UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
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 DECEMBER 31, 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 _____
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No _____
Number of shares outstanding of each of registrant's class of common stock at
June 22, 1999:
CLASS OUTSTANDING SHARES
Common Stock, $.01 par value 17,241,379
<PAGE>
PART I. FINANCIAL INFORMATION.
THIS QUARTERLY REPORT ON FORM 10-Q/A AMENDS CAI WIRELESS SYSTEMS, INC.'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998.
THE FINANCIALS AND NOTES THERETO HAVE BEEN ADJUSTED HEREIN FOR (A) THE
COMPANY'S REVISION TO THE MARCH 31, 1998 FINANCIAL STATEMENTS TO REFLECT
FINANCIAL RESTRUCTURING FEES WHICH RELATE TO A SUBSEQUENT PERIOD BUT WHICH
ARE IMMATERIAL, (B) THE REVERSAL OF CONTRACTURAL INTEREST IN THE AMOUNT OF
$4,956,347 FOR THE PERIOD FROM JULY 30, 1998, THE DATE OF THE COMPANY'S
VOLUNTARY FILING OF A CHAPTER 11 BANKRUPTCY PETITION THROUGH OCTOBER 14,
1998, THE DATE OF THE BANKRUPTCY CONSUMMATION, IN ACCORDANCE WITH SOP 90-7
SINCE CONTRACTUAL INTEREST IS AN UNSECURED, UNALLOWED CLAIM IN THE
BANKRUPTCY PROCEEDING, AND (C) THE APPLICATION OF FRESH-START ACCOUNTING
IN ACCORDANCE WITH SOP 90-7. ACCORDINGLY, THROUGHOUT THE NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS TO WHICH THE
NOTES ARE ATTACHED, USE OF THE TERM "PREDECESSOR ENTITY" REFERS TO CAI AND
ITS SUBSIDIARIES PRIOR TO OCTOBER 15, 1998. A VERTICAL BLACK
LINE HAS BEEN INSERTED IN THE CONSOLIDATED FINANCIAL STATEMENTS TO SEPARATE
THE REORGANIZED COMPANY AND THE PREDECESSOR ENTITY SINCE THEY HAVE NOT BEEN
PREPARED ON A CONSISTENT BASIS OF ACCOUNT. FURTHER, THE EMERGENCE FROM
CHAPTER 11 PROCEEDING RESULTED IN THE ADJUSTMENTS TO REFLECT THE CREATION OF
A NEW REPORTING ENTITY WITHOUT ANY ACCUMULATED DEFICIT AND WITH CAI'S ASSETS
AND LIABILITIES RESTATED TO THEIR ESTIMATED FAIR VALUE.
ITEM 1. FINANCIAL STATEMENTS.
CAI WIRELESS SYSTEMS, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Reorganized Company | Predecessor Entity
DECEMBER 31, 1998(a) | MARCH 31, 1998
-------------------- | --------------
(Unaudited) |
<S> <C> <C> | <C>
|
ASSETS |
Cash and cash equivalents $ 1,785,185 | $ 1,275,020
Restricted cash and cash equivalents 19,293,330 | 9,134,651
Debt service escrow - | 16,418,922
Subscriber accounts receivable, net 456,768 | 387,144
Prepaid expenses 606,863 | 661,669
Property and equipment, net 38,505,017 | 49,898,337
Wireless channel rights, net 201,321,434 | 194,050,792
Investment in CS Wireless Systems, Inc. - | 43,337,527
Investment in TelQuest Satellite Services LLC 293,240 | 3,174,732
Goodwill, net of accumulated amortization - | 22,985,876
Debt financing costs, net 3,852,083 | 7,079,424
Reorganization value in excess of amounts allocable |
to identifiable assets, net 37,161,629 | -
Other assets 2,565,313 | 3,061,780
------------ | ------------
Total Assets $ 305,840,862 | $ 351,465,874
============= | =============
|
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) |
LIABILITIES |
Accounts payable $ 2,148,548 | $ 4,852,091
Accrued expenses 10,094,731 | 8,094,763
Wireless channel rights obligations 2,825,225 | 4,832,971
Interim debt financing 63,780,761 | 45,000,000
Notes payable 106,456,285 | 312,088,506
------------ | -----------
185,305,550 | 374,868,331
------------ | -----------
|
COMMITMENTS AND CONTINGENCIES |
|
SHAREHOLDERS' EQUITY (DEFICIT) |
Preferred stock, no shares outstanding - | -
Common stock: |
40,543,039 no par value shares outstanding as of |
March 31,1998; canceled as of October 14, 1998 - | 275,770,764
17,241,379 new $.01 par value shares issued and |
outstanding as of December 31, 1998 172,414 | -
Additional paid-in capital 137,718,131 | 101,711,759
Accumulated deficit (b) (17,355,233) | (400,884,980)
------------ | ------------
120,535,312 | (23,402,457)
------------ | -----------
|
Total Liabilities and Shareholders' Equity (Deficit) $305,840,862 | $351,465,874
============ ============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reorganized as of October 15, 1998. See Note 2 of the notes to consolidated financial statements.
(b) Accumulated deficit of $415,434,847, net of a $85,355,624 extraordinary gain from the extinguishment of debt
in the reorganization, was eliminated as of October 14, 1998. The accumulated deficit shown at December 31,
1998 is for the period from October 15, 1998 to December 31, 1998.
See notes to consolidated financial statements.
</TABLE>
CAI WIRELESS SYSTEMS, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
REORGANIZED COMPANY | PREDECESSOR ENTITY
--------------------- | ------------------------------------------
Period from | Period from
October 15, 1998 to | April 1, 1998 to Nine Months Ended
December 31, 1998(a) | October 14, 1998(c) December 31, 1997
-------------------- | ------------------- ------------------
<S> <C> | <C> <C>
Revenues $ 3,490,526 | $ 11,481,498 $ 21,977,384
------------ | ----------- ------------
Costs and expenses: |
Programming and licensing 2,761,446 | 8,099,445 10,973,934
General and administrative 3,905,633 | 11,660,357 23,115,093
Depreciation and amortization 6,943,667 | 14,663,560 26,152,839
------------ | ------------ ------------
13,610,746 | 34,423,362 60,241,866
------------ | ------------ ------------
|
Operating loss (10,120,220) | (22,941,864) (38,264,482)
------------ | ------------ ------------
|
Other income (expense): |
Interest expense (6,611,422) | (18,243,038) (40,128,505)
Equity in losses of affiliates (735,053) | (45,483,966) (23,118,008)
Reorganization expense - | (17,101,383) -
Interest and other income 111,462 | 3,864,780 2,974,426
----------- | ------------ ------------
(7,235,013) | (76,963,607) (60,272,087)
----------- | ------------ ------------
|
Loss before extraordinary item (17,355,233) | (99,905,471) (98,536,569)
|
Extraordinary gain from early |
extinguishment of debt - | 85,355,624 -
----------- | ------------ ------------
|
Net loss (17,355,233) | (14,549,847) (98,536,569)
|
Preferred stock dividends - | - (11,125,453)
------------ | ------------ ------------
|
Net loss applicable to |
common shareholders $ (17,355,233) | $ (14,549,847) $(109,662,022)
============ | ============ ============
|
Basic and diluted loss per new |
common share(b) $ (1.01) |
======== |
Weighted average new common |
shares outstanding 17,241,379 |
=========== |
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reorganized as of October 15, 1998. See Note 2 of the notes to consolidated financial statements.
(b) Share data for the pre-reorganization periods are not presented as the amounts are not meaningful.
(c) Contractual interest of $4,956,347 was not recorded for the period July 30, 1998, the date
CAI voluntarily filed its Chapter 11 bankruptcy petition, through October 14, 1998, the date of
the bankruptcy consummation, in accordance with SOP 90-7 since contractual interest was an
unsecured unallowed claim in the bankruptcy proceeding.
