UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended JUNE 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission File Number: 0-22888
CAI WIRELESS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Connecticut 06-1324691
<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
18 Corporate Woods Boulevard, Albany, New York 12211
(Address and zip code of principal executive offices)
(518) 462-2632
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Number of shares outstanding of each of registrant's class of common stock at
August 10, 1998:
CLASS OUTSTANDING SHARES
Common Stock, no par value 40,543,039
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
CAI WIRELESS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<S> <C> <C> <C>
JUNE 30, 1998 MARCH 31, 1998
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 960,438 $ 1,275,020
Restricted cash 2,307,446 9,134,651
Debt service escrow 16,659,433 16,418,922
Subscriber accounts receivable, net 555,503 387,144
Prepaid expenses 596,766 661,669
Property and equipment, net 46,842,656 49,898,337
Wireless channel rights, net 190,860,525 194,050,792
Investment in CS Wireless Systems, Inc. 33,335,527 43,337,527
Investment in TelQuest Satellite Services LLC 2,209,568 3,174,732
Goodwill, net of accumulated amortization 22,526,159 22,985,876
Debt financing costs, net 5,947,707 7,079,424
Other assets 2,828,739 3,061,780
----------- -----------
Total Assets $325,630,467 $351,465,874
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES
Accounts payable $ 4,347,667 $ 4,852,091
Accrued expenses 22,261,516 12,253,286
Wireless channel rights obligations 4,072,100 4,832,971
Interim debt financing 45,000,000 45,000,000
Long term notes 311,618,543 312,088,506
------------ ------------
387,299,826 379,026,854
------------ ------------
Commitments and Contingencies
SHAREHOLDERS' DEFICIT
Common stock, 100,000,000 shares authorized,
no par value; 40,543,039 shares issued and
outstanding 275,770,764 275,770,764
Additional paid-in capital 101,711,759 101,711,759
Accumulated deficit (439,151,882) (405,043,503)
------------ ------------
(61,669,359) (27,560,980)
------------ ------------
Total Liabilities and Shareholders' Deficit $ 325,630,467 $ 351,465,874
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAI WIRELESS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<S> <C> <C>
QUARTER ENDED JUNE 30,
1998 1997
Revenues $ 5,632,967 $ 8,091,252
---------- ----------
Costs and expenses:
Programming and licensing 3,656,685 3,702,910
General and administrative 6,327,175 7,472,333
Depreciation and amortization 6,819,622 7,938,832
---------- ----------
16,803,482 19,114,075
---------- ----------
Operating loss (11,170,515) (11,022,823)
---------- ----------
Other income (expense):
Interest expense (12,909,875) (10,973,673)
Equity in net losses of affiliates (10,967,164) (6,616,000)
Interest income and other income 939,175 860,637
---------- ----------
(22,937,864) (16,729,036)
---------- ----------
Net loss (34,108,379) (27,751,859)
Preferred stock dividends - (3,567,958)
----------- ----------
Loss applicable to common shareholders $(34,108,379) $(31,319,817)
=========== ===========
Loss per common share $ (0.84) $ (0.77)
======== ========
Average common and equivalent shares
outstanding 40,543,039 40,540,539
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY <DEFICIT>
FOR THE QUARTER ENDED JUNE 30, 1998 (UNAUDITED)
AND THE YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED TOTAL
SHARES AMOUNT CAPITAL DEFICIT EQUITY<DEFICIT>
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1997 40,540,539 $275,769,414 $ - $(161,079,224) $114,690,190
Common stock issued in exchange for
BANX warrants 2,500 1,350 - - 1,350
Senior preferred stock and accumulated
dividends contributed to capital
pursuant to the BANX termination
agreement on March 3, 1998 - - 101,711,759 - 101,711,759
Preferred stock dividends accrued - - - (13,891,025) (13,891,025)
Net loss - - (230,073,254) (230,073,254)
---------- ------------ ------------ ------------ ------------
Balance at March 31, 1998 40,543,039 275,770,764 101,711,759 (405,043,503) (27,560,980)
Net loss - - - (34,108,379) (34,108,379)
---------- ------------ ------------ ------------ ------------
Balance at June 30, 1998 40,543,039 $275,770,764 $101,711,759 $(439,151,882) $ (61,669,359)
========== ============ ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended June 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (34,108,379) $ (27,751,859)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 6,819,622 7,938,832
Equity in net losses of affiliates 10,967,164 6,616,000
Gain on sale of assets (28,971) -
Debt financing costs and discount amortization 1,861,258 711,500
Debt service escrow interest income (240,511) (702,142)
Changes in assets and liabilities:
Subscriber accounts receivable (168,359) (97,009)
Other assets (600,956) (54,169)
Accounts payable and accrued expenses 9,900,282 7,559,589
----------- -----------
Net cash used in operating activities (5,598,850) (5,779,258)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Funds provided from restricted investment account 6,827,205 -
Purchase of wireless channel rights - (1,238,253)
Purchase of equipment (418,250) (1,850,022)
Proceeds from sale of equipment 53,650 -
Payments received from CS Wireless Systems, Inc. 157,412 386,298
Investment in TelQuest Satellite Services LLC (411,567) -
Loan to related parties - (100,000)
Cash paid for investment - (356,025)
Other 37,260 (269,053)
----------- -----------
Net cash provided by (used in) investing
activities 6,245,710 (3,427,055)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from interim debt financing - 8,500,000
Repayment of debt including wireless channel
rights obligations (834,997) (504,580)
Debt financing costs paid (126,445) (1,462,619)
----------- -----------
Net cash provided by (used in) financing
activities (961,442) 6,532,801
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (314,582) (2,673,512)
Cash and cash equivalents, beginning of year 1,275,020 10,471,918
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 960,438 $ 7,798,406
=========== ===========
CASH PAYMENTS DURING THE PERIOD FOR INTEREST $ 10,794 $ 97,531
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include
all the information and notes required by generally accepted accounting
principles for complete financial statements. The Company does not have
comprehensive income pursuant to SFAS No. 130 for the periods presented and,
accordingly, a comprehensive income disclosure has not been included.
