA, Portland, OR, and Phoenix, AZ. In late 1999, our strategy evolved to providing high-speed transmission services, including Internet access, to businesses. During 2000, we launched these services in ten markets. In the first quarter of 2001, we were unable to secure additional funding sources to continue to finance our operations and service our debt.

Reorganization

In April 2001, we sought to reorganize our business under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (“Court”). We terminated nearly all of our employees, terminated operation of our networks and eliminated customer support. We developed a Joint Plan of Reorganization (“Plan”) that was approved by the Court on October 31, 2001. On December 20, 2001 (“Effective Date”), the Plan was effective and we emerged from the proceedings under Chapter 11 of the United States Bankruptcy Code pursuant to the terms of the Plan.

Under the Plan, we issued 20 million shares of new post-Chapter 11 common stock (“New Common Stock”) to our unsecured creditors and holders of our Series A Preferred Stock (“Old Preferred Stock”). Each holder of an

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unsecured claim received its pro rata share of 19 million shares of New Common Stock. Each holder of our Old Preferred Stock received its pro rata share of 1 million shares of New Common Stock. Holders of our pre-Chapter 11 common stock (“Old Common Stock”) and holders of any other equity interest received no distribution under the Plan. All Old Common Stock, Old Preferred Stock and all other equity interests such as employee stock options and warrants were cancelled on the Effective Date.

These transactions and related transactions are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” under Item 7 of this report.

Industry Discussion

Telecommunication users continue to demand reliable, fast and inexpensive transport services. However, the climate for the implementation of new wireless, high-speed, point-to-point telecommunications services of the type we provide has not been attractive. Market acceptance of these types of services has not yet been strong. Consumers continue to turn to terrestrial facilities, such as DSL and cable modems, while demand for service from wireless operators using unlicensed spectrum is increasing. Tight capital markets continue to restrict access to the funding required to develop broadband wireless networks.

Notwithstanding the recent difficulties of emerging telecommunications businesses like ours, management believes that there are certain business environment conditions that broadly frame out future opportunities. According to equity reports and research analysts, the metro access last-mile segment of the transport market is expected to enjoy the highest gross margins (45% to 50%) and the highest annual growth rates (20% to 30%) through 2005, as compared with long haul and metro transport segments. As new technology, applications and services evolve in response to demands for rapid, reliable and less expensive transport, we believe opportunities for high-speed, wireless transmission services will increase.

Our Business Strategy

Our strategy is to utilize our FCC licenses in a capital efficient manner. Our long-term objective is to develop our business plan in response to carrier, business and other customer demands for wireless, high-speed telecommunications services.

Current.    In the short-term, we will seek to identify, contact and serve existing telecommunication carriers and end users in a manner that does not require significant sales and marketing, operating and capital expenditures. We believe that the greatest near-term opportunity is to make our spectrum capacity available to those companies linking to implement fixed wireless backbone systems. We are pursuing opportunities to (i) provide wireless backbone networks for internet service providers (ISPs) and competitive local exchange carriers (CLECs); (ii) provide short-range OC-3 links to fiber optic data and telephony carriers, allowing them to extend the reach of their networks; (iii) provide point to point links between buildings for organizations with metropolitan areas and campus environments; and, (iv) connect remote cellular tower sites to the telephone network. To minimize capital requirements and operational risks, we may enter into joint ventures with established telecommunication industry participants. Such arrangements may include capital cost sharing through equipment sharing, joint ventures and other similar arrangements.

Future.    Our long-term objective is to develop our business plan in response to carrier demands for wireless, high-speed telecommunications services. We will continue to evaluate larger scale business opportunities as they develop. We expect that our ability to pursue other opportunities will be subject to the development of applicable technology and our ability to secure the necessary financing. In addition to high-speed transmission services, we may provide related communications services. We are unable to predict what business opportunities will be available to us or which we may seek to pursue.

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Advantages of our 39 GHz Transmission Services

Advantages of our fixed wireless transmission services include:

High-Capacity.    Current technology allows transmission with high-capacity local access with quality and reliability superior to copper and comparable to fiber. For example, current radio technology is capable of two-way data transfer at rates up to 622 megabits per second (Mbps) (OC-12).

Lower Cost.    We believe that wireless networks cost less than comparable fiber networks. Our fixed wireless links do not require the same magnitude of installation and maintenance costs as required by fiber networks. Furthermore, we expect this cost differential to increase over time because the cost of deploying fiber involves substantial labor and right-of-way costs that we believe will increase in the future. The cost of our links involves substantial electronic equipment which costs we expect will continue to decline.

Rapid deployment.    Because wireless links using our own spectrum licenses do not require rights of way, substantial construction infrastructure, or additional FCC licensing, they can be established quickly between two points as long as line of sight and the appropriate level of reliability are assured.

Our 39 GHz Wireless Broadband Licenses

The FCC has allocated the use of the 37.0–40.0 GHz airwave band consisting of fourteen 100 MHz channels by issuing licenses for the provision of wireless telecommunications services within a specified geographic territory. The licenses issued in the 37.0-40.0 GHz band are generally referred to as 39 GHz licenses.

Our spectrum licenses were acquired through application with the FCC and purchase contracts with other spectrum holders. Additionally, in 2000, we were the winning bidder for 253 licenses covering substantially all of the contiguous United States in an auction conducted by the FCC. In total, we hold over 750 licenses that represent over 980 million channel pops. Our licenses were granted for initial ten-year terms with expirations ranging from 2006 through 2011. We have an anticipation of renewal upon a showing of “substantial service” as determined by the FCC. Over 170 of our licenses cover the top 50 BEAs and result in our holding nearly 350 MHz of spectrum on average in these most populous areas. The following chart presents our BEA license holdings and total channel pops in each of our top 50 BEAs based upon 2000 census data.

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Our Foreign Licenses

We have certain foreign subsidiaries that have been granted broadband wireless authorizations covering Finland, Norway and the United Kingdom. In 2002, we returned all of these licenses to the respective foreign regulators and began liquidating our foreign subsidiaries.

Our Competition

We face significant competition from entities that currently deliver or could in the future deliver telecommunications services over copper wire, fiber and wireless networks. As we pursue our current strategy of

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seeking economically viable opportunities to provide services without significant capital outlay, we expect to face competition from other high capacity point-to-point telecommunications, broadband, fiber and wireless companies. As our business develops in the longer term, we may face competition from such providers, as well as from satellite communications companies, internet service providers, cable television operators and others seeking to profit from the demand for wireless, high-speed services. In addition, we may encounter new competition due to the consolidation of telecommunications companies and the formation of strategic alliances and cooperative relationships in the telecommunications and related industries, as well as the development of new technologies.

