<PAGE> 1
FORM 10-QSB
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U.S. 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 SEPTEMBER 30, 1997
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File Number: 0-20999
CHADMOORE WIRELESS GROUP, INC.
------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1058165
- ------------------------------------------- -------------------
(State of other jurisdiction of incorporation (I.R.S. Employer
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 to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ X ] 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 OCTOBER 31, 1997, ISSUER HAD 21,118,274 SHARES OF COMMON STOCK, .001 PAR
VALUE, OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes [ ] No [ X ]
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<PAGE> 2
FORM 10-QSB
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INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS. PAGE
Unaudited Condensed Consolidated Financial Statements of Chadmoore
Wireless Group, Inc., and Subsidiaries (Formerly CapVest
Internationale, Ltd.):
Condensed Consolidated Balance Sheets:
As of September 30, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Operations:
For the Nine Months Ended September 30, 1997 and 1996 and
Period from January 1, 1994 to September 30, 1997 3
For the Three Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows:
For the Nine Months Ended September 30, 1997 and 1996 and
Period from January 1, 1994 to September 30, 1997 5-6
Notes to Unaudited Condensed Consolidated Financial Statements 7-12
ITEM 2. PLAN OF OPERATION. 13-17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18-19
ITEM 2. CHANGES IN SECURITIES 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 20
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K 21-23
SIGNATURES 24
<PAGE> 3
FORM 10-QSB
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
(UNAUDITED)
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 229,261 1,463,300
Accounts receivable 289,744 266,520
Inventory 108,759 197,476
Prepaid property management rights 54,374 81,563
Prepaid expenses and deposits 92,044 156,644
------------ ------------
Total current assets 774,182 2,165,503
Investment in JJ&D, LLC 343,474 532,997
Property and equipment, net 4,997,254 3,164,098
FCC licenses, net of accumulated amortization of $211,466 and $153,404, 1,336,833 1,394,895
respectively
Debt issuance costs, net of accumulated amortization of $0 and $39,038, --- 77,562
respectively
Management agreements, net of valuation allowance 17,008,573 22,725,442
Investment in license options 3,374,941 3,239,691
Investment in options to acquire licenses, net valuation allowance 7,321,358 9,771,445
Other 38,515 55,994
============ ============
Total Assets 35,195,130 43,127,627
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current installments of long-term debt $ 2,343,665 217,096
Accounts payable and accrued liabilities 1,533,663 329,122
Licenses - options payable 49,800 49,800
License option commission payable 524,800 524,800
Accrued interest -- 62,346
Other 66,000 32,080
------------ ------------
Total current liabilities 4,517,928 1,215,244
Capital lease obligations --- 8,646
Long-term debt, excluding current installments 1,320,235 2,500,141
Restricted option prepayment 670,187 832,116
Minority interest 161,154 ---
------------ ------------
Total liabilities 6,669,504 4,556,147
------------ ------------
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 21,019 17,824
and outstanding 21,016,574 shares at September 30, 1997 and
17,823,445 shares at December 31, 1996
Additional paid-in capital 55,215,765 52,951,491
Stock subscribed 32,890 288,835
Deficit accumulated during the development stage (26,744,048) (14,686,670)
------------ ------------
Total shareholders' equity 28,525,626 38,571,480
------------ ------------
Total liabilities and shareholders' equity $ 35,195,130 43,127,627
============ ============
</TABLE>
================================================================================
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE> 4
FORM 10-QSB
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CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 1997 and 1996 and for the
Period from January 1, 1994 through September 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED SEPT 30, JANUARY 1, 1994
------------------------------ THROUGH SEPT 30,
1997 1996 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------
<S> <C> <C> <C>
Gross revenues 1,502,425 1,241,793 3,204,650
------------ ------------ ------------
Costs and expenses:
Cost of sales 781,050 667,510 1,694,220
Salaries, wages and benefits 1,868,647 1,250,426 4,429,320
General and administrative 2,275,827 3,922,302 14,874,712
Depreciation and amortization 591,940 215,882 1,197,474
------------ ------------ ------------
Total costs 5,517,464 6,056,120 22,195,726
------------ ------------ ------------
Loss from operations (4,015,039) (4,814,327) (18,991,076)
------------ ------------ ------------
Other income (expense):
Minority interest 16,184 -- 16,184
Loss on reduction of management agreements and licenses to
estimated fair value (7,166,956) -- (7,166,956)
Management fees -- 100,198 472,611
Interest expense (293,660) (204,383) (718,721)
Gain on sale of assets -- -- 330,643
Gain on forgiveness of debt -- 47,450 47,450
Equity on losses from minority investment -- (1,322) (1,322)
Loss on retirement of note payable -- -- (32,404)
Cost of extinguishment of debt (See note 4) (598,222) -- (598,222)
Other, net 315 (116,825) (102,235)
------------ ------------ ------------
(8,042,339) (174,880) (7,752,972)
------------ ------------ ------------
Net loss $(12,057,378) $ (4,989,207) $(26,744,048)
============ ============ ============
Weighted average number of common 19,664,951 10,855,756 19,664,951
shares outstanding
============ ============ ============
Net loss per share (.61) (.46) (1.36)
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 5
FORM 10-QSB
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CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 1997 and 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT 30,
------------------------------
1997 1996
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
Gross revenues 420,541 404,252
------------ ------------
Costs and expenses:
Cost of sales 235,560 214,734
Salaries, wages and benefits 698,291 373,787
General and administrative 868,212 2,202,453
Depreciation and amortization 268,598 91,051
------------ ------------
2,070,661 2,882,025
------------ ------------
Loss from operations (1,650,120) (2,477,773)
------------ ------------
Other income (expense):
Minority interest 16,184 --
Interest expense (96,431) (128,344)
Gain on sale of assets -- --
Gain on forgiveness of debt -- 47,450
Equity on losses from minority investment -- (1,323)
Cost of extinguishment of debt (See note 4) (598,222) --
Other, net -- --
------------ ------------
(678,469) (82,217)
------------ ------------
Net loss $ (2,328,589) $ (2,559,990)
============ ============
Weighted average number of common
shares outstanding 19,966,574 13,289,918
============ ============
Net loss per share $ (.12) $ (.19)
============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 6
FORM 10-QSB
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CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statement of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996 and
for the Period from January 1, 1994 through September 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED JANUARY 1,
SEPT 30, 1994 THROUGH
------------------------------ SEPT 30,
1997 1996 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(12,057,378) $ (4,989,207) $(26,744,048)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Minority interest in loss (16,184) (16,184)
Depreciation and amortization 541,536 215,882 1,147,070
Loss on reduction of management agreements and licenses to 7,166,956 -- 7,166,956
estimated fair value
Cost of extinguishment of debt 598,222 598,221
Amortization of debt discount and debt issuance 157,313 101,525 255,416
Non cash interest 8,598 -- 8,598
Gain on sale of assets -- 433,344 (330,643)
Equity in losses from minority investments -- -- 1,322
Expense associated with:
Stock issued for services -- 220,833 2,583,161
Options issued for services -- -- 3,708,038
Change in operating assets and liabilities:
Increase (Decrease) in stock subscriptions receivable, net -- 195,000 (637,193)
of stock subscribed
Increase in accounts receivable (23,225) (53,395) (121,261)
Increase in inventory 88,717 (241,621) (30,778)
Decrease in due from General Communications, Inc. -- 76,252 --
Increase in amounts held to shares issued -- 250,000 --
Decrease in prepaids 27,189 27,187 63,439
Increase in other receivable -- (13,098) --
Decrease (increase) in other noncurrent assets 6,000 -- (30,859)
Increase in deposits (16,331) (446,111) (22,455)
Increase in other current assets 5,976 (30,896) (26,064)
Increase (decrease) in accounts payable 1,142,069 (60,252) 1,473,000
Decrease in options payable -- (297,300) --
Increase in commission payable -- 175,600 524,800
Equity in losses from minority investment -- 1,323
Increase in accrued interest 73,973 78,716 318,284
Increase in other current liabilities 128,824 -- 128,824
