<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to ______________
Commission file number: 33-14841-D
CHADMOORE WIRELESS GROUP, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1058165
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4720 POLARIS STREET, LAS VEGAS, NEVADA 89103
---------------------------------------------
(Address of principal executive offices)
(702) 891-5255
---------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
AS OF APRIL 30, 1996, ISSUER HAD 9,888,982 SHARES OF COMMON STOCK, $.001 PAR
VALUE, OUTSTANDING.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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<PAGE> 2
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS.
Unaudited Consolidated Financial Statements of Chadmoore
Wireless Group, Inc. and Subsidiaries (Formerly CapVest Internationale, Ltd.):
Consolidated Balance Sheets:
As of March 31, 1996 and December 31, 1995 1
Consolidated Statements of Operations:
For the Three Months Ended March 31, 1996 and 1995 and Cumulative
from January 1, 1994 to March 31, 1996 2
Consolidated Statements of Cash Flows:
For the Three Months Ended March 31, 1996 and 1995 and Cumulative
from January 1, 1994 to March 31, 1996 3-4
Consolidated Statement of Changes in Shareholders' Equity
For the Three Months Ended March 31, 1996 5
Notes to Unaudited Consolidated Financial Statements 6-9
ITEM 2. PLAN OF OPERATION 9-11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11-13
SIGNATURES 14
</TABLE>
<PAGE> 3
PART I. ITEM I. FINANCIAL STATEMENTS
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,1996 December 31,
ASSETS (Unaudited) 1995
------ ----------- ----
<S> <C> <C>
Current assets:
Cash $ 804,995 $ 188,029
Amounts held for shares issued -- 675,000
Stock subscription receivable -- 287,000
Accounts receivable 220,762 --
Inventory 99,844 --
Due from General Communications 17,729 76,252
Prepaid property management rights 108,750 117,813
Deposits 16,742 16,742
Other 7,813 7,813
------------- -------------
Total current assets 1,276,635 1,368,649
Property and equipment, net 1,365,633 353,942
FCC licenses, net (note 5) 1,452,955 1,321,336
Organization costs, net of accumulated amortization of $6,213 and $5,370, respectively 10,646 11,489
Other Receivable 20,000 20,000
Investment in license options 1,321,220 1,147,700
Deposit on licenses 1,682,106 860,258
Non-competition and consulting agreements, net of accumulated amortization $94,838 -- 258,121
------------- -------------
$ 7,129,195 $ 5,341,495
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Current installments of long-term debt $ 151,250 $ 337,255
Accounts payable and accrued liabilities 320,014 361,641
Deposit on sale 72,029 --
Licenses - options 413,950 448,350
License option commission payable 524,800 349,200
Non-compete and consulting agreement - current -- 119,225
Accrued interest -- 54,490
------------- -------------
Total current liabilities 1,482,043 1,670,161
Non compete and consulting agreements, excluding current installments -- 108,840
Long term debt, excluding current installments, net 1,057,837 524,868
------------- -------------
Total Liabilities 2,539,880 2,303,869
------------- -------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value. Authorized 40,000,000 shares;
issued and outstanding -0- shares -- --
Common stock, $.001 par value. Authorized 100,000,000 shares issued and outstanding;
9,733,981 shares at March 31, 1996 and 8,387,064 shares at December 31,1995 9,734 8,387
Additional paid-in capital 12,285,568 10,564,852
Stock subscribed 821,848 324,807
Deficit accumulated during the development stage (8,527,835) (7,860,420)
------------- -------------
Total shareholders' equity 4,589,315 3,037,626
------------- -------------
$ 7,129,195 $ 5,341,495
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements
1
<PAGE> 4
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND MARCH 31,1995
<TABLE>
<CAPTION>
Period from
January 1,
1994
March 31, 1996 March 31, 1995 through March 31, 1996
(Unaudited) (Unaudited) (Unaudited)
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues
Radio services $ 19,285 $ -- $ 19,285
Equipment sales 168,539 -- 168,539
------------- ------------- -------------
187,824 -- 187,824
------------- ------------- -------------
Costs and expenses
Cost of sales 48,454 -- 48,454
Salaries, wages and benefits 251,130 100,750 1,124,011
General and administrative 585,347 375,667 7,881,700
Depreciation and amortization 50,333 46,158 276,621
------------- ------------- -------------
935,264 522,575 9,330,786
------------- ------------- -------------
Loss from operations (747,440) (522,575) (9,142,962)
Other income (expense)
Management fees (notes 2,3) 100,198 59,687 472,611
Interest expense (22,048) (46,015) (180,373)
Gain on sale of assets -- -- 330,643
Loss on retirement of note -- -- (32,404)
Other, net 1,875 -- 24,650
------------- ------------- -------------
80,025 13,672 615,127
------------- ------------- -------------
Net loss $ (667,415) $ (508,903) $ (8,527,835)
============= ============= =============
Weighted-average number of common shares outstanding 9,105,746 4,483,945 9,105,746
============= ============= =============
Net loss per share $ (.07) $ (0.11) $ (.94)
============= ============= =============
</TABLE>
2
<PAGE> 5
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND MARCH 31,1995
<TABLE>
<CAPTION>
Period from
January 1, 1994
through
March 31,1996 March 31,1995 March 31,1996
(Unaudited) (Unaudited) (Unaudited)
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss (667,415) $ (508,903) (8,527,835)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 50,333 46,158 276,621
Amortization of debt discount 12,718 -- 12,718
Gain on sale of assets held for resale -- -- (330,643)
Expense associated with:
