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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the transition period from              to             

FIRST AVENUE NETWORKS, INC.

(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 $12.8 million on March 1, 2004. As of March 1, 2004, non-affiliates held 4.4 million shares of the common stock.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date: The registrant has 21,257,179 shares of its common stock outstanding as of March 1, 2004.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to a distribution of securities under a plan confirmed by a court:    Yes  x    No  ¨.

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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 2004 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”). 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 1 billion channel pops, calculated as number of channels in a given area multiplied by the population covered by these channels. At December 31, 2003, our FCC licenses represented 84% of the book value of our assets.

We lease the spectrum represented by these licenses to facilitate the construction of high-speed wireless telecommunications networks. Our leasing products, Express Link and Express Net, offer a way for telecommunications carriers and enterprise customers to access interference-free, carrier class licensed spectrum.

Our leasing strategy allows us to utilize our FCC licenses to provide wireless telecommunications services in a capital efficient manner. We seek to identify, contact and serve existing telecommunications carriers in a manner that does not require significant sales and marketing, operating and capital expenditures.

We currently have 14 leases for our spectrum on a link-by-link basis and have leased spectrum in two urban regions. Additionally, we have retained nine fixed transmission links originated by our predecessor which 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. Our long-term objective is to respond to telecommunications carrier, business and other customer demands for wireless, high-speed services. Whether those customers require leased spectrum, installation services or a complete turnkey network, we expect to work with experienced channel partners and subcontractors to minimize operational expense, capital expense and execution risk.

We are a Delaware corporation incorporated 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. We emerged from bankruptcy in December 2001 and currently have three employees. Our focus is on leasing our 39 GHz licenses and providing full-service solutions by partnering with established telecommunications industry participants.

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 access and usage 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.

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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 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 canceled 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 generally 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. The capital markets continue to restrict access to the funding required to develop wireless broadband networks.

Notwithstanding the recent difficulties of emerging telecommunications businesses like ours, management believes that there are certain business trends that point to future opportunities. According to industry 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 the 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

We are the holder of one of the nation’s most expansive 39 GHz license portfolios and we lease this spectrum to telecommunications carriers, wholesale bandwidth providers and end users. Leasing greatly simplifies, accelerates and reduces the cost of the use of fixed wireless broadband via licensed spectrum.

We lease our 39 GHz spectrum to facilitate the construction of high-speed, wireless telecommunications networks. Our spectrum leasing products, Express Link and Express Net, offer a way for carriers and enterprise customers to access interference-free, carrier class licensed spectrum. We lease our spectrum to operators to address communications opportunities such as fixed wireless broadband, wireless Internet access, cellular telephone traffic backhaul and last mile connections for fiber carriers.

Our spectrum-leasing products are designed to promote economically viable use of licensed, high capacity spectrum. Our products are an important link in the value chain of enabling fixed wireless broadband networks and offer a simple and capital-efficient way to lease spectrum. Our spectrum offers both large and small telecom providers a carrier-class spectrum solution that can accommodate speeds from T-1 up to OC-12 (622 Mbps). Our product line economically addresses spectrum requirements as small as a single link to as large as a regional or national deployment.

Express Link - Our link-by-link product solution enables telecom carriers and enterprise customers to lease 39 GHz spectrum on a per-link basis. Generally offered at $500 per link per year, this product is designed for customers that need to deploy from one to 10 links. Express Link users benefit from rapid authorization, automatic renewal terms, long-term price guarantees and no minimum link commitment.

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Express Net - Our regional product solution provides exclusive use of up to 100 MHz of spectrum in a specific geographic area. This product, which can be tailored to meet telecommunications carrier’s precise bandwidth and coverage requirements, is designed for providers who require a large number of links with each link requiring a specific amount of spectrum. Express Net users benefit from rapid authorization and long-term price guarantees.

