SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 22, 1998 (January 7,
1998)
CAI WIRELESS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Connecticut 0-22888 06-1324691
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
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18 CORPORATE WOODS BLVD., ALBANY, NY 12211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 462-2632
(Former name or former address, if changed since last report)
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Item 5 - OTHER EVENTS
(A) On January 14, 1998, members of the senior management of CAI
Wireless Systems, Inc. held a conference call for financial analysts concerning
the public comments received by the Federal Communications Commission on the
Notice of Proposed Rulemaking for two-way use of MDS and ITFS frequencies.
Excerpts from the conference call are set forth below:
"CAI Wireless Systems, Inc.
Update on Notice of Proposed Rulemaking for
Full Two-Way Use of MMDS Spectrum
Excerpts from a Conference Call
held on January 14, 1998 at 4:00 PM (EST)
Operator: Welcome to the CAI Wireless update conference call. [ . . . ] I
would now like to turn the conference over to Mr. Michael Glickman at
Lippert/Heilshorn. Please go ahead, sir.
Michael Glickman: [ . . . ] Let me introduce who is on the call today. With
us, from management, we have Jared Abbruzzese, Chairman and CEO; John Prisco,
President and COO, and Gerry Kittner, Senior Vice President-Spectrum
Management. And now I'm going to turn the call over to Jared Abbruzzese. [ .
. . ]
Jared Abbruzzese: Thank you. First of all I want to start out and say we
recognize, to say the least, the last year and a half has been very, very
difficult for everybody [ . . . ] involved in CAI. It has been very difficult
for our shareholders, challenging for our bond holders, and it's been very
difficult and challenging for management, also.
[FCC RECEIVES SUPPORTIVE COMMENTS ON TWO-WAY USE OF MMDS SPECTRUM]
Last week the [comment period expired for the] Notice of Proposed Rulemaking
[that would govern the two-way use of wireless spectrum]. CAI was one of the
sponsors of and a very strong supporter of [ . . . ] the NPRM. All the
comments [filed at the FCC were generally supportive, which] we think presents
reasonably good news. In fact, it represents excellent news for [our company's
move] towards [flexible,] two-way use of our spectrum.
[SHIFTING AWAY FROM RAPID DIGITAL VIDEO ROLL-OUT]
I want to step back for a quick second and remind you all about what has
transpired over the last year. Many of you probably don't need reminding, but
I want to explain it from management's perspective. Late in `96, management
and the board of CAI came to the conclusion that Bell Atlantic and NYNEX would
not fulfill what we perceived as commitments in [rolling] out their digital
video systems. [ . . . ] And that [conclusion eventually] precipitated the
December 13{th} agreement whereby we agreed to separate.
We knew this [decision] would have a devastating effect on our company. It was
done because the management felt sincerely that if we had continued on [the
prior] course, the damage would have been more severe than breaking off and
trying to reinvent ourselves. [ . . . ]
Management here, over the course of the holiday seasons in 1996 and early `97,
put together a comprehensive business plan, based on looking at the cash that
CAI had available to it, the reputation and [weak] position of MMDS in the
marketplace and assessing where the telecommunications marketplace would be
over the next several years. We laid out a strategy that we felt offered the
best chance for this company, its shareholders and its bondholders to benefit
long-term and near-term.
[TWO-WAY TECHNOLOGY; REGULATORY AUTHORITY; STRATEGIC PARTNERING]
The strategy was a three-tiered strategy. [First,] was [ . . . ] to take our
spectrum into a two-way environment. That required the development of two-way
equipment that heretofore had never been developed. This was all going to be
alpha and beta equipment. This would require CAI going out to vendors
throughout [ . . . ] North America, trying to get them to take equipment that
was geared toward PCS and other technologies and having it [reconfigured] and
tuned for MMDS Spectrum (which is primarily in the 2.5 to 2.7 Gigahertz range).
This was going to be a very challenging effort for a company that had a poor
balance sheet and had just been [spurned] by Bell Atlantic and NYNEX. But we
recognized that without the technology, we would not be able to demonstrate the
capabilities of the spectrum.