------------ ------------ ------------
Net cash (used in) provided by operating activities (2,167,745) (4,356,218) (9,982,356)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of assets from General Communications, Inc. -- (363,870) (352,101)
20% investment in JJ&D, LLC -- (100,000) (100,000)
Purchase of Airtel Communications, Inc. assets -- (50,000) (50,000)
Purchase of CMRS and 800 SMR Network, Inc. -- (3,547,000) (3,547,000)
Purchase of SMR station licenses -- -- (1,398,575)
Purchase of license options (9,200) (147,550) (1,141,287)
Increase in deposits of licenses (112,050) (143,904) (454,858)
Increase (decrease) in license options payable -- --
Purchase of property and equipment (657,435) (1,603,578) (3,396,387)
Sale of property and equipment 430,649 -- 430,649
Purchase of assets held for resale -- -- (219,707)
Sale of assets held for resale -- -- 700,000
Increase in customer deposits -- 900 --
Increase in deposit on sale -- -- --
------------ ------------ ------------
Net cash used in investing activities (348,036) (5,955,002) (9,529,266)
------------ ------------ ------------
</TABLE>
(Continued)
5
<PAGE> 7
FORM 10-QSB
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CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statement of Cash Flows, Continued
For the Nine months Ended September 30, 1997 and 1996 and for the
Period From January 1, 1994 through September 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED JANUARY 1,
JUNE 30, 1994 THROUGH
------------------------------ JUNE 30,
1997 1996 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds upon issuance of stock $ -- $ 4,414,672 $ --
Proceeds upon issuance of common stock -- -- 4,316,543
Proceeds upon issuance of preferred stock -- 2,273,707 2,273,707
Proceeds upon exercise of options - related -- -- 62,500
Proceeds upon exercise of options - unrelated -- 2,123,583 3,075,258
Purchase and conversion of CCI stock -- -- 45,000
Advances from related parties -- -- 767,734
Payments of notes payable -- (100,000) --
Payment of advances from related parties -- -- (73,000)
Payments on capital lease obligations (13,201) -- (37,288)
Increase in capital lease obligations -- (15,193) --
Payments of long-term debt (260,057) (4,131,797) (764,571)
Increase in debt issuance costs -- (820,000) --
Prepaid option exercise -- 1,582,116 --
Proceeds from issuance of notes payable -- -- 375,000
Proceeds from issuance of long-term debt 1,555,000 8,000,000 9,700,000
------------ ------------ ------------
Net cash provided by financing activities 1,281,742 13,327,088 19,740,883
------------ ------------ ------------
Net increase (decrease) in cash (1,234,039) 3,015,868 229,261
Cash at beginning of period 1,463,300 188,029 --
------------ ------------ ------------
Cash at end of period $ 229,261 $ 3,203,897 $ 229,261
============ ============ ============
Supplemental disclosure of cash paid for:
Taxes $ -- $ -- $ --
Interest $ 25,852 $ 107,339 $ 388,567
============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
<PAGE> 8
FORM 10-QSB
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CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
A. BASIS OF PRESENTATION
The accompanying unaudited condensed 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, 1997. These unaudited condensed consolidated financial statements
should be read in conjunction with the audited condensed consolidated financial
statements included in the Annual Report on Form 10-KSB for the period ending
December 31, 1996.
B. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share, (Statement 128)
which establishes standards for computing and presenting earnings per share
(EPS). It replaces the presentation of primary and fully diluted EPS with a
presentation of basic and diluted EPS. Statement 128 is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Earlier application is not permitted. After adoption, all prior period EPS data
should be restated to conform to Statement 128.
The Company will adopt Statement 128 in the fourth quarter of 1997. The pro
forma impact of Statement 128, on the nine months and three months ended
September 30, 1997, is that basic and diluted EPS would have been $(.61) and
$(.12) per share, respectively.
In February 1997, the Financial Accounting Standards Board issued SFAS No.129,
"Disclosure of Information about Capital Structure" (SFAS No. 129). SFAS No. 129
establishes standards for disclosing information about an entity's capital
structure. The Company intends to comply with the disclosure requirements of
this statement which is effective for periods ending after December 15, 1997 and
anticipates that implementation will not significantly affect the Company's
financial presentation of its capital structure.
In June 1997, the Financial Accounting Standards Board issued SFAS No.130,
"Reporting Comprehensive Income" (SFAS No. 130). SFAS No. 130 requires companies
to classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
sections of a statement of financial position, and is effective for financial
statements issued for fiscal years beginning after December 15, 1997. The
Company is currently assessing the impact on the financial statements and for
the three months and nine months ended September 30, 1997, the Company believes
that SFAS No. 130 will not result in comprehensive income different from net
income reported in the accompanying condensed consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued No. 131,
"Disclosure About Segments of an Enterprise and Related Information" (SFAS No.
131). SFAS No. 131 establishes additional standards for segment reporting in the
financial statements and is effective for fiscal years beginning after December
15, 1997. The Company is currently assessing the impact on the financial
statements.
C. RECLASSIFICATIONS
Certain amounts in the 1996 Unaudited Condensed Consolidated Financial
Statements have been reclassified to conform with the 1997 presentation.
D. LOSS PER SHARE
Loss per share is computed by dividing the net loss by the weighted average
number of common shares outstanding at September 30, 1997 and 1996. The
inclusion of equivalent shares in the form of stock options and warrants were
not included in a
7
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FORM 10-QSB
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CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
computation of fully dilutive loss per share as the results would be
anti-dilutive.
(2) PARTNERSHIPS
The Company has entered into nine joint venture agreements, two subsequent to
September 30, 1997, with its dealers ("Minority Partner"), to finance, install,
optimize and aggressively load SMR systems in selected markets. The Company has
ownership percentages ranging from 60% to 93% in such joint ventures, and has
complete operating control in all cases. The Minority partner will be
responsible for loading the system and will have to meet mutually agreeable
minimum loading standards.
The Company contributed licenses necessary to provide service and the Minority
Partner contributed a percentage of the system equipment equal to their
ownership interest and financed with a note, which was discounted at a present
value basis, the balance of the capital requirement necessary to bring the
individual market to full commercial service. This financing will be repaid from
positive cash flow from the system in that market.
Based upon the success to date of this program in attracting and motivating
quality partners in selected markets, the Company is currently planning to
extend the program to an additional 20-25 markets.
(3) MANAGEMENT AGREEMENTS AND INVESTMENT IN OPTION TO ACQUIRE LICENSES
In June of 1996 the Company completed the transaction to acquire all of the
issued and outstanding stock of Commercial Mobile Radio Service ("CMRS") and 800
SMR Network, Inc. ("800"). CMRS and 800 collectively held irrevocable 10 year
Options to Acquire and Management Agreements in excess of 5,500 channels.
The channels managed by 800 and CMRS Systems are included in a five-year
Extended Implementation Plan granted by the FCC on March 31, 1995, under Section
90.629 of the FCC's rules, 47 C.F.R. ss. 90.629. Under the Extended
Implementation Plan, as granted, the stations must be constructed in accordance
with a five-year construction plan. On December 15, 1995, the FCC requested that
all licensees included in a Section 90.629 Extended Implementation Plan file
documents re-justifying the extended construction period. A rejustification of
the Extended Implementation Plan including the stations managed by 800 and CMRS
Systems was timely filed. On May 20, 1997, the FCC denied the re-justification
plan. The FCC granted six months from the date of the denial to complete
construction of the stations managed by 800 and CMRS Systems. The licensees of
the stations appealed the denial of the rejustification by a Petition for
Reconsideration filed with the FCC on June 18, 1997. The licensees also
requested a stay of the construction deadline, pending resolution of the
underlying Petition for Reconsideration. No decision has been rendered on these
matters and the Company is unable to predict how they will be decided. Under the
Commission's decision, the license for any station not constructed and placed in
operation before November 20, 1997 will be cancelled.