The consolidated financial statements include the accounts of CAI Wireless
Systems, Inc. and its wholly-owned subsidiaries (the "Company" or "CAI"). All
intercompany transactions have been eliminated in consolidation. CAI's 60%
investment in CS Wireless Systems, Inc. ("CS Wireless") and 25% investment in
TelQuest Satellite Services LLC ("TSS") are accounted for on the equity method
since CAI does not control day to day operations of either company. Current
summarized financial information regarding CS Wireless is presented in Note 5.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of results for interim
periods have been included. Certain items in the prior period financial
statements have been reclassified to conform with the current period's
presentation. Operating results for the quarter ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the fiscal year
ending March 31, 1999. The unaudited financial statements presented herein
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended March 31, 1998 which is on file with the Securities and Exchange
Commission.
NOTE 2. CHAPTER 11 FILING
On July 30, 1998 (the "Petition Date"), CAI Wireless Systems, Inc., a
Connecticut corporation, and one of its wholly-owned subsidiaries, Philadelphia
Choice Television, Inc., a Delaware corporation ("PCT" and together with CAI,
the "Debtors"), filed voluntary petitions for relief under Chapter 11, Title 11
of the United States Code (the "Bankruptcy Code") with the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"),
Wilmington, Delaware. The bankruptcy cases (the "Cases") of CAI and PCT are
being jointly administered, for procedural purposes only, before the Bankruptcy
Court under Case No. 98-1765 (JJF). Pursuant to Sections 1107 and 1108 of the
Bankruptcy Code, the Debtors, as debtors and debtors-in-possession, have
continued to manage and operate their assets and businesses pending the
confirmation of a joint reorganization plan and subject to the supervision
and orders of the Court. Because CAI is operating as debtor-in-possession
under Chapter 11 of the Bankruptcy Code, the existing directors and
officers of CAI continue to manage the operations of CAI, subject to the
supervision and orders of the Bankruptcy Court.
The Debtors expect to reorganize under Chapter 11 and have proposed a
joint reorganization plan (the "Plan"), which was filed with the Bankruptcy
Court on the Petition Date, and filed by the Company on a Current Report on
Form 8-K dated July 1, 1998. The Plan has already been voted on and accepted
by the requisite number of creditors prior to the Petition Date. Under the
Plan, holders of CAI's 12 1/4 % Senior Notes due 2002 (the "Senior Notes")
will receive approximately $16,400,000 in cash, $100,000,000 in new senior
notes due 2004 and 91% of the equity of reorganized CAI. Holders of
subordinated indebtedness of CAI will receive their pro rata share of the
remaining 9% of the equity in reorganized CAI. The equity interests granted to
the Company's debtholders will be subject to dilution for the issuance
of stock options to members of CAI's senior management and for equity
issued in connection with the Exit Facility (defined below). The Plan
does not provide for any distribution to existing shareholders of CAI.
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. CHAPTER 11 FILING (CONTINUED)
At this time, it is not possible to predict the outcome of the Debtors'
Chapter 11 cases or their effect on the Debtors' business. Although management
intends that CAI will emerge from bankruptcy in a prompt and expeditious manner
during September 1998, there can be no assurance that the Plan will be
consummated. Reference is made to Item 7 - "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and the Report of
Independent Public Accountants included in CAI's Annual Report on Form 10-K for
the fiscal year ended March 31, 1998, filed with the Securities and Exchange
Commission on June 30, 1998, which indicates the substantial doubt about CAI's
ability to continue as a going concern.
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization
of assets and liquidation of liabilities and commitments in the normal course
of business. The Chapter 11 filing, as well as related circumstances and the
losses from operations, continue to raise substantial doubt about the Company's
ability to continue as a going concern. The appropriateness of reporting on the
going concern basis is dependent upon, among other things, confirmation of the
Plan, future operations, and the ability to generate sufficient cash from
operations and financing sources to meet obligations. The consolidated
financial statements included herein do not include any adjustments relating to
the commencement of the Cases.
NOTE 3. DIP FINANCING AND EXIT FACILITY
DIP FINANCING. In connection with the Cases, CAI consummated a
$60,000,000 Debtor-in-Possession financing arrangement (the "DIP Facility")
provided by Merrill Lynch Global Allocation Fund, Inc. ("MLGAF"). The DIP
financing is governed by an Amended and Restated Note Purchase Agreement dated
as of July 30, 1998 (the "NPA") between CAI and MLGAF, a copy of which was
filed as an exhibit to CAI's Current Report on Form 8-K dated August 3, 1998.
Of the $60,000,000 provided to CAI under the DIP Facility, $49,105,894
represented the outstanding principal, interest and fees due to the Purchaser
pursuant to that certain Note Purchase Agreement dated as of November 24, 1997
(the "Existing Note Purchase Agreement") among CAI, certain of its subsidiaries
and MLGAF. All such amounts outstanding under the Existing Note Purchase
Agreement were converted into DIP Notes as if there had been a purchase under
the DIP Facility Agreement in the amount of $49,105,894. The remaining amount,
$10,894,106, was made available to CAI for its use during the Chapter 11 case,
in accordance with the terms of an approved budget.
The indebtedness under the DIP Facility is represented by promissory notes
in the aggregate principal amount of $60,000,000 (the "DIP Notes"), which notes
bear interest at the per annum rate of 13% and mature on January 29, 1999 (the
"Maturity Date"). A commitment fee of (i) 1% for the three-month period
commencing with the Petition Date, (ii) 4% for the next succeeding three-month
period, and (iii) 2% for each three-month period thereafter, of the aggregate
principal amount of the DIP Notes will be earned quarterly in advance and
payable on the Maturity Date.