See notes to consolidated financial statements
</TABLE>
<PAGE>
CAI WIRELESS SYSTEMS, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
REORGANIZED COMPANY | PREDECESSOR ENTITY
--------------------- | ------------------------------------------
Period from | Period from
October 15, 1998 to | October 1, 1998 to Three Months Ended
December 31, 1998(a) | October 14, 1998(c) December 31, 1997
-------------------- | ------------------- ------------------
<S> <C> | <C> <C>
Revenues $ 3,490,526 | $ 629,342 $ 6,591,341
------------ | ----------- ------------
Costs and expenses: |
Programming and licensing 2,761,446 | 493,417 3,702,771
General and administrative 3,905,633 | 641,405 8,343,478
Depreciation and amortization 6,943,667 | 1,026,250 10,245,751
------------ | ----------- ------------
13,610,746 | 2,161,072 22,292,000
------------ | ----------- ------------
|
Operating loss (10,120,220) | (1,531,730) (15,700,659)
------------ | ------------ ------------
|
Other income (expense): |
Interest expense (6,611,422) | (184,256) (17,198,770)
Equity in losses of affiliates (735,053) | (192,111) (9,378,008)
Reorganization expense - | (13,146,175) -
Interest and other income 111,462 | 8,164 1,351,399
----------- | ------------ ------------
(7,235,013) | (13,514,378) (25,225,379)
----------- | ------------ ------------
|
Loss before extraordinary item (17,355,233) | (15,046,108) (40,926,038)
|
Extraordinary gain from early |
extinguishment of debt - | 85,355,624 -
----------- | ------------ ------------
|
Net income (loss) (17,355,233) | 70,309,516 (40,926,038)
|
Preferred stock dividends - | - (3,850,594)
------------ | ------------ ------------
|
Net income (loss) applicable to |
common shareholders $ (17,355,233) | $ 70,309,516 $ (44,776,632)
============ | ============ ============
|
Basic and diluted loss per new |
common share(b) $ (1.01) |
======== |
Weighted average new common |
shares outstanding 17,241,379 |
=========== |
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reorganized as of October 15, 1998. See Note 2 of the notes to consolidated financial statements.
(b) Share data for the pre-reorganization periods are not presented as the amounts are not meaningful.
(c) Contractual interest of $462,664 was not recorded for the period October 1, 1998, through
October 14, 1998, in accordance with SOP 90-7 since contractual interest from the date CAI voluntarily
filed its Chapter 11 bankruptcy petition, July 30, 1998, to the date of bankruptcy consummation, October 14,
1998, was an unsecured unallowed claim in the bankruptcy proceeding.
See notes to consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
CAI WIRELESS SYSTEMS, INC.
Consolidated Statements of Shareholders' Equity (Deficit)
Periods Ended December 31, 1998 (unaudited) and October 14, 1998 (unaudited)
and the Years Ended March 31, 1998 and 1997
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR ENTITY:
Balance at March 31, 1997 40,540,539 $275,769,414 $ - $(161,079,224) $114,690,190
Common stock issued in exchange for
Bell Atlantic warrants 2,500 1,350 - - 1,350
Senior preferred stock and accumulated
dividends contributed to capital
pursuant to the Bell Atlantic
termination agreement on March 3, 1998 - - 101,711,759 - 101,711,759
Preferred stock dividends - - - (13,891,025) (13,891,025)
Net loss for the year - - - (225,914,731) (225,914,731)
---------- ----------- ----------- ------------ -----------
Balance at March 31, 1998 40,543,039 275,770,764 101,711,759 (400,884,980) (23,402,457)
Net loss for the period from April 1, 1998
to October 14, 1998, including an extraordinary
gain of $85,355,624 - - - (14,549,847) (14,549,847)
Eliminate predecessor equity accounts and
fair value assets in connection with
fresh-start accounting:
Cancel common shares (no par value)
and restate the accumulated deficit (40,540,039) (275,770,764) (101,711,759) 377,482,523 -
Issue new common shares,
par value $.01 15,000,000 150,000 119,814,776 - 119,964,776
New shares issued in connection
with the exit facility 2,241,379 22,414 17,903,355 - 17,925,769
Record excess of reorganization
value over identifiable assets - - - 37,952,304 37,952,304
---------- ----------- ----------- ----------- -----------
Balance at October 14, 1998 17,241,379 172,414 137,718,131 - 137,890,545
REORGANIZED COMPANY:
Net loss for the period from October 15,
1998 to December 31, 1998 - - - (17,355,233) (17,355,233)
---------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 17,241,379 $ 172,414 $137,718,131 $(17,355,233) $120,535,312
========== =========== ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
REORGANIZED COMPANY | PREDECESSOR ENTITY
------------------- |--------------------------------------
Period from | Period from
October 15, 1998 to | April 1, 1998 to Nine Months Ended
December 31, 1998(a)| October 14, 1998 December 31, 1997
------------------- | ---------------- -----------------
<S> <C> | <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Net loss $ (17,355,233) | $ (14,549,847) $ (98,536,569)
Adjustments to reconcile net loss to |
net cash used in operating activities: |
Extraordinary gain on early extinguishment of debt - | (85,355,624) -
Depreciation and amortization 6,152,992 | 14,663,560 26,152,839
Reorganization expense - | 10,795,636 -
Amortization of reorganization value in excess |
of amounts allocable to identifiable assets 790,675 | - -
Equity in losses of affiliates 735,053 | 45,483,966 23,118,008
Gain (loss) on sale of assets 1,999 | (2,543,327) (538,307)
Debt financing costs and discount amortization |
and accretion 4,536,684 | 1,407,539 8,263,013
Write-off of projects and other costs - | - 633,952
Changes in assets and liabilities: |
Subscriber accounts receivable and other assets 635,424 | (413,230) (289,644)
Accounts payable and accrued expenses (3,143,358) | 4,263,245 12,605,498
----------- | ----------- -----------
Net cash used in operating activities (7,645,764) | (26,248,082) (28,591,210)
----------- | ----------- -----------
|
CASH FLOWS FROM INVESTING ACTIVITIES |
Purchase of wireless channel rights - | (110,000) (2,221,096)
Purchase of property and equipment (24,961) | (991,649) (6,336,574)
Proceeds from sale of equipment 135,718 | 4,810,018 178,759
Proceeds from sale of investments 103,744 | - 626,937
Proceeds from maturity of escrow investments - | 16,472,495 15,083,943
Payments received from CS Wireless Systems, Inc. 331,231 | - 3,529,689
Investment in affiliates - | (411,567) (3,138,797)
Loan to related parties, net of collections - | - (297,440)
Cash paid for investment - | - (356,025)
Other (167,458) | (81,527) -
------------ | ----------- -----------
Net cash provided by investing activities 378,274 | 19,687,770 7,069,396
------------ | ----------- -----------
|
CASH FLOWS FROM FINANCING ACTIVITIES |
Increase (decrease) in restricted cash account 7,864,252 | (18,022,931) -
Proceeds from interim debt financing - | 26,847,439 20,793,979
Repayment of senior and other debt including |
wireless channel rights obligations (150,644) | (2,073,704) (2,608,004)
Debt financing costs paid - | (126,445) (4,965,643)
------------ | ----------- ------------
Net cash provided by financing activities 7,713,608 | 6,624,359 13,220,332
------------ | ----------- ------------
Net increase (decrease) in cash and cash equivalents 446,118 | 64,047 (8,301,482)
|
Cash and cash equivalents, beginning of year 1,339,067 | 1,275,020 10,471,918
------------ | ----------- ------------
Cash and cash equivalents, end of period $ 1,785,185 | $ 1,339,067 $ 2,170,436
============ | ============ ============
Cash payments during the period for interest $ 11,869 | $ 17,028,872 $ 18,038,893
======== | ============ ============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reorganized as of October 15, 1998. See Note 2 of the notes to consolidated financial statements.
