1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
---------------- ----------------
Commission file number: 0-20999
CHADMOORE WIRELESS GROUP, INC.
------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1058165
-------------------------------------------- -------------------
State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
4720 POLARIS STREET, LAS VEGAS, NEVADA 89103
--------------------------------------------
(Address of principal executive offices)
(702) 891-5255
--------------
(Issuer's telephone number)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
AS OF OCTOBER 31, 1996 16,405,138 SHARES OF COMMON STOCK, $.001 PAR VALUE,
- --------------------------------------------------------------------------
OUTSTANDING.
- ------------
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
2
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INDEX
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS.
Unaudited Consolidated Financial Statements of Chadmoore
Wireless Group, Inc. and Subsidiaries:
Consolidated Balance Sheets:
As of September 30, 1996 and December 31, 1995 1-2
Consolidated Statements of Operations:
Forthe Nine Months Ended September 30, 1996 and 1995
and Cumulative from January 1, 1994 to September 30,
1996 3
For the Three Months Ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows:
For the Nine Months Ended September 30, 1996 and 1995 and
Cumulative from January 1, 1994 to September 30, 1996 5-6
Consolidated Statement of Changes in Shareholders' Equity
(Deficiency):
For the Nine Months Ended September 30, 1996 7
Notes to Unaudited Consolidated Financial Statements 8-23
ITEM 2. PLAN OF OPERATION 24-27
PART II - OTHER INFORMATION 28
ITEM 1. LEGAL PROCEEDINGS 28
ITEM 2. CHANGES IN SECURITIES 28
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 28
ITEM 5. OTHER INFORMATION 28
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 29-31
SIGNATURES 32
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3
PART I. ITEM I. FINANCIAL STATEMENTS
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
September December
30, 1996 31, 1995
ASSETS (Unaudited)
----------- -----------
Current Assets:
Cash $ 3,210,014 $ 188,029
Amounts held for shares issued -- 675,000
Stock subscriptions receivable (note 3) 32,890 287,000
Accounts receivable 234,956 --
Inventory 369,255 --
Due from General Communications -- 76,252
Prepaid property management rights (note 11) 90,625 117,813
Other prepaids 37,066 --
Deposits 462,853 16,742
Other current assets 1,643 7,813
----------- -----------
Total Current Assets 4,439,302 1,368,649
Property, plant and equipment, net (note 4) 2,414,053 353,942
FCC licenses, net (note 5) 1,414,248 1,321,336
Organization costs, net of accumulated amortization of
$7,056 and $5,370, respectively 8,960 11,489
Debt issuance costs, net (note 10) 363,402 --
Management Agreements (note 2, 8) 29,780,631 --
Customer Lists, net (note 2) 37,831 --
Other Receivable 20,000 20,000
Investment in JJ&D, LLC (note 2) 598,677 --
Investment in license options (note 6) 3,021,612 2,007,958
Investment in options to acquire stock (note 2, 7) 3,342,113 --
Non-competition and consulting agreements, net of accumulated
amortization $-0- and $94,838, respectively -- 258,121
----------- -----------
$45,440,829 $ 5,341,495
=========== ===========
1
4
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(CONCLUDED)
September December
30,1996 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
------------ ------------
Liabilities:
Current installments of long-term debt $ 200,614 $ 337,255
Accounts payable and accrued liabilities 302,055 361,641
Prepaid option exercise (note 11) 1,582,116 --
Customer Deposits 1,600 --
Licenses - options payable 49,800 448,350
License option commission payable (note 6) 524,800 349,200
Capital lease obligations 27,113 --
Non-compete and consulting agreement - current -- 119,225
Accrued interest 62,346 54,490
------------ ------------
Total Current Liabilities: 2,750,444 1,670,161
Non compete and consulting agreements, excluding current
installments -- 108,840
Capital lease obligations 21,390 --
Convertible notes payable (note 10) 3,985,000 --
Long term debt, excluding current installments, net 1,094,727 524,868
------------ ------------
Total Liabilities: 7,851,562 2,303,869
------------ ------------
Commitments and contingencies (note 12)
Shareholders' equity:
Common stock, $.001 par value. Authorized 100,000,000 shares issued
and outstanding; 14,487,336 shares at September 30,1996 and 8,387,064
shares at December 31, 1995
14,487 8,387
Additional paid-in capital 50,115,379 10,564,852
Stock subscribed (note 3) 32,890 324,807
Deficit accumulated during the development stage (12,573,490) (7,860,420)
------------ ------------
Total Shareholders' Equity: 37,589,268 3,037,626