As a result of this ruling the Company is following a dual plan. It plans to
vigorously pursue all legal remedies available to it while constructing as many
markets as it deems economically viable, prior to the November 20, 1997 FCC
deadline. The construction plan encompasses several key components. First, the
Company has thoroughly reviewed and prioritized its more than 200 markets,
selecting 131 of these markets as its first priority ("Priority Markets"). While
there can be no assurance, it is management's belief that the Company will
successfully construct substantially all of these Priority Markets by November
20, 1997. Management also believes that it is reasonably likely that an
additional 19 markets will be engineered and constructed by November 20, 1997,
for a total of approximately 150 markets. As of November 13, 1997, the Company
has successfully constructed 143 markets. For markets that did not fall into the
Priority Market category and/or are not deemed economically feasible for
construction by November 20th, the Company is actively pursuing several
alternative strategies to realize value from these licenses. The options being
explored include: sale, lease and strategic alliances whereby other providers
will construct channels in exchange for significant ownership interests.
On September 22, 1997 the Company entered into an agreement terminating
5,500,000 options at $0.50/share that remained outstanding from the original
grant of 8,323,857 to Libero Limited (Libero). These options were granted as
consideration when Chadmoore acquired the Management and Option rights from
Libero for over 5,000 channels in June of 1996. As previously disclosed by
Chadmoore, portions of the original options granted to Libero have been
exercised by it in the past.
Chadmoore's agreement with Libero canceled the Stock Purchase, Stock Option,
and Offshore Securities Subscription Agreements, each dated June 14, 1996.
The termination agreement does not obligate Chadmoore to pay further cash or
other consideration to Libero. The termination described above was
previously disclosed by the Company by filing of a Current Report on
Form 8-K dated November 6, 1997.
In a separate transaction, the Company amended its option and management
agreements respecting [32] corporate FCC licensees. Prior to the amendment
the Company had held options to acquire the stock of the licensees and the
rights to manage their assets. The amendment granted the Company the right
to acquire specified assets of the licensees and provided that the Company's
right to manage assets related only to such assets now subject to the
amended options. The amendments described above were previously disclosed by
the Company by filing of a Current Report on Form 8-K dated November 6,
1997.
8
<PAGE> 10
FORM 10-QSB
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CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(4) LONG-TERM DEBT
A. DEBT ISSUANCES AND CONVERSIONS
On June 10, 1997, the holder of the $1,750,000 convertible Debenture, tendered a
notice of payment for penalties in the amount of $52,500. The penalties are a
result of the Company's nonperformance to prepare and have declared effective, a
registration statement with the Securities and Exchange Commission to register
the shares underlying the convertible Debentures within 110 days from the day of
closing. In addition, on July 31, 1997, and August 1, 1997, the holder tendered
to the Company notices of conversion, pursuant to Regulation S, for $100,000 and
$50,000 of principal, respectively. The notices as tendered do not comply with
the requirements of Regulation S, and the Company therefore has not issued the
requested stock. If the Company is had been compelled to issue all of the stock
into which the Debenture is convertible, the effect of the Company's stock price
and liquidity could be severe. In particular, the conversion price (which is set
off against amounts outstanding under the Debenture) is not fixed, but is
instead set at a substantial discount to the current market price.
In September of 1997, the holder of the convertible Debenture entered into a
agreement with the Company to restructure the convertible Debenture financing
described above (the "Debenture Restructuring Agreement"). The Debenture
Restructuring Agreement was the previously disclosed by the Company pursuant to
a Current Report on Form 8-K dated October 6, 1997. Under the Debenture
Restructuring Agreement the holder agreed to restrict the holder's daily sales
of Company stock to not more than 10% of its total trading volume on the NASDAQ
bulletin board (but, notwithstanding the foregoing restriction, the holder may
sell up to 100,000 shares per month). In addition, the Debenture Restructuring
Agreement also requires the holder to exchange the convertible debenture
(including rights to all accrued interest and penalties ) for a new debenture
(the "New Debenture") with a maturity date of August 31, 1998, in the principal
amount of $1,627,500, payable in ten monthly payments of $162,750, beginning in
November 1997. These payments can be made in cash or stock at the then current
market price (at the Company's option). Interest, in the liquidated amount of
$425,000, can also be paid, by the Company, in cash or stock at the then current
market price and is payable in September 1998. The New Debenture is required to
be secured by specified Company assets with value at least 150% of principal
outstanding. Pursuant to the Restructuring Agreement, the holder also received
1,050,000 shares of common stock, which represented: payment of principal,
interest through September 1997, and penalties. The common stock was issued at
market price. The Debenture Restructuring Agreement contemplated that final
documentation of the restructuring described above would be negotiated and
executed by October 17, 1997, but such date was subsequently extended by
agreement to November 20, 1997.
The company has accounted for the transaction in accordance with the provisions
of FASB 125, "Accounting for Transfers and Servicing of Financial Asset and
Extinguishment of Liabilities", wherein gain or loss on extinguishment is the
difference between the total reacquisition cost of the debt, to the debtor, and
the net carrying amount of the ("Original Convertible Debenture") on the
company's books on the date of extinguishment, except that pursuant to EITF 85-2
the company has not classified as an extraordinary item the costs incurred
attributable to the stand still agreement.
(5) EQUITY TRANSACTIONS
A. OPTIONS
On September 22, 1997 the Company entered into an agreement terminating
5,500,000 options at $0.50/share that remained outstanding from the original
grant of 8,323,857 to Libero Limited (Libero). These options were granted as
consideration when Chadmoore acquired the Management and Option rights from
Libero for over 5,000 channels in June of 1996. As previously disclosed by
Chadmoore, portions of the original options granted to Libero have been
exercised by it in the past.
Chadmoore's agreement with Libero canceled the Stock Purchase, Stock Option, and
Offshore Securities Subscription Agreements, each dated June 14, 1996. The
termination agreement does not obligate Chadmoore to pay further cash or other
consideration to Libero. The termination described above was previously
disclosed by the Company by filing of a Current Report on Form 8-K dated
November 6, 1997.
In a separate transaction, the Company amended its option and management
agreements respecting [32] corporate FCC licensees. Prior to the amendment the
Company had held options to acquire the stock of the licensees and the rights to
manage their assets. The amendment granted the Company the right to acquire
specified assets of the licensees and provided that the Company's right to
manage assets related only to such assets now subject to the amended options.
The amendments described above were previously disclosed by the Company by
filing of a Current Report on Form 8-K dated November 6, 1997.
During the nine months ended September 30, 1997, 1,409,000 stock options were
granted by the Company. The outstanding options issued to shareholders,
employees, consultants, investors and third parties through acquisitions are
exercisable for three to ten years from date of issuance. The following is a
summary of options outstanding and their terms as of September 30, 1997 and
1996:
9
<PAGE> 11
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER NUMBER
STOCK OPTIONS OF SHARES OF SHARES
1997 1996
---------- ----------
<S> <C> <C>
Outstanding at January 1: 9,642,968 3,072,136
Granted at $.37-$6.00 per share 1,409,000 9,942,364
Less exercised at $0.37-$2.50 per share (323,857) (1,908,334)
Lapsed or canceled (5,955,000) (205,000)
---------- ----------
Outstanding at September 30: 4,773,111 10,901,166
========== ==========
</TABLE>
The 1,409,000 were employee options and were repriced to market on August 22,
1997.