See notes to consolidated financial statements
</TABLE>
<PAGE>
CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 Statement of Financial Accounting Standards
No. 130 for the periods presented and, accordingly, a comprehensive income
disclosure has not been included. CAI Wireless Systems, Inc. and one of its
subsidiaries emerged from a pre-packaged Chapter 11 bankruptcy on October 14,
1998.
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 has a 94% investment (as of December 2, 1998) in CS Wireless Systems, Inc.
("CS"). CS has retained CIBC Oppenheimer Corp. ("CIBC") to serve as its
financial advisor. CS and CIBC have begun to evaluate available options with
respect to the capitalization of CS, including financial restructuring
alternatives. As a consequence, CAI's investment in CS is accounted for on the
equity method. CAI also has a 30% investment in TelQuest Satellite Services
LLC ("TelQuest"), excluding the 30% interest in TelQuest held by CS. CAI's
investment in TelQuest is accounted for on the equity method. 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 periods from October 15, 1998 to
December 31, 1998 ("Reorganized Company") and from April 1, 1998 to October 14,
1998 ("Predecessor Entity") 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.
FRESH-START REPORTING. Financial accounting during a Chapter 11 proceeding is
prescribed in the American Institute of Certified Public Accountants' Statement
of Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code." The emergence from the Chapter 11 proceeding
resulted in the creation of a new reporting entity without any accumulated
deficit and with the Company's assets and liabilities restated to their
estimated fair values (see note 2). Due to the application of fresh-start
reporting, the financial statements for periods after the reorganization are
not comparable in all respects to the financial statements for periods prior to
the reorganization, primarily with respect to depreciation and amortization.
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS.
Reorganization value approximates the amount a willing buyer would pay for the
assets of a company immediately after a restructuring. The reorganization
value in excess of amounts allocable to identifiable assets (total assets after
adjusting to fair value) is amortized over 10 years. Accumulated amortization
at December 31, 1998 is $790,675.
SEGMENT REPORTING. The Company adopted SFAS No. 131, "Disclosures about
segments of an enterprise and related information." SFAS No. 131 requires that
public companies report operating segments based upon how management allocates
resources and assesses performance. Based on the criteria outlined in SFAS No.
131, the Company is comprised of a single reportable segment-distribution of
wireless cable television subscription services. Accordingly, no additional
disclosure is required by the Company to conform to the requirements of SFAS
No. 131.
<PAGE>
RESTRUCTURING COSTS. The Company has revised its March 31, 1998 financial
statements to reflect financial restructuring fees which relate to a subsequent
period but which are immaterial.
Note 2. GOING CONCERN AND CHAPTER 11 REORGANIZATION.
Going Concern.
Although the Company has emerged from bankruptcy, there continues to be
substantial doubt as to the Company's ability to continue as a going concern.
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 Commission on June 30, 1998.
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 appropriateness of reporting on a going concern basis is
dependent upon, among other things, future operations and the ability to
generate sufficient cash from operations and financing sources to meet
obligations.
On July 30, 1998, CAI and one of its wholly-owned subsidiaries filed
voluntary petitions under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the District of Delaware. The CAI
reorganization plan, which provided for the restructuring of certain amounts of
CAI's long-term indebtedness, was confirmed on September 30, 1998 and
consummated on October 14, 1998. Under the confirmed reorganization plan, each
holder of CAI's 12.25% senior notes due 2002 received, in full satisfaction of
its claim against CAI as a holder of senior notes, a pro-rata portion of
$212,909,624 aggregate principal amount at maturity ($100 million aggregate
discounted principal amount at issuance) of 13% senior notes due 2004, 91% of
the equity of reorganized CAI and approximately $16.5 million in cash. The
12.25% senior notes have been extinguished and certificates for such notes
represent solely the right to receive the pro-rata share of the distribution
contemplated by the CAI reorganization plan to be made on account of such
previously-held senior notes. The reorganization plan also provided that each
holder of subordinated indebtedness claims against CAI receive, in full
satisfaction of its claim against CAI as a holder of a subordinated
indebtedness claim, a pro-rata portion of the remaining 9% of the equity of
reorganized CAI. The subordinated indebtedness claims against CAI have been
extinguished and notes previously representing such claims represent solely the
right to receive the pro-rata share of the distribution contemplated by the CAI
reorganization plan to be made on account of such previously-held subordinated
indebtedness claims. All equity received by the holders of 12.25% senior notes
and subordinated indebtedness claims was diluted by equity reserved for
issuance upon the exercise of options granted to members of CAI's senior
management and for equity issued in connection with the exit facility.
In connection with the reorganization, the Company recorded an
extraordinary gain of $85.4 million reflecting the extinguishment of debt.
Long-term notes totaling approximately $308 million, including the interest
accrued thereon and associated issuance costs, were replaced with $100 million
aggregate principal amount at issuance of 13% senior notes, equity of CAI, and
cash from the debt escrow account. The consolidated balance sheet reflects the
13% senior notes, together with accreted interest thereon from October 15, 1998
to December 31, 1998.
In determining the post-confirmation going concern enterprise value,
CAI's financial advisors performed a variety of generally accepted valuation
techniques. The three primary methodologies used were: (1) comparable public
company analysis ("Comparables"), (2) discounted cash flow ("DCF") and (3)
comparable mergers and acquisitions analysis ("M&A"). The Comparables approach
included comparisons with five similar companies and detailed multi-year
financial comparisons. Specifically, the total enterprise value for each
company was compared to its respective estimated gross line-of-sight
households. The DCF value represents the present value of unlevered, after-tax
cash flows. The basis for the DCF was the Company's ten-year projections in
the provision of fixed wireless video and two-way voice and data services on a
wholesale basis to prospective strategic partners. An effective tax rate of
40% was estimated, and a discount rate of 25% was applied to the cash flows,
reflective of the estimated high degree of risk associated with the business
plan. In addition, a terminal value was determined by assuming the sale of the
business at the end of the time period. The terminal value multiple of ten was
used. The M&A approach included evaluation of a series of transactions
involving companies in the wireless cable industry. Seven transactions between
1996 and 1997 were considered. Based upon the analyses, the assumptions made
and matters considered, the post-confirmation going concern enterprise value of
CAI was estimated to be $293 million.
<PAGE>
Reorganization expense recorded by CAI prior to consummation of the
reorganization plan consisted of the following for the period from April 1,
1998 to October 14, 1998:
<TABLE>
<CAPTION>
<S> <C>
Professional fees and other expenses
related to the Chapter 11 proceedings $ 6,305,747
Adjustment of assets and liabilities to fair value 10,795,636
----------
17,101,383
==========
</TABLE>
<PAGE>
The effects of the CAI reorganization plan and the application of fresh-
start reporting on CAI's Consolidated Balance Sheet at October 15, 1998 are as
follows:
<TABLE>
<CAPTION>
Predecessor Entity Debt Fresh-Start Reorganized CAI
OCTOBER 14, 1998 EXIT FINANCING DISCHARGE ADJUSTMENTS OCTOBER 15, 1998
------------------ -------------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,339,067 $ - $ - $ - $ 1,339,067
Restricted cash and cash
equivalents 11,204,249 15,953,333 - - 27,157,582
Debt service escrow 16,971,807 - (16,971,807) - -
Subscriber receivables, net 701,635 - - - 701,635
Prepaid expenses 549,100 - - - 549,100
Property and equipment, net 40,982,272 - - 263,526 41,245,798
Wireless channel rights, net 187,249,998 - - 17,112,933 204,362,931
Investment in CS Wireless
Systems, Inc. - - - - -
Investment in TelQuest
Satellite Services LLC 1,220,404 - - - 1,220,404
Other investments - - - - -
Goodwill, net 21,997,237 - - (21,997,237) -
Reorganization value in
excess of amounts
allocable to identifiable
assets - - - 37,952,304 37,952,304
Debt financing costs, net 5,781,300 4,300,000 - (5,781,300) 4,300,000
Other assets 3,059,931 - - (393,558) 2,666,373
------------ ----------- ------------ ----------- -----------
Total Assets $ 291,057,000 $ 20,253,333 $(16,971,807) $ 27,156,668 $321,495,194
============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C> <C> <C> <C> <C>
Liabilities
Accounts payable $ 3,125,495 $ (600,000) $ - $ - $ 2,525,495
Accrued expenses 9,170,546 2,500,000 - 647,224 12,317,770
Accrued interest 16,145,874 (1,646,667) (14,499,207) - -
Wireless channel rights
obligations 2,922,100 - - - 2,922,100
Interim debt financing 60,000,000 2,074,231 - - 62,074,231
Senior notes 311,558,053 - (207,793,000) - 103,765,053
------------ ----------- ------------ ----------- -----------
Total Liabilities 402,922,068 2,327,564 (222,292,207) 647,224 183,604,649
============= ============ ============ ============ ============
Shareholders' Equity (Deficit)
Preferred stock - - - - -
Common stock 275,770,764 22,414 150,000 (275,770,764) 172,414
Additional paid-in capital 101,711,759 17,903,355 119,814,776 (101,711,759) 137,718,131
Accumulated deficit (489,347,591) - 85,355,624 403,991,967 -
------------ ----------- ------------ ----------- -----------
Total Shareholders'
Equity (Deficit) (111,865,068) 17,925,769 205,320,400 26,509,444 137,890,545
------------ ----------- ------------ ----------- -----------
Total Liabilities and
Shareholders' Equity
(Deficit) $291,057,000 $ 20,253,333 $ (16,971,807) $ 27,156,668 $321,495,194
============= ============ ============ ============ ============
</TABLE>
<PAGE>
CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. INTERIM FINANCING.