We seek to identify, contact and serve existing telecommunications 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 looking to implement fixed wireless backbone systems. We are pursuing opportunities to (i) connect remote cellular tower sites to the telephone network; (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 wireless backbone networks for internet service providers (ISPs) and competitive local exchange carriers (CLECs); and, (iv) provide point to point links between buildings for organizations within metropolitan areas and campus environments. To minimize capital requirements and operational risks, we may enter into joint ventures or equipment sharing arrangements with experienced channel partners and subcontractors.

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. At this time, we are unable to predict what business opportunities will become available to us or which we may seek to pursue.

Advantages of using 39 GHz Transmission Services

Advantages of 39 GHz 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 over time.

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 38.6–40.0 GHz airwave band consisting of fourteen 100 MHz channels by issuing licenses for the provision of wireless telecommunications services within a specified geographic area. The licenses issued in the 38.6-40.0 GHz band are generally referred to as 39 GHz licenses.

Our spectrum licenses were acquired through applications with the FCC and purchase contracts with other spectrum holders. Additionally, in 2000, we were the winning bidder for 352 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 1 billion channel pops. Our licenses were granted for initial ten-year terms with expirations

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ranging from 2006 through 2011. We have an expectation 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 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 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 also face competition in our strategy to lease spectrum. Holders of similar spectrum may elect to lease their spectrum and target the same types of customers. Potential lessees of our spectrum can obtain spectrum in the Common Carrier frequencies (18 GHz and 23 GHz) on a link-by-link basis directly by application to the FCC.

We expect to compete primarily on the basis of responsiveness to customer needs, leasing process simplicity, deployment speed, service quality, 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

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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, competition from cable television operators may 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 and could elect to lease their spectrum. 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 may 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. Nextel and Sprint are the principal holders of such licenses and use them primarily for wireless broadband telecommunications services in residential areas. However, these companies may also market high-speed telecommunications services elsewhere.

The FCC had allocated 300 MHz of spectrum in the 5 GHz band, and has recently allocated 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.

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 compete with 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 transmissions) 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

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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 38.6-40.0 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.

Last year the FCC also adopted regulations permitting certain classes of licensees, such as 39 GHz licensees, to lease a portion, or all, of their spectrum to third parties (“Secondary Market Ruling”). The FCC’s spectrum leasing rules are generally designed to promote a secondary market for spectrum and provide a number of options for leasing depending upon the degree of control that the lessee desires to be afforded. The FCC’s leasing rules, while generally beneficial to our business plans, may introduce additional competition to the types of services and products offered by the Company. Moreover, the FCC spectrum leasing rules are also subject to petitions for reconsideration and may, as a result, be modified in a manner that is not favorable to our business.

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.

A number of our licenses were also obtained through auctions where the Company qualified for bidding credits as a designated “very small business” entity. To avoid repayment of those bidding credits, the Company is subject to certain limitations on types of investments and overall control. These requirements may constrain our ability to obtain financing needed for our operations.

Licenses in the 39 GHz 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.

Auctions.    Since 1994, the FCC has conducted auctions of licenses for spectrum to award licenses to those that will use them most effectively. The FCC has recently announced that it will auction 24 GHz spectrum in 2004. The availability of more spectrum in this band could increase the number of entities with which we compete. The FCC still controls a substantial amount of 39 GHz spectrum. The FCC could auction this spectrum in the future, increasing the number of entities that hold this spectrum.

Competition.    Over the last several years, the FCC and the states have issued a series of decisions and Congress continues to enact legislation making the interstate access services market more competitive. These regulatory actions continue to evolve and the Congress, the states and the FCC implement reforms in a manner unfavorable to us.

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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 1, 2004 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 84% of the book value of our assets at December 31, 2003. 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 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

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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, 2004, $20.8 million of the bidding credit must be repaid with interest. The bidding credit required to be repaid decreases by 25% of the total original credit of $41.6 million 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 decline.

Our wireless licenses comprise virtually all of our assets. The value of any or all of our licenses could 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 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:

• raise adequate additional capital when required;

• attract and retain an adequate customer base;

• deploy and commercialize our services;

• attract and retain experienced and talented personnel as needed; and,

• establish strategic business relationships.

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

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We may be unsuccessful in executing our strategy of leasing our spectrum to 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 opportunities to provide services and may be better able to respond to such opportunities than we are.