The second thing we had to get done was dealing with the regulatory
environment. At that point in time, as of December 13, 1996, the FCC had
indicated an interest in allowing owners of spectrum to have flexibility in how
they used their spectrum and had indicated to CAI a willingness to allow CAI to
use their spectrum [ . . . ] for data and other uses beyond just video. But
the concept of [and the guidelines for] two-way flexible use of the spectrum
for services such as telephony and other things was beyond what was currently
being pursued [by MMDS operators] at the FCC.
Therefore, CAI had to lay out a very comprehensive plan [ . . . ] to approach
the FCC. We laid out a series of benchmarks that we intended to hit over the
course of 1997, in order to achieve a [dual set of final regulatory goals for
CAI] -- one of which was getting a permanent [flexible] two-way authority in
one of our major markets. We decided we would target Boston [ . . . ] where we
decided to load in all of our two-way equipment. And the second [goal was] to
push [for establishing] rules at the FCC [governing full two-way flexible use
authority]. [ . . . ]
If you look back over `97, [ . . . ] we were able to announce a permanent two-
way authority for two of our channels in Boston. During that time, our
engineering group, under the leadership of John Prisco, our COO, and Bruce
Kostreski, our head of engineering, both former Bell Atlantic employees, led a
group of [wireless industry] engineers and management in something called the
Ticket Two Task Force, where we compiled engineering data on how two-way MMDS
would be used in the market place. This data [was] submitted as the [basis for
the rulemaking] for operating two-way MMDS going forward.
Our belief was, from day one, that any rulemaking at the FCC would not be for
PERMISSION to do two-way, but rather to [establish] the rules on HOW two-way
would be [utilized for the industry]. We believed that was consistent with the
FCC rules, and we believed also that the two-way authority we received in
Boston prior to the NPRM being filed and going on public notice, [ . . . ]
indicates that we were correct in that assessment.
In the Fall, the FCC accepted for filing the NPRM [and it] went on public
notice. [ . . . ] Comments were required to be filed as of last Thursday
evening, on or about 5 o'clock. [We were all] very concerned about what those
comments would look like. [Specifically, we] were very concerned about whether
PCS companies that have invested billions of dollars in auctions would be
coming in and saying, "You know we're not going to pay our bills if MMDS gets
two-way." We felt that wouldn't happened. And there were no [such comments].
We have now gone through all the comments. [ . . . ] I'm going to let Gerry
[Kittner] talk to you about them in a second. [ . . . ] Most of them were in
support of MMDS [operating] two-way and supportive of the technical rules that
[ . . . ] would govern two-way use of MMDS going forward.
This whole regulatory effort was the second piece of our triad approach or
business plan for 1997 and early 1998. The third component was that [ . . . ]
if we were successful in getting good technology in place and if we could
remove the regulatory barriers or, better said, enhance the regulatory
environment for two-way authorization, then those two together would help us
pursue and develop a relationship with large strategic investors or large
strategic partners going forward. [ . . . ]
We have spent the year working with other companies in testing the technology.
It takes time. [ . . . ] CAI had to get [people] over misperceptions and
misunderstandings [about MMDS because of our history] to start with. We have
worked aggressively to build systems in Boston that have demonstrated two-way
capability. And we think they hold great promise.
I want to be clear though. One of the other key decisions that CAI management
and the board made back in December and January of 1996 and early `97 was that
we had a fixed amount of money available to us, [ . . . ] and we had a decision
to make. We had [to make] a decision [whether] to strip everything down and
live off that [fixed amount of money for as long as we could], or [we could] go
out and change the rules and demonstrate what the real capabilities of the
spectrum would be. We made the decision that we would spend our money building
this new technological platform and pursuing this regulatory agenda in order to
attract [ . . . ] strategic partners.
We felt that this was the best track and the best use of our money, and that to
pursue the more complacent agenda would end up almost certainly in disaster.