We expect to compete primarily on the basis of responsiveness to customer needs, time required to deploy, quality of service, price, transmission speed and reliability. We cannot give any assurance that we will be able to compete effectively in any of our markets with any of our existing or potential competitors. Many of our competitors have long-standing relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than we do. Additionally, market perceptions as to reliability and security for the relatively earlier-stage wireless networks as compared to copper or fiber networks provide us with additional marketing challenges. We may not be able to exploit new or emerging technologies or adapt to changes in customer requirements more quickly than these competitors, or devote the necessary resources to the marketing and sale of our services.

Following are types of providers with which we now compete or may compete in the future:

Fiber Networks.    We face competition from expanding fiber-optic networks owned by various telecommunications carriers, electric utilities and other companies. Many of these companies have greater name recognition and greater financial, technical and marketing resources than we do. Fiber-optic service generally offers transmission speeds which are superior to ours. In addition, fiber technology may enjoy a greater degree of market acceptance than our wireless broadband technology.

Copper Networks of the Local Exchange Carriers.    We face significant competition from the traditional local telephone companies that typically deliver telecommunication services over copper networks and can provide broadband services via Digital Subscriber Lines (DSL). These companies have long-standing relationships with their customers and substantial name recognition.

Coaxial Cable Networks.    We are likely to face competition from cable television operators, which provide high-speed data transmission capability over installed coaxial cable television networks. We believe that in order to provide broadband capacity to a significant number of businesses, cable operators will be required to spend significant time and capital to upgrade and extend their existing networks to a more advanced network architecture. However, we can give no assurance that competition from cable television operators will not be significant.

Other Fixed Wireless Networks.    We also face competition from other service providers that utilize fixed wireless technology including Teligent, Inc., Winstar Communications, Inc. (currently IDT Solutions) and XO Communications, Inc. In many cases, these service providers hold FCC licenses to operate in the same markets we do. Winstar and Teligent have positioned themselves as fixed wireless telecommunications service providers, and therefore will compete with us in offering broadband telecommunication services to off-fiber businesses and buildings. XO also has the ability to provide wireless broadband services. These companies potentially have access to greater financial resources than we do.

Various other entities also have 39 GHz and other wireless broadband licenses. Due to the relative ease and speed of deployment of fixed wireless technology, we could face price competition and competition for customers from other wireless service providers.

Multichannel Multipoint Distribution service providers, also known as MMDS or wireless cable, operating in the 2.4 GHz spectrum band, also provide metropolitan wireless high-speed transmission services. Worldcom

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and Sprint are the principal holders of such licenses and use them primarily for wireless broadband telecommunications services in residential areas. We can give no assurances that these companies will not also market high-speed telecommunications services elsewhere.

The FCC has already allocated 300 MHz of spectrum in the 5 GHz band, and shortly intends to allocate another 255 MHz of spectrum, for unlicensed devices to provide short-range, high-speed wireless digital communications. These frequencies must be shared with incumbent users without causing interference. The allocation was designed to facilitate the creation of new wireless local area networks, and thus may compete with our strategy of providing wireless telecommunication services. It is too early for us to predict, however, how and to what extent this particular frequency may be used in competition with our services.

Mobile Wireless Networks.    Cellular, personal communications services and other mobile service providers may also offer high-speed telecommunications services over their licensed frequencies. The FCC has allocated a number of spectrum blocks for use by wireless devices that do not require site or network licensing. A number of vendors have developed such devices, which may provide competition to us.

Government Regulation

Our wireless broadband services are subject to regulation by federal, state and local governmental agencies. At the federal level, the FCC has jurisdiction over the use of the electromagnetic spectrum (i.e., wireless services) and has exclusive jurisdiction over all interstate telecommunications services; that is, those that originate in one state and terminate in another state. State regulatory commissions have jurisdiction over intrastate communications; that is, those that originate and terminate in the same state. Municipalities may regulate limited aspects of our business by, for example, imposing zoning requirements and requiring installation permits. The regulations of these agencies are continually evolving through rulemakings and other administrative and judicial proceedings, and there is no guarantee that in the future regulatory changes will not have an adverse effect on our business.

Federal Regulation

FCC Licensing.    As an FCC licensee and regulatee, we are subject to comprehensive regulatory oversight, including regulations constraining ownership of us, rules governing the services we can provide, and rules related to construction and operation of our services. In addition, we are subject to certain regulatory and other fees levied by the FCC for certain classes of licenses and services. Under certain circumstances, including certain violations of FCC rules, our licenses may be revoked, canceled or conditioned, or we may be fined. Among other things, the Communications Act of 1934, as amended, and the FCC Rules and Regulations impose requirements on radio licensees and carriers that include regulations on the ownership, operation, acquisition and sale of the broadband operating radio systems that are needed to provide the services we offer. The operational rules generally provide significant flexibility to licensees operating in the 37.0-40.0 GHz band. For example, licensees are permitted to offer point-to-multipoint and point-to-point services, and will be permitted to provide mobile services upon adoption of inter-licensee coordination policies.

Our 39 GHz licenses, like other FCC licenses, are generally granted for an initial ten-year term, subject to renewal. In order to obtain renewal of a 39 GHz license, the licensee must demonstrate that it has provided “substantial service” during its license term. What level of service is considered “substantial” will vary depending upon the type of offering by the licensee, and the FCC has provided specific guidance only for point-to-point offerings, where it has indicated the licensee should have constructed four links per channel per million persons in the licensed market area. Licensees are required, prior to the expiration date of their licenses, to file renewal applications with an exhibit demonstrating compliance with the substantial service criteria. If an entity is deemed not to have provided substantial service with respect to a license for which renewal is sought, the renewal will not be granted and the license canceled.

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Licenses in this band are subject to an arrangement between the FCC and the Department of Industry of Canada regarding sharing between broadband wireless systems along the U.S.-Canada border. Additionally, this band is subject to satellite power flux density limits that are subject to change. We cannot assure you that the ultimate resolution of these issues will not adversely affect our operations.

Competition.    Over the last several years, the FCC has issued a series of decisions and Congress has enacted legislation making the interstate access services market more competitive by requiring reasonable and fair interconnection by local exchange carriers. The Telecommunications Act of 1996 substantially departed from prior legislation in the telecommunications industry by establishing local exchange competition as a national policy through the removal of state regulatory barriers to competition and the preemption of laws restricting competition in the local exchange market. The provisions of the Telecommunications Act are designed to ensure that regional Bell Operating Companies take affirmative steps to level the playing field for their competitors so that emerging telecommunications service providers can compete effectively. The FCC, with advice from the United States Department of Justice, and the states are given jurisdiction to enforce these requirements. We can give no assurance, however, that the states and the FCC will implement the Telecommunications Act in a manner favorable to us.