CAI's obligations under the DIP Notes are secured by a first priority lien
on, and security interest in, all of CAI's assets, including the stock of its
wholly-owned subsidiaries, and a pledge of its holdings in CS Wireless Systems,
Inc., TelQuest Satellite Services LLC and Wireless Enterprises, L.L.C., an
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. DIP FINANCING AND EXIT FACILITY CONTINUED
MMDS-operator programming cooperative. In addition, certain of CAI's wholly-
owned subsidiaries have guaranteed CAI's obligations under the DIP Notes and
have secured such guaranty by granting to MLGAF a first lien on, and security
interest in, all of such subsidiaries' assets.
The Bankruptcy Court approved the DIP Facility on an interim basis on July
30, 1998. A final hearing before the Bankruptcy Court on any objections to the
DIP Facility is scheduled for August 25, 1998.
EXIT FACILITY. CAI is seeking to obtain an $80,000,000 credit facility
(the "Exit Facility"), the proceeds of which will be used to repay all
outstanding amounts under the DIP Facility and to fund CAI's operations for
approximately 12 months following the consummation of the bankruptcy. Based
upon the advice of CAI's financial advisor, BT Alex. Brown Incorporated, CAI
anticipates that the Exit Facility will consist of two tranches of secured
debt. The first tranche would consist of approximately $30,000,000 principal
amount of senior secured notes (the "Senior Secured A Notes"), which would be
secured by a first priority lien on and security interest in (i) substantially
all of CAI's existing and after-acquired assets, (ii) the stock of the
Company's subsidiaries, and (iii) selected assets that are held by certain of
the Company's subsidiaries, in each case subject to certain limited exceptions
and qualifications. The second tranche would consist of approximately
$50,000,000 principal amount of senior secured notes (the "Senior Secured B
Notes"), which would be secured by a second priority lien on and security
interest in the same assets.
CAI anticipates the Senior Secured A Notes will accrue interest semi-
annually at a rate of approximately 10.5% per annum, payable at maturity, and
the Senior Secured B Notes at a rate of approximately 13.0% per annum, payable
at maturity. The maturity date for both the Senior Secured A Notes and the
Senior Secured B Notes (together, the "New Senior Secured Facility") is
expected to be in September, 2000. CAI anticipates that the Senior Secured A
Notes and the Senior Secured B Notes will require the payment at maturity of
certain commitment and other fees (collectively, the "Facility Fees") of
approximately 1% and 7%, respectively.
CAI further anticipates that prospective purchasers of the Senior Secured
A Notes and Senior Secured B Notes would expect to receive six-year warrants to
purchase shares of Common Stock of CAI, which would be exercisable for $.01 per
share and would contain usual and customary registration rights and standard
anti-dilution protections. Although no definitive negotiations have taken
place with any prospective exit lenders, depending upon a wide variety of
factors including the actual interest rate of such notes, the Facility Fees,
the apparent prospects of reorganized CAI at the time of consummation of the
Plan, and the interest of prospective lenders, it is anticipated that warrants
to acquire approximately 2% and 10% of the common equity of reorganized CAI
would be issued to purchasers of the Senior Secured A Notes and Senior Secured
B Notes, respectively. The economic terms of the New Senior Secured Facility
are interrelated and the interest rate, Facility Fees and equity components of
the proposed New Senior Secured Facility may vary without significantly
affecting the overall economic impact of the proposed New Senior Secured
Facility on CAI or its current stakeholders.
If the New Senior Secured Facility is provided in significant part by one
or more current holders of CAI's Senior Notes, CAI anticipates offering each
holder of Senior Notes the non-transferable right to subscribe for up to 65% of
the principal amount of Senior Secured A Notes and Senior Secured B Notes.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. DIP FINANCING AND EXIT FACILITY CONTINUED
Under the terms of the NPA, MLGAF was granted the right, but not the
obligation, to assume up to 35% of the New Senior Secured Facility. If and to
the extent that holders of Senior Notes wish to subscribe for more than the
entire principal amount of the New Senior Secured Facility (subject to MLGAF's
aforementioned right under the NPA), the right to subscribe would be allocated
on a PRO RATA basis, in accordance with the amount of each current holder of
Senior Notes wishes to invest in the New Senior Secured Facility.
The foregoing is a summary of certain anticipated terms of the New Senior
Secured Facility and is qualified in its entirety by reference to the New
Senior Secured Facility. As of the date hereof, CAI has not received any
commitments with respect to all or any part of the New Senior Secured Facility
and there can be no assurance that the terms of the actual New Senior Secured
Facility will not vary from the terms described above or that the New Senior
Secured Facility can be obtained at all.
NOTE 4. LITIGATION
IN RE CAI WIRELESS SYSTEMS, INC., DEBTOR, Chapter 11 Case No.98-1765
(JJF), pending before the United States Bankruptcy Court for the District of
Delaware, Wilmington, Delaware. See Note 2 above.
CAI has been named in six class action lawsuits alleging various
violations of the federal securities laws filed in the United States District
Court for the Northern District of New York. The actions were consolidated
into one lawsuit entitled IN RE CAI WIRELESS SYSTEMS, INC. SECURITIES
LITIGATION (96-CV-1857) (the "Securities Lawsuit"), which is currently pending
in the Northern District of New York. The amended, consolidated complaint,
which names the Company, Jared E. Abbruzzese, chairman and chief executive
officer of the Company, John J. Prisco, president, chief operating officer and
a director of the Company, and Alan Sonnenberg, the former president of the
Company, as defendants, alleges a variety of violations of the anti-fraud
provisions of the Federal securities laws by CAI arising out of its alleged
disclosure (or alleged omission from disclosure) regarding its Internet and
other flexible use of MMDS spectrum, as well as its business relationship with
Bell Atlantic and NYNEX. Specifically, the complaint alleges that defendants
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 10b-5 promulgated under the Exchange Act
during the specified Class Period (May 23, 1996 through December 6, 1996).