And understand that there is no guarantee that the direction we have taken
won't present SIGNIFICANT problems ahead. But we felt that this offered the
best promise. And I think that if everybody looks back over the course of the
year, we have made great strides in everything that we have done. [ . . . ]
We spend most of our efforts demonstrating this equipment and these platforms
up in Boston.
We want to talk to you today about the success we achieved in the regulatory
environment. We're very happy about it. We think it is worth discussing
briefly so everybody can understand [ . . . ] why it's important; it's the
second of the three things that we wanted to accomplish. The first was the
technology. We feel we have workable equipment in Boston now. We have three
workable platforms in Boston that are operating in various types of services
that are being tested by other companies: fractional T-1, and symmetrical and
asymmetrical services. We think they have some very attractive promise. But
again, time will tell. [ . . . ] Some of the things in Boston are deployed no
where else in the world, that we're aware of.
[THE REGULATORY ENVIRONMENT-COMMENTS ON THE NPRM]
And now the second effort we feel we've achieved some [excellent] success in is
the regulatory [environment]. Gerry, if you could take five minutes to explain
to everybody what the comments were like and who was in support and where any
negative comments, if any, were found.
Gerry Kittner: There was only one entity outside of the ITFS and MMDS industry
that filed comments questioning whether the spectrum should be used for two-
way. That was a company called Webcell, a company that wants to be in the LMDS
industry. They have filed comments before in this same proceeding, and the
Commission has dismissed their comments and given that position absolutely no
credence.
The other comments [questioned] elements of "how to" implement two-way, not
"whether to" implement two-way. Primarily, you had commentators who didn't
really understand the petition for rulemaking or the notice of proposed
rulemaking, and that were concerned with the potential for interference to
existing ITFS downstream facilities. The task force, of which CAI is a member,
that put the petition for rulemaking together approached this whole process on
a very conservative basis, knew that one of our absolute top priorities would
have to be protecting the existing ITFS community. And we think we did that.
We [have some work to do], now that the initial set of comments were filed.
There is a reply comment deadline coming up on February 9th, after which the
Commission takes all of the comments under advisement and eventually issues a
report and order with the actual rules. [ . . . ] We intend to use the
opportunity to talk to the other commentators, explain why we think the
interference concerns that they have are unwarranted and, more importantly,
talk to the Commission and make sure the Commission understands.
Twenty comments is very small relative to other rulemaking proceedings.
Everybody involved in this effort is very encouraged and we remain very
optimistic that we'll see a final set of rules. Our target is the next
wireless cable convention in July and we hope that Chairman Kennard, at that
point, will be able to announce the issuance of that report and order.
Jared Abbruzzese: We should state that the FCC has been very cooperative. [ . .
. ] We don't look for that to change. Again, I want to say, this is
important stuff.
[COMPANY'S FINANCIAL CONDITION]
We recognize underneath all of this, the reality is that we are running out of
money. We [have] stated that over and over. We recognized that [this would
eventually] happen. We have been spending a lot of effort on trying to find
alternative sources of funding for the company, both from a strategic investor
perspective and from financial investors. There is no certainty as to whether
we'll be able to achieve that before some sort of a restructuring may or may
not have to be undertaken. But we're certainly working towards that effort.
There are a lot of big financial institutions that cozied up to us over the
late summer and early fall, who were saying this could be a great restructuring
or reorganization. [ . . . ] We've resisted that. We've tried to, at all
turns, do what [management felt was] right for [CAI's] shareholders and
bondholders.
We continue to develop this technology, we continue to develop this broadband
platform that we think is unique. There is nothing else like it. There's
nothing else available today at the price points we can provide that would
match what we have developed up in Boston. And, as I say, we think it holds
promise. But there are financial realities that encircle all of our issues.
And we are trying to deal with those.
Management has been dealing with the concept of restructuring or reorganization
for months now, and has been looking at that as an option. You know, we hope
it's not an option that has to be pursued, but it's certainly an option that
everybody has to recognize is in the realm of possibility. At the end of the
day, we're doing everything we can to keep that from happening to the degree
that it doesn't injure the company.