10
<PAGE> 12
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
The Company applied APB Opinion No. 25 in accounting for its Plan and,
accordingly, compensation expense of $-0- and $928,750 was recognized for the
nine months ended September 30, 1997 and 1996, respectively. Had the Company
determined compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net income would have been the
pro forma amount indicated below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT 30 THREE MONTHS ENDED SEPT 30
- ---------------------------------------------------------------------------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income As reported (12,057,378) (4,989,207) (2,328,589) (2,559,990)
Pro forma (12,157,378) (4,989,207) (2,428,589) (2,559,990)
EPS As reported (.61) (.46) (.12) (.19)
Pro forma (.62) (.46) (.12) (.19)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes' option-pricing model with the following weighted average
assumptions: expected volatility of 25%, risk free interest rate of 6.5% and
expected life of one year for the options.
Pro forma net income reflects only options granted in the nine months ended
September 30, 1997 and 1996. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not reflected in the
pro forma net income amounts presented above because compensation cost is
reflected over the options' vesting period of two years and compensation cost
for options granted prior to January 1, 1996 is not considered.
In the nine months ended September 30, 1997 the Company issued 75,000 warrants
at a strike price of $.50 in conjunction with convertible debentures.
11
<PAGE> 13
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
(6) COMMITMENTS AND CONTINGENCIES
A. LICENSE OPTION AND MANAGEMENT AGREEMENT CONTINGENCIES
Once a Specialized Mobilized Radio ("SMR") channel is operating, the Company may
exercise its option to acquire the license at any time prior to the expiration
of the option. Although, the Company presently intends to exercise substantially
all options, which meet the criteria for economic feasibility and/or the
Company's ability to construct prior to the November 20, 1997, Federal
Communications Commission ("FCC") mandated deadline. The exercise is subject to
a number of contingencies. These contingencies include timely construction of
the station, continued operation of the station once constructed, having the
ability to purchase the license and the FCC approval of the assignment of the
station.
The Company may elect not to exercise an option for various business reasons,
including the Company's inability to acquire other stations in a given market,
making it economically unfeasible for the Company to offer an SMR system in such
market. If the Company does not exercise an option, its grantor may retain the
consideration previously paid by the Company. Moreover, if the Company defaults
in its obligations under an option, the grantor may retain the consideration
previously paid by the Company as liquidated damages. Further, if the SMR system
is devalued by the Company's direct action, the Company may be liable under the
option for the full option price, provided the grantor is not in breach of the
Agreement.
Goodman/Chan Waiver. Nationwide Digital Data Corp. and Metropolitan
Communications Corp. (collectively, NDD/Metropolitan"), traded in the selling of
SMR application preparation and filing services to the general public. Most of
the purchasers in these activities had no experience in the wireless
communications industry. Based on evidence that NDD/Metropolitan had been unable
to fulfill their construction and operation obligations to over 4,000 applicants
who had received FCC licenses, the Federal Trade Commission ("FTC") filed suit
against NDD/Metropolitan in January, 1993, in the Federal District Court for the
Southern District of New York ("District Court").
The District Court appointed a receiver, Daniel R. Goodman, to preserve the
assets of NDD/Metropolitan. In the course of the receiver's duties, Mr. Goodman,
together with a licensee, Dr. Robert Chan, who had received several FCC licenses
through NDD/Metropolitan's services, filed a request to extend the construction
period for each of over 4,000 SMR stations. At that time, licensees of most of
the stations included in the waiver request ("Receivership Stations") were
subject to an eight month construction period. On May 24, 1995, the FCC granted
the request for extension. The FCC reasoned that the Receivership Stations were
subject to regulation as CMRS stations, but had not been granted the extended
construction period to be awarded all Commercial Mobile Radio Service ("CMRS")
licensees. In fairness, the FCC granted an additional four months in which to
construct and place the Receivership Stations in operation. The grant of the
Goodman/Chan Waiver is to become effective upon publication in the Federal
Register. As of this date, the Goodman/Chan Waiver has not been published in the
Federal Register.
The FCC has never released a list of stations it considers to be Receivership
Stations. Nonetheless, on the basis of general descriptions of the Receivership
Stations contained in FCC communications, the Company believes that many of the
stations CCI manages are Receivership Stations. In cooperation with each
licensee, CCI is proceeding with the construction of the Receivership Stations
it manages. Because the FCC will not release a list of Receivership Stations, no
assurance can be given that any of the stations managed by CCI are Receivership
Stations or that the construction of all of the stations managed by CCI will be
timely constructed. Only a portion of the stations managed by CCI are implicated
in or involved with the receivership.
12
<PAGE> 14
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
B. LEGAL PROCEEDINGS
AIRNET, INC. V. CHADMOORE WIRELESS GROUP, INC. CASE NO. 768473,
ORANGE COUNTY SUPERIOR COURT
On April 3, 1997, Airnet, Inc. ("Airnet") served a summons and complaint on
Chadmoore Wireless Group, Inc. ("Chadmoore"), alleging claims related to a
proposed merger between Airnet and Chadmoore that never materialized. In
particular, Airnet has alleged that a certain "letter of intent" obligated the
parties to complete the proposed merger. Chadmoore denies this allegation. In
its complaint, Airnet has alleged the following purported causes of action
against Chadmoore: breach of contract, breach of the implied covenant of good
faith and fair dealing, intentional interference with prospective economic
advantage, intentional interference with contractual relationship, including
breach of contract, false promise and conversion. Airnet has also purported to
seek the following relief from Chadmoore: $28,000,000 in compensatory damages
plus interest, punitive damages, costs of suit and attorney's fees. Chadmoore
challenged the sufficiency of the complaint as to most of the purported causes
of action on the grounds that these purported causes of action fail to state
facts sufficient to constitute a cause of action. Chadmoore also challenged the
sufficiency of the punitive damages allegations on the grounds that the
compliant fails to state facts sufficient to support these allegations. Rather
than oppose these challenges to its complaint, Airnet elected to file a first
amended complaint. Believing that Airnet's amendments were immaterial Chadmoore
renewed its challenges to Airnet's pleading. On September 9, 1997, the court
sustained the Company's demurrers to Airnet's claims for damages based on
Chadmoore's alleged failure to complete the merger and to Airnet's claims for
conversion. At Airnet's request, the court allowed Airnet to amend its pleading
a second time to attempt to state these claims, and Airnet's new complaint
asserts claims for breach of contract, anticipatory breach of contract,
intentional interference with prospective economic advantage, interference with
contractual relationship, inducing breach of contract and false promise.
Chadmoore again filed papers challenging certain of the claims in Airnet's
pleading. These challenges to Airnet's pleadings are expected to be heard on
December 9, 1997. Although the Company intends to defend the action vigorously,
it is still in its early stages and no substantial discovery has been conducted
in this matter. Accordingly, at this time, the Company is unable to predict the
outcome of this matter.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In addition, the recent decline in the Company's
stock price has resulted in several threats by shareholders to commence
litigation against the Company on grounds relating to such price decline.
However as of today no such threat has been served on the Company. The Company
is also involved in legal proceedings as disclosed on Item I, Part II here of.
In the opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on the Company's condensed consolidated financial
position, results of operations or liquidity.