Our spectrum leasing strategy may not be accepted by the telecommunications carriers.

Leasing small amounts of spectrum has not previously been cost effective. As a result, there is no track record for companies pursuing this strategy. Large telecommunication carriers may not be willing to lease, rather than own, spectrum upon which their business is dependent.

There are few barriers to entry to spectrum leasing.

Other entities hold similar FCC licenses to operate in the same markets as we do. These entities may decide to follow our lead and lease spectrum to telecommunication companies. They may be able to offer lower prices than we do or may have more spectrum available to lease in a market than we do.

Competition may increase.

The FCC has recently announced that it will auction 24 GHz spectrum in 2004. As a result, there may be more entities which hold spectrum similar to ours. These entities could have greater financial and operating resources than we do,

The FCC still controls a substantial amount of 39 GHz spectrum. The FCC could auction this spectrum in the future, increasing the number of entities that hold this spectrum and the general availability of 39 GHz spectrum. Companies that would otherwise lease spectrum from us could instead decide to buy spectrum in these auctions.

We may be unable to successfully discover and respond to future 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:

In addition, we anticipate having limited resources available to develop our long-term business plan. If a longer-term opportunity does arise, we may not be able 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.

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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 may 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:

Our failure to adequately address the above factors would have a significant impact on our ability to implement any business plan. Our inability to successfully execute our business may effect the recoverability of our investment in FCC licenses.

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

We had a cash balance of $3.6 million at December 31, 2003 and raised an additional $4.4 million in January 2004. While we expect this cash balance to support our operations through and including 2008, unforeseen expenses and business opportunities could cause us to spend money more rapidly than expected. We may not be able to secure the necessary financing to undertake business opportunities. We expect to need additional capital to refinance our current debt that is due in December 2008. We may be unable to secure additional financing when needed, on acceptable terms, or at all, to pursue such opportunities. Any such financing could be on onerous terms and could be very dilutive to our stockholders. 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 two years of operating and financial information reflecting our current strategy is available and our recent financial results are not comparable to periods before 2002.

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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:

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 successfully to 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 better able to develop and exploit new and better technologies, adapt to changes in customer requirements, 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 on our website through a link to 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:

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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”, we sought protection under Chapter 11 of the Bankruptcy Code on April 20, 2001. We developed a Plan that was approved by the Court on October 31, 2001. On December 20, 2001, 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.

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 2003.

ITEM 4A.    EXECUTIVE OFFICERS OF THE COMPANY

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 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

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

The following table sets forth high and low bid quotations of the New Common Stock traded under the ticker symbol “FRNS.OB” as reported on the Over the Counter Bulletin Board from April 11, 2002 through December 31, 2003. The quotations below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Prior to April 11, 2002, the New Common Stock was not traded on any exchange.

New Common Stock

On March 1, 2004, the last sale price of our common stock as reported by the Over the Counter Bulletin Board was $2.90 per share. There were 991 holders of record of our common stock on March 1, 2004.

We have not paid any cash dividends in the past and do not anticipate paying any cash dividends 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 and, as of December 31, 2003, prohibit dividends or other distributions.

Equity Compensation Plan Information

The following table provides information about our equity compensation plans as of December 31, 2003.

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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 adopted “fresh start” financial reporting effective as of December 31, 2001 as a result of the court-approved Plan. Fresh start financial 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

You should read the following discussion in conjunction with the section below titled “ Cautionary Statement” our Consolidated Financial Statements and related Notes, and other financial information appearing elsewhere in this annual report on Form 10-K.

Executive Overview

The Company holds over 750 licenses granted by the Federal Communications Commission (“FCC”). It leases the spectrum represented by these licenses to others to construct high-speed wireless telecommunications networks. Our leasing products, Express Link and Express Net, offer a way for telecommunications carriers and enterprise customers to access interference-free, carrier class licensed spectrum.

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

The Company’s leasing strategy allows it to utilize its FCC licenses to facilitate wireless telecommunications services in a capital efficient manner. It seeks to identify, contact and serve existing telecommunications carriers in a manner that does not require significant sales and marketing, operating and capital expenditures.