Stock issued for services 62,500 -- 2,364,542
Options issued for services -- -- 2,841,788
Change in operating assets and liabilities:
(Increase) decrease in stock subscriptions receivable, net of
stock subscribed 675,000 -- 37,807
Increase in Accounts receivable (52,299) -- (52,299)
Increase in inventory (21,860) -- (21,860)
(Increase) Decrease Due from General Communications, Inc. 58,523 (26,732) (17,729)
Decrease in prepaids 9,063 -- 9,063
Increase in other receivable -- -- (20,000)
Increase in deposits -- -- (16,742)
Increase in other current -- -- (7,813)
(Decrease) increase in accounts payable (52,142) 473,188 309,499
Increase in commission payable 175,600 -- 524,800
Increase in accrued interest 16,370 34,960 70,860
-------------- -------------- --------------
Net cash provided by (used in) operating activities 266,391 18,671 (2,547,223)
-------------- -------------- --------------
Cash flows from investing activities
Purchase of assets from General Communications (345,609) -- (345,609)
Purchase of SMR station licenses -- -- (1,398,575)
Purchase of license options (207,920) (699,950) (907,270)
Purchase of property and equipment (591,125) (72,021) (1,143,557)
Purchase of assets held for resale -- (149,650) (219,707)
Sale of assets held for resale -- 178,750 700,000
Increase in organization costs -- -- (16,859)
Increase in deposit on sale 72,029 -- 72,029
-------------- -------------- --------------
Net cash used in investing activities (1,072,625) (742,871) (3,259,548)
-------------- -------------- --------------
Cash flows from financing activities
Proceeds upon issuance of stock 1,317,690 592,155 3,689,292
Proceeds upon exercise of options - related -- -- 62,500
Proceeds upon exercise of options - unrelated 127,500 -- 1,105,001
Purchase and conversion of CCI stock -- -- 45,000
Advances from related parties -- 114,205 767,734
Payment of advances from related parties -- -- (73,000)
Repayment of long-term debt (21,990) (34,500) (324,761)
Proceeds from issuance of notes payable -- -- 375,000
Proceeds from issuance of long-term debt -- -- 965,000
-------------- -------------- --------------
Net cash provided by financing activities 1,423,200 671,860 6,611,766
-------------- -------------- --------------
</TABLE>
(CONTINUED)
3
<PAGE> 6
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONCLUDED
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND MARCH 31,1995
<TABLE>
<CAPTION>
Period from
January 1, 1994
through
March 31,1996 March 31,1995 March 31,1996
(Unaudited) (Unaudited) (Unaudited)
------------- ------------- -------------
<S> <C> <C> <C>
Net increase (decrease) in cash 616,966 (52,340) 804,995
Cash at beginning of period $ 188,029 $ 151,972 $ --
------------- ------------- -------------
Cash at end of period $ 804,995 $ 99,632 $ 804,995
============= ============= =============
</TABLE>
Non-cash transactions: see notes 3 and 4
See accompanying notes to unaudited consolidated financial statements
4
<PAGE> 7
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONCLUDED
FOR THE PERIOD FROM JANUARY 1, 1996 TO MARCH 31,1996
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
--------------------------- Additional during the Common Total
Outstanding paid-in development Stock shareholders'
Shares Amount capital stage Subscribed equity
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 8,387,064 $ 8,387 $ 10,564,852 $ (7,860,420) $ 324,807 $ 3,037,626
Shares issued in connection with the
private placement 441,666 442 665,058 -- (324,807) 340,693
Additional private placement shares 107,751 108 (108) -- -- --
Shares issued to investors for cash 430,000 430 644,570 -- -- 645,000
Shares issued for options exercised 205,000 205 172,295 -- -- 172,500
Shares issued for legal fees 62,500 62 62,438 -- -- 62,500
Shares issued for assets purchased from
Communications (note 3) 100,000 100 176,463 -- -- 176,563
Shares subscribed (note 4) -- -- -- -- 821,848 821,848
Net Loss -- -- -- (667,415) -- (667,415)
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 1996 9,733,981 $ 9,734 $ 12,285,568 $ (8,527,835) $ 821,848 $ 4,589,315
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements
5
<PAGE> 8
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Chadmoore Wireless Group, Inc. and subsidiaries (the
Company)(formerly CapVest Internationale, Ltd.), a development stage company,
and have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission Form 10-QSB. All material adjustments,
consisting only of normal recurring adjustments which are, in the opinion of
management, necessary to present fairly the financial condition and related
results of operations, cash flows and shareholders' equity for the respective
interim periods presented are reflected. The current period results of
operations are not necessarily indicative of results for the full year ended
December 31, 1996. These unaudited consolidated financial statements should be
read in conjunction with the audited consolidated financial statements included
in the Annual Report on Form 10-KSB for the period ending December 31, 1995 and
the Current Report on Form 8-K dated March 22, 1996 and May 14, 1996.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The unaudited consolidated financial statements
include the financial statements of Chadmoore Wireless Group, Inc. and its
subsidiaries Chadmoore Construction Services, Inc. (CCSI) and Chadmoore
Communications, Inc. (CCI) and CCI's wholly-owned subsidiaries Chadmoore
Communications of Tennessee, Inc.(CCT) and Chadmoore Communications of Memphis,
Inc. (a non-active entity). All significant intercompany balances and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS: The Company considers all short-term highly liquid
investments with original maturities of three months or less cash equivalents.