The Company has notified the carrier of its Directors' and Officers'
Liability insurance policy, which is intended to cover not only the Company's
officers and directors, but also the Company, itself, against claims such as
those made in the Securities Lawsuit. The policy covers up to $5,000,000 of
any covered liability, subject to a retention amount of $500,000.
The Securities Lawsuit is in its preliminary stages. A scheduling
conference was held on June 3, 1997, at which the briefing schedule for
defendants' motion to dismiss was agreed upon among the parties. The
defendants' motion to dismiss was heard by the Northern District of New York on
October 17, 1997 and is still pending. While the motion is pending, all other
deadlines affecting motions and discovery have been postponed.
The Company and individual defendants are contesting the Securities
Lawsuit vigorously and believe it is entirely without merit at this time. The
Plan provides no recovery for claims against the
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. LITIGATION (CONTINUED)
Company arising out of the Securities Lawsuit. Reference is made to description
of Class CAI-7 contained in the Plan, filed as an exhibit to CAI's Current
Report on Form 8-K dated July 1, 1998. Accordingly, management believes the
Securities Lawsuit will not have a material adverse effect on the Company's
earnings, financial condition or liquidity.
The Company is also a defendant in JOE HAND PROMOTIONS, INC. V. 601 L&P,
INC. V. CAI WIRELESS SYSTEMS, INC. , JOE HAND PROMOTIONS, INC. V. CAI WIRELESS
SYSTEMS, INC. D/B/A POPVISION WIRELESS CABLE AND JOE HAND PROMOTIONS V. CAROL
VALICEE D/B/A MARV'S BAR & RESTAURANT V. CAI WIRELESS SYSTEMS, INC. D/B/A
POPVISION WIRELESS CABLE TV pending in the U.S. District Court for the Eastern
District of Pennsylvania. These actions arise out of the alleged improper
broadcasts of certain sporting events in commercial establishments in violation
of Federal statutes. The plaintiff is the exclusive distributor of such
sporting events in the greater Philadelphia area for commercial establishments,
and has alleged the improper broadcast by CAI in approximately five instances.
The lawsuits are in preliminary stages and are being vigorously defended by
CAI.
NOTE 5. INVESTMENTS IN CS WIRELESS SYSTEMS, INC. AND TELQUEST SATELLITE
SERVICES LLC
CS WIRELESS SYSTEMS, INC. The Company's 60% investment in CS Wireless
reflects an equity loss of $10,002,000 (based on CAI's pro-rata share of CS's
net loss of $16,668,000 for the three-month period ended March 31, 1998). There
is no amortization of goodwill associated with this investment, since the
related goodwill was written off as of March 31, 1998.
The following is an unaudited condensed consolidated balance sheet of CS
derived from its Form 10-Q as of March 31, 1998:
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 65,010,000
Restricted cash 5,030,000
Other current assets 2,103,000
Systems and equipment, net 52,625,000
Wireless channel rights, net 169,228,000
Goodwill, net of accumulated amortization 47,310,000
Investment in and loans to equity affiliates 7,732,000
Debt issuance costs and other assets, net 10,975,000
-----------
Total Assets $360,013,000
===========
LIABILITIES AND EQUITY
Accounts payable and accrued expenses $ 8,300,000
FCC Auction payable 3,757,000
Other liabilities 676,000
Debt 291,719,000
Equity 55,561,000
-----------
Total Liabilities and Equity $360,013,000
===========
</TABLE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5. INVESTMENTS IN CS WIRELESS SYSTEMS, INC. AND TELQUEST SATELLITE
SERVICES LLC (CONTINUED)
The following is an unaudited condensed consolidated statement of
operations of CS derived from its March 31, 1998 Form 10-Q for the period
presented:
<TABLE>
<CAPTION>
Quarter Ended
MARCH 31, 1998
<S> <C>
Revenues $ 6,823,000
-----------
Operating expenses:
Systems operations 3,908,000
General and administrative 4,119,000
Depreciation and amortization 7,224,000
-----------
Total operating expenses 15,251,000
-----------
Operating loss (8,428,000)
Interest income 1,017,000
Interest expense (8,271,000)
Equity in losses of affiliates (986,000)
-----------
Net loss $(16,668,000)
===========
</TABLE>
TELQUEST SATELLITE SERVICES LLC. The Company's investment in TSS reflects
an equity loss of $736,000 based on CAI's pro-rata share of TSS's net losses
approximating $2,944,000 for the three months ended June 30, 1998.
Additionally, the investment has been reduced by $208,300 reflecting
depreciation of the equipment on lease to TSS. TSS has negative net worth of
$4,751,000 at June 30, 1998.