The Company currently has 14 leases for spectrum on a link-by-link basis and has leased spectrum in two urban regions. Additionally, the Company has retained nine fixed transmission links originated by our predecessor which 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 In December 2003, the Company entered into an Express Net contract with a large national telecommunications carrier. Under the terms of this contract, the Company has leased a portion of its spectrum in two urban regions for seven years.

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. 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. 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 (the “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 (the “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 holder

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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 canceled 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 Financial Reporting

For financial reporting purposes, the Company has reflected its emergence from bankruptcy as of December 31, 2001. Effective December 31, 2001, the Company adopted fresh start financial 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 financial 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. Balances as of and results of operations for the years ended December 31, 2003 and 2002 are referred to as the successor. Results of operations for years ended December 31, 2001 are those of the predecessor entity. All other information prior to December 31, 2001 is that of the predecessor entity. 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 telecommunications 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 is recorded in future periods.

Results of Operations

Year ended December 31, 2003 compared to year ended December 31, 2002

Revenues for the year ended December 31, 2003, decreased 52.5% to $140,000 from $295,000 in 2002. Revenues in 2003 and 2002 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. At December 31, 2003 and 2002, the Company provided customers with nine and 14 dedicated links, respectively, remaining from the predecessor. The decrease in revenue in 2003 is a result of the decrease in the number of legacy links as customers of the predecessor continued to disconnect their services. The Company realized minimal revenue from its new spectrum leasing program which was launched in late 2003. At December 31, 2003, the Company had 14 leases for its spectrum on a link-by-link basis and has leased spectrum in two urban areas.

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 90.3% to

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$3,000 for the year ended December 31, 2003, compared to $31,000 in 2002. This decrease resulted from the reduction in facilities and rent as a result of the declining number of links remaining from the predecessor. Percentage of revenue comparison is 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 increased 83.9% to $399,000 for the year ended December 31, 2003, compared to $217,000 in 2002. This increase resulted primarily from non-cash stock-based compensation expense of $146,000 recorded in 2003. Percentage of revenue comparison is not meaningful.

General and administrative expenses increased 21.7% to $2.3 million for the year ended December 31, 2003 from $1.9 million for the year ended December 31, 2002. This increase resulted from a non-cash stock-based compensation expense of $1.1 million recorded in 2003 offset by a $200,000 reduction from 2002 in professional fees incurred in finalizing the bankruptcy and $300,000 reduction from 2002 in costs incurred to support the Company’s international subsidiaries. Percentage of revenue comparison is not meaningful.

In 2003, the Company recorded a non-cash charge of $124,000 to reduce its carrying value of inventory to market.

As a result of its annual impairment evaluation of the fair value of its FCC licenses, the Company determined that its license portfolio, with a book value of $21.6 million, had a value of $50.8 million and that no further decline in their value had occurred during 2003. While performing its impairment evaluation the Company considered (i) the increase in its public equity value; (ii) private purchases or restructurings for companies holding similar licenses; and, (iii) the increase in the public equity value of companies providing similar services or holding FCC licenses. The fair value of $50.8 million at December 31, 2003 was based upon a valuation performed by an independent valuation firm.

Depreciation and amortization expense of $9,000 for the year ended December 31, 2003 decreased 55.0% from $20,000 for 2002. This decrease was due to the disposal of depreciable equipment and fixtures as a result of closing the predecessor’s Kent, WA warehouse facility in April 2002.

Interest and other increased to $1.4 million for the year ended December 31, 2003 from $1.0 million in 2002. This increase is a result of non-recurring other income of $421,000 realized in 2002 related to the liquidation of excess equipment from the predecessor and other bankruptcy matters.

During the year ended December 31, 2003, the Company has recorded an increase of $1.3 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, 2003, the Company’s valuation allowance was equal to its deferred tax asset.

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. The decrease in revenue in 2002 was a result of the elimination of services and the decrease in the number of links. 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.