State Regulation

Many of our services, either now or in the future, may be classified as intrastate and therefore may be subject to state regulation. Under current state regulations services that can be provided are:

Employees

As of March 7, 2003 we had three employees, none of whom is represented by a collective bargaining agreement.

Risk Factors

The following risk factors should be reviewed and considered. Any of the following risks could materially adversely affect our business, financial conditions or results of operation. Additional risks and uncertainties not known to us or that we currently deem immaterial may also impair our business operations.

Our FCC licenses may be canceled or revoked for violations of the FCC’s rules, which could limit our operations and growth.

Our FCC radio licenses comprise 79% of the book value of our assets. As an FCC licensee and regulatee, we are subject to comprehensive regulatory oversight, including regulations constraining ownership of us, rules governing the services we can provide and the prices we charge, and rules related to construction and operation of our services. Under certain circumstances, our licenses may be revoked, canceled, or conditioned. For example, the licenses may be revoked for violations of the FCC’s rules or we may be fined. The loss of some of our licenses could limit the expansion of our business. Even the initiation of a proceeding that may result in the loss of our licenses could adversely affect our business. We have had no correspondence from the FCC or any other regulatory body which would indicate that we are in violation of any of the requirements of our licenses.

Our FCC licenses may not be renewed upon expiration.

Our 39 GHz licenses are granted for initial ten-year terms with renewal dates ranging from 2006 to 2011. For renewal, we must demonstrate that we have provided “substantial service” during the license term. The level

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of service that will be considered “substantial” may vary depending upon our type of product offering. The FCC has provided specific guidance only for point-to-point offerings, where it has indicated the licensee should have constructed four links per channel per million persons in the market area. We may not be able to meet the substantial service requirement before the expiration date of our licenses or the FCC may modify its definition of substantial service. In the future, we may offer products for which the FCC establishes more stringent substantial service requirements. We may be unable to meet the FCC’s renewal requirements and could lose our licenses. The loss of some of our licenses could limit the expansion of our business.

An investment in us or sale of our assets may trigger a repayment of FCC small business bidding credit.

We acquired 39 GHz licenses for BEAs in a FCC auction in 2000. For this auction, the FCC found that we qualified under its regulations as a “very small business” and consequently awarded us a 35 percent bidding credit, reducing our gross winning bids by approximately $41.5 million. Under the FCC’s rules, if control of the licenses acquired in this auction is transferred or assigned to an entity that does not meet the financial requirements for “very small businesses”, the amount of the bidding credit may be required to be repaid to the FCC. If a change in control of the licenses occurs before October 18, 2003, $31.1 million of the bidding credit must be repaid with interest. The bidding credit required to be repaid decreases by 25% or $10.4 million on each October 18 until October 18, 2005 when no repayment of the bidding credit would be required if control of the licenses were transferred. To qualify as a “very small business”, an entity, its controlling investors, the entity’s affiliates, and the affiliates of the entity’s controlling investors must collectively have average gross revenues for the prior three years of $15 million or less. We may find it more difficult to obtain investors or purchasers since potential investors or potential purchasers of our assets may trigger a significant repayment obligation to the FCC.

We are subject to comprehensive and continually evolving regulation that could increase our costs and adversely affect our ability to successfully implement our business plan.

We and some of our communications services and installations are regulated by the FCC, the states, local zoning authorities, and other governmental entities. These regulators regularly conduct rulemaking proceedings and issue interpretations of existing rules. For example, the FCC has a number of proceedings still pending to implement the Telecommunications Act of 1996, which Act sought to increase competition in local telephone services. These regulatory proceedings could impose additional obligations on us, give rights to competitors, increase our costs, and otherwise adversely affect our ability to implement our business plan.

The value of our licenses could continue to decline.

Our wireless licenses comprise virtually all of our assets. The value of any or all of our licenses could continue to decrease as a result of:

We expect to incur negative cash flows and operating losses during at least the next few years.

We have generated only nominal revenues from operations to date. We have generated operating and net losses since our inception and we expect to generate operating and net losses and negative cash flows for at least

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the next few years. We may not develop a successful business or achieve or sustain profitability in the future. Our ability to achieve profitability will depend, in part, on our ability to:

We may not be able to do any of these successfully, and our failure to do so is likely to harm our operating results.

We may be unsuccessful in executing our short-term strategy of serving existing telecommunications carriers in a manner that does not require significant sales and marketing costs, other operating costs or capital expenditures.

We presently have only three employees and operate with limited resources. Our ability to find and respond to opportunities to deliver our services in a cost-effective manner may be limited by the number of personnel we employ and our lack of capital and other operational resources. Even if we are able to find customers to whom we can provide services, we may have to hire additional personnel without whom we may only be able to provide limited support for those services, which could result in customer dissatisfaction. Additionally, our competitors may be better able to seek out opportunities to provide services and may be better able to respond to such opportunities than we are.

In the long-term, we may be unable to successfully discover and respond to business opportunities to utilize our 39 GHz licenses.

Our long-term strategy requires that we both identify uses for our 39 GHz licenses and be able to effectively implement a business plan with respect to such uses. Opportunities for us to provide services may not arise due to one or more of the following factors:

We also will have limited resources available to develop our long-term business plan. If a longer-term opportunity does arise, we may not have the capacity to respond in a timely manner. Additionally, we have many competitors who may be better prepared to respond quickly to increasing demand for the services we provide. If we are unprepared to implement a solution when an opportunity arises, we may never achieve profitability.

We may be unable to successfully execute on any longer-term business opportunities that we determine to pursue.

We currently have only three employees and maintain limited capital infrastructure. We have minimum internal systems and do not operate a service and support organization. If we identify a longer-term business opportunity for our services, we will need to build our infrastructure and operational capabilities. Depending on our business plan, our ability to do so could be affected by one of more of the following factors:

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Our failure to adequately address the above factors would have a significant impact on our ability to implement any business plan. The recoverability of our investment in FCC licenses is dependent on our successful execution of our business plan.

We have limited financial resources and may be unable to secure additional capital to operate our business.

We had a cash balance of $5.3 million at December 31, 2002. While we expect this cash balance to support our operations through and including 2004, unforeseen expenses and business opportunities could cause us to spend money more rapidly than expected. Even if our estimates are correct, we will need additional capital to operate our business after 2004 and to pay the debt due in December 2006. We may not be able to secure the necessary financing to continue with our short-term strategy after that time at all, or on acceptable terms. Any longer-term business opportunities we may undertake will also likely require us to obtain additional capital. We may be unable to secure additional financing on acceptable terms, or at all, to pursue such opportunities. If we are unable to secure capital when needed, we may be unable to maintain our licenses or continue any level of operations.