EXIT FACILITY. On October 14, 1998, in connection with consummating CAI's
Reorganization Plan, the Company obtained an $80,000,000 credit facility (the
"exit facility") from Merrill Lynch Global Allocation Fund, Inc. ("MLGAF").
The Company received net proceeds from the exit facility of $15,953,000, after
repaying all outstanding amounts under the debtor-in-possession credit facility
(the "DIP facility") provided to the Company by MLGAF during the Company's
Chapter 11 case, and certain commitment fees associated with the exit facility.
The exit facility is governed by the terms of a note purchase agreement dated
October 14, 1998 (the "NPA"), a copy of which was filed by the Company with the
Commission as an exhibit to the Company's Current Report on 8-K dated October
15, 1998.
The exit facility consists of two tranches: Tranche A and Tranche B.
Tranche A is a $30,000,000 senior secured loan bearing interest at 10.5%
compounded semi-annually and evidenced by a Senior Secured A Note. The Company
has granted a first priority lien on and security interest in all of its assets
to secure performance of the Company's obligations with respect to Tranche A.
Tranche B is a $50,000,000 senior secured loan bearing interest at 13% per
annum and evidenced by a Senior Secured B Note. The Company has granted a
second priority lien on and security interest in and to all of its assets to
secure performance of its obligations with respect to Tranche B.
In addition to the liens granted by the Company, substantially all of the
Company's wholly-owned subsidiaries have guaranteed the obligations of the
Company with respect to the exit facility. The subsidiaries have granted a
lien on and security interest in all of their respective assets to secure their
performance under such subsidiary guaranties.
The exit facility is a two-year credit facility, maturing on October 14,
2000. The Company paid a 1% facility fee equal to $300,000 on the Tranche A
amount at the closing of the exit facility. In addition, the Company is
required to pay an 8% facility fee equal to $4,000,000 on the Tranche B amount,
of which the Company paid $1,500,000 at the closing of the exit facility. The
remaining $2,500,000 balance of the Tranche B facility fee is payable at
maturity of the exit facility (by its term, acceleration or otherwise). All
interest on amounts outstanding under the exit facility accrues at the stated
rates and is payable at maturity of the exit facility.
The Company issued 2,241,379 shares of its common stock, par value $.01
per share (the "new common stock") to MLGAF as additional consideration to
MLGAF for providing the exit facility. The shares issued to MLGAF represent
13% of the total new common stock issued and outstanding on October 14, 1998.
The value of the new stock is reflected as an unamortized discount to the exit
facility and accreted over the life of the exit facility. The foregoing is a
summary of certain terms of the exit facility and is qualified in its entirety
by reference to the NPA.
<PAGE>
NOTE 4. LITIGATION.
In Re CAI Wireless Systems Inc. Securities Litigation. CAI and certain
individuals had 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 against Jared E. Abbruzzese, chairman and
chief executive officer of the Company, John J. Prisco, a former president,
chief operating officer and director of the Company, and Alan Sonnenberg, a
former president and director of the Company. The amended, consolidated
complaint 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 Plan provided no recovery to any holder of the Company's equity or to
any holder of an equity-based claim, such as the claims made against the
Company in the Securities Lawsuit. Upon the confirmation of the Plan on
September 30, 1998 and the October 14, 1998 consummation of the Plan,
plaintiffs' claims against the Company in the Securities Lawsuit were
discharged and released by order of the Bankruptcy Court. Furthermore, the
Securities Lawsuit plaintiffs were enjoined from continuing their action
against the Company. The individual defendants are continuing to contest the
Securities Lawsuit vigorously and believe it is entirely without merit at this
time. Accordingly, management believes the Securities Lawsuit will not have a
material adverse effect on the Company's earnings, financial condition or
liquidity.
OTHER LITIGATION.The Company is also named as a defendant in JOE HAND
PROMOTIONS, INC. V. CAI WIRELESS SYSTEMS, INC. D/B/A POPVISION WIRELESS CABLE
and as a third party defendant in JOE HAND PROMOTIONS, INC. V. 601 L & P BAR,
INC. 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 the alleged distributor's
exclusive broadcast rights. The Complaints seek actual compensatory damages in
unspecified amounts, together with statutory penalties claimed for alleged
violations of federal statutes. The Plaintiff, Joe Hand Promotions, has alleged
itself to be the exclusive distributor of certain televised sporting events in
the greater Philadelphia area for commercial establishments, and has alleged
the improper broadcast of such events in approximately five instances. The
lawsuits were in the preliminary stages when the Company commenced its Chapter
11 case. Action against CAI in these lawsuits has been suspended by the Court.
The Company believes that in the event of an adverse outcome, the amount would
not be material given the nature of the claims.
<PAGE>
NOTE 5. EQUITY INVESTMENTS.
CS WIRELESS SYSTEMS, INC. The elimination of the Company's investment in CS
reflects equity losses limited to the extent of its investment since CAI does
not guarantee any CS debt. CS' net loss of $100,762,000 for the nine-month
period ended September 30, 1998 included a $46,378,000 writedown of goodwill.
CAI's ownership interest in CS increased to approximately 94% as a result of
the December 2, 1998 purchase by the Company of 3,836,035 shares of CS common
stock held by Nucentrix Broadband Networks, Inc. ("Nucentrix," formerly known
as Heartland Wireless Communications, Inc.). Subsequent to the purchase, CS
redeemed the shares of CS common stock purchased by the Company from Nucentrix.
At December 31, 1998, CAI held 6,421,166 shares of CS common stock,
representing approximately 94% of the issued and outstanding common stock of
CS.
CS has retained CIBC to serve as its financial advisor. CS and CIBC have
begun to evaluate available options with respect to the capitalization of CS,
including financial restructuring alternatives. As a consequence, CAI's
investment in CS is accounted for on the equity method.