INVENTORY: Inventory is stated at cost and is valued on a first-in first-out
basis.
DEPRECIATION AND AMORTIZATION: Property and equipment is stated at cost.
Depreciation is calculated on the straight-line method over the estimated
useful lives of the assets, generally 5-10 years.
FCC LICENSES: FCC licenses are recorded at cost and consist of agreements with
the Federal Communications Commission (FCC) which allow the use of certain
communications frequencies. FCC licenses have a primary term of five years and
are renewable for additional five year periods for a nominal fee. Although
there can be no assurances the licenses will be renewed, management expects
that the licenses will be renewed prior to expiration. FCC license costs and
renewal fees are amortized using the straight-line method over 20 and 5 years,
respectively. The Company evaluates the recoverability of FCC licenses by
determining weather the unamortized balance of this asset is expected to be
recovered over its remaining life through projected undiscounted operating cash
flows.
INTANGIBLE ASSETS: Organization costs are stated at cost, net of accumulated
amortization and are amortized over a five year period using the straight-line
method. Non-competition and consulting agreements are stated at cost, net of
accumulated amortization and are amortized over a three to five year period
using the straight-line method.
INCOME TAXES: The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes(SFAS 109), whereby
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS 109, the effect
on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
6
<PAGE> 9
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONCLUDED
REVENUES: The Company's only source of revenue through March 7, 1996, was
management fee income from General Communications Radio Sales and Service,
Inc.(General). In connection with these services, the Company records a
management fee equal to the net cash flow of General. This revenue has been
included as part of Other Income (Expense) in the Consolidated Statement of
Operations through March 7, 1996. The Company completed the asset purchase of
General on March 8, 1996 (see Note 3). As such, the Company now recognizes
revenue from telephone interconnect and dispatch services based upon monthly
access charges per unit, plus in the case of telephone interconnect service,
revenue is recognized based on airtime charges as used. Revenue from equipment
service is recognized upon acceptance of the work by the customer. Revenue is
recognized from the sale of equipment when delivered. This revenue has been
included as part of Revenue and Sales in the Unaudited Consolidated Statement
of Operations from March 8, 1996 through March 31, 1996.
LOSS PER SHARE: Loss per share is computed by dividing the net loss by the
weighted average number of Common Shares Outstanding at March 31, 1996 and
1995.
(3) GENERAL COMMUNICATION ASSET PURCHASE AGREEMENT
On March 8, 1996, the Company renegotiated and finalized the purchase of
phases 2-5 of the General Communications Asset Purchase Agreement. In
conjunction with the this transaction, the Company purchased certain SMR
equipment, land, building, other fixed assets, accounts receivable, inventory
and FCC licenses for SMR channels in Memphis, Tennessee from General.
Prior to the asset purchase and since November 1994, the Company was managing
the daily operations of General for a management fee equal to the net cash
flows of General.
The acquired assets were recorded at $834,569. The Company paid $345,609 in
cash and issued 100,000 shares of restricted common stock with a fair market
value on March 8, 1996 of $176,563, based on the discounted average closing
bid and ask price of the Company's common stock trading on the NASD Electronic
Bulletin Board. The Company's non-competition, consulting agreement and note
payable liabilities to General with a balance totaling $906,687, net of the
corresponding non-competition and consulting agreement asset of $244,571, were
canceled and a new note payable was entered into. The new note is a 25 year,
unsecured, noninterest bearing, negotiable promissory note face amount of
$4,110,000, scheduled to be repaid in 300 monthly installments.
The note is subject to Consumer Price Index increases in years three through
thirteen. The Company has assumed a CPI increase of 2.5% for recording purposes
thereby reflecting the gross value of the note equal to $5,024,198. Interest on
the note has been imputed at 9% giving a net present value of $1,208,869, net
of unamortized discount of $3,815,329 amortized on the straight line method
over the term of the note.