NOTE 6. OPERATING SEGMENT INFORMATION
The following information is provided for operating segments for the
quarter ended June 30, 1998 as determined by senior management and subject to
meeting quantitative thresholds. While CAI is a corporate holding company and
not an operating segment, it is shown separately for clarity in segment
reporting. AMI, a wholly owned subsidiary of CAI, holds the stock of entities
owning or leasing a substantial portion of CAI's spectrum rights.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6: OPERATING SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ALBANY NEW YORK PHILADELPHIA
CORPORATE MARKET MARKET MARKET AMI ALL OTHER(1)
<S> <C> <C> <C> <C> <C> <C>
Revenues
External $ - $ 766,300 $ 850,989 $ 3,526,503 $ - $ 489,175
Inter-company 579,000 - - - 4,166,137 72,772
Interest expense (12,876,382) - - 341 (21,653) (11,499)
Depreciation &
amortization (519,668) (366,840) (970,170) (2,117,400) (3,117,480) (2,548,544)
Segment l (25,795,124) (240,450) (1,398,791) (1,428,194) (581,932) (4,663,888)
Assets 418,757,104 2,653,491 1,269,478 10,648,711 183,947,856 35,599,034
Due from segments 307,396,573 - - - - -
Due to parent - (11,331,845) (28,884,701) (26,635,444) (183,280,129) (57,264,454)
Expenditures for
segment assets 1,354 10,144 3,047 60,330 - 101,852
</TABLE>
(1) includes the Boston Market
Total revenues, income(loss), and assets are reconciled as follows:
<TABLE>
<CAPTION>
REVENUES (EXTERNAL) INCOME (LOSS) ASSETS
<S> <C> <C> <C>
Total reported for identified segments $5,143,792 $(29,444,491) $617,276,640
Boston Market (included in All Other) - (2,372,124) 17,201,477
All Other (excluding Boston Market) 489,175 (2,291,764) 18,397,557
Elimination of inter-segment balances - - (309,400,690)
Elimination of inter-segment
investments - - (17,844,517)
---------- ------------ ------------
Consolidated totals $5,632,967 $(34,108,379) $325,630,467
========== ============ ============
</TABLE>
NOTE 7. SUBSEQUENT EVENTS
On July 30, 1998, the Company was informed by
PricewaterhouseCoopers LLP ("PWC") that PWC had resigned from its
engagement as the Company's independent accountant. The Company was
informed by PWC that it had resigned from the engagement due to a
conflict of interest arising as the result of the July 1, 1998 merger of
Price Waterhouse, LLP and Coopers & Lybrand L.L.P. Prior to the merger,
Coopers & Lybrand L.L.P. acted as the Company's independent accountant.
Price Waterhouse, LLP, acted as collateral agent and administrative agent
for MLGAF under a Note Purchase
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7. SUBSEQUENT EVENTS (CONTINUED)
Agreement dated as of November 24, 1997, as amended from time to time.
PWC will continue to act as collateral agent and administrative agent for
MLGAF under the Amended and Restated Note Purchase Agreement dated as of
July 30, 1998 between the Company and MLGAF.
Except as discussed below, the reports of Coopers & Lybrand L.L.P.
on the Company's financial statements for the past two fiscal years
contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting
principle.
The report of Coopers & Lybrand L.L.P. delivered in connection with
the Company's audited financial statements for the years ended March 31,
1998 and 1997 contained an explanatory paragraph which indicated that
there was substantial doubt regarding the Company's ability to continue
as a going concern.
In connection with its audits for the two most recent fiscal years
and through July 30, 1998, there have been no disagreements with Coopers
& Lybrand L.L.P. or PWC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of
Coopers & Lybrand L.L.P. would have caused them to made reference thereto
in their report on the financial statements for such years.
During the two most recent fiscal years and through July 30, 1998,
there have been no reportable events (as defined in Regulation S-K item
304(a)(1)(v)) involving the Company.
The Company is currently seeking independent accountants to replace
PWC.
The Company requested that PWC furnish it with a letter
addressed to the SEC stating whether or not PWC agrees with the above
statements. A copy of such letter, dated August 6, 1998, was filed as
Exhibit 16 on The Company's Current Report on Form 8-K dated August 6,
1998.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The statements contained in this Quarterly Report on Form 10-Q,
including the exhibits hereto, relating to the Company's future
operations may constitute forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results of the Company may differ materially from those in the
forward-looking statements and may be affected by a number of factors
including Bankruptcy or District Court actions or proceedings related to
the bankruptcy of CAI and Philadelphia Choice Television, Inc., the
Company's ability to obtain additional financing, the Company's ability
to attract one or more strategic partners and such strategic partner's
willingness to enter into arrangements with CAI on a timely basis, the
terms of such arrangements, the receipt of regulatory approvals for
alternative uses of its MMDS spectrum, the success of CAI's trials in
various of its markets, the commercial viability of any alternative use
of MMDS spectrum, consumer acceptance of any new products offered or to
be offered by CAI, subscriber equipment availability, practical success
of CAI's engineered technology, tower space availability, absence of
interference and the ability of the Company to redeploy or sell excess
equipment, the assumptions, risks and uncertainties set forth below in
this "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere herein, as well as other factors
contained herein and in the Company's other securities filings.
Furthermore, there can be no assurance that the financing obtained by the
Company to date will enable it to meet its future cash needs.
GENERAL. On July 30, 1998 (the "Petition Date"), CAI Wireless
Systems, Inc., a Connecticut corporation, and one of its wholly-owned
subsidiaries, Philadelphia Choice Television, Inc., a Delaware
corporation ("PCT" and together with CAI, the "Debtors"), filed voluntary
petitions for relief under Chapter 11, Title 11 of the United States Code
(the "Bankruptcy Code") with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"), Wilmington, Delaware. The
bankruptcy cases (the "Cases") of CAI and PCT are being jointly
administered, for procedural purposes only, before the Bankruptcy Court
under Case No. 98-1765 (JJF). Pursuant to Sections 1107 and 1108 of the
Bankruptcy Code, the Debtors, as debtors and debtors-in-possession, have
continued to manage and operate their assets and businesses pending the
confirmation of a joint reorganization plan and subject to the
supervision and orders of the Court. Because CAI is operating as debtor-
in-possession under Chapter 11 of the Bankruptcy Code, the existing
directors and officers of CAI continue to manage the operations of CAI,
subject to the supervision and orders of the Bankruptcy Court.