(7) SUBSEQUENT EVENTS
A. ALASKA CHANNEL SALE
On April 4, 1997, the Company completed an agreement assigning management and
options to acquire 57 channels located in Anchorage, Alaska for total
consideration of $684,000. The transaction was contingent upon receiving
approval of the transfer from the Federal Communications Commission ("FCC"),
which was applied for in June, 1997, and subsequently received. The terms of the
sale agreement provided for payment to the Company of the consideration fifty
days after grant of the applications for assignment of the twelve stations. The
applications appeared on public notice on August 5, 1997. They were granted on
October 3, 1997. The sale will be recognized when realized. proceeds from the
sale were received on November 12, 1997.
13
<PAGE> 15
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements FIX THIS
September 30, 1997
- --------------------------------------------------------------------------------
ITEM 2. PLAN OF OPERATION
CAUTIONARY STATEMENT
Information provided herein by the Company contains, and from time to time the
Company may disseminate material and make statements which may contain, "forward
looking" information, as that term is defined by the Private Securities
Litigation Reform Act of 1995 (the "PSLRA"). These cautionary statements are
being made pursuant to the provisions of the PSLRA and with the intention of
obtaining the benefits of the "safe harbor" provisions of the PSLRA. The Company
cautions investors that any forward-looking statements made by the Company are
not guarantees of future performance and that actual results may differ
materially from those in the forward-looking statements as a result of various
factors, including but not limited to the following:
(i) The Company competes with well-established competitors who have
substantially greater financial resources and longer operating
histories than the Company.
(ii) The Company's business strategy requires it to have access to
substantial additional capital. There can be no assurance that
the Company will be able to obtain such desired capital.
(SEE ITEM 2. LIQUIDITY AND CAPITAL RESOURCES)
(iii) The Company is subject to substantial regulatory requirements,
including FCC requirements that the Company "build out" the
Company's channels within specified periods or risk losing its
rights to such channels. There can be no assurances that the
Company will be able to satisfy such requirements, or that the
Company will not be subject to other adverse regulatory
developments.
PLAN OF OPERATION
The Company has entered into binding five and ten year Options to Acquire and
Management Agreements for over 7,000 (approximately 5,500 represent management
agreements and options to acquire licenses (SEE: ITEM 1, FOOTNOTE 3), and
approximately 1,500 represent licenses currently under the Goodman Chan ruling
(SEE: ITEM 1, FOOTNOTE 6) channels licensed by the Federal Communications
Commission ("FCC"). The Company offers wireless communication services including
two-way dispatch, and telephone interconnect. Chadmoore's strategy is to bring
new analog SMR capacity, with initial focus on dispatch (also known as
one-to-many or push-to-talk) wireless communication applications, primarily to
secondary and tertiary cities where demand for basic, flat-rate service (rather
than costlier, high tech features) tends to be strong. Key reasons for this
strategy include: (1) established market base, (2) pent-up demand, (3) proven
technology, (4) excellent system economics, (5) established dealer networks, and
(6) inherent operating leverage (excellent base for generating incremental
revenue streams at relatively little additional costs).
In addition, where its market research indicates strong customer demand, the
Company plans to offer other "value added" services. These services may include
vehicle tracking, data, voice mail, etc. Further, if market demands dictate the
future conversion to a spectrum-efficient, feature-rich digital infrastructure,
such a conversion would allow the Company to dramatically expand existing system
capacity and provide advanced features, call clarity, and call security to its
subscribers.
The Company has elected to focus on existing, local, SMR dealers in each market
as its primary method of distribution and system maintenance. There are several
reasons for employing this strategy: (1) local market expertise and focus; these
dealers are experienced in providing SMR service to customers in their cities
(2) technical know-how; these entities have maintained the same or similar
systems (3) significantly reduced capital cost; these dealers already own
facilities and employ personnel, and (4) significantly reduced "time to market"
since the Company does not have to construct facilities, hire a staff in each
market, and establish relationships with local business communities.
In markets in which the Company operates, but where a suitable dealer or
independent agent is not available, the Company will establish its own marketing
presence. In addition, the Company's management team recognizes that additional
staff will be required to properly support marketing, sales, engineering, and
accounting to achieve its 1998 marketing objectives.
14
<PAGE> 16
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
During the past nine months the Company has made significant progress towards
establishing its dealer distribution network, with full commercial service
available in 19 markets (Augusta, GA, Austin, TX, Baton Rouge, LA, Bay
City/Saginaw, MI, Bowling Green, KY, Charlotte, NC, Fayetteville, AR, Fort
Wayne, IN, Grand Rapids, MI, Jacksonville, FL, Lake Charles, LA, Little Rock,
AR, Mankato, MN, Memphis, TN, Naples, FL, Pine Bluff, AR, Portland, ME,
Richmond, VA, and Rockford, IL). In each fully commercial market the Company
has one or more experienced SMR dealerships (usually Motorola full-line sales
and service facilities) who were carefully selected to assure that the
highest level of customer care and service quality will be provided to our
customers. In addition, SMR dealers have been identified in numerous other
markets and will be ready to join the Company's growing dealership network as
full commercial service is initiated in those markets.
In selected markets, in order to maximize aggressive commercialization and
loading with highly motivated and focused dealers, the Company has devised a
"partnership" agreement with selected SMR dealers, whereby the partners will
finance, install, optimize, and actively load certain markets in exchange for an
ownership of 20% to 30% of the individual market. To date, 9 markets are under
this program, with approximately 20-25 additional planned.
In March 1996, the Company acquired its first Operating System in Memphis,
Tennessee. In the third and fourth quarters of 1996, the Company began
operations in 3 additional markets. So far during 1997, the Company has
commenced full commercial operations in 15 additional markets, bringing the
total fully commercial markets to 19, covering a population of approximately 8
million people. The Company plans to commence full commercial operations in an
additional 3 to 5 markets during the final 6 weeks of 1997.
In addition to those markets in which the Company is fully commercial, there are
135 additional markets in which the Company has activated initial services but
has not yet entered into distribution agreements and/or optimized system
configuration to the level necessary to provide commercial quality service to
large numbers of customers.
The aggregate population served in the 154 total markets currently constructed
exceeds 39 million.
Over the next 12 months, the Company's marketing objective is to fully
commercialize and actively market the Company's services in as many additional
cities as economically feasible, and position the Company as the pre-eminent
provider of fixed-cost, two-way, analog voice communications for small and
medium size businesses in secondary and tertiary markets.
Motorola is a principal supplier to the Company, and the Company believes that
Motorola's brand name recognition, combined with the Company's targeted
marketing approach, will assist in developing customer interest in the wireless
services offered.
The Company uses leased facilities on existing towers wherever possible to avoid
the capital cost of tower and shelter construction. The Company believes that
this approach expedites and simplifies the construction process and avoids
delays associated with local zoning, permit and logistical issues. To date the
Company has been successful in locating and leasing facilities in all of its
activated markets.
15
<PAGE> 17
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
ITEM 2. PLAN OF OPERATION, CONTINUED
The Company's recurring revenues consist mainly of subscriber network usage
revenues, consisting primarily of monthly access fees per unit and incremental
charges based on minutes of use. From time to time, changes in the Company's
plans may dictate that rights or channels, 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.
On May 20, 1997, the FCC issued a ruling regarding the re-justification plan for
the approximately 5,500 channels (SEE: ITEM 1: NOTE 3), which required the
company to construct systems utilizing the FCC licenses by November 20, 1997 or
the licenses would revert back to the FCC.
As a result of this ruling the Company has pursued all legal remedies available
to it while also accelerating its build out plan to construct as many markets as
possible, which it deems economically viable, prior to the November 20, 1997 FCC
deadline. The construction plan encompasses several key components. The company
has thoroughly reviewed and prioritized its more than 200 markets, selecting 131
of these markets as its first priority ("Priority Markets").