(4) EQUITY TRANSACTIONS
PRIVATE PLACEMENT
In August 1995, the Company consummated a Private Placement Memorandum (PPM)
and offered 1,000,000 units at a price of $2.00 per unit. Each unit consisted
of one share of the Company's common stock and one common stock purchase
warrant. One warrant entitles the holder to purchase one share of common stock
at $5.00 per share for a period of three years from the date of issuance. In
October 1995, the Company reduced the price to $1.50 per unit with the same
warrant terms.
On March 12, 1996, the Company issued 418,332 shares of common stock to
investors participating in the PPM for proceeds of $538,920, net of offering
expenses of $88,580.
On January 15, 1996 and March 14, 1996, the Company issued sufficient common
shares amounting to 30,417 and 77,334, respectively, to investors participating
in the PPM at a price of $2.00 per unit to establish an effective price per
unit of $1.50 consistent with the per unit price established in October 1995.
7
<PAGE> 10
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
(4) EQUITY TRANSACTIONS -CONCLUDED
PRIVATE PLACEMENT - CONCLUDED
In January 1996, the Company issued 23,334 shares of common stock to certain
PPM investors whose funds in the amount of $35,000 were received in 1995.
In the first quarter of 1996, the Company also sold 430,000 shares of common
stock to three foreign investors for proceeds of $600,000, net of placement
fees of $45,000. Options to purchase 400,000 shares were also issued at strike
prices ranging from $2.50 - $6.00.
OPTION EXERCISES
On January 29, 1996, the Company issued 62,500 shares of common stock upon the
exercise of options in lieu of legal fees.
In the first quarter of 1996, the Company also issued 205,000 shares of common
stock upon the exercise of options which provided proceeds of $172,500 to the
Company.
ASSET PURCHASE
In connection with the asset purchase of General, the Company issued 100,000
shares of restricted common stock valued at $176,463 (see Note 3).
LICENSE PURCHASE
During 1995, the Company purchased options to buy licenses from individuals
ranging between $100 to $1500 per option. In February 1996, the Company
authorized the issuance of 285,860 restricted common shares as down payment for
the exercise of the option to purchase approximately 140 licenses under the
license option agreements (see Note 5). The issuance of the stock will
represent 40% of the purchase price. As of March 31, 1996, agreements have
been executed but the stock has not yet been issued. The value of the unissued
shares is classified as common stock subscribed in shareholders' equity at
March 31, 1996. The amount capitalized as down payment of these licenses was
based on fair market value of the stock on the date of authorization and
totaled $821,848.
(5) FCC LICENSES AND OPTIONS
FCC licenses are recorded at cost and consist of agreements with the Federal
Communications Commission (FCC) which allow the use of certain communications
frequencies. FCC licenses have a primary term of five years and are renewable
for additional five year periods for a nominal fee. Although there is no
assurance that the license will be renewed, management expects that the
licenses will be renewed as they expire. FCC license costs and renewal fees are
amortized using the straight-line method over 20 years and 5 years,
respectively. The Company evaluates the recoverability of FCC licenses by
determining whether the unamortized balance of this asset is expected to be
recovered over its remaining life through projected undiscounted operating cash
flows. FCC licenses consist of the following at March 31, 1996:
<TABLE>
<S> <C>
FCC licenses $1,548,299
Less: accumulated amortization 95,344
----------
$1,452,955
----------
</TABLE>
The Company has entered into various option agreements to acquire FCC radio
licenses for SMR channels and also entered into management agreements with the
licensees of the SMR channels. Depending on the size of the market in which the
channel is located, the Company paid $100 to $1,500 for each option.
8
<PAGE> 11
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(UNAUDITED)
(5) FCC LICENSES AND OPTIONS - CONCLUDED
The option agreements allow the Company to purchase licenses within a specified
period of time after the option agreement is signed. Upon entering into the
option agreement, the Company also enters into a management agreement with the
licensee. The management agreements give the Company the right to manage the
SMR systems for the period stated in the agreements, usually 2 to 5 years.
During the period that the Company is managing the SMR system, revenues are
shared with the licensee. The Company has not recognized any revenue from these
agreements, as none of the systems under option are operational.
(6) SUBSEQUENT EVENT
On April 4, 1996, the Company issued 250,000 shares of preferred stock in
exchange for $2,275,956 net of expenses of $224,044. In addition, no later than
April 15, 1996, the agreement calls for the Company to issue warrants to
purchase 150,000 shares of common stock.
ITEM 2. PLAN OF OPERATION
The Company's objectives over the next 12 months are to aggregate channels in
selected markets, construct analog channels, construct a digital SMR network,
establish distribution, institute a marketing plan, convert existing analog
customers to digital service and increase recurring revenues through the
addition of subscribers. Through acquisition and management of existing
operating systems and construction of newly licensed SMR stations, the Company
will increase the customer base and corresponding revenues within each market.