The Debtors expect to reorganize under Chapter 11 and have proposed
a joint reorganization plan (the "Plan"), which was filed with the
Bankruptcy Court on the Petition Date, and filed by the Company on a
Current Report on Form 8-K dated July 1, 1998. The Plan has already
been voted on and accepted by the requisite number of creditors prior to
the Petition Date. Under the Plan, holders of CAI's 12 1/4 % Senior
Notes due 2002 (the "Senior Notes") will receive approximately
$16,400,000 in cash, $100,000,000 in new senior notes due 2004 and 91% of
the equity of reorganized CAI. Holders of subordinated indebtedness of
CAI will receive their pro rata share of the remaining 9% of the equity
in reorganized CAI. The equity interests granted to the Company's
debtholders will be subject to dilution for the issuance of stock options
to members of CAI's senior management and for equity issued in connection
with the Exit Facility (defined below). The Plan does not provide for
any distribution to existing shareholders of CAI.
At this time, it is not possible to predict the outcome of the
Debtors' Chapter 11 cases or their effect on the Debtors' business.
Reference is made to Item 7 - "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the Report of
Independent Public Accountants included in CAI's Annual Report on Form
10-K for the fiscal year ended March 31, 1998, filed with the Securities
and Exchange Commission on June 30, 1998, which indicates the substantial
doubt about CAI's ability to continue as a going concern.
The Company's consolidated financial statements have been prepared
on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities and commitments in
the normal course of business. The Chapter 11 filing, as well as related
circumstances and the losses from operations, continue to raise
substantial doubt about the Company's ability to continue as a going
concern. The appropriateness of reporting on the going concern basis is
dependent upon, among other things, confirmation of the Plan, future
operations, and the ability to generate sufficient cash from operations
and financing sources to meet obligations. The consolidated financial
statements included herein do not include any adjustments relating to the
commencement of the Cases.
DIP FINANCING. In connection with the Cases, CAI consummated a
$60,000,000 Debtor-in-Possession financing arrangement (the "DIP
Facility") provided by Merrill Lynch Global Allocation Fund, Inc.
("MLGAF"). The DIP financing is governed by an Amended and Restated Note
Purchase Agreement dated as of July 30, 1998 (the "NPA") between CAI and
MLGAF, a copy of which was filed as an exhibit to CAI's Current Report on
Form 8-K dated August 3, 1998. Of the $60,000,000 provided to CAI under
the DIP Facility, $49,105,894 represented the outstanding principal,
interest and fees due to the Purchaser pursuant to that certain Note
Purchase Agreement dated as of November 24, 1997 (the "Existing Note
Purchase Agreement") among CAI, certain of its subsidiaries and MLGAF.
All such amounts outstanding under the Existing Note Purchase Agreement
were converted into DIP Notes as if there had been a purchase under the
DIP Facility Agreement in the amount of $49,105,894. The remaining
amount, $10,894,106, was made available to CAI for its use during the
Chapter 11 case, in accordance with the terms of an approved budget.
The indebtedness under the DIP Facility is represented by promissory
notes in the aggregate principal amount of $60,000,000 (the "DIP Notes"),
which notes bear interest at the per annum rate of 13% and mature on
January 29, 1999 (the "Maturity Date"). A commitment fee of (i) 1% for
the three-month period commencing with the Petition Date, (ii) 4% for the
next succeeding three-month period, and (iii) 2% for each three-month
period thereafter, of the aggregate principal amount of the DIP Notes
will be earned quarterly in advance and payable on the Maturity Date.
CAI's obligations under the DIP Notes are secured by a first
priority lien on, and security interest in, all of CAI's assets,
including the stock of its wholly-owned subsidiaries, and a pledge of its
holdings in CS Wireless Systems, Inc., TelQuest Satellite Services LLC
and Wireless Enterprises, LLC, an MMDS-operator programming cooperative.
In addition, certain of CAI's wholly-owned subsidiaries have guaranteed
CAI's obligations under the DIP Notes and have secured such guaranty by
granting to MLGAF a first lien on, and security interest in, all of such
subsidiaries' assets.
The Bankruptcy Court approved the DIP Facility on an interim basis
on July 30, 1998. A final hearing before the Bankruptcy Court on any
objections to the DIP Facility is scheduled for August 25, 1998.
EXIT FACILITY. CAI is seeking to obtain an $80,000,000 credit
facility (the "Exit Facility"), the proceeds of which will be used to
repay all outstanding amounts under the DIP Facility and to fund CAI's
operations for approximately 12 months following the consummation of the
bankruptcy. Based upon the advice of CAI's financial advisor, BT Alex.
Brown Incorporated, CAI anticipates that the Exit Facility will consist
of two tranches of secured debt. The first tranche would consist of
approximately $30,000,000 principal amount of senior secured notes (the
"Senior Secured A Notes"), which would be secured by a first priority
lien on and security interest in (i) substantially all of CAI's existing
and after-acquired assets, (ii) the stock of the Company's subsidiaries,
and (iii) selected assets that are held by certain of the Company's
subsidiaries, in each case subject to certain limited exceptions and
qualifications. The second tranche would consist of approximately
$50,000,000 principal amount of senior secured notes (the "Senior Secured
B Notes"), which would be secured by a second priority lien on and
security interest in the same assets.
CAI anticipates the Senior Secured A Notes will accrue interest
semi-annually at a rate of approximately 10.5% per annum, payable at
maturity, and the Senior Secured B Notes at a rate of approximately 13.0%
per annum, payable at maturity. The maturity date for both the Senior
Secured A Notes and the Senior Secured B Notes (together, the "New Senior
Secured Facility") is expected to be in September, 2000. CAI
anticipates that the Senior Secured A Notes and the Senior Secured B
Notes will require the payment at maturity of certain commitment and
other fees (collectively, the "Facility Fees") of approximately 1% and
7%, respectively.