The following is an unaudited condensed consolidated balance sheet of CS
derived from its September 30, 1998 Form 10-Q:
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 45,394,000
Restricted cash 4,222,000
Other current assets 2,224,000
Systems and equipment, net 54,905,000
Wireless channel rights, net 168,247,000
Investment in and loans to equity affiliates 6,983,000
Debt issuance costs and other assets, net 8,609,000
-----------
Total Assets $290,584,000
============
LIABILITIES AND EQUITY
Accounts payable and accrued expenses $ 6,042,000
FCC auction payable 3,942,000
Other liabilities 914,000
Debt 308,219,000
Equity (28,533,000)
-----------
Total Liabilities and Equity $290,584,000
============
</TABLE>
<PAGE>
The following are unaudited condensed consolidated statements of operations of
CS derived from its September 30, 1998 Form 10-Q for the periods presented:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues $ 6,448,000 $ 20,076,000
---------- -----------
Operating expenses:
Systems operations 4,094,000 12,019,000
Selling, general and administrative 4,500,000 13,602,000
Impairment of goodwill - 46,378,000
Depreciation and amortization 7,062,000 22,003,000
---------- -----------
Total operating expenses 15,656,000 94,002,000
---------- -----------
Operating loss (9,208,000) (73,926,000)
Interest income 803,000 2,746,000
Interest expense (8,765,000) (25,657,000)
Equity in losses of affiliates (292,000) (2,057,000)
Cumulative effect of change in accounting
principle for organizational costs - (1,868,000)
---------- -----------
Net loss $(17,462,000) $(100,762,000)
=========== ============
</TABLE>
TELQUEST SATELLITE SERVICES LLC. The Company's investment in TelQuest
reflects an equity loss of $2,194,000 based on CAI's pro-rata share of
TelQuest's net losses approximating $6,040,000 for the nine months ended
December 31, 1998 plus an adjustment for CAI's ownership which increased as of
December 8, 1997 to 30% based on a non-exclusivity agreement signed as of that
date. Additionally, the investment has been reduced by $625,000 in depreciation
on the equipment leased to TelQuest. As of December 31, 1998, TelQuest has
negative net worth of $7,504,000. The Company's investment in TelQuest
excludes a 30% ownership interest in TelQuest held by CS.
<PAGE>
NOTE 6. RESIGNATION OF AUDITORS.
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 Agreement dated as of
November 24, 1997, as amended from time to time. PWC currently acts as
collateral agent and administrative agent for MLGAF under the Note Purchase
Agreement dated as of October 14, 1998 between the Company and MLGAF. The
Company is currently seeking independent accountants to replace PWC.
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 make 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 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 to the Company's
Current Report on Form 8-K dated August 6, 1998.
NOTE 7. DEBT OF REORGANIZED COMPANY.
Reference is made to Notes 2 and 3 above for a description of the October
14, 1998 consummation of CAI's Chapter 11 case and the exit facility that CAI
entered into in connection therewith. The following debt is outstanding as of
December 31, 1998:
<TABLE>
<CAPTION>
INTERIM DEBT FINANCING (EXIT FACILITY)
<S> <C>
Senior Secured A Note at 10.5% interest, compounded semi-annually with a first
priority lien on Company assets $ 30,000,000
Senior Secured B Note at 13.0% interest per annum with a second
priority lien on Company assets 50,000,000
Less unamortized discount (16,219,239)
-----------
Total interim debt financing $ 63,780,761
===========
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM NOTES
<S> <C>
Senior debt of $100,000,000 accreting at 13% per annum, due
October 14, 2004:
Amount due at maturity $ 212,909,624
Less unearned discount (110,165,180)
-----------
Principal and earned interest outstanding as of
December 31, 1998 102,744,444
Note: Principal and interest are payable at maturity. The senior debt is unsecured.
Acquisition-related notes 3,708,264
Other 3,577
-----------
Total long-term notes $ 106,456,285
=============
</TABLE>
<PAGE>
The pre and post-reorganization capital structures of the Company are as
follows:
<TABLE>
<CAPTION>
Shares Authorized Shares Issued and Outstanding
--------------------------------------- ------------------------------------
Reorganized PREDECESSOR Reorganized Predecessor
COMPANY ENTITY COMPANY ENTITY
CLASS OF STOCK DECEMBER 31, 1998 March 31, 1998 DECEMBER 31, 1998 MARCH 31, 1998
--------------- ----------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
PREDECESSOR ENTITY:
Preferred stock -
14% Senior convertible preferred
stock, par value $10,000 per share 15,000 -
---------- --------
Series preferred stock, no par value
Series A 8% redeemable convertible
preferred stock, no par value 350,000 -
Undesignated 4,650,000 -
---------- --------
Total series preferred stock 5,000,000 -
---------- --------
Voting preferred stock, no par value 2,000,000 -
---------- --------
Total preferred stock 7,015,000 -
========== ========
Common stock, no par value 100,000,000 40,543,039
=========== ==========
REORGANIZED COMPANY:
Preferred stock, par value $0.01 5,000,000 -
========== ==========
Common stock, par value $0.01 (a) 25,000,000 17,241,379
========== ==========
</TABLE>
(a) CAI's post-reorganization common stock, par value $0.01, entitles the
holder thereof to one vote per share held. Holders of CAI common stock are
entitled to dividends if, as, or when declared out of funds legally
available therefore, which consists of current or accumulated earnings. In
the event of a liquidation or dissolution, any preferred stock outstanding
including accumulated dividends thereon would be satisfied before holders of
common stock would receive any distribution. As of December 31, 1998, there
were 17,241,379 shares of common stock issued and outstanding.
<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 THE COMPANY'S ABILITY TO DESIGN AND IMPLEMENT
COMPETITIVE, COST EFFECTIVE TWO-WAY OPERATING PLANS, 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, THE COMPANY'S
ABILITY TO FUND ITS BUSINESS PLANS, EQUIPMENT AVAILABILITY FOR ALTERNATIVE USES
OF MMDS SPECTRUM, 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 OR THAT THE COMPANY CAN OBTAIN FINANCING IN THE FUTURE.
REORGANIZATION. On July 30, 1998 (the "Petition Date"), CAI Wireless
Systems, Inc., a Connecticut Corporation ("CAI Wireless"), and one of its
wholly-owned subsidiaries, Philadelphia Choice Television, Inc., a Delaware
Corporation ("PCT"; and together with CAI Wireless, 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 Wireless and PCT are being jointly
administered, for procedural purposes only, before the Bankruptcy Court under
Case No. 98-1765 (JJF). Pursuant to Section 1107 and 1108 of the Bankruptcy
Code, the Debtors, as debtors and debtors-in-possession, managed and operated
their assets and businesses pending the September 30, 1998 confirmation of a
joint reorganization plan (the "Plan") under the supervision and orders of the
Bankruptcy Court. The Plan was filed with the Bankruptcy Court on the Petition
Date and filed by the Company with the Securities and Exchange Commission (the
"Commission") on a Current Report on Form 8-K on July 1, 1998.
Prior to the Petition Date, the Company solicited and received the
requisite approvals from those classes of creditors that would be impaired
under the Plan. Specifically, the Company solicited and received the requisite
approval of the holders of the Company's 12.25% Senior Notes due 2002 (the
"Old Senior Notes") and the holders of certain subordinated indebtedness of the
Company. The Company did not solicit the vote of its shareholders, for whom
the Plan provided no right to receive or retain any property of the Company
post-reorganization. Section 1126(g) of the Bankruptcy Code specifically deems
such shareholders not to have accepted the Plan.
A confirmation hearing was held in the Bankruptcy Court on September 9,
1998. The Plan was confirmed on September 30, 1998 and consummated on October
14, 1998. Under the confirmed Plan, each holder of the Old Senior Notes
received a pro rata portion of $212,909,624 aggregate principal amount at
maturity ($100,000,000 aggregate principal amount at issuance) of 13% Senior
Notes due 2004 (the "New Senior Notes"), 91% of the equity of reorganized CAI
and approximately $16,500,000 in cash. Holders of subordinated indebtedness
claims against CAI received a pro rata portion of 9% of the equity of
reorganized CAI. CAI recorded an extraordinary gain of $85,355,624 reflecting
the extinguishment of debt. The New Senior Notes are governed by that certain
Indenture dated as of October 14, 1998 (the "New Senior Notes Indenture")
between the Company and State Street Bank and Trust Company, as trustee, a copy
of which was filed as an exhibit to the Company's Current Report on Form 8-K
filed with the Commission on October 15, 1998. All equity received by the
holders of Old Senior Notes and subordinated indebtedness claims was
subsequently diluted by equity reserved for issuance upon the exercise of
options granted to members of CAI's senior management and for equity of
reorganized CAI issued in connection with the exit facility (defined below).