In light of our brief operating history, change of strategy, and adoption of “fresh start” accounting, investors may have difficulty evaluating us.

We have a limited operating history under our current business strategy. As a result of the effectiveness of the Reorganization Plan, we adopted “fresh start” reporting as of December 31, 2001 and eliminated our accumulated deficit. As of the Effective Date, we had a complete change in strategy and a new management team. As a result, only one year of operating and financial information about our current strategy is available and our recent financial results are not comparable to prior periods.

If our services do not achieve market acceptance we may lose or not obtain revenue and our ability to achieve profitability would suffer.

Because the provision of wireless high-speed transmission services represents an emerging sector of the telecommunications industry, the demand for our services is uncertain. A substantial market for our services may not develop. The demand for our services may be adversely affected by:

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The telecommunications market is highly competitive and we may be unable to compete effectively, especially against competitors with greater financial and other resources, which may affect our ability to attract customers and grow and maintain our sales.

We operate in a highly competitive environment and may not be able to successfully compete. In the short-term, we expect to face competition from other high capacity, point-to-point telecommunications, broadband, fiber and other wireless companies. As we seek more long-term opportunities to provide our services, we may face competition from such providers, as well as from satellite communications companies, internet service providers, cable television operators and others seeking to profit from the demand for wireless, high-speed services. We also expect to compete with new providers and technologies not yet introduced. To date, we do not have a significant market share in any of the markets in which we are operating. Given the intense competition, we may be unable to compete effectively with these and other technologies and service providers in the short-term, and consequently we may be unable to attract customers and grow and maintain our sales, or we may experience difficulty in responding to any longer-term opportunities that might develop.

Many of our competitors are larger, have greater financial and other resources and have more experience than we have. As a result, these competitors may be able, among other things, to develop and exploit new and better technologies, adapt to changes in customer requirements more quickly, devote greater resources to the marketing and sale of their services or more rapidly deploy telecommunication services than we can.

Available Information

We maintain a website with the address www.firstavenet.com. Information contained on our website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, are available free of charge at the Internet World Wide Web site maintained by the Securities and Exchange Commission at http://www.sec.gov.

ITEM 2.    PROPERTIES

The following is a summary of our principal facilities leases:

ITEM 3.    LEGAL PROCEEDINGS

As more fully described in ITEM 1—“BUSINESS” and ITEM 7—“MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, the Company sought protection under Chapter 11 of the Bankruptcy Code on April 20, 2001. The Company developed a Plan that was approved by the Court on October 31, 2001. On December 20, 2001, the Plan was effective and the Company emerged from the proceedings under Chapter 11 of the United States Bankruptcy Code pursuant to the terms of the Plan.

On October 31, 2001, the Company filed suit against Commco Partners, LLC (“Commco”) and Scott Reardon (together, the “Defendants”) in the United States Bankruptcy Court for the District of Delaware alleging breach of contract under their guarantees of a Bridge Loan Agreement pursuant to which the Company advanced over $13.0 million to BroadStream Communications Corporation, which was later assumed by Commco Technology, LLC, a wholly owned subsidiary of Commco (“Commco Technology”). On February 19, 2002, the Defendants served on the Company their Answer, Affirmative Defenses and Counterclaim (the

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“Counterclaim”) to the Company’s breach of contract claim. In the Counterclaim, the Defendants have asserted breach of contract under an Asset Purchase Agreement between the Company, the Defendants, Commco Technology, BroadStream Communications Corporation and BroadStream Corporation entered into April 14, 2000 (the “Asset Purchase Agreement”), breach of implied duty of good faith and fair dealing, breach of the Company’s indemnification obligation under the Asset Purchase Agreement, and the realization of substantial damages due to the failure of the Company to register common stock held by the Defendants. Pursuant to a Settlement Agreement entered into between the Company and the Defendants in connection with the Company’s bankruptcy proceedings which was approved by the United States Bankruptcy Court for the District of Delaware on December 18, 2001, any recovery by the Defendants on the counterclaim is restricted to reducing or eliminating any claim, demand or cause of action of the Company against the Defendants, and is limited in amount to the total of any recovery by the Company on its claims, demands or causes of actions against the Defendants. On January 23, 2003, the parties reached a settlement agreement whereby in exchange for the Defendants paying the Company $45,000 and transferring an interest in a real estate partnership, both parties would drop all claims. The settlement agreement is subject to approval by the United States Bankruptcy Court of the District of Delaware.

Department of Labor Investigation—In May 2002, the Company was notified that the U.S. Department of Labor (“DOL”) had completed its investigation of the Company’s pre-petition 401(k) Retirement Plan (“401(k) Plan”). The DOL has raised questions regarding the retention of the Old Common Stock used to match employee contributions in the 401(k) Plan. Under the Plan, all common stock was cancelled resulting in a complete loss of the value of the common stock held in the 401(k) Plan. Correspondence from the DOL states that the DOL believes that the Plan’s fiduciaries were prudently required to sell the stock of the Company held in the 401(k) Plan at some date prior to the date on which the Company sought protection under Chapter 11 of the U.S. Bankruptcy Code and may not have complied with certain requirements of the Employee Retirement Income Security Act of 1974 (ERISA). The DOL estimates that 401(k) Plan assets in excess of $1 million were lost as a result of failure to sell this stock. In July 2002, the Company responded to the DOL that it was not a fiduciary of the 401(k) Plan and, that even if it were, any potential liability was discharged on the Effective Date. In February 2003, the DOL notified the Company that it had completed its investigation and that the DOL would take no further action in this matter.

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

The Company did not submit any matter to a vote of the security holders during the fourth quarter of 2002.

ITEM 4A.    EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers are as follows:

Dean M. Johnson has served as our Chief Executive Officer, President and Director since December 2001. From February 2001 through December 2001, Mr. Johnson was President of Cardinal Point Associates, a strategic and financial consultant to broadband wireless companies. From November 1999 to February 2001, he was founder and President of MuseumCompany.com, Inc., a specialty retailer of museum-related merchandise. Mr. Johnson served as Executive Vice President and Chief Financial Officer of Value America, Inc., a discount retailer, from November 1997 through November 1999. He served as a director of Value America from November 1997 through April 1999. From April 1996 to November 1997, Mr. Johnson served as Vice President of Business Development of Pacific Monolithics, a developer of semiconductors used for broadband wireless applications. From April 1991 until August 1995, he was General Manager of CFW Cable, Inc., a broadband

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wireless company that he co-founded. From September 1986 to April 1991, he was Vice President—Corporate Finance for Lehman Brothers, an investment bank.