The Company, (in pursuing its strategy of providing affordable, quality two-way
voice communications in secondary and tertiary markets) determined its Priority
Markets based on a number of key factors including: available channel density;
population base; analog competition and remaining capacity on the competition's
systems; availability of experienced SMR dealerships; perceived plans of certain
digital providers to remove analog channels from service (creating demand from
users who wish to remain with a low-cost, analog provider); and the
competition's price structure.
Based on the six month time period allowed by the FCC, the Company determined
that the most cost-effective method to maximize its build-out by November 20th
was to pursue a dual construction path, with the engineering and construction of
systems being accomplished both internally and by turnkey providers supervised
by the Company. Therefore, the Company entered into agreements with two large
wireless industry, turnkey construction companies to engineer and construct at
least 88 markets by November 20, 1997. In addition, the Company has engineered
and constructed approximately 72 markets internally. While there can be no
assurances, as of this date the Company has not only activated service in all of
its Priority Markets, but believes that it will construct a total of
approximately 160 markets by November 20, 1997.
The activation of these additional markets (all of which are believed to
represent excellent opportunities for the Company), was made possible only
through the extraordinary and tireless efforts of many individuals, both inside
and external to the Company, to whom the Company is very grateful.
For markets that did not fall into the Priority Market category and/or are not
deemed economically feasible for construction by November 20th, the Company is
actively pursuing several alternative strategies to realize value from these
licenses. The options being explored include: sale, lease and strategic
alliances whereby other providers will construct channels in exchange for
significant ownership interests.
ITEM 2. PLAN OF OPERATION, CONCLUDED
16
<PAGE> 18
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that in the next 12 months it will require approximately
$8.0 million to $17.0 million in additional funding for capital expenditures
associated with full commercialization and marketing of its services as well as
meeting operating expenses, depending on the rate of commercial market growth.
The Company's sources of capital have primarily been proceeds from (I) sales of
common stock, convertible preferred stock, debt and convertible debt, (ii)
vendor financing , and (iii) payments from exercise of options to acquire
Company stock. No Company convertible preferred stock remains outstanding, but
the Company has entered into a binding agreement to issue additional convertible
preferred stock, as described below.
On October 25, 1996, the Company's subsidiary Chadmoore Communications, Inc.
("CCI") signed a purchase agreement with Motorola to purchase approximately
$10,000,000 of Motorola's radio communications equipment, including Smartnet II
trunked radio systems. The purchase agreement requires that the equipment be
purchased within 30 months of its effective date. In connection with that
purchase agreement, CCI entered into a financing and security agreement with
Motorola, Inc. ("Motorola") for the equipment stated above. This financing and
security agreement allows CCI to borrow up to a total of $5,000,000 (the "Loan
Facility"). The Loan Facility is available for draw downs during the effective
term of the purchase agreement. The Loan Facility allows no more than one draw
down per month. Each of the draw downs will be evidenced by a promissory note
(the "Promissory Note"). Principal and interest on the Promissory Note are
payable in arrears monthly from the date of each funding for a period of 36
months from the funding date. The Loan Facility agreement closed on October 25,
1996 and is subject to certain pledges, representations, warrantees and
covenants. As a part of the financing provided pursuant to the purchase
agreement between CCI and Motorola, the Company executed a guaranty and security
agreement with Motorola, pursuant to which the Company unconditionally and
irrevocably guarantees the obligations of CCI under the purchase agreement. The
guaranty and security agreement contains various financial and other covenants
of the Company. As of September 30, 1997, the Company is now indebted for
$435,005 under the loan facility. As of September 30, 1997, the Company has
purchased approximately $996,000 under the loan facility.
Depending on the Company's ability to obtain additional funding, the Company may
fund approximately $4.5 million of the $10.0 million required for the
construction of SMR systems over the next twelve months through the Loan
Facility with Motorola
In February 1997, the Company executed a Securities Placement Agreement to place
a minimum of $1,000,000 and maximum of $4,000,000 of the Company's three year,
8%, convertible Debentures. Principal and interest are convertible into shares
of the Company's common stock. The Securities Purchase Agreement calls for the
issuance of 75,000 warrants to purchase shares of the Company's common stock at
an exercise price of $2.50 per share for each $1 million of 8% convertible
debentures placed. The warrants are exercisable for three years from date of
grant. On February 19, 1997, the Company placed $1,000,000 of the 8% convertible
Debentures and received $860,000, net of $140,000 of placement fees. The Company
granted 75,000 warrants in connection with the placement. On February 24, 1997,
the Company placed an additional $750,000 of the 8% Convertible Debentures and
received $670,000, net of $80,000 in placement fees. The Company granted 56,250
warrants in connection with the placement. The Company has entered into an
agreement to restructure the convertible Debentures described above. (See Item
1, Footnote 4)
In November 1997 the Company entered into a binding agreement with [Settondown
Capital International, Ltd] to issue between $1,000,000 and $1,500,000 in new
convertible preferred stock (the "Convertible Preferred"). The Convertible
Preferred will be convertible into common stock of the Company pursuant to the
exemption from registration requirements under the Securities Act allowed by
Regulation S promulgated thereunder. The face amount of the Convertible
Preferred will be 120% of its purchase price. The Convertible Preferred will
bear a coupon at a rate of 8% per annum, payable either in cash or additional
common stock (at the Company's option). The holder of the Preferred Stock will
agree to limit daily resales of the common stock obtained by the holder
thereunder to 10% of the total volume of the Company common stock on the NASDAQ
bulleting board for such day. The conversion price for the common stock will be
a percentage (the "Applicable Conversion Rate") of the average trading price
for the common stock for the five trading days prior to conversion (except
where the difference between such average and the market price on the
conversion date is more than 20% of such current price, then the conversion
price will be the Applicable Conversion Rate times the average price for the
preceding 20 trading days). The Applicable Conversion Rate will vary over time
from 85% to 75%. The Convertible Preferred may be redeemed by the Company at
any time for an amount equal to the unconverted face amount plus accrued
dividends. The holder
17
<PAGE> 19
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
of the Convertible Preferred will also be issued 200,000 warrants per $1,000,000
in face amount of Convertible Preferred issued. The holders will receive
registration rights respecting the common stock underlying the Convertible
Preferred and the warrants. The Company will pay fees not exceeding 11% of the
total proceeds from issuance of the Convertible Preferred to the investment bank
arranging the transaction.
On October 30, 1997, Chadmoore Communications, Inc. ("CCI") and CMRS Systems,
Inc. ("CMRS") entered into a First Amendment to Financing and Security Agreement
with MarCap Corporation ("MarCap"), which amended that certain Financing and
Security Agreement dated October 29, 1996 between CCI and Motorola, Inc., with
the interest of Motorola, Inc. therein having been assigned to MarCap, and
pursuant to which MarCap extended to CCI and CMRS an additional loan facility in
a maximum amount of $2,000,000 (plus certain fees payable to MarCap and plus
certain legal expenses), with the additional loan facility being secured by (a)
a pledge by CMRS of all of the stock of PTT Artina, Inc., a Nevada corporation,
(b) a pledge by CCI of all of the stock of PTT Maple, Inc., a Nevada
corporation, (c) an Assignment by CCI of all of its limited liability company
membership interest in PTT Communications of Fort Wayne LLC, a Delaware limited
liability company and PTT Communications of Richmond LLC, a Delaware limited
liability company, (d) an assignment by 800 SMR Network, Inc. of all its limited
liability company membership interest in PTT Communications of Baton Rouge LLC,
a Delaware limited liability company, and (e) by a cross pledge of all of the
collateral previously granted in favor of Motorola, Inc. in connection with the
original Financing and Security Agreement. The additional loan facility is
further guaranteed by Chadmoore Wireless Group, Inc., and by Chadmoore
Communications of Tennessee, Inc. to the extent of its interest in the
collateral previously pledged in favor of Motorola, Inc. On October 31, 1997,
the initial draw under the additional loan facility was made in the amount of
$481,440, which was evidenced by a Promissory Note executed by CCI and CMRS to
the order of MarCap. Additional advances under the additional loan facility may
be made from time to time as licenses are transferred into the names of PTT
Artina, Inc. and PTT Maple, Inc. (or CCI and/or CMRS). Advances under the
additional loan facility can be made until March 31, 1998, and with respect to
any licenses which are not transferred prior to that date, CCI and CMRS can use
the licenses as collateral for loans from other parties, provided that MarCap
will have a right of first refusal to loan additional amounts under the
additional loan facility for ten business days after the date MarCap receives
notice that the licenses have been transferred. The advances under the
additional loan facility are subject to a loan fee equal to 2% of the amount of
the advance, and bear interest at the rate of 12% per annum, amortized over a 36
month basis, provided that any draws after December 30, 1997 will bear interest
at 12% per annum plus any increase int the interest on three year treasury bills
after that date. Advances under the additional loan facility are subject to
prepayment fees in the amount of 5% of the principal amount if prepaid during
the first 12 months, 4% if prepaid during the second 12 months, and 3% if
prepaid during the last 12 months of the term of the advance.