The CAI reorganization plan did not provide any recovery for the holders
of CAI equity, or holders of claims against CAI based upon or arising out of
the purchase or sale of CAI equity securities. Consequently, 40,543,039 shares
of CAI common stock, without par value, together with all options and warrants
to purchase such common stock, were cancelled on October 14, 1998. CAI issued
15,000,000 shares of CAI common stock, par value $.01 per share, to the holders
of the 12.25% senior notes, the 12% subordinated note and the acquisition-
related notes. CAI also issued 2,241,379 shares of CAI common stock on October
14, 1998 to Merrill Lynch Global Allocation Fund, Inc. ("MLGAF"), in connection
with an $80 million credit facility provided by MLGAF to CAI.
Although the Company has emerged from bankruptcy, there continues to be
substantial doubt as to the Company's ability to continue as a going concern.
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 Commission on June 30, 1998.
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 appropriateness of reporting on a going concern basis is
dependent upon, among other things, future operations and the ability to
generate sufficient cash from operations and financing sources to meet
obligations.
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 was governed by an Amended and Restated Note Purchase Agreement dated
as of July 30, 1998 (the "DIP Agreement") 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. Indebtedness under the DIP Facility was evidenced by certain
promissory notes, accrued interest at 13% per annum and had a maturity date of
January 29, 1999.
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 MLGAF
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 thereof
under the DIP Agreement in the amount of $49,105,894. The remaining
$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.
On October 14, 1998, in connection with consummating the Plan, all
outstanding amounts under the DIP Facility, including the $60,000,000 aggregate
principal amount, accrued and unpaid interest in the amount of $1,646,667 and a
$600,000 commitment fee, were repaid out of the proceeds of the exit facility
(defined below).
EXIT FACILITY. On October 14, 1998, in connection with consummating the
Plan, the Company obtained an $80,000,000 credit facility (the "exit
facility"), also from MLGAF. The Company realized net proceeds from the exit
facility of $15,953,000, after repaying all outstanding amounts under the DIP
Facility and certain commitment fees associated with the exit facility. The
exit facility is governed by the terms of a Note Purchase Agreement dated
October 14, 1998 (the "NPA"), a copy of which was filed by the Company with the
Commission as an exhibit to the Company's Current Report on 8-K dated October
15, 1998.
The exit facility consists of two tranches: Tranche A and Tranche B.
Tranche A is a $30,000,000 senior secured loan bearing interest at 10.5%
compounded semi-annually and evidenced by a Senior Secured A Note. The Company
has granted a first priority lien on and security interest in and to all of its
assets to secure performance of the Company's obligations with respect to
Tranche A. Tranche B is a $50,000,000 senior secured loan bearing interest at
13% per annum and evidenced by a Senior Secured B Note. The Company has
granted a second priority lien on and security interest in and to all of its
assets to secure performance of its obligations with respect to Tranche B.
In addition to the liens granted by the Company, substantially all of the
Company's wholly-owned subsidiaries have guaranteed the obligations of the
Company with respect to the exit facility. The subsidiaries have granted a
lien on and security interest in and to all of their respective assets to
secure their performance under such subsidiary guaranties.
The exit facility is a two-year credit facility, maturing on October 14,
2000. The Company was required to pay a 1% facility fee equal to $300,000 on
the Tranche A amount at the closing of the exit facility. In addition, the
Company is required to pay an 8% facility fee equal to $4,000,000 on the
Tranche B Amount of which the Company paid $1,500,000 at the closing of the
exit facility. The remaining $2,500,000 balance of the Tranche B facility fee
is payable at maturity of the exit facility (by its term, acceleration or
otherwise). All interest on amounts outstanding under the exit facility
accrues at the stated rates and is payable at maturity of the exit facility.
The Company issued 2,241,379 shares of its common stock, par value $.01
per share (the "new common stock") to MLGAF as additional consideration to
MLGAF for providing the exit facility. The shares of new common stock issued
to MLGAF represent 13% of the total New Common Stock issued and outstanding on
October 14, 1998. The value of the new stock is reflected as an unamortized
discount to the exit facility and accreted over the life of the exit facility.
The foregoing is a summary of certain terms of the exit facility and is
qualified in its entirety by reference to the NPA.
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, subsequently under the DIP facility and after reorganization
on October 14, 1998, the exit facility. Funds provided under these interim
financing facilities totalling $26,847,000 were invested in a restricted
account controlled by MLGAF and made available to the Company for its operating
requirements in accordance with an approved budget. During the nine months
ended December 31, 1998 which consists of the period October 15, 1998 to
December 31, 1998 and the period from April 1, 1998 to October 14, 1998, CAI
expended $33,894,000 on operating activities. In conjunction with the
reorganization, the final escrow payment of $16,376,000 was made to holders of
the Old Senior Notes. CAI also expended $2,224,000 in debt payments, $856,000
for equipment, and paid $412,000 to TelQuest in fulfillment of its investment
obligation. The cash requirements were primarily funded by existing cash
balances maintained in the restricted account. At December 31, 1998, CAI had
available funds of $21,079,000, of which $19,293,000 was held in the restricted
account. CAI is committed through additional open purchase orders as of
December 31, 1998 to spend approximately $500,000, primarily for capital
expenditures associated with additional development of its two-way and Internet
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
borrowings or the issuance of certain types of equity instruments is currently
limited by the terms of the New Senior Notes Indenture and/or the terms of the
exit facility. There can be no assurance that the funds obtained by the Company
in connection with the exit facility will enable CAI to meet its future cash
needs.
<PAGE>
RESULTS OF OPERATIONS
IMPACT OF FRESH-START REPORTING ON RESULTS OF OPERATIONS. In connection
with its emergence from Chapter 11, CAI adopted fresh-start reporting in
accordance with Statement of Position ("SOP") 90-7 of the American Institute of
Certified Public Accountants. Under fresh-start reporting, the reorganization
value of CAI has been allocated to its assets and liabilities on a basis
substantially consistent with purchase accounting. The portion of
reorganization value not attributable to specific tangible assets has been
recorded on the balance sheet as "Reorganization Value in Excess of Amounts
Allocable to Identifiable Assets." Certain fresh-start reporting adjustments,
primarily related to the adjustment of CAI's assets and liabilities to fair
market values as of October 14, 1998, the date CAI consummated its Chapter 11
bankruptcy, will have a significant effect on future statements of operations.
The more significant adjustments relate to increased amortization expense of
the reorganization value in excess of amounts allocable to identifiable assets
and of wireless channel rights.
DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997
For the purpose of this discussion, the nine months ended December 31,
1998 refers to the periods October 15, 1998 to December 31, 1998 and April 1,
1998 to October 14, 1998 and the quarter ended December 31, 1998 refers to the
periods October 15, 1998 to December 31, 1998 and October 1, 1998 to October
14, 1998.
The Company currently operates six analog subscription video systems.
The Company has experienced a decline in analog-based video subscribers, which
decline has had and will continue to have an adverse effect on the Company's
revenues.
During the last several quarters, the Company has operated its analog
video systems within the confines of a cash conservation strategy, while
pursuing a strategic alliance with one or more strategic partners interested in
using the Company's spectrum for fixed, one- and two-way transmission services.
The Company's cash conservation strategy includes the recovery of out-of-pocket
expenses associated with adding a new analog video subscriber by charging such
subscriber an up-front installation fee. The cash conservation strategy also
includes the continued implementation of cost-cutting measures and the periodic
sales of non-core assets in an effort to maximize the value of assets that are
no longer used or useful to the Company's long-term operating strategy, which
is to be a wholesale provider of two-way transmission services to one or more
strategic partners. Accordingly, the Company has sold assets relating to the
provision of analog subscription video services to multiple dwelling units
("MDUs"), such as apartment and condominium complexes, in certain of its
markets. Assets typically involved in providing analog subscription video
services to residents of MDUs include the tangible assets necessary to transmit
and receive the video programming signal, customer premises equipment and a
right of entry agreement with the property owner or manager, pursuant to which
the Company's operating subsidiary is granted the right to provide subscription
video services to residents of the MDU.