Sandra Thomas Watson has served as our Vice President, Chief Financial Officer and Treasurer since December 2001 and our Secretary since April 2002. From February 2001 through December 2001, Ms. Watson was a consultant with Cardinal Point Associates, a strategic and financial consultant to broadband wireless companies. From January 2000 to February 2001 she served as Chief Financial Officer of MuseumCompany.com, Inc., a specialty retailer of museum-related merchandise. Ms. Watson served as Senior Vice President—Finance of Value America, Inc., a discount retailer, from March 1998 through November 1999 and was Controller from November 1997 until February 1999. From August 1993 to August 1997, Ms. Watson was Financial and Regulatory Manager for CFW Cable, Inc. a broadband wireless provider, and the Chief Financial Officer of Charlottesville Quality Cable, a company acquired by the parent-corporation of CFW Cable, Inc. From July 1979 to August 1993, she was at Coopers & Lybrand, most recently as Audit Manager.

Evans Mullan has served as our Vice President, Business Development since December 2001. From March, 2000 to September, 2001, he served as a Vice President in Operations at Winstar, a broadband wireless provider, with executive responsibility for several different areas: Network Management Center, Operations Support staff, and Customer Provisioning. From January 1999 to March 2000 he was Senior Director of Revenue Assurance for Winstar and served as Director of Program Management for Winstar from May 1997 to January, 1999. Mr. Mullan led the start up effort of the Consulting Services Division of Net2000 from September 1995 to April 1997. He also has fifteen years of sales and sales management experience with Bell Atlantic and Hill Associates (Burlington, VT), and has sold complex telecom solutions to Federal and top commercial accounts and technical consulting services to national telecom carriers.

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PART II

The following table sets forth high and low sales price information of the New Common Stock traded under the ticker symbol “FRNS” as reported on the Over the Counter Bulletin Board from April 11, 2002 through December 31, 2002. Prior to April 11, 2002, the New Common Stock was not traded on any exchange.

New Common Stock

On March 7, 2003, the last sale price of our common stock as reported by the Over the Counter Bulletin Board was $0.35 per share. There were 729 holders of record of our common stock on March 7, 2003.

The following table sets forth for periods indicated high and low sales price information of the Old Common Stock as reported on the Nasdaq National Market. Until April 27, 2001, the Old Common Stock was traded in the over-the-counter market and reported on the Nasdaq National Market under the symbol “ARTT.” Such transactions reflect inter-dealer prices, without retail markup, markdown or commission, and may not necessarily represent actual transactions.

Old Common Stock

Old Common Stock was cancelled on the Effective Date in accordance with the Court-approved Plan.

We have not paid any cash dividends on Old Common Stock or New Common Stock in the past and do not anticipate paying any cash dividends on New Common Stock in the foreseeable future. We intend to retain earnings, if any, to finance the expansion of our business and fund ongoing operations for the foreseeable future. In addition, terms of our debt restrict our ability to pay dividends on New Common Stock and, as of December 31, 2002, prohibit dividends or other distributions.

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ITEM 6.    SELECTED FINANCIAL DATA

Selected financial data presented below has been derived from and should be read in conjunction with our audited consolidated financial statements and the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report. As more fully described in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we have adopted “fresh start” reporting as a result of the court-approved Plan. Fresh start reporting creates a new reporting entity whose assets are recorded at their estimated fair value and liabilities are recorded at the present value of the amounts to be paid. As a result, period to period comparison may not be meaningful and are not indicative of future results of the successor.

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

Cautionary Statement—This report includes “forward-looking” information, as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases, regarding, among other things, our financial and business prospects, the deployment of our services, capital requirements and financing prospects. The Company cautions investors that any such statements are based on currently available operational, financial and competitive information, and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors. Those factors include, among others, those matters disclosed as Risk Factors at the end of the business section of this Annual Report on Form 10-K.

Overview

The Company holds over 750 licenses granted by the Federal Communications Commission (“FCC”) and currently provides 14 wireless, high-speed, point-to-point telecommunications links to customers. The Company engineered these telecommunication links, purchased and installed radios and tested the links for proper operation and reliability. Its customers incorporate these fixed wireless transmission links into their telecommunication networks and utilize wireless links to provide a primary telecommunication link or, in other cases, redundancy, back up or diversity to other telecommunication services.

The Company’s recoverability of its investment in FCC licenses is dependent on its successful execution of its business plan.

The Company’s strategy is to utilize its FCC licenses to provide telecommunications services in a capital efficient manner. In the short-term, the Company will seek to identify, contact and serve existing telecommunications carriers in a manner that does not require significant sales and marketing, operating and capital expenditures. Our long-term objective is to develop our business plan in response to carrier, business and other end-user customer demands for wireless, high-speed services.

From 1996 to 2000, the Company utilized several strategies to provide broadband Internet services. It invested heavily in the testing and deployment of fixed wireless links and networks.

From its inception in 1993 through the first quarter of 2001, the Company acquired airwave capacity, or spectrum rights, through FCC auctions and purchase transactions, raised capital through public and private offerings of securities, acquired equipment and roof rights, and developed operating and support systems and networks. In 1998, it began to sell a variety of Internet services to end-users in Seattle, WA, Portland, OR, and Phoenix, AZ. In late 1999, the Company’s strategy evolved to providing high-speed transmission services, including Internet access to businesses. During 2000, it launched these services in ten markets. In the first quarter of 2001, the Company was unable to secure additional funding sources to continue to finance operations and service debt.

Reorganization

The Company sought reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (“Court”) on April 20, 2001 (the “Petition Date”). It terminated nearly all of its employees, terminated operation of its networks and eliminated customer support. A Joint Plan of Reorganization (“Plan”) was developed and was approved by the Court on October 31, 2001. On December 20, 2001 (“Effective Date”), the Plan was effective and the Company emerged from the proceedings under Chapter 11 of the United States Bankruptcy Code pursuant to the terms of the Plan.

Under the Plan, the Company issued 20 million shares of new-post Chapter 11 common stock (“New Common Stock”) to unsecured creditors and holders of Series A Preferred Stock (“Old Preferred Stock”). Each holder of an unsecured claim received its pro rata share of 19 million shares of New Common Stock. Each

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holder of Old Preferred Stock received its pro rata share of 1 million shares of New Common Stock. Holders of pre-Chapter 11 common stock (“Old Common Stock”) and holders of any other equity interest received no distributions under the Plan. All Old Common Stock, Old Preferred Stock and all other equity interests such as employee stock options and warrants were cancelled on the Effective Date.

Prior to the Company’s reorganization, it incurred significant operating costs and interest expense. While pursuing its short-term strategy, the Company expects significantly less costs in these areas. The Company also expects its general and administrative and sales and marketing costs to be less than those incurred by the predecessor.