18
<PAGE> 20
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES, CONCLUDED
The Company is exploring the possibility of doing one or more of the following
in the next twelve months: (i) an offering of long-term promissory notes, (ii)
an offering of its preferred stock (iii)operating or capital lease financing
and/or (iv) sale of certain management rights and option to acquire rights to
FCC licenses.
On June 5, 1997, the Company engaged the firm of Private Equity Partners, LLC
("PEP") to provide financial advisory services associated with the raising of
capital for the Company in the form of the issuance and/or sale of equity and/or
debt securities.
Accordingly, based on the plans and intentions set forth above, management
desires, through the establishment of operational SMR systems, short term
funding of operations and long term acquisition and development activities, to
emerge from the development stage and establish normal operations in early 1998.
However, there can be no assurance that the Company will achieve the objectives
discussed herein, or of the overall profitability of the Company's operations
once its development stage has ended.
19
<PAGE> 21
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
AIRNET, INC. V. CHADMOORE WIRELESS GROUP, INC. CASE NO. 768473,
ORANGE COUNTY SUPERIOR COURT
On April 3, 1997, Airnet, Inc. ("Airnet") served a summons and complaint on
Chadmoore Wireless Group, Inc. ("Chadmoore"), alleging claims related to a
proposed merger between Airnet and Chadmoore that never materialized. In
particular, Airnet has alleged that a certain "letter of intent" obligated the
parties to complete the proposed merger. Chadmoore denies this allegation. In
its complaint, Airnet has alleged the following purported causes of action
against Chadmoore: breach of contract, breach of the implied covenant of good
faith and fair dealing, intentional interference with prospective economic
advantage, intentional interference with contractual relationship, including
breach of contract, false promise and conversion. Airnet has also purported to
seek the following relief from Chadmoore: $28,000,000 in compensatory damages
plus interest, punitive damages, costs of suit and attorney's fees. Chadmoore
challenged the sufficiency of the complaint as to most of the purported causes
of action on the grounds that these purported causes of action fail to state
facts sufficient to constitute a cause of action. Chadmoore also challenged the
sufficiency of the punitive damages allegations on the grounds that the
compliant fails to state facts sufficient to support these allegations. Rather
than oppose these challenges to its complaint, Airnet elected to file a first
amended complaint. Believing that Airnet's amendments were immaterial Chadmoore
renewed its challenges to Airnet's pleading. On September 9, 1997, the court
sustained the Company's demurrers to Airnet's claims for damages based on
Chadmoore's alleged failure to complete the merger and to Airnet's claims for
conversion. At Airnet's request, the court allowed Airnet to amend its pleading
a second time to attempt to state these claims, and Airnet's new complaint
asserts claims for breach of contract, anticipatory breach of contract,
intentional interference with prospective economic advantage, interference with
contractual relationship, inducing breach of contract and false promise.
Chadmoore again filed papers challenging certain of the claims in Airnet's
pleading. These challenges to Airnet's pleadings are expected to be heard on
December 9, 1997. Although the Company intends to defend the action vigorously,
it is still in its early stages and no substantial discovery has been conducted
in this matter. Accordingly, at this time, the Company is unable to predict the
outcome of this matter.
CHADMOORE COMMUNICATIONS, INC. V. JOHN PEACOCK CASE NO. CV-S-97-00587-HDM (RLH),
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEVADA
In September 1994, Chadmoore Communications, Inc. ("CCI") entered into a two
year consulting agreement (the "Consulting Agreement" with John Peacock
("Peacock") to act as a consultant and technical advisor to CCI concerning
certain specialized mobile radio ("SMR") stations. In May, 1997 CCI filed a
complaint against Peacock for declaratory relief in the United States District
Court for the District of Nevada, seeking a declaration of the respective rights
and obligations of CCI under the Consulting Agreement. CCI is seeking this
judicial declaration based upon Peacock's contention that he is entitled to
certain bonus compensation under the Consulting Agreement. Peacock contends that
this bonus compensation is due regardless of whether an SMR license is granted
based upon his activities as a consultant. CCI contends that the Consultant
Agreement is clear that such bonus compensation is only awarded upon the "grant"
of an SMR license. Peacock contends that he is entitled to bonus compensation
of $200,000. In lieu of answering the complaint, Peacock filed a motion seeking
dismissal of the action based on the assertion that he is not subject to
jurisdiction in Nevada courts. After briefing, that motion was denied by the
Court, and the parties are now proceeding with discovery. Because this action is
in its early stages, we are unable to predict its outcome.
20
<PAGE> 22
FORM 10-QSB
================================================================================
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS, CONCLUDED
GOODMAN/CHAN WAIVER PETITION JUNE 1997- WTB
The Goodman/Chan waiver petition involves approximately 4000 individuals who
obtained 800 MHZ Specialized Mobile Radio (SMR) licenses through application
mills that were subsequently shut down by the Federal Trade Commission in a
fraud action in federal court. A court-appointed Receiver sought an extension of
the eight-month construction period on behalf of all of the affected licensees.
The extension was sought because the licensees wish to sell their licenses to
established SMR operators to recoup their "investment" losses, and Commission
rules provide that only constructed and operational systems may be transferred.
Many of the licensees appear to be unsophisticated investors who were unaware of
or misinformed regarding their responsibilities as licensees.
On May 22, 1995, the Commission issued the Goodman/Chan Order, which granted the
Goodman/Chan Licensees limited relief by extending the build-out period for the
affected licenses from eight months to twelve months. The twelve-month
construction period was granted to put Goodman/Chan Licensees in the same
posture as other Part 90 Commercial Mobile Radio Service (CMRS) providers,
because during the intervening period, the Commission had changed the
construction period for new CMRS licenses (including SMR licenses) from eight to
twelve months. The Commission also stated that the four month extension would
commence upon publication of the Goodman/Chan Order in the Federal Register.
However, publication of the order in the Federal Register was and remains
delayed because of litigation brought by Receiver to resolve certain licensing
issues.
In the interim, some Goodman/Chan licensees have constructed facilities and
requested permission to operate under Special Temporary Authority (STA). STAs
are required for these facilities because licensees find their original licensed
sites to be unsuitable for construction and have therefore constructed at
alternate sites for which they are not yet licensed. However, under the
Communications Act, CMRS providers may not routinely obtain STAs, but must
demonstrate the existence of extraordinary circumstances. This policy has
affected Goodman/Chan licensees because Congressional amendments enacted in 1993
to the Communications Act have caused these licensees to be recently
reclassified as CMRS providers.