The plan is to select markets with adequate available channel density and
population base to prove its operating capability and generate sufficient
revenues to justify the capital necessary to ultimately provide digital
wireless service.
To date, the Company's activities have been limited to raising capital for
operations and acquisitions, hiring a core team of employees, managing and
acquiring an initial operating system, and commencing negotiations for
acquisitions of SMR systems. In March 1996, the Company acquired an initial
operating SMR system in Memphis, Tennessee with over 3,300 subscribers and
annualized gross revenues in excess of $2,000,000. The Company currently offers
two types of wireless communication services in Memphis, Tenn.: SMR dispatch
(two-way) and telephone interconnect. Both services are analog SMR technology.
The Company sells analog SMR equipment to subscribers and provides the system
and services on which customers can use their equipment. This operation serves
a population of approximately 1,100,000.
The Company has also entered into binding five year Options to Acquire and
Management Agreements with over 1,250 licensees, comprising over 2,300 channels
licensed by the FCC, in over sixty cities throughout the mid-South and mid-
West regions of the United States. When complete, the network would cover
areas with a total combined population in excess of 40,000,000. Additionally,
the Company has formed dealer agreements with independent SMR operators, and
has begun to develop, construct and market SMR services. As the Company
develops its digital wireless network, it will selectively convert analog SMR
channels to iDEN digital wireless service, beginning in the markets in the
mid-south and continuing as capacity and marketplace demands dictate.
The Company plans to offer digital wireless communication services ranging from
two-way dispatch, and telephone interconnect, to services comparable in quality
to those provided by current cellular telephone operators. In addition, the
Company plans to offer in a single handset, services and combinations of
services currently not available in its operating areas. These services will
include combined mobile telephone, dispatch and data transmission. The
conversion to Motorola's integrated Dispatch Enhanced Network ("iDEN") digital
technology will allow the Company to dramatically expand existing system
capacity and provide advanced features, call clarity, and call security to its
subscribers.
The Company plans to use leased facilities on existing towers wherever possible
to avoid the cost of tower and shelter construction. This approach will also
expedite the construction process and avoid time delays associated with local
zoning and permit issues. The Company expects approximately 33% of the planned
sites will need to be constructed. In the cases where construction is
necessary, the Company will be required to bear the costs of constructing a
site which may include: access road development, land acquisition, shelter
costs, foundation and tower construction.
9
<PAGE> 12
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
ITEM 2. PLAN OF OPERATION - CONCLUDED
Over the next 12 months, the marketing objective is to activate customers on
the Company's mid-South iDEN network and position the Company as a leader in
new wireless communication technology and service. Motorola's brand name
recognition, combined with the Company's targeted marketing approach, will
assist in developing customer interest in the digital wireless services
offered. The strategy is to increase Company revenues with the smallest
possible incremental marketing expense.
The Company's recurring revenues will consist primarily of subscriber network
usage revenues, which consist of monthly access fees per unit, incremental
charges based on minutes of use, and lease revenues from site operations where
the Company owns or manages a transmission facility and leases space to a third
party. Lease revenues, while not a primary source of revenue, offer increased
cash flow opportunities for little additional cost. From time to time, changes
in the Company's plans may dictate that facilities, originally acquired to be
included in an operating system, will be sold, traded or used in partnership
with existing service providers in a particular market to provide either
additional cash flow for growth or to begin or strengthen specific strategic
alliances.
The Company has elected to develop two channels of distribution: direct sales
representatives and independent agents. The Company will establish a sales
office in each of the markets selected to provide iDEN services. Each sales
office will have a minimal retail presence for walk-in customer traffic. To
further develop the Company's distribution network, independent agents will be
established in each of the markets. In addition, the Company's management team
recognizes that additional staff will be required to properly support
marketing, sales, engineering, and accounting for the mid-South region. It
is anticipated that approximately 50 more employees will be required to meet
the demands of the projected mid-South market.
LIQUIDITY AND CAPITAL RESOURCES
During the next 12 months, the Company will require access to sufficient
capital to enable it to act quickly on opportunities that present themselves in
the Company's target markets. The Company believes that in the next 12 months
it will require approximately $19.9 million for acquisitions and capital
expenditures associated with the leased and capital assets necessary for the
construction of systems. $4.8 million will be required to construct 2,074 SMR
channels in the analog format and $15.1 million will be required to construct
the initial SMR channels in the iDEN format. In addition, the Company expects
to require an additional $2.6 million to meet operating expenses.
When the Company commences the staged conversion of its SMR systems to a
Digital Mobile format, it will require significant additional capital. It
intends to finance a large portion of these expenditures through vendor
financing provided by the manufacturer of its Digital Mobile equipment, debt
and/or convertible debt and through the sale of its securities to the general
public.