------------ ------------
$ 45,440,829 $ 5,341,495
============ ============
See accompanying notes to unaudited consolidated financial statements
2
5
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from
January 1,
Nine Months Nine Months 1994
Ended Ended through
September September September
30,1996 30,1995 30,1996
(Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------
Revenues
Radio services $ 405,675 $ -- $ 529,586
Equipment sales 606,270 -- 455,330
Maintenance and installation 195,628 -- 190,281
Other 159,960 -- 149,389
------------ ------------ ------------
1,367,533 -- 1,324,586
------------ ------------ ------------
Costs and expenses
Cost of sales 679,953 -- 636,313
Salaries, wages and benefits 1,244,835 383,663 2,110,851
Sales, general and administrative 3,363,976 5,205,235 10,641,586
Depreciation and amortization 215,881 151,338 451,985
------------ ------------ ------------
5,504,645 5,740,236 13,840,735
------------ ------------ ------------
Loss from operations (4,137,112) (5,740,236) (12,516,149)
------------ ------------ ------------
Other income (expense)
Equity in losses from minority investment (1,323) -- (1,323)
Management fees (notes 2) 100,198 181,782 472,611
Interest income (expense) (204,382) (102,865) (362,708)
Gain (Loss) on sale of assets -- 330,643 330,643
Gain (Loss) on forgiveness of debt 47,450 -- 47,450
Financing expense (417,560) -- (417,560)
Loss on retirement of note payable -- (28,904) (32,404)
Other, income (expense) (100,341) 5,950 (94,050)
------------ ------------ ------------
575,958 386,606 (57,341)
------------ ------------ ------------
Net loss ($ 4,713,070) ($ 5,353,630) ($12,573,490)
============ ============ ============
Weighted-average number of common shares outstanding 10,855,726 5,005,852 9,700,120
============ ============ ============
Net loss per share ($ .43) ($ 1.06) ($ 1.15)
============ ============ ============
See accompanying notes to unaudited consolidated financial statements
3
6
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
September 30,1996 September 30,1995
(Unaudited) (Unaudited)
----------------- -----------------
Revenues
Radio services $ 148,279 $ --
Equipment sales 58,462 --
Maintenance and installation 92,115 --
Other 81,771 --
------------ ------------
480,626 --
------------ ------------
Costs and expenses
Cost of sales 226,770 --
Salaries, wages and benefits 361,331 159,655
General and administrative 1,916,382 4,285,402
Depreciation and amortization 100,866 47,885
------------ ------------
------------
2,605,350 4,492,941
------------ ------------
Loss from operations (2,124,724) (4,492,941)
------------ ------------
Other income (expense)
Equity in losses from minority investment (1,323) --
Management fees (notes 2,3) -- 94,254
Interest income (expense) (128,344) (24,482)
Gain (Loss) on sale of assets -- 330,643
Gain (Loss) on forgiveness of debt 47,450 --
Financing Expense (417,560) --
Loss on Conversion of Note -- (28,904)
Other, income (expense) -- 5,950
------------ ------------
(499,776) 377,461
------------ ------------
Net loss ($ 2,624,499) ($ 4,115,480)
============ ============
Weighted-average number of common shares outstanding
(13,289,918) 5,509,481
============ ============
Net loss per share ($ .02) ($ 0.74)
See accompanying notes to unaudited consolidated financial statements
4
7
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from
January 1,
1994
Nine Months Nine Months through
Ended Ended September
September 30,1996 September 30,1995 30,1996
(Unaudited) (Unaudited) (Unaudited)
----------------- ----------------- --------------
Cash flows from operating activities
Net loss ($ 4,713,069) ($ 5,353,630) ($12,573,490)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 231,672 141,333 457,959
Amortization of debt discount 101,525 -- 101,525
Amortization of debt issuance costs 417,560 -- 417,560
Gain on sale of assets held for resale -- (330,643) (330,643)
Expense associated with:
Stock issued for services 62,500 1,919,055 2,364,542
Options issued for services -- 2,198,063 2,841,788
Change in operating assets and liabilities:
Increase (decrease) in stock subscriptions
receivable, net of stock subscribed 48,152 -- (589,041)
Increase in Accounts receivable (53,394) -- (53,394)
Increase in inventory (291,270) -- (291,270)
Decrease Due from General Communications, Inc. 76,252 (93,932) --
Increase (decrease) in prepaids 27,187 -- 27,187
Increase in other receivable (13,099) -- (33,099)
Increase in deposits (446,111) -- (462,853)
Increase (decrease) in other current assets (30,896) (4,117) (38,709)
Increase (decrease) in Accounts payable (70,102) 212,369 291,539
Decrease in options payable (297,300) (297,300)
Increase in commission payable 175,600 -- 524,800
Equity in minority investment 1,322 -- 1,323