CAI further anticipates that prospective purchasers of the Senior
Secured A Notes and Senior Secured B Notes would expect to receive six-
year warrants to purchase shares of Common Stock of CAI, which would be
exercisable for $.01 per share and would contain usual and customary
registration rights and standard anti-dilution protections. Although no
definitive negotiations have taken place with any prospective exit
lenders, depending upon a wide variety of factors including the actual
interest rate of such notes, the Facility Fees, the apparent prospects of
reorganized CAI at the time of consummation of the Plan, and the interest
of prospective lenders, it is anticipated that warrants to acquire
approximately 2% and 10% of the common equity of reorganized CAI would be
issued to purchasers of the Senior Secured A Notes and Senior Secured B
Notes, respectively. The economic terms of the New Senior Secured
Facility are interrelated and the interest rate, Facility Fees and equity
components of the proposed New Senior Secured Facility may vary without
significantly affecting the overall economic impact of the proposed New
Senior Secured Facility on CAI or its current stakeholders.
If the New Senior Secured Facility is provided in significant part
by one or more current holders of CAI's Senior Notes, CAI anticipates
offering each holder of Senior Notes the non-transferable right to
subscribe for up to 65% of the principal amount of Senior Secured A Notes
and Senior Secured B Notes. Under the terms of the NPA, MLGAF was
granted the right, but not the obligation, to assume up to 35% of the New
Senior Secured Facility. If and to the extent that holders of Senior
Notes wish to subscribe for more than the entire principal amount of the
New Senior Secured Facility (subject to MLGAF's aforementioned right
under the NPA), the right to subscribe would be allocated on a PRO RATA
basis, in accordance with the amount of each current holder of Senior
Notes wishes to invest in the New Senior Secured Facility.
The foregoing is a summary of certain anticipated terms of the New
Senior Secured Facility and is qualified in its entirety by reference to
the New Senior Secured Facility. As of the date hereof, CAI has not
received any commitments with respect to all or any part of the New
Senior Secured Facility and there can be no assurance that the terms of
the actual New Senior Secured Facility will not vary from the terms
described above or that the New Senior Secured Facility can be obtained
at all.
LIQUIDITY AND CAPITAL RESOURCES
CAI's primary sources of liquidity are cash flows from operations,
trade credit and borrowings under the Existing Credit Facility for the
period prior to July 30, 1998 and subsequently under the DIP Facility.
During the quarter ended June 30, 1998, CAI expended approximately
$5,600,000 of cash to fund operating activities. CAI also expended
approximately $418,000 for equipment, $412,000 to TSS in fulfillment of
its investment obligation and $835,000 in debt payments. The cash
requirements were primarily funded by existing cash balances maintained
in the restricted investment account. At June 30, 1998, CAI had
available funds of approximately $3,268,000, of which $2,307,000 was
restricted and all of which will be used to fund the operations of the
Company. CAI is committed through additional open purchase orders as of
June 30, 1998 to spend approximately $2,500,000, primarily for capital
expenditures associated with additional development its digital
transmission facilities.
The Company's operating plans, including digital video, voice and
two-way data, Internet and intranet access services and testing, will
require additional funding. The Company's ability to raise additional
funds through secured loans and the issuance of certain equity is
currently limited by the terms of the Indenture governing the Company's
12.25% Senior Notes due 2002, the terms of various outstanding securities
and/or the terms of the NPA. Additionally, assuming confirmation of the
Plan, the Company's ability to raise additional funds through secured
loans and the issuance of certain equity is expected to be limited under
the terms of the new Senior Notes that will be issued to the holders of
CAI's 12.25% Senior Notes at the consummation of the Plan, and under the
terms of the New Senior Secured Facility. There can be no assurance that
the funds obtained by the Company in connection with the DIP Facility, or
that funds anticipated to be obtained by CAI upon consummation of the New
Senior Secured Facility, and as permitted under the terms of the New
Senior Secured Facility and the indenture governing the new Senior Notes
will enable CAI to meet its future cash needs.
RESULTS OF OPERATIONS
JUNE 30, 1998 COMPARED TO JUNE 30, 1997
The Company's strategy is not to pursue analog-based television
subscriber growth while it evaluates its business opportunities in
addition to subscription television including high-speed Internet and
Intranet access, as well as digital video and telephony services. The
policy has had a negative impact on the Company's subscription revenues.
As of June 30, 1998, the Company's subscriber base had decreased by
approximately 16,600 to 49,100 subscribers from approximately 65,700 at
June 30, 1997. Consequently, subscriber revenues decreased $2,042,000
for the quarter ended June 30, 1998 compared to the corresponding period
last year.
Operating expenses were $16,803,000 and $19,114,000 for the quarter
ended June 30, 1998 and 1997, respectively. Programming costs, which
decreased by $46,000, did not decline in proportion to the revenue
decline due to minimum provisions provided by certain of the programming
agreements. The $2,311,000 reduction in operating expenses for the first
quarter versus last year's first quarter reflects lower technical,
customer service and marketing costs approximating $1,349,000 which were
in-line with the decline in subscribers, offset by an increase in general
and administrative expenses of $204,000 consisting of incremental
increases in financial and corporate restructuring costs, attorneys fees
in the class action lawsuit, and various FCC filings. The remaining
decrease of approximately $1,120,000 reflects lower depreciation and
amortization, primarily due to a reduction in goodwill amortization
resulting from the goodwill write-down at March 31, 1998, offset by
greater depreciation related to the Boston digital project.
Interest expense was $12,910,000 and $10,974,000 for the quarters
ended June 30, 1998 and 1997, respectively. This increase is primarily
due to the interest on the interim debt financing in the 1998 quarter
that did not exist during the comparable quarter last year.