The Company's sources of capital are the proceeds from the sale of common stock
from private placement(s), registered offering(s) of stock to the general
public, vendor financing, debt or convertible debt and the anticipated cash
from future operating revenue and the possible receipt of proceeds from the
exercise of the Company's options and warrants. The Company does not intend to
incur any additional significant debt in the foreseeable future except for
equipment financing and a possible note offering as referenced below. There is
no assurance that the Company will be able to obtain such additional financing
or, if available, that the terms of the financing would be advantageous to the
Company or its shareholders.
On February 28, 1996, the Company has executed with Motorola a purchase
agreement for the iDEN product. The agreement is conditional upon the Company
acquiring acceptable financing by August 1996. The Company intends to obtain
the required financing through Motorola's Financing Division.
In April 1996, the Company issued 250,000 shares of its Convertible Series A
Preferred Stock for a net consideration of $2,275,956. The Company intends,
among other opportunities, to do one or more of the following offerings in
fiscal 1996: (a) an offering of promissory notes in an aggregate principal
amount of up to $1,500,000; and (b) an offering of its common stock pursuant to
a secondary public offering for approximately $6,000,000. If the Company
proceeds with both offerings, it intends to redeem the promissory notes with
proceeds from the secondary public offering.
10
<PAGE> 13
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
LIQUIDITY AND CAPITAL RESOURCES - CONCLUDED
Accordingly, based on the plans and intentions set forth above, management
anticipates that through the establishment of operational SMR systems in
conjunction with the ability to provide both short term funding of operations
and long term acquisition and development activities, the Company expects to
emerge from the development stage and establish normal operations in 1996.
However, as of March 31, 1996, the success of achieving the objectives
discussed herein, as well as the overall profitability of the Company's
operations once the development stage has ended, cannot presently be
determined.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 31, 1994, a lawsuit titled Key Communications Group, Inc. v. Robert
Moore, David Chadwick, Chadmoore Communications, Inc. and Chadmoore
Communications of Tennessee, Inc. was filed in the District Court, City and
County of Denver, State of Colorado (Civil Action No. 94-CV-4196). This
litigation seeks a declaration affirming its allegations, damages, and
imposition of a constructive trust based on the defendants' alleged breach of
fiduciary duty, conspiracy to deprive Key Communications of assets, and
constructive trust in connection with CCI's agreement to acquire an SMR
transmission system formerly owned by General Communications. The case has
been dismissed as to CCI and CCT for lack of jurisdiction over them as
non-resident corporate defendants. The plaintiff has filed a motion seeking to
amend the second amended complaint asking the court to add Chadmoore Wireless
Group, Inc. as a defendant in the action. Service of process was made upon the
individual defendants on August 9, 1995. The individual defendants have
submitted an answer to the allegations denying the material allegations of the
complaint and contend that the claims of Key Communications, Inc. are without
merit. The plaintiffs have not specified an amount of damages being sought.
The defendants have filed counterclaims against the plaintiff and certain
individuals, Donald G. Mack and George Ulrich, as agents of the plaintiff, and
allege false and deceptive representations made by the plaintiff to induce them
to change employment, and intentional and negligent misrepresentation. The
defendants seek an unspecified amount of damages. The trial is set for July
1996. In March 1996, the defendants filed a Motion to Dismiss the constructive
trust claim.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Reorganization dated February 2, 1995, by and
between the Company (f/k/a CapVest Internationale, Ltd.) and
Chadmoore Communications, Inc.(1)
2.2 Addendum to the Agreement and Plan of Reorganization, dated February
21, 1995, by and between the Company (f/k/a CapVest Internationale,
Ltd.) and Chadmoore Communications, Inc.(1)
2.3 Addendum No. 2 to the Agreement and Plan of Reorganization, dated
March 31, 1995, by and between the Company (f/k/a CapVest
Internationale, Ltd.) and Chadmoore Communications, Inc.(1)
3.1 Articles of Incorporation(2)
- ---------
(1) Incorporated by reference to Exhibit 1 in the Form 8-K, under Item 2, date
of earliest event reported February 21, 1995
(2) Incorporated by reference to Exhibit 3 to the Company s Registration
Statement on Form S-18 (33-14841-D)