Fresh Start Reporting

For reporting purposes, the Company has reflected its emergence from bankruptcy as of December 31, 2001. Effective December 31, 2001, the Company adopted fresh start reporting in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”). Pursuant to fresh start reporting, a new reporting entity was created. The new reporting entity’s assets were recorded at their estimated fair value based on the confirmed Plan, and liabilities are recorded at the present value of the amounts to be paid. Results of operations for years ended December 31, 2001 and 2000 are those of the predecessor entity. All other information prior to December 31, 2001 is that of the predecessor entity. As a result of the adoption of fresh start accounting and elimination of substantial debt in the reorganization, results of operations for 2002 are not comparable to prior periods. The Company’s reorganization value was estimated to be approximately $53.7 million based upon a valuation of the Company’s license portfolio and expected future cash flows that considered an evaluation of the present state of the economy and telecommunication industry.

In accordance with SOP 90-7, the Company adopted those changes in accounting principles which were required within twelve months of the Effective Date. As a result, the Company adopted Statement of Financial Accounting Standards No. 141 “Business Combinations” (SFAS No. 141) and Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (SFAS No. 142). SFAS No. 141 requires the purchase method of accounting to be used for all business combinations, and prohibits the pooling of interest method of accounting. SFAS No. 142 addresses how goodwill and intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition. This statement requires goodwill and indefinite lived intangible asset amortization to cease and for the assets to be reviewed annually for impairment. The provisions of SFAS No. 141 were applied in the Company’s allocation of the reorganization value. The FCC licenses held by the Company are treated as indefinite lived assets and no amortization will be recorded in future periods.

Results of Operations

Year ended December 31, 2002 compared to year ended December 31, 2001

Revenues for the year ended December 31, 2002, decreased 53.1% to $0.3 million from $0.6 million in 2001. Revenues in 2001 were primarily derived from Fast Ethernet metropolitan networks, OC-3 services and dedicated business links which provide services emphasizing unique links rather than links combined to form a network. During the year ended December 31, 2001 the Company provided service through as many as 120 links. After the Petition Date, the Company discontinued services, dismantled its Fast Ethernet networks and substantially reduced the number of dedicated business links it offered. During 2002, the Company continued to offer dedicated wireless links to its customers. At December 31, 2002 and 2001, the Company provided customers with 14 and 23 dedicated links, respectively. The decrease in revenue in 2002 is a result of the elimination of services and the decrease in the number of links.

Technical and network operations costs and expenses are comprised primarily of compensation, facilities and backhaul rent and maintenance. Technical and network operations costs and expenses decreased 99.7% to $31,000 for the year ended December 31, 2002, compared to $8.9 million in 2001. This decrease resulted from (i)

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the elimination of all technical and network operations personnel as a result of seeking protection under Chapter 11 of the Bankruptcy Code and restructuring the Company and (ii) the significant reduction in facilities and backhaul rent as a result of discontinuing services, dismantling the Company’s Fast Ethernet networks and substantially reducing the number of dedicated business links it offered. Percentage of revenue comparisons are not meaningful.

Sales and marketing costs and expenses are comprised primarily of compensation and related costs as well as consulting fees and advertising expenses. These costs decreased 84.3% to $0.2 million for the year ended December 31, 2002, compared to $1.4 million in 2001. This decrease resulted primarily from the elimination of both marketing personnel and marketing efforts as a result of seeking bankruptcy protection and restructuring the Company. Percentage of revenue comparisons are not meaningful.

General and administrative expenses decreased 84.1% to $1.9 million for the year ended December 31, 2002 from $12.1 million for the year ended December 31, 2001. This decrease resulted primarily from the elimination of substantially all management, accounting, legal and other administrative personnel as a result of seeking bankruptcy protection and restructuring the Company. Included in general and administrative expenses for 2001 is $3.9 million of expense for the impairment of a note receivable from Commco LLC. In 2000, the Company acquired FCC licenses from Commco LLC and loaned Commco LLC $13.0 million which was due in November 2000. Commco LLC declared bankruptcy in the fourth quarter of 2000. The Company wrote the receivable down to the fair value of the underlying collateral during the year ended December 31, 2000, and wrote off the remainder of the receivable balance in the first quarter of 2001. Percentage of revenue comparisons are not meaningful.

As a result of its annual impairment evaluation of the fair value of its FCC licenses, the Company reduced the carrying value of the licenses by $24.8 million to its fair value of $21.6 million at December 31, 2002. While performing its impairment evaluation the Company considered (i) the decline in its public equity value; (ii) private purchases or restructurings for companies holding similar licenses; and, (iii) the decline in the public equity value of companies providing similar services or holding FCC licenses. The fair value of $21.6 million at December 31, 2002 was based upon a valuation performed by an independent valuation firm.

Depreciation and amortization expense of $20,000 for the year ended December 31, 2002 decreased 99.9% from $15.5 million for 2001. This decrease was due to the write-down and disposal of network equipment as a result of seeking protection under Chapter 11 of the Bankruptcy Code and the implementation of the Plan.

Interest and other decreased to $1.0 million for the year ended December 31, 2002 from $7.9 million in 2001. This decrease is comprised of a 78.2% or $6.7 million decrease in interest expense and 68.4% or $0.2 million decrease in interest income. The decrease in interest expense is a result of the Company’s debt restructuring in the Plan. These decreases are offset by a gain on the reversal of a $0.3 million accrual for professional fees that were not approved by the Bankruptcy Court.

During the year ended December 31, 2002, the Company has recorded an increase of $9.9 million in its deferred tax valuation allowance based upon management’s determination that the recognition criteria for realization had not been met. At December 31, 2002, the Company’s valuation allowance was equal to its deferred tax asset.

Year ended December 31, 2001 compared to year ended December 31, 2000

Revenues for the year ended December 31, 2001, decreased to $0.6 million from $1.2 million in 2000. In 2000, revenues were primarily derived from Fast Ethernet metropolitan networks and OC-3 services. The Company also offered dedicated business links, providing services emphasizing unique links rather than links combined to form a network. At December 31, 2000, the Company provided 45 wireless links to customers. The

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Company continued to market its services and increased the number of customers to more than 120 at the Petition Date, resulting in $248,000 of revenue in the first quarter of 2001. After the Petition Date, the Company discontinued services, dismantled its Fast Ethernet networks and substantially reduced the number of dedicated business links it offered. At December 31, 2001, the Company provided 23 dedicated wireless links to customers. The decrease in revenue in 2001 is due to the elimination of services and the decrease in customers.