Increase in accrued interest 78,716 39,681 133,206
------------ ------------ ------------
Net cash used in operating activities (4,694,756) (1,271,821) (7,508,371)
------------ ------------ ------------
Cash flows from investing activities
Purchase of assets from General Communications (345,609) -- (345,609)
20% Investment in JJ&D, LLC (100,000) -- (100,000)
Purchase of Airtel Communications Assets (50,000) -- (50,000)
Management Agreements - Airtel SMR -- -- --
Purchase of CMRS and 800 (3,547,000) -- (3,547,000)
Purchase of SMR station licenses -- (20,450) (1,398,575)
Purchase of license options 739,549 (852,200) 40,199
Decrease in deposits on licenses (143,906) -- (143,906)
Decrease in license options payable (66,850) 641,350 (66,850)
Purchase of property, machinery and equipment (1,603,623) (255,241) (2,156,055)
Purchase of assets held for resale -- (149,650) (219,707)
Sale of assets held for resale -- -- 700,000
Decrease in debt issuance costs (400,000) -- (400,000)
Increase in organization costs -- -- (16,859)
Increase in customer deposits 1,600 -- 1,600
Increase in deposit on sale -- 325,000 --
------------ ------------ ------------
Net cash used in investing activities (5,515,839) (311,191) (7,702,762)
------------ ------------ ------------
(Continued)
5
8
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONCLUDED
Period from
January 1,
1994
Nine Months Nine Months through
Ended Ended September
September 30,1996 September 30,1995 30,1996
(Unaudited) (Unaudited) (Unaudited)
----------------- ----------------- --------------
Cash flows from financing activities
Proceeds upon issuance of stock 6,062,404 1,911,280 8,434,006
Proceeds upon exercise of options - related 93,752 -- 156,252
Proceeds upon exercise of options - unrelated 2,167,327 -- 3,144,828
Purchase and conversion of CCI stock -- -- 45,000
Advances from related parties -- 114,205 767,734
Payments of notes payable (100,000) (200,000) (100,000)
Payment of advances from related parties -- (1,000) (73,000)
Payments of capital lease obligations (14,452) -- (14,452)
Increase in capital lease obligations -- -- --
Repayment of long-term debt (4,139,544) (191,325) (4,442,315)
Increase in debt issuance costs (420,000) -- (420,000)
Prepaid option exercise 1,582,116 -- 1,582,116
Proceeds from issuance of common stock 977 -- 977
Proceeds from issuance of notes payable -- -- 375,000
Proceeds from issuance of long-term debt 8,000,000 -- 8,965,000
------------ ------------ ------------
Net cash provided by financing activities 13,232,580 1,631,160 18,421,146
------------ ------------ ------------
Net increase in cash 3,021,985 (21,112) 3,210,013
Cash at beginning of period $ 188,029 $ 151,972 $ --
------------ ------------ ------------
Cash at end of period $ 3,210,014 $ 130,860 $ 3,210,013
============ ============ ============
See accompanying notes to unaudited consolidated financial statements
6
9
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 30, 1996
Deficit
Common Stock Accumulated
--------------------------- Additional during the Common Total
Outstanding paid-in development stock shareholders'
Shares Amount capital stage Subscribed equity
--------------- ----------- ------------- ----------------- -------------- --------------
Balance at January 1, 1996 $ 8,387,064 $ 8,387 $ 10,564,852 ($ 7,860,420) $ 324,807 $ 3,037,626
Shares issued in connection with the 441,666 442 665,058 -- (324,807) 340,693
private placement
Additional private placement shares 107,751 108 (108) -- -- --
Shares issued to investors for cash 1,407,057 1,407 2,914,550 -- -- 2,915,957
Shares issued for options exercised 2,849,166 2,849 2,503,236 -- -- 2,506,085
Shares issued for legal fees 62,500 63 62,437 -- -- 62,500
Shares issued for assets purchased 100,000 100 176,463 -- -- 176,563
from General Communications (Note 3)
Shares issued to license holders (note 11) 285,860 286 821,564 -- -- 821,850
11)
Shares issued for CMRS and 800 508,000 508 1,237,742 -- -- 1,238,250
Acquisition (note 11)
Shares issued for Convertible 1,852,538 1,853 4,077,991 -- -- 4,079,844
Debenture (note 11)
Options issued for 20% interest in -- -- 872,000 -- -- 872,000
JJ&D, LLC
(note 2)
Options Issued for CMRS and 800 -- -- -- -- -- 28,300,196
Acquisition (note 2)
Shares subscribed (note 5) -- -- -- -- 32,890 32,890
Canceled Shares (note 11) (1,514,266) (1,514) (2,080,602) -- -- (2,082,116)
Net Loss -- -- -- (4,713,070) -- (4,713,070)
------------ ---------- ------------ ------------ ------------ ------------
Balance, September 30, 1996 $ 14,487,336 $ 14,487 $ 50,115,379 ($12,573,491) $ 32,890 $ 37,589,266
============ ========== ============ ============ ============ ============
See accompanying notes to unaudited consolidated financial statements
7
10