In March 1998, the Company sold assets relating to MDUs located in its
Washington, DC operating market. Most recently, in September 1998 the Company
completed the sale of assets relating to approximately 60 MDUs located in CAI's
Philadelphia system (the "Philadelphia MDU Sale") to Mid-Atlantic Telcom Plus,
LLC d/b/a OnePoint Communications, a leading operator of satellite master
antenna television (SMATV) systems. Consummated under the auspices of the
Bankruptcy Court, the Philadelphia MDU Sale generated net proceeds to the
Company of approximately $5,000,000, of which $646,000 is currently being held
in escrow pending certain post-closing adjustments. The Company expects to use
the proceeds from the Philadelphia MDU Sale, as well as proceeds from
subsequent sales of non-core assets, for working capital purposes.
The Company's analog video subscriber base has declined over the last
several quarters. As of December 31, 1998, the Company's subscriber base had
decreased to 33,800 analog video subscribers compared to 57,500 at December 31,
1997. The 23,700 subscriber decrease includes the loss of approximately 10,400
subscribers as a result of the Philadelphia MDU Sale. The decrease in analog
video subscribers has resulted in subscriber revenue decreases of $2,471,000
and $7,005,000 for the quarter and nine months ended December 31, 1998,
respectively, compared to the corresponding periods last year.
Operating expenses were $48,034,000 and $60,242,000 for the nine months
ended December 31, 1998 and 1997, respectively. The $12,208,000 reduction in
operating expenses for the nine months versus last year's corresponding nine-
month period reflects lower technical, customer service and marketing costs and
general and administrative approximating $7,549,000 which were in proportion
with the decline in subscribers. Programming costs decreased by $754,000 and
$2,045,000 for the quarter and nine months ended December 31, 1998,
respectively, in proportion with decreased revenues. However, licensing costs
were $306,500 and $1,932,000 higher for the quarter and nine months ended
December 31, 1998, respectively, due to certain channel payments which had been
previously capitalized being currently expensed. The remaining decrease of
$4,546,000 reflects lower goodwill amortization relative to the write-down at
March 31, 1998, offset in part by greater expense recorded on the Boston
digital project, and $791,000 amortization of reorganization value in excess of
amounts allocable to identifiable assets.
Interest expense was $24,854,000 and $40,129,000 for the nine months
ended December 31, 1998 and 1997, respectively. The decrease of $10,403,000
in the quarter ended December 31, 1998 compared to the same period last year
was due to the consummation of the Company's Chapter 11 case on October 14,
1998 that resulted in a debt reduction of $207,793,000, offset in part by a
$20,000,000 increase in interim debt under the exit facility including
$1,707,000 of interest expense resulting from the accretion on the exit
facility discount. The remaining decrease of $4,872,000 resulted from the
cessation of interest on the $307,793,000 debt which was subject to compromise
as of July 30, 1998.
Interest and other income increased by $1,009,000 for the nine months
ended December 31, 1998 compared to the same period last year. The
$2,642,000 net gain from the Philadelphia MDU Sale was partially offset by the
declining interest income on the debt escrow and money market investments.
Other expense includes reorganization expense of $13,146,175 for the
quarter and $17,101,383 for the nine months ended December 31, 1998 relative to
the bankruptcy and resulting fresh-start accounting.
The elimination of the Company's investment in CS reflects equity losses
recorded to the extent of its investment (CAI does not guarantee any CS debt).
CS' net loss of $100,762,000 for the nine-month period ended September 30, 1998
includes a $46,378,000 write down of goodwill. CAI's ownership interest in CS
increased to approximately 94% as a result of the December 2, 1998 purchase by
the Company of 3,836,035 shares of CS common stock held by Nucentrix.
Subsequent to the purchase, CS redeemed the shares of CS common stock purchased
by the Company from Nucentrix. At December 31, 1998, CAI held 6,421,166 shares
of CS common stock, representing approximately 94% of the issued and
outstanding common stock of CS.
The extraordinary gain from early extinguishment of debt of $85,355,624
represents the excess of debt forgiven over the amount of debt attributable to
issuance of new common stock resulting from consummation of the bankruptcy.
THE YEAR 2000 ISSUE
OVERVIEW. The Company is continuing to evaluate and address the impact
of the Year 2000 date transition on its operations. The Company is in the
process of taking steps to (a) inventory and assess for Year 2000 compliance
its equipment, software and systems, (b) determine which items will be
remediated, replaced or retired, and establish a plan to accomplish these
steps, (c) remediate, replace or retire the items, (d) test the items, where
required, and (e) provide senior management with a reporting system to support
a seamless transition to the Year 2000.
STATE OF READINESS. The Company's Year 2000 compliance program focuses
on the Company's analog video operations, limited internet operations, and
internal business processes, such as accounting. As of December 31, 1998, the
inventory, assessment and compliance planning phases for these areas have been
materially completed, and remediation, replacement or retirement and testing
activities are beginning. The inventory items that were not assessed as Year
2000 compliant and that require action to avoid service impact are to be fixed,
replaced, or retired. CAI's goal for its accounting services is to have its
accounting software and any other mission critical systems relating directly to
the accounting function Year 2000 compliant by April 1, 1999, the beginning of
its fiscal year. For all other areas, CAI's goal is to have all mission
critical systems Year 2000 compliant by July 1, 1999.
VENDOR AND SERVICE PROVIDER ISSUES. The Company has requested that its
vendors and service providers provide CAI with information as to the compliance
status of products and/or services used by CAI and its operating subsidiaries,
which information is subject to Company testing and verification. Although the
Company has received information from some of its vendors and service
providers, it has not yet received information from each of the vendors and
service providers it has identified. The Company will continue to pursue its
vendors and service providers in order to obtain the necessary information
regarding Year 2000 compliance of such vendors and service providers.
COSTS. The Company has estimated that it will cost approximately
$375,000 to effect its Year 2000 compliance program, based on information it
has received as of December 31, 1998 from vendors and service providers. The
Company anticipates that most of the cost associated with its Year 2000
compliance program will be the result of remediation or replacement of non-
compliant equipment necessary for the Company's analog video operations and
internal business processes.
RISKS. The failure to correct a material Year 2000 problem could cause an
interruption or failure of certain of the Company's normal business functions
or operations, which could have a material adverse effect on its results of
operations, liquidity or financial condition. Due to the uncertainty inherent
in other Year 2000 issues that are ultimately beyond CAI's control, including,
for example, the final Year 2000 readiness of its mission critical vendors and
service providers, the Company is unable to determine at this time the
likelihood of a material impact on its results of operations, liquidity or
financial condition, due to such Year 2000 issues.
The costs of the Company's Year 2000 program and the timetable for
completing its Year 2000 preparations are based on current estimates, which
reflect numerous assumptions about future events, including the continued
availability of certain resources, the timing and effectiveness of third-party
remediation plans and other factors. The Company can give no assurance that
these estimates will be achieved, and actual results could differ materially
from those currently anticipated. In addition, there can be no assurance that
the Company's Year 2000 program will be effective or that its contingency plans
will be sufficient. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct relevant
computer software codes and embedded technology, the results of internal and
external testing and the timeliness and effectiveness of remediation efforts of
third parties.