Technical and network operations costs and expenses are comprised primarily of compensation, facilities and backhaul rent and maintenance. Technical and network operations costs and expenses decreased 58% to $8.9 million for the year ended December 31, 2001, compared to $21.5 million in 2000. This decrease resulted primarily from the elimination of substantially all technical and network operations personnel as a result of seeking protection under Chapter 11 of the Bankruptcy Code and restructuring the Company. During 2000, the Company entered into lease, maintenance and network circuit agreements as it deployed its high-speed broadband metropolitan area networks in ten major U.S. markets. Substantially all of these agreements were terminated in the bankruptcy proceedings resulting in a further reduction in expenses after the Petition Date. Percentage of revenue comparisons are not meaningful.

Sales and marketing costs and expenses are comprised primarily of compensation and related costs as well as consulting and advertising fees and expenses. These costs decreased 77% to $1.4 million for the year ended December 31, 2001, compared to $6.0 million in 2000. This decrease resulted primarily from the elimination of both marketing personnel and marketing efforts as a result of seeking bankruptcy protection and restructuring the Company. Percentage of revenue comparisons are not meaningful.

General and administrative expenses decreased 49% to $12.1 million for the year ended December 31, 2001 from $23.8 million for the year ended December 31, 2000. This decrease resulted primarily from the elimination of substantially all management, accounting, legal and other administrative personnel as a result of seeking bankruptcy protection and restructuring the Company. Included in general and administrative expenses for 2001 and 2000 is $3.9 million and $9.3 million, respectively, of expense for the impairment of a note receivable from Commco LLC. In 2000, the Company acquired FCC licenses from Commco LLC and loaned Commco LLC $13.0 million which was due in November 2000. Commco LLC declared bankruptcy in the fourth quarter of 2000. The Company wrote the receivable down to the fair value of the underlying collateral during the year ended December 31, 2000, and wrote off the remainder of the receivable balance in the first quarter of 2001. Percentage of revenue comparisons are not meaningful.

As a result of seeking protection under Chapter 11 and developing the Plan, the Company approved a plan to sell or abandon substantially all of the network and other equipment. The Company recorded an impairment charge of $42.6 million in 2001 to write the carrying amount of these assets down to fair value less estimated costs to sell.

Depreciation and amortization expense of $15.5 million for the year ended December 31, 2001 decreased 2% from $15.8 million for 2000. This slight decrease was due to increased amortization in 2001 resulting from investments in FCC licenses in 2000 that was offset by a significant decrease in depreciation in the last two quarters of 2001 as a result of ceasing depreciation on a majority of its property and equipment when the Company dismantled its networks and decided to dispose of the equipment.

Interest and other expenses decreased to $7.9 million for the year ended December 31, 2001 from $13.1 million in 2000. This decrease is comprised of a 61% or $13.5 million decrease in interest expense and a 96% or $8.7 million decrease in interest income. The decrease in interest expense was a result of the Company ceasing to record interest expense and amortization of deferred financing costs on its vendor financing facility borrowings and long term debt in 2001. The decrease in interest income was a result of a reduction in the average balance of cash and short-term investments of $110.7 million for 2000 to $3.0 million for 2001. The decrease in the average cash balance resulted from (i) the payment of $80 million primarily in the fourth quarter of 2000 for the purchase of FCC licenses; (ii) cash used for operating activities of $28.9 million and $47.8 million in 2001

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and 2000, respectively; and (iii) capital expenditures of $4.2 million and $28.2 million for 2001 and 2000, respectively, without any significant cash inflow from financings.

Reorganization items represent costs resulting from seeking protection and emerging from bankruptcy. The Company wrote off $30.0 million of financing costs, including original issue discount, incurred in obtaining the vendor financing facility borrowings and long-term debt that had been deferred. The Company conducted a valuation of its FCC licenses and reduced their carrying value by $310.8 million to a fair value of $46.4 million. Professional fees and other reorganization costs includes $2.5 million in professional fees incurred as a result of the bankruptcy proceedings, $1.0 million in severance and $2.4 million of other direct costs.

Deferred income tax benefit increase of 2105% to $48.5 million from $2.2 million is the result of a reduction of the deferred tax liability due primarily to the revaluation of the FCC licenses.

The Company has recognized an extraordinary gain on the early extinguishment of debt of $128.9 million. This represents the difference between the value of the claims extinguished on the Effective Date and the value of cash and New Common Stock distributed under the Plan to satisfy these claims.

Liquidity and Capital Resources

On April 20, 2001, the Company filed a voluntary petition with the Bankruptcy Court for protection under Chapter 11 of the Bankruptcy Code. As a result of the Chapter 11 filing, the Company was prohibited from paying, and creditors were prohibited from attempting to collect claims or debts arising prior to the Petition Date. On October 31, 2001, the Bankruptcy Court approved the Plan. On December 20, 2001, after the Company met all of the Conditions Precedent to the Effective Date (as defined), the Plan was effective and the Company emerged from proceedings under Chapter 11 of the Bankruptcy Code. On the Effective Date of the Plan, the Company:

In February 2002, the Company verified approximately 90% of the holders of unsecured claims and 100% of the holders of Old Preferred Stock and distributed stock certificates of New Common Stock. The Company estimates that it will complete the verification of the remaining holders of unsecured claims by June 30, 2003 and make another distribution of stock certificates of New Common Stock. The Company will not make any additional distributions to holders of Old Preferred Stock.

We distributed 17,512,064 and 1,000,000 shares of New Common Stock to holders of unsecured claims and holders of Old Preferred Stock, respectively, in February 2002. Once we complete the verification process, we will distribute the remaining 1,487,936 shares of New Common Stock to settle the remaining unsecured claims. If the verification process results in fewer than 1,487,936 shares of New Common Stock being allocated to settle these claims, the difference between 1,487,936 and the number of shares required to settle the claims will be allocated to the current holders of New Common Stock on a pro rata basis relative to their current holdings.

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During the year ended December 31, 2002, operating activities used cash of approximately $1.5 million as compared to $28.9 million during 2001. Cash used by operating activities resulted primarily from the Company’s net loss increased by a non-cash charge for impairment of its FCC licenses and non-cash interest expense.

Investing activities for the year ended December 31, 2002 provided cash of $978,000 as a result of selling assets held for sale at December 31, 2001. During the year ended December 31, 2001 investing activities used cash of $2.6 million to acquire property and equipment. The increase in the cash used in investing activities results from the Company not making significant investments in property and equipment and the sale of surplus equipment as a result of its bankruptcy filing and substantial curtailment of its operations.