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(1) DESCRIPTION OF BUSINESS
THE COMPANY AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Chadmoore
Wireless Group, Inc. and subsidiaries (the "Company"), which
is a development stage company. The Company commenced formal operations
in the state of Nevada on May 11, 1994 and was organized for the purpose
of acquiring and operating Specialized Mobile Radio ("SMR")
wireless communication systems. The Company's current market area is
primarily located in Tennessee and Arkansas.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities
and Exchange Commission Form 10-QSB. All material adjustments,
consisting only of normal recurring adjustments which are, in the
opinion of management, necessary to present fairly the financial
condition and related results of operations, cash flows and
shareholders' equity for the respective interim periods presented are
reflected. The current period results of operations are not necessarily
indicative of results for the full year ending December 31, 1996. These
unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included
in the annual report on Form 10-KSB for the period ended December 31,
1995 and the current reports on Form 8-K dated March 22, 1996, May 14,
1996, June 28, 1996, and July 30, 1996.
In February 1995, the Company (formerly Capvest Internationale, Ltd.
("Capvest"), a publicly held entity) entered into a Plan of
Reorganization ("Plan") whereby the Company exchanged 89% of
its issued and outstanding stock for 85% of restricted common shares of
Chadmoore Communications, Inc. ("CCI"). Capvest has not had
significant operations since its inception in 1988. Pursuant to the
Plan, Capvest changed its name to Chadmoore Wireless Group, Inc.
The transaction has been accounted for under the purchase method of
accounting as a reverse purchase acquisition whereby Chadmoore Wireless
Group, Inc. is the remaining legal entity and CCI is the acquirer and
remaining operating entity. Pursuant to this structure, the consolidated
shareholders' equity (deficiency) of the legal entity has been adjusted
for the effect of the reorganization and to reflect the shareholders'
equity (deficiency) of the acquiring entity as of December 31, 1994.
In addition, a development stage company is required to report the
results of its operations and cash flow from inception to date. However,
Capvest has been dormant since 1988 and CCI began operations on May 11,
1994. As a result, the statements of operations, shareholders' equity
(deficiency) and cash flows have been presented for the period from
January 1, 1994 to September 30, 1996.
8
11
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(1) DESCRIPTION OF BUSINESS - CONTINUED
DEVELOPMENT STAGE AND LIQUIDITY
Through September 30, 1996, the Company has been engaged primarily in
the identification, development and acquisition of SMR systems and SMR
Stations and has therefore not commenced normal operations nor generated
significant revenues. Accordingly, the Company has generated an
accumulated net loss during its development stage of approximately $12.6
million from operations as of September 30, 1996. Management believes
its acquisition of SMR Stations from CMRS Systems, Inc. (CMRS) and 800
SMR Network, Inc. (800), consummated on June 14, 1996 and SMR systems
and other assets from General Communications, Inc. (General), which was
consummated on March 8, 1996 as described in Note 3, as well as other
associated system acquisitions, will provide the basis for the
commencement of normal operations towards the end of 1996.
In June 1996, the Company issued $4.0 million out of a $5.0 million
offering of 8%, three year, convertible notes. The Company received
3,580,000, net of placement fees of $420,000. In July 1996, the Company
placed the remaining $1.0 million and received $900,000, net of
placement fees of $100,000.
In September 1996, the Company issued a new debt offering of $3 million
of 8%, two year convertible notes. The Company received $2,700,000, net
of placement fees of $300,000.
On October 25, 1996, the Company's subsidiary Chadmoore Communications,
Inc. ("CCI") signed a purchase agreement with Motorola to
purchase approximately $10 million of Motorola's radio communications
equipment, including a Smartnet II radio system within 30 months of the
effective date of the agreement. In connection with this purchase
agreement, CCI entered into a financing and security agreement with
Motorola. This agreement allows CCI to borrow up to a total of $5
million. This Loan Facility is available for draw downs during the
effective date of the purchase agreement. Principle and interest on the
Promissory Note are payable in arrears monthly from the date of each
funding for a period of 36 months from the fund date.