I think, we have made a lot of progress. Two of the three things [CAI] wanted
to get accomplished, have been accomplished. And we are working our hardest at
the third, which is probably the most important: [ . . . ] getting a strategic
partner that can help stabilize our balance sheet.
[STRATEGIC PARTNERING]
I want to state categorically, CAI has, for years now, been looking at
strategic partners as a requirement for us doing business going forward.
That's why we did Bell Atlantic and NYNEX to begin with, recognizing that we
needed their type of a balance sheet in order to assist us in our funding
requirements going forward. That has not changed. That's not inconsistent.
The deal with Bell Atlantic and NYNEX was a good one in concept. The bad part
was it was an option. We will do our best not to allow an option to ever occur
again.
[NASDAQ DELISTING]
The last thing we want to say is that we sincerely regret what happened with
the de-listing last week. It was beyond our control. [ . . . ] We believe in
the direction we're taking. We're very concerned about the pain of our
shareholders and bondholders over the last year or more.
So, at this point, any questions anybody may have we're happy to answer. If
there are none, we appreciate your time. Thank you.
* * * * *
(B) The following news releases were issued:
(i) CAI Wireless Systems, Inc. Common Stock to be listed on the Nasdaq
SmallCap Market dated January 7, 1998; and
(ii) CAI Wireless Systems, Inc. Common Stock to be de-listed from the
Nasdaq SmallCap Market dated January 12, 1998.
Forward Looking Statements; Going Concern
The statements contained in this Form 8-K relating to the Company's
operating results, and plans and objectives of management for future
operations, including plans or objectives relating to the Company's pursuit of
one or more strategic partners and its products and services, 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 the availability of additional funds on terms
and conditions that are satisfactory to the Company, receipt of regulatory
approvals, including approvals relating to fixed, two-way use of the MMDS
spectrum, the availability of new strategic and other partners and their
willingness to enter into arrangements with the Company and the terms
of such arrangements, including arrangements relating to the use of the MMDS
spectrum, including potential use as a telephony delivery platform, and
investment arrangements, subscriber and two-way equipment availability, tower
space availability, absence of interference and the ability of the Company to
sell excess equipment, as well as other factors contained herein and in the
Company's securities filings. There can be no assurance that that the Company
will be able to implement its business strategy or that CAI will apply for and
receive authorization for additional spectrum in Boston or any other market,
that final rules regarding two-way use of the MMDS spectrum will be adopted,
and if adopted, will be favorable to the Company, any third parties will
utilize the Company's Internet access product for their subscribers, or that a
definitive agreement with one or more potential strategic partners can be
reached, and if reached, that the definitive agreement will be on terms and
conditions favorable to the Company. The Company will not undertake to
disclose the progress of any discussions with potential strategic partners or
any other third parties until such time as one or more definitive agreements
have been reached or the Company determines that such agreements are not
probable, at which time appropriate public disclosure will be made by the
Company.
CAI's recurring losses, restrictions on its ability to obtain additional
financing and substantial commitments raise doubt about the continuation of CAI
as a going concern. The Company continues to implement cost-saving measures
while it reviews the alternatives that may be available to it, including
without limitation, decreasing analog video operations, selling non-core assets
and the implementation of various plans of financial restructuring. The
Company's ability to raise additional funds through secured loans and the
issuance of capital stock, is limited by the terms of the Indenture governing
the Company's 12 1/4 % Senior Notes due 2002, the terms of various outstanding
securities and/or the terms of the Secured Note Agreement.