CONTINGENCY PLAN. At December 31, 1998, the Company is not aware of any
mission critical aspect of its operations or internal business processes that
can not be made Year 2000 compliant, however, its inventory and assessment of
Year 2000 compliance is not yet completed. Due to the uncertainties presented
by third party Year 2000 problems, and the possibility that, despite its
efforts, the Company is unsuccessful in preparing its internal systems and
equipment for the Year 2000, the Company expects to develop contingency plans
for dealing with the most reasonably likely worst case scenario. The Company's
assessment of its most reasonably likely worst case scenario and the exact
nature and scope of its contingency plans will be affected by the Company's
continued Year 2000 assessment and testing. The Company expects to complete
such assessment by July 1, 1999 and to have all contingency systems in place
and fully tested by the fourth quarter of 1999.
PART II. OTHER INFORMATION
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>
2.1 Joint Reorganization Plan of CAI Wireless Systems, Inc. [3] Exhibit 2.1
and Philadelphia Choice Television, Inc.
3.1 Amended and Restated Certificate of Incorporation of [1] Exhibit 3.1
CAI
3.2 Amended and Restated Bylaws of CAI [1] Exhibit 3.2
3.3 Certificate Amending the Amended and Restated [7] Exhibit 3.1
Certificate of Incorporation of CAI
4.1 Amended and Restated Note Purchase Agreement dated as [2] Exhibit 4.1
of July 30, 1998 between Registrant and Merrill Lynch
Global Allocation Fund, Inc.
4.2 Indenture dated as of October 14, 1998 between CAI [3] Exhibit 4.1
and State Street Bank and Trust Company governing
CAI's 13% Senior Notes due 2004
4.3 Note Purchase Agreement dated as of October 14, 1998 [3] Exhibit 4.2
by and between CAI and Merrill Lynch Global
Allocation Fund, Inc.
4.4 Senior Secured A Note in the principal amount of $30 [3] Exhibit 4.3
million due October 14, 2000
4.5 Senior Secured B Note in the principal amount of $50 [3] Exhibit 4.4
million due October 14 2000
4.6 Registration Rights Agreement dated as of October 14, [7] Exhibit 4.1
1998 by and among CAI, Merrill Lynch Global
Allocation Fund, Inc. and Merrill Lynch
Equity/Convertible Series Fund (Global Allocation
Portfolio)
10.1 1998 Outside Directors' Stock Option Plan [9] Exhibit 10.1
10.2 1998 Stock Option Plan [9] Exhibit 10.2
10.3 Amended and Restated Employment Agreement dated as of [9] Exhibit 10.3
October 14, 1998 between CAI and Jared E. Abbruzzese
10.4 Amended and Restated Employment Agreement dated as of [9] Exhibit 10.4
October 14, 1998 between CAI and James P. Ashman
10.5 Amended and Restated Employment Agreement dated as of [9] Exhibit 10.5
October 14, 1998 between CAI and Gerald Stevens-
Kittner
10.6 Amended and Restated Employment Agreement dated as of [9] Exhibit 10.6
October 14, 1998 between CAI and Bruce Kostreski
10.7 Amended and Restated Employment Agreement dated as of [9] Exhibit 10.7
October 14, 1998 between CAI and Derwood Edge
16. Letter by PricewaterhouseCoopers to Securities and [4] Exhibit 16.
Exchange Commission dated August 6, 1998
<dagger>27. Financial Data Schedule
99.1 Disclosure Statement dated as of June 30, 1998 [5] Exhibit 99.1
99.2 Disclosure Statement Supplement dated as of July 15, [6] Exhibit 99.1
1998
99.3 Interim Order Authorizing Postpetition Financing [2] Exhibit 99.1
99.4 Press Release dated July 30, 1998 [2] Exhibit 99.2
99.5 Pro Forma Balance Sheet Giving Effect to the [7] Exhibit 99.1
Company's Reorganization Plan as if it had occurred
on September 30, 1998
99.6 Revised Pro Forma Balance Sheet Giving Effect to the [8] Exhibit 99.1
Company's Reorganization Plan as if it had occurred
on September 30, 1998
</TABLE>
LEGEND
[1] Incorporated by reference to the exhibits to the Company's Quarterly Report
on Form 10-Q for September 30, 1995.
[2] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated August 3, 1998.
[3] Incorporated by reference to the exhibit to the Company's Current Report
on Form 8-K dated October 15, 1998.
[4] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated August 6, 1998.
[5] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated July 1, 1998.
[6] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated July 16, 1998.
[7] Incorporated by reference to the exhibit to the Company's Quarterly Report
on Form 10-Q for September 30, 1998.
[8] Incorporated by reference to the exhibit to the Company's Quarterly Report
on Form 10-Q/A for September 30,1998, filed with the Commission on
June 29, 1999.
[9] Incorporated by reference to the exhibit to the Company's Quarterly Report
on Form 10-Q for December 31, 1998.
<dagger> Filed herewith.
b) REPORTS ON FORM 8-K.
(1) Form 8-K filed October 15, 1998, reporting the following:
Item 3. Bankruptcy or Receivership.
CAI and one of its subsidiaries filed a petition
for reorganization relief under Chapter 11 of the United
States Bankruptcy Code on July 30, 1998. The Plan was
confirmed on September 30, 1998 and consummated on October
14, 1998.
Item 5. Other Events.
Simultaneously with the consummation of the Plan, CAI
consummates an $80 million senior secured credit facility
(Exit Facility) of which $64 million was used to repay
principal, interest and fees on the $60 million interim
debtor-in-possession financing.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
2.1 Joint Reorganization Plan of CAI Wireless Systems,
Inc. and Philadelphia Choice Television, Inc. dated
June 30, 1998.
4.1 Indenture dated as of October 14, 1998 governing the
terms of registrant's 13% Senior Notes due 2004.
4.2 Note Purchase Agreement dated as of October 14, 1998
by and between registrant and Merrill Lynch Global
Allocation Fund, Inc.
4.3 Senior Secured A Note in the principal amount of $30
million due October 14, 2000.
4.4 Senior Secured B Note in the principal amount of $50
million due October 14, 2000.
(2) Form 8-K filed October 30, 1998, reporting the following:
Item 1. Changes in Control of Registrant.
In connection with the consummation of its previously-
announced reorganization under Chapter 11 of the U.S.
Bankruptcy Code, the Company issued its voting common stock
to holders of its 12.25% Senior Notes due 2002 (the "Old
Senior Notes"). As a result of this issuance, certain
holders of Old Senior Notes acquired more than 10% of the
voting securities of CAI. In response to Item 1, CAI
disclosed the identity and certain other information
regarding these 10% holders.
<PAGE>
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/ Vice President and Controller June 29, 1999
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 Nine Months Ended December 31, 1998
(Presented below are the operating results for the Reorganized Company (2.5
months ended December 31, 1998) and the predecessor entity (6.5 months ended
October 14, 1998).
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 2-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1999
<PERIOD-START> OCT-15-1998 APR-01-1998
<PERIOD-END> DEC-31-1998 OCT-14-1998
<CASH> 21,078,515 0
<SECURITIES> 0 0
<RECEIVABLES> 741,722 0
<ALLOWANCES> 281,954 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 41,327,333 0
<DEPRECIATION> 2,822,316 0
<TOTAL-ASSETS> 305,840,862 0
<CURRENT-LIABILITIES> 0 0
<BONDS> 106,456,285 0
0 0
0 0
<COMMON> 172,414 0
<OTHER-SE> 120,362,898 0
<TOTAL-LIABILITY-AND-EQUITY> 305,840,862 0
<SALES> 0 0
<TOTAL-REVENUES> 3,490,526 11,481,498
<CGS> 0 0
<TOTAL-COSTS> 13,610,746 34,423,362
<OTHER-EXPENSES> 735,053 62,585,349
<LOSS-PROVISION> 44,250 115,050
<INTEREST-EXPENSE> 6,611,422 18,243,038
<INCOME-PRETAX> (17,355,233) (99,905,471)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (17,355,233) (99,905,471)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 85,355,624
<CHANGES> 0 0
<NET-INCOME> (17,355,233) (14,549,847)
<EPS-BASIC> (1.01) 0
<EPS-DILUTED> (1.01) 0
</TABLE>