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

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$31,000 for the year ended December 31, 2002, compared to $8.9 million in 2001. This decrease resulted from (i) 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 comparison is 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 comparison is 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 comparison is 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 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.

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

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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. In December 2003, the Company completed the verification process and distributed the remaining 1.5 million shares of common stock.

During the year ended December 31, 2003, operating activities used cash of approximately $1.7 million as compared to $1.5 million during 2002. Cash used by operating activities resulted primarily from the Company’s net loss decreased by non-cash interest expense and non-cash stock-based compensation expense.

Investing activities for the year ended December 31, 2003 used cash of $2,000 to acquire equipment. During the year ended December 31, 2002, investing activities provided cash of $978,000 as a result of selling assets held for sale at December 31, 2001. In 2002, the Company disposed of all surplus equipment remaining after its bankruptcy filing and substantial curtailment of its operations and, accordingly, future comparable dispositions are not anticipated.

Financing activities provided $7,000 for the year ended December 31, 2003 as a result of employee stock options being exercised. The Company had no financing activities for the year ended December 31, 2002. In 2001, the Company issued New Senior Secured Notes bearing interest at the rate of 9% per annum, payable quarterly through the issuance of additional New Senior Notes. Interest is payable in cash only upon a continuing event of default. 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 2003, the Company issued $1.1 million of New Senior Secured Notes for paid-in-kind interest.

The Company had cash and cash equivalents of $3.6 million at December 31, 2003. 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, 2003, it had three employees and non-cancelable financial commitments of $8,000 due in 2004.

In January 2004, the Company received $4.4 million of gross proceeds from the sale of 1.2 million shares of common stock and the issuance of 1.2 million warrants exercisable for shares of common stock. These five-year warrants are exercisable immediately with a strike price of $1.83 per share of common stock. With this additional

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cash, the Company believes that its cash resources are sufficient to fund its operations and capital requirements through and including 2008. However, additional unforeseen expenditures may require the Company to obtain additional financing.

As a condition to the sale of the 1.2 million shares of common stock, the holders of the New Senior Secured Notes agreed to extend the maturity of these notes from December 20, 2006 to December 20, 2008. The notes continue to bear interest at the rate of 9% per annum that is payable quarterly through the issuance of additional New Senior Secured Notes.

Management expects operating losses and negative cash flows to continue for foreseeable future. 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.

Contractual Obligations

The table below sets for the due dates of the Company’s contractual obligations as of December 31, 2003.

The Company’s long-term debt bears paid-in-kind interest of 9% and is due December 20, 2008. At its maturity, if all interest is paid-in-kind, the balance of this debt will approximate $20.5 million.

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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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 relevance 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.

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.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s existing $13.1 million long-term debt bears interest at a fixed 9% rate and is due in full in 2008; 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, 2003, the Company had cash and cash equivalents of $3.6 million that were held in bank accounts and in certificates of deposits with an average annual interest rate of 0.8% 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.

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ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Accountants

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

We have audited the accompanying balance sheet of First Avenue Networks, Inc. and its subsidiaries (the “Company”) at December 31, 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. We have also audited the financial statement schedule appearing under Item 15(a)(2) for the year ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of First Avenue Networks, Inc. and its subsidiaries at December 31, 2003, 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 appearing under Item 15(a)(2) for the year ended December 31, 2003 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/    KBA GROUP LLP

Dallas, Texas

January 29, 2004

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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 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.

/s/    PricewaterhouseCoopers LLP

McLean, VA

March 3, 2003

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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.

/s/    PricewaterhouseCoopers LLP

McLean, VA

January 28, 2002, except for the fourth

    paragraph of Note 13, as to which the

    date is February 19, 2002

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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 statements of operations, of changes in stockholders’ equity and of cash flows present fairly, in all material respects, the results of operations and cash flows for the year ended December 31, 2001 of Advanced Radio Telecom Corp. and its subsidiaries (the “Company”) 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.

/s/    PricewaterhouseCoopers LLP

McLean, VA

January 28, 2002, except for the fourth

    paragraph of Note 13, as to which the

    date is February 19, 2002

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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)