11
<PAGE> 14
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
3.2 Articles of Amendment to the Articles of Incorporation filed November
1, 1988(3)
3.3 Articles of Amendment to the Articles of Incorporation filed April
28, 1995(4)
3.4 Articles of Amendment to the Articles of Incorporation filed April 1,
1996(5)
3.5 Articles of Amendment to the Articles of Incorporation filed April
11, 1996(6)
3.6 Bylaws(2)
4.1 Form of Warrant Certificate, together with the Terms of Warrants(7)
4.2 Registration Rights Agreement(8)
4.3 Certificate of Designation of Rights and Preferences of Series A
Convertible Preferred Stock of the Company(9)
10.1 Amended Nonqualified Stock Option Plan dated October 12, 1995
(employee stock option plan covering 1,500,000 shares)(10)
10.2 Employee Benefit and Consulting Services Plan dated July 7, 1995(11)
10.3 First Amendment to the Employee Benefit and Consulting Services Plan
dated December 8, 1995(12)
10.4 Employment Agreement between the Company and Robert W. Moore
effective as of April 21, 1995(13)
10.5 Employment Agreement between the Company and David J. Chadwick
effective as of April 21, 1995(14)
10.6 Employment Agreement between the Company and William C. Bossung
effective as of April 21, 1995(15)
10.7 Integrated Dispatched Enhanced Network ("iDEN") Purchase Agreement
dated February 28, 1996, by and between the Company and Motorola,
Inc.(16)
10.8 Amendment Number 001 to the Integrated Dispatched Enhanced Network
("iDEN") Purchase Agreement dated March 25, 1996(17)
10.9 Asset Purchase Agreement dated November 2, 1994 by and between
Chadmoore Communications, Inc. and General Communications Radio Sales
and Service, Inc., General Electronics, Inc. and Richard Day with
Exhibits(18)
10.10 Modification to Asset Purchase Agreement dated March 8, 1996, by and
between Chadmoore Communications, Inc., the Company and Chadmoore
Communications of Tennessee, Inc. and General Communications Radio
Sales and Service, Inc., General Electronics, Inc. and Richard Day
with Exhibits(19)
11.1 Earnings Per Share (see notes to Consolidated Financial
Statements)(20)
27.1 Financial Data Schedule
- ---------
(3) Incorporated by reference to Exhibit 3.2 to the Company s Form 10-KSB for
the year ended December 31, 1995
(4) Incorporated by reference to Exhibit 3.3 to the Company s Form 10-KSB for
the year ended December 31, 1995
(5) Incorporated by reference to Exhibit 3.4 to the Company s Form 10-KSB for
the year ended December 31, 1995
(6) Incorporated by reference to Exhibit 3.5 to the Company s Form 10-KSB for
the year ended December 31, 1995
(7) Incorporated by reference to Exhibit 4.1 to the Company s Form 10-KSB for
the year ended December 31, 1995
(8) Incorporated by reference to Exhibit 4.2 to the Company s Form 10-KSB for
the year ended December 31, 1995
(9) Incorporated by reference to Exhibit 3.4 to the Company s Form 10-KSB for
the year ended December 31, 1995
(10) Incorporated by reference to Exhibit 10.1 to the Company s Form 10-KSB for
the year ended December 31, 1995
(11) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective July 12, 1995 (file no.33-94508)
(12) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective December 14, 1995 (file no. 33-80405)
(13) Incorporated by reference to Exhibit 10.4 to the Company s Form 10-KSB for
the year ended December 31, 1995
(14) Incorporated by reference to Exhibit 10.5 to the Company s Form 10-KSB for
the year ended December 31, 1995
(15) Incorporated by reference to Exhibit 10.6 to the Company s Form 10-KSB for
the year ended December 31, 1995
(16) Incorporated by reference to Exhibit 10.7 to the Company s Form 10-KSB for
the year ended December 31, 1995
(17) Incorporated by reference to Exhibit 10.8 to the Company s Form 10-KSB for
the year ended December 31, 1995
(18) Incorporated by reference to Exhibit 2.2 in the Form 8-K, under Item 2,
date of earliest event reported March 8, 1996
(19) Incorporated by reference to Exhibit 2.1 in the Form 8-K, under Item 2,
date of earliest event reported March 8, 1996
(20) Incorporated by reference to Exhibit 11.1 to the Company s Form 10-KSB for
the year ended December 31, 1995
12
<PAGE> 15
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
(FORMERLY CAPVEST INTERNATIONALE, LTD.)
(b) Reports on Form 8-k
(i) Current Report Form 8-K dated March 22, 1996 reporting
consummation of the Modification to Asset Purchase Agreement
dated March 8, 1996 by and between Chadmoore Communications of
Tennessee, Inc. and General Communications Radio Sales and
Service, Inc., General Electronics, Inc. and Richard Day with
Exhibits
(ii) Current report of Form 8-K dated May 14, 1996 reporting the
resignation, effective April 30, 1996, of David Chadwick as
Executive Officer and Director of the Company and similar
positions with affiliates of the Company with Exhibit.
13
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CHADMOORE WIRELESS GROUP, INC.