The decrease in CAI's investment in CS Wireless of $10,002,000
reflects primarily the Company's 60% pro rata share of the $16,668,000
net loss reported by CS Wireless for the three months ended March 31,
1998. The aggregate decrease in this investment was $6,616,000 for the
same period last year. The decrease in CAI's investment in TSS of
$736,000 reflects primarily the Company's 25% pro-rata share of the
estimated $2,944,000 loss of TSS from April 1, 1998 to June 30, 1998,
plus another $208,300 reflecting CAI's depreciation on the equipment
leased to TSS.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Note 4 of Notes to Consolidated Financial
Statements in Part I, Item 1 of this filing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
The following exhibits are filed herewith or incorporated by
reference as indicated:
<TABLE>
<CAPTION>
Incorporation
by Reference Page
EXHIBIT NO. DESCRIPTION (SEE LEGEND) REFERENCE
<S> <C> <C> <C>
3.1 Amended and Restated Certificate of
Incorporation of CAI [1] Exhibit 3.1
3.2 Amended and Restated Bylaws of CAI [1] Exhibit 3.2
4.1 Amended and Restated Note Purchase Agreement
dated as of July 30, 1998 between Registrant
and Merrill Lynch Global Allocation Fund, Inc. [2] Exhibit 4.1
16. Letter by PricewaterhouseCoopers to Securities
and Exchange Commission dated August 6, 1998 [3] Exhibit 16.
<dagger>27. Financial Data Schedule
99.1 Disclosure Statement dated as of June 30, 1998 [4] Exhibit 99.1
99.2 Disclosure Statement Supplement dated as of
July 15, 1998 [5] Exhibit 99.1
99.3 Interim Order Authorizing Postpetition
Financing [2] Exhibit 99.1
99.4 Press Release dated July 30, 1998 [2] Exhibit 99.2
</TABLE>
LEGEND
[1] Incorporated by reference to the exhibits to the Quarterly Report on
Form 10-Q for September 30, 1995.
[2] Incorporated by reference to the exhibit to the Current Report on
Form 8-K dated August 3, 1998.
[3] Incorporated by reference to the exhibit to the Current Report on
Form 8-K dated August 6, 1998.
[4] Incorporated by reference to the exhibit to the Current Report on
Form 8-K dated July 1, 1998.
[5] Incorporated by reference to the exhibit to the Current Report on
Form 8-K dated July 16, 1998.
<dagger> Filed herewith.
<PAGE>
b) REPORTS ON FORM 8-K.
(1) Form 8-K filed July 1, 1998, regarding the following:
Item 5. Other Events:
The Company commenced a solicitation of votes on June 30,
1998 with respect to a pre-packaged reorganization plan
and upon acceptance, intends to file a voluntary petition
under Chapter 11 of the Bankruptcy Code.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
C. Exhibits
99.1 Disclosure Statement dated as of June 30, 1998
(2) Form 8-K filed July 16, 1998, regarding the following:
Item 5. Other Events
The Company disseminated a Disclosure Statement
Supplement to certain impaired creditors which sets forth
additions and/or amendments to the Disclosure Statement
originally sent to certain impaired creditors.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
C. Exhibits
99.1 Disclosure Statement Supplement dated as of July
15, 1998
(3) Form 8-K filed August 3, 1998, regarding the following:
Item 3. Bankruptcy or Receivership
The Company filed voluntary petitions for relief under
Chapter 11, Title 11 of the United States Code with the
United States Bankruptcy Court for the District of
Delaware, Wilmington, Delaware. CAI, as Debtor-in-
possession, will continue to manage and operate its
assets and business with its existing directors and
officers, subject to the supervision and orders of the
Court. Concurrent with filing the voluntary petitions,
CAI sold 13% senior secured notes due January 29, 1999 to
Merrill Lynch Global Allocation Fund, Inc. which provided
for the rollover of the existing bridge financing with
the remaining $10,894,000 available for use during the
Chapter 11 proceedings, in accordance with the terms of
an approved budget.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
C. Exhibits
4.1 Amended and Restated Note Purchase Agreement
dated as of July 30, 1998 between Registrant and
Merrill Lynch Global Allocation Fund, Inc.
99.1 Interim Order Authorizing Postpetition
Financing.
99.2 Press Release dated July 30, 1998.
(4) Form 8-K filed August 6, 1998, regarding the following:
Item 4. Changes in Registrant's Certifying Accountant
PricewaterhouseCoopers LLP resigned from its engagement
as the Company's independent accountant due to a conflict
of interest arising as a result of the merger of the two
accounting firms.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ Chairman, Chief Executive Officer August 12, 1998
JARED E. ABBRUZZESE and Director (Principal Executive
Officer)
/S/ Executive Vice President, Chief August 12, 1998
JAMES P. ASHMAN Financial Officer and Director
(Principal Financial Officer)
/S/ Vice President and Controller August 12, 1998
ARTHUR J. MILLER (Principal Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
CAI Wireless Systems, Inc. and Subsidiaries
Financial Data Schedule
As of and For the Three Months Ended June 30, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,267,884
<SECURITIES> 0
<RECEIVABLES> 793,613
<ALLOWANCES> 238,110
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 91,981,605
<DEPRECIATION> 45,138,949
<TOTAL-ASSETS> 325,630,467
<CURRENT-LIABILITIES> 0
<BONDS> 311,618,543
0
0
<COMMON> 275,770,764
<OTHER-SE> (337,440,123)
<TOTAL-LIABILITY-AND-EQUITY> 325,630,467
<SALES> 0
<TOTAL-REVENUES> 5,632,967
<CGS> 0
<TOTAL-COSTS> 16,803,482
<OTHER-EXPENSES> 10,967,164
<LOSS-PROVISION> 29,200
<INTEREST-EXPENSE> 12,909,875
<INCOME-PRETAX> (34,108,379)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,108,379)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,108,379)
<EPS-PRIMARY> (0.84)
<EPS-DILUTED> (0.84)
</TABLE>