The Company had no financing activities for the year ended December 31, 2002. Issuance of New Senior Secured Notes by the Successor provided cash of approximately $11.0 million during 2001. The New Senior Secured Notes are due on December 20, 2006 and are collateralized by all assets of the Company. They bear interest at the rate of 9% per annum that is payable quarterly through the issuance of additional New Senior Notes. Only if an event of default has occurred and is continuing is interest payable in cash. The New Senior Note and Class A Warrant Purchase Agreement contains covenants which limit the Company’s ability to incur additional debt, pay dividends or make other distributions, incur liens, merge or sell assets or enter into certain transactions with related parties. During 2002, the Company issued $1.1 million of New Senior Secured Notes for paid-in-kind interest.

The Company had cash and cash equivalents of $5.3 million at December 31, 2002. Since its inception, the Company has incurred losses from operations and expects to continue to incur losses in the foreseeable future. It has altered its business plan to minimize expenditures and the amount of future capital required. The Company dismantled its networks, eliminated customer support and reduced its work force during 2001. At December 31, 2002, it had only three employees and non-cancelable financial commitments of $21,000 due in 2003. The Company believes that the cash balance at December 31, 2002 is sufficient to cover its operations and capital requirements through and including 2004.

The Company has very limited non-cancelable commitments through 2005 with less than $30,000 due in 2003 through 2005. The Company has $12.0 million in Senior Secured Notes plus paid in kind interest at 9% for 2003 through 2006 due in full on December 20, 2006. Management expects operating losses and negative cash flows to continue for the near term. Failure to generate sufficient revenues could have a material adverse effect on the Company’s ability to pay the debt on its due date. The Company’s ability to generate sufficient cash to meet its future debt payments is highly dependent on the ability of management to execute its business plan.

Critical Accounting Matters and Significant Estimates

The preparation of consolidated financial statements requires management to make judgments based upon estimates and assumptions that are inherently uncertain. Such judgments affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management continuously evaluates its estimates and assumptions, including those related to long-lived assets, inventories, income taxes, contingencies and litigation, and the carrying values of assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

A summary of our most critical accounting policies and significant estimates used in the preparation of our consolidated financial statements is as follows:

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result of its annual impairment evaluation under SFAS No. 142. In performing its impairment evaluation, the Company identified a number of factors that are considered to be indicative of the value of its FCC licenses, including (i) the decline in its public equity value; (ii) private purchases or restructurings for companies holding similar licenses; and, (iii) the decline in the public equity value of companies providing similar services or holding FCC licenses. Each of the factors was then quantified and weighted in deriving the estimated fair value.

Several key assumptions were included in the valuation model: (i) the value of the FCC licenses directly correlates with public trading value of the Company’s stock and that of other public companies in the telecommunication industry; (ii) certain private purchases of similar licenses are reflective of the fair value of the underlying assets; (iii) the relative weights assigned to each factor represents the level of the factor’s relevancy to the estimation of the fair value of the FCC licenses; and, (iv) the model captures relevant information impacting the fair value of these licenses. Any change in the above assumptions could lead to a different result. The Company will continue to evaluate the fair value of its FCC licenses for impairment as events or changes in circumstances indicate that the carrying value of these assets may not be fully recoverable.

The Company faces various contingencies including the renewal of its FCC licenses in 2006 to 2011 and changing FCC regulations. The loss of some or all of the FCC licenses or the imposition of FCC usage restrictions could adversely affect the Company’s future business prospects and operations and result in an impairment to the carrying value of these intangible assets.

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Inflation

Management of the Company believes that its business has not been affected by inflation to a significantly different extent than has the general economy.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s existing long-term debt has a fixed interest rate; however, future borrowings may bear interest at variable rates and accordingly, the Company’s exposure to market risk for changes in interest rates may change in the future.

At December 31, 2002, the Company had cash and cash equivalents of $5.3 million that were held in bank accounts and in certificates of deposits with an average interest rate of 1.5% and original maturity of less than three months. The Company’s investment policy provides that funds in excess of current operating needs may be invested in cash equivalents, marketable securities issued by the U.S. Government, its agencies and commercial paper of domestic corporations. The policy prohibits investing in instruments with maturities that exceed 35 days. The Company’s investment priorities are to minimize short-term risk and preserve capital. The Company has had no holdings of derivative financial or commodity instruments in the past and has no current plans to do so in the future. The Company has not conducted business in foreign currencies in the past and has no current plans to do so in the future.

The Company’s $12.0 million of long-term debt bears fixed-rate interest at 9% and is due in full in 2006.

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Report of Independent Accountants

To Board of Directors and Stockholders of First Avenue Networks, Inc.:

In our opinion, the accompanying consolidated balance sheet and the related consolidated statement of operations, of changes in stockholders’ equity (deficit) present fairly, in all material respects, the financial position of First Avenue Networks, Inc. and its subsidiaries at December 31, 2002 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15 (a) (2) on page 53 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, on October 31, 2001, the United States Bankruptcy Court for the District of Delaware confirmed the Company’s Plan of Reorganization (the “Plan”). After satisfaction of certain conditions, the Plan became effective on December 20, 2001 and the Company emerged from Chapter 11, and subsequently changed its corporate name to First Avenue Networks, Inc. As discussed in Note 4, the Company adopted fresh start reporting as of December 31, 2001 in connection with its emergence from Chapter 11.

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Report of Independent Accountants

(Post-Emergence)

To the Board of Directors and Stockholders of First Avenue Networks, Inc.:

In our opinion, the accompanying consolidated balance sheet presents fairly, in all material respects, the financial position of First Avenue Networks, Inc. and its subsidiaries (the “Company”) at December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. This financial statement is the responsibility of the Company’s management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this statement in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, and evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, on October 31, 2001, the United States Bankruptcy Court for the District of Delaware confirmed the Company’s Plan of Reorganization (the “Plan”). After satisfaction of certain conditions, the Plan became effective on December 20, 2001 and the Company emerged from Chapter 11, and subsequently changed its corporate name to First Avenue Networks, Inc. As discussed in Note 4, the Company adopted fresh start reporting as of December 31, 2001 in connection with its emergence from Chapter 11.

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Report of Independent Accountants

(Pre-Emergence)

To the Board of Directors and Stockholders of Advanced Radio Telecom Corp. (now known as First Avenue Networks, Inc.):

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of changes in stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Advanced Radio Telecom Corp. and its subsidiaries (the “Company”) at December 31, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, on October 31, 2001, the United States Bankruptcy Court for the District of Delaware confirmed the Company’s Plan of Reorganization (the “Plan”). After satisfaction of certain conditions, the Plan became effective on December 20, 2001 and the Company emerged from Chapter 11 and subsequently changed its corporate name to First Avenue Networks, Inc. As discussed in Note 4, the Company adopted fresh start reporting as of December 31, 2001 in connection with its emergence from Chapter 11.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FIRST AVENUE NETWORKS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)

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

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FIRST AVENUE NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

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

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FIRST AVENUE NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(in thousands)