Item 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
C. Exhibits
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EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION
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99.1 Press Release - CAI Wireless Systems, Inc. Page __
Common Stock to be listed on the Nasdaq
SmallCap Market dated January 7, 1998
99.2 Press Release - CAI Wireless Systems, Inc. Page __
Common Stock to be de-listed from the
Nasdaq SmallCap Market dated January 12,
1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIGNATURE TITLE DATE
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/s/Jared E. Abbruzzese Chairman, Chief Executive Officer, January 22, 1998
and Director (Principal Executive
Officer)
/s/James P. Ashman Executive Vice President, Chief January 22, 1998
Financial Officer and Director
(Principal Financial Officer)
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EXHIBIT 99.1
CAI WIRELESS SYSTEMS, INC. COMMON STOCK TO BE LISTED ON THE NASDAQ
SMALLCAP MARKET{ SM}
Albany, NY, January 7, 1998 - CAI Wireless Systems, Inc. ("CAI")
(Nasdaq: CAWS) announced today that beginning January 8, 1998, its Common
Stock will be listed on the Nasdaq SmallCap Market{SM} and will continue
to be listed under the trading symbol "CAWS."
The Common Stock of CAI is currently listed on the Nasdaq National
Market<reg-trade-mark> ("NNM"). As previously reported by CAI, its
listing on the NNM had been under review by Nasdaq as a result of CAI's
being out of compliance with the net tangible asset listing requirement.
On January 6, 1998, the Nasdaq informed CAI that it had completed its
review of CAI's NNM listing and had concluded that CAI's Common Stock
listing would be transferred to the Nasdaq SmallCap Market{SM} effective
January 8, 1998.
In connection with the decision, Nasdaq informed CAI that it would
waive the $4.00 per share initial inclusion bid price requirement, but
that CAI would be required to maintain compliance with the $1.00 per
share bid price maintenance requirement for the period from January 8
through January 20, 1998. Failure to maintain such bid price would
result in immediate delisting from the Nasdaq SmallCap Market.{ SM}
Continued listing on the Nasdaq SmallCap Market{SM} will be subject to
CAI's completion of a new listing application and continued satisfaction
of the maintenance criteria for such market.
CAI, based in Albany, operates six analog-based wireless systems in
New York City, Rochester and Albany, NY; Philadelphia, PA; Washington,
DC; and Norfolk/Virginia Beach, VA, and provides Internet access services
in Boston, Rochester and New York City. CAI also owns a portfolio of
wireless channel rights in eight additional markets, including Long
Island, Buffalo and Syracuse, NY; Providence, RI; Hartford, CT; Boston,
MA; Baltimore, MD; and Pittsburgh, PA. CAI is the holder of
approximately 51% of CS Wireless Systems, Inc., an MMDS operator based in
Plano, TX.
EXHIBIT 99.2
CAI WIRELESS SYSTEMS, INC. COMMON STOCK TO BE DE-LISTED FROM THE NASDAQ
SMALLCAP MARKET{ SM}
Albany, NY, January 12, 1998 - CAI Wireless Systems, Inc. ("CAI")
(Nasdaq: CAWS) was notified today by The National Stock Market, Inc.
("NASD") that beginning January 13, 1998, its Common Stock will no longer
be listed on The Nasdaq SmallCap Market{SM}. CAI believes that its
Common Stock is eligible for inclusion on the Electronic Bulletin Board
system, and expects the shares to be traded on this system beginning on
January 13, 1998 under the "CAWS" symbol.
As previously announced, the NASD recently transferred trading of
the CAI Common Stock from the Nasdaq National Market<reg-trade-mark> to
The Nasdaq SmallCap Market{SM}, on the condition that CAI comply with the
$1.00 per share bid price maintenance requirement for the period from
January 8 through January 20, 1998. The CAI Common Stock closed at 31/32
on Friday, January 9, 1998, prompting the NASD's action.
CAI, based in Albany, operates six analog-based wireless systems in
New York City, Rochester and Albany, NY; Philadelphia, PA; Washington,
DC; and Norfolk/Virginia Beach, VA, and provides Internet access services
in Boston, Rochester and New York City. CAI also owns a portfolio of
wireless channel rights in eight additional markets, including Long
Island, Buffalo and Syracuse, NY; Providence, RI; Hartford, CT; Boston,
MA; Baltimore, MD; and Pittsburgh, PA. CAI is the holder of
approximately 51% of CS Wireless Systems, Inc., an MMDS operator based in
Plano, TX.