The Commission has adopted its Second Report and Order and Memorandum Opinion
and Order in the 800 MHZ SMR proceeding. These rulings may make it easier for
the Goodman/Chan licensees. For example, Goodman/Chan licensees that have
licenses on the lower 230 channels in the 800 MHZ block will be permitted to
transfer or assign unconstructed facilities. Those licensees that desire to
continue to operate their facilities, will be able to do so within their 18 dbu
interference contours. Licensees will also be able to more freely partition and
disaggregate their licenses to other parties. These measures should assist
Goodman/Chan licensees in either selling or building out their licenses.
21
<PAGE> 23
FORM 10-QSB
================================================================================
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULT UPON SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES' HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
22
<PAGE> 24
FORM 10-QSB
================================================================================
ITEM 6. EXHIBITS AND CURRENT REPORTS ON FORM 8K
(a)(1) A list of the financial statements and schedules thereto as
filed in this report reside at Item 7 on page F1 of this
report.
(a)(2) The following exhibits are submitted herewith:
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 (1)
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 to the Registration Statement on
Form S-8 effective July 12, 1996
(file no. 33-94508)
(12) Incorporated by reference to Exhibit 4.1 to the Registration Statement on
Form S-8 effective December 1, 1996
(file no.33-80405)
23
<PAGE> 25
FORM 10-QSB
================================================================================
ITEM 6. EXHIBITS AND CURRENT REPORTS ON FORM 8K - CONTINUED
(a)(2) The following exhibits are submitted herewith: - Concluded
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 Dispatch 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 Dispatch 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)
10.11 Stock Purchase Agreement dated June 14, 1996, by and between
Chadmoore Wireless Group, Inc. and Libero Limited (20)
10.12 Purchase Agreement between Motorola, Inc. and Chadmoore
Wireless Group, Inc. and Chadmoore Communications, Inc., dated
October 25, 1996 (21)
10.13 Promissory Note executed by Chadmoore Communications, Inc.
payable to Motorola, Inc., dated December 30, 1996 (22)
10.14 Guarantee and Security Agreement executed by Chadmoore
Wireless Group, Inc. in favor of Motorola, Inc., dated
December 30, 1996 (23)
11.1 Calculation of Weighted Average Shares Outstanding (see
Consolidated Statement of Operations and Notes to Consolidated
Financial Statement, 1-L)
16.1 Letter of Mitchell Finley & Company, P.C. dated July 10, 1995,
stating its concurrence with the disclosure contained in the
Company's Current Report on Form 8-K (24)
21.1 Subsidiaries of the Company (25)
23.1 Consent of KPMG Peat Marwick LLP (26)
- --------------------------------------------------------------------------------
(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 to the Company's Form 8K, under
Item 2, date of earliest event reported -March 8, 1996
(19) Incorporated by reference to Exhibit 2.1 to the Company's Form 8K, under
Item 2, date of earliest event reported -March 8, 1996
(20) Incorporated by reference to Exhibit 10.11 to the Company's Form 8K, under
Item 2, date of earliest event reported - June 14, 1996
(21) Incorporated by reference to Exhibit 10.12 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
(22) Incorporated by reference to Exhibit 10.13 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
(23) Incorporated by reference to Exhibit 10.14 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
(24) Incorporated by reference to Exhibit 16 to the Company's Form 8K, under
Item 4, date of earliest event reported - July 7, 1995
(25) Incorporated by reference to Exhibit 21.1 to the Company's Form 10-KSB, for
the year ended December 31, 1996.
(26) Incorporated by reference to Exhibit 23.1 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
24
<PAGE> 26
FORM 10-QSB
================================================================================
ITEM 6. EXHIBITS AND CURRENT REPORTS ON FORM 8K - CONCLUDED
(b) Current Reports on Form 8-K
I. Current Report on Form 8-K filed on 1997, reporting the
resignation of Gary L. Killoran, Chief Financial Officer and
Director of the Company.
25
<PAGE> 27
FORM 10-QSB
================================================================================
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Chadmoore Wireless Group, Inc.
(formerly CapVest International, Ltd.)
By:/s/ Jan Zwaik
---------------------
Jan Zwaik
Chief Financial Officer
Date: November 14, 1997
26
<PAGE> 28
EXHIBIT INDEX
TO
FORM 10-QSB
<TABLE>
<CAPTION>
========================================================================================
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<S> <C> <C>
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 (1)
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)
</TABLE>
- --------------------------------------------------------------------------------
(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 to the Registration Statement on
Form S-8 effective July 12, 1996
(file no. 33-94508)
(12) Incorporated by reference to Exhibit 4.1 to the Registration Statement on
Form S-8 effective December 1, 1996
(file no.33-80405)
<PAGE> 29
EXHIBIT INDEX
TO
FORM 10-QSB
<TABLE>
<CAPTION>
========================================================================================
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<S> <C> <C>
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 Dispatch 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 Dispatch 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)
10.11 Stock Purchase Agreement dated June 14, 1996, by and between
Chadmoore Wireless Group, Inc. and Libero Limited (20)
10.12 Purchase Agreement between Motorola, Inc. and Chadmoore
Wireless Group, Inc. and Chadmoore Communications, Inc., dated
October 25, 1996 (21)
10.13 Promissory Note executed by Chadmoore Communications, Inc.
payable to Motorola, Inc., dated December 30, 1996 (22)
10.14 Guarantee and Security Agreement executed by Chadmoore
Wireless Group, Inc. in favor of Motorola, Inc., dated
December 30, 1996 (23)
11.1 Calculation of Weighted Average Shares Outstanding (see
Consolidated Statement of Operations and Notes to Consolidated
Financial Statement, 1-L)
16.1 Letter of Mitchell Finley & Company, P.C. dated July 10, 1995,
stating its concurrence with the disclosure contained in the
Company's Current Report on Form 8-K (24)
21.1 Subsidiaries of the Company (25)
23.1 Consent of KPMG Peat Marwick LLP (26)
</TABLE>
- --------------------------------------------------------------------------------
(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 to the Company's Form 8K, under
Item 2, date of earliest event reported -March 8, 1996
(19) Incorporated by reference to Exhibit 2.1 to the Company's Form 8K, under
Item 2, date of earliest event reported -March 8, 1996
(20) Incorporated by reference to Exhibit 10.11 to the Company's Form 8K, under
Item 2, date of earliest event reported - June 14, 1996
(21) Incorporated by reference to Exhibit 10.12 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
(22) Incorporated by reference to Exhibit 10.13 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
(23) Incorporated by reference to Exhibit 10.14 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
(24) Incorporated by reference to Exhibit 16 to the Company's Form 8K, under
Item 4, date of earliest event reported - July 7, 1995
(25) Incorporated by reference to Exhibit 21.1 to the Company's Form 10-KSB, for
the year ended December 31, 1996.
(26) Incorporated by reference to Exhibit 23.1 to the Company's Form 10-KSB,
for the year ended December 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 229,261
<SECURITIES> 0
<RECEIVABLES> 289,744
<ALLOWANCES> 0
<INVENTORY> 108,759
<CURRENT-ASSETS> 774,182
<PP&E> 5,491,869
<DEPRECIATION> 494,615
<TOTAL-ASSETS> 35,195,130
<CURRENT-LIABILITIES> 4,517,928
<BONDS> 0
0
0
<COMMON> 21,019
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,195,130
<SALES> 1,502,425
<TOTAL-REVENUES> 1,502,425
<CGS> 781,050
<TOTAL-COSTS> 5,517,464
<OTHER-EXPENSES> 8,042,339
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293,660
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,057,378)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