By: /s/ Gary L. Killoran
-----------------------------------
Gary L. Killoran, Chief Financial
Officer
DATE: May 17, 1996
14
<PAGE> 17
EXHIBIT INDEX
2.1 Agreement and Plan of Reorganization dated February 2, 1995, by and
between the Company (f/k/a CapVest Internationale, Ltd.) and
Chadmoore Communications, Inc.(1)
2.2 Addendum to the Agreement and Plan of Reorganization, dated February
21, 1995, by and between the Company (f/k/a CapVest Internationale,
Ltd.) and Chadmoore Communications, Inc.(1)
2.3 Addendum No. 2 to the Agreement and Plan of Reorganization, dated
March 31, 1995, by and between the Company (f/k/a CapVest
Internationale, Ltd.) and Chadmoore Communications, Inc.(1)
3.1 Articles of Incorporation(2)
3.2 Articles of Amendment to the Articles of Incorporation filed November
1, 1988(3)
3.3 Articles of Amendment to the Articles of Incorporation filed April
28, 1995(4)
3.4 Articles of Amendment to the Articles of Incorporation filed April 1,
1996(5)
3.5 Articles of Amendment to the Articles of Incorporation filed April
11, 1996(6)
3.6 Bylaws(2)
4.1 Form of Warrant Certificate, together with the Terms of Warrants(7)
4.2 Registration Rights Agreement(8)
4.3 Certificate of Designation of Rights and Preferences of Series A
Convertible Preferred Stock of the Company(9)
10.1 Amended Nonqualified Stock Option Plan dated October 12, 1995
(employee stock option plan covering 1,500,000 shares)(10)
10.2 Employee Benefit and Consulting Services Plan dated July 7, 1995(11)
10.3 First Amendment to the Employee Benefit and Consulting Services Plan
dated December 8, 1995(12)
- ---------
(1) Incorporated by reference to Exhibit 1 in the Form 8-K, under Item 2, date
of earliest event reported February 21, 1995
(2) Incorporated by reference to Exhibit 3 to the Company s Registration
Statement on Form S-18 (33-14841-D)
(3) Incorporated by reference to Exhibit 3.2 to the Company s Form 10-KSB for
the year ended December 31, 1995
(4) Incorporated by reference to Exhibit 3.3 to the Company s Form 10-KSB for
the year ended December 31, 1995
(5) Incorporated by reference to Exhibit 3.4 to the Company s Form 10-KSB for
the year ended December 31, 1995
(6) Incorporated by reference to Exhibit 3.5 to the Company s Form 10-KSB for
the year ended December 31, 1995
(7) Incorporated by reference to Exhibit 4.1 to the Company s Form 10-KSB for
the year ended December 31, 1995
(8) Incorporated by reference to Exhibit 4.2 to the Company s Form 10-KSB for
the year ended December 31, 1995
(9) Incorporated by reference to Exhibit 3.4 to the Company s Form 10-KSB for
the year ended December 31, 1995
(10) Incorporated by reference to Exhibit 10.1 to the Company s Form 10-KSB for
the year ended December 31, 1995
(11) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective July 12, 1995 (file no.33-94508)
(12) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective December 14, 1995 (file no. 33-80405)
<PAGE> 18
10.4 Employment Agreement between the Company and Robert W. Moore
effective as of April 21, 1995(13)
10.5 Employment Agreement between the Company and David J. Chadwick
effective as of April 21, 1995(14)
10.6 Employment Agreement between the Company and William C. Bossung
effective as of April 21, 1995(15)
10.7 Integrated Dispatched Enhanced Network ("iDEN") Purchase Agreement
dated February 28, 1996, by and between the Company and Motorola,
Inc.(16)
10.8 Amendment Number 001 to the Integrated Dispatched Enhanced Network
("iDEN") Purchase Agreement dated March 25, 1996(17)
10.9 Asset Purchase Agreement dated November 2, 1994 by and between
Chadmoore Communications, Inc. and General Communications Radio Sales
and Service, Inc., General Electronics, Inc. and Richard Day with
Exhibits(18)
10.10 Modification to Asset Purchase Agreement dated March 8, 1996, by and
between Chadmoore Communications, Inc., the Company and Chadmoore
Communications of Tennessee, Inc. and General Communications Radio
Sales and Service, Inc., General Electronics, Inc. and Richard Day
with Exhibits(19)
11.1 Earnings Per Share (see notes to Consolidated Financial
Statements)(20)
27.1 Financial Data Schedule
- ---------
(13) Incorporated by reference to Exhibit 10.4 to the Company s Form 10-KSB for
the year ended December 31, 1995
(14) Incorporated by reference to Exhibit 10.5 to the Company s Form 10-KSB for
the year ended December 31, 1995
(15) Incorporated by reference to Exhibit 10.6 to the Company s Form 10-KSB for
the year ended December 31, 1995
(16) Incorporated by reference to Exhibit 10.7 to the Company s Form 10-KSB for
the year ended December 31, 1995
(17) Incorporated by reference to Exhibit 10.8 to the Company s Form 10-KSB for
the year ended December 31, 1995
(18) Incorporated by reference to Exhibit 2.2 in the Form 8-K, under Item 2,
date of earliest event reported March 8, 1996
(19) Incorporated by reference to Exhibit 2.1 in the Form 8-K, under Item 2,
date of earliest event reported March 8, 1996
(20) Incorporated by reference to Exhibit 11.1 to the Company s Form 10-KSB for
the year ended December 31, 1995
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