In October 1996, the Company entered into an agreement with American
Credit Corp to establish a $16.5 million equipment financing facility
for the purpose of purchasing analog systems and related equipment. The
equipment will be purchased by AMC Corp (the "Lessor") and
leased to the Company. The Agreement calls for a basic lease term of
five years. At the expiration of the lease, the Company will have the
right to purchase all, but not less than all, of such equipment at a
purchase price equal to the fair market value of such equipment.
Accordingly, based on the plans and intentions set forth above and
assuming the additional capital infusion as described above, management
anticipates through the establishment of operational SMR systems in
conjunction with the ability to provide both short-term funding of
operations and long-term financing of acquisition and development
activities, that the Company expects to emerge from the development
stage and establish normal operations towards the end of 1996.
However, as of September 30, 1996, the success of achieving the
objectives discussed herein, as well as the ultimate profitability of
the Company's operations once the development stage has ended, cannot
presently be determined.
9
12
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(1) DESCRIPTION OF BUSINESS - CONCLUDED
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(2) ACQUISITIONS
CMRS AND 800 STOCK PURCHASE AGREEMENT
On June 14, 1996, the Company executed a Stock Purchase Agreement with
Libero Limited ("Libero"). Pursuant to the agreement, the
Company acquired from Libero all the issued and outstanding common stock
of CMRS Systems, Inc. ("CMRS") and 800 SMR Network, Inc.
("800") (jointly the "Management Companies"). The
Management Companies intend to engage in the business of constructing
and managing multi-channel 800 MHz Specialized Mobile Radio stations.
The Management Companies have entered into management agreements
("Management Agreements") with certain companies (the
"Companies"), pursuant to which CMRS or 800, as the case may
be, has agreed, in accordance with applicable Federal Communications
Commission ("FCC") rules, regulations and policies, to
construct and manage all of the Stations for which the Companies have
received licenses from the FCC. The respective shareholders of the
Companies have granted to CMRS or 800, as the case may be, options to
acquire all of the stock of the Companies ("Options"), at such
time as all conditions of such transfer of control have been met, as set
forth in the FCC rules, regulations and policies and as required by
(beta)310 of the Communications Act of 1934, as amended by 47
U.S.C.(beta)310.
The Company consummated such acquisition for combined consideration
valued at $33,085,446. The Company has accounted for the acquisition
under the purchase method of accounting. The purchase price was paid
with (1) an aggregate cash consideration of $3,547,000; (2) 508,000
shares of the Company's restricted common stock valued at $1,238,250;
and (3) a grant of an option to purchase 8,323,857 shares of common
stock for a period of ten years at an exercise price of $.50 per share
valued at $28,300,196. Combined consideration of $29,776,901 was
allocated to management agreements held by CMRS and 800 and combined
consideration of $3,308,545 was allocated to options to acquire the
stock of the licensee corporations also held by CMRS and 800. These
allocations were based on management's estimates of value. The Company
will begin amortizing the cost allocated to the management contracts
over the useful lives commencing upon the underlying Station being
placed in service not to extend past June 2006. The Company is seeking
to obtain separate independent verifications of the value of the
Stations acquired and the value of the Securities issued in connection
with the acquisition. The Company had sufficient cash on hand for the
cash consideration paid.
10
13
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(2) ACQUISITIONS - CONTINUED
GENERAL COMMUNICATIONS ASSET PURCHASE AGREEMENT
On March 8, 1996, the Company re-negotiated and finalized the purchase
of phases 2-5 of the General Communications Asset Purchase Agreement. In
conjunction with this transaction, the Company purchased certain SMR
equipment, land, building, other fixed assets, accounts receivables,
inventory and FCC licenses for SMR channels in Memphis, Tennessee from
General Communications Radio Sales and Service, Inc.
("General"). Prior to the asset purchase and since November
1994, the Company was managing the daily operations of General for a
management fee equal to the net cash flows of General.
The acquired assets were recorded at $834,569. The Company paid $345,609
in cash and issued 100,000 shares of restricted common stock with a fair
market value on March 8, 1996 of $176,563, based on the discounted
average closing bid and ask price of the Company's common stock trading
on the NASD Electronic Bulletin Board. The Company's non-competition,
consulting agreement and note payable liabilities to General with a
balance totaling $906,687, net of the corresponding non-competition and
consulting agreement asset of $244,571, were canceled and a new note
payable was issued. The new note is a 25 year, unsecured, non-interest
bearing, negotiable promissory note with a face amount of $4,110,000,
scheduled to be repaid in 300 monthly installments.
The note's monthly payments are subject to Consumer Price Index
increases in years three through thirteen. The Company has assumed a CPI
increase of 2.5% for recording purposes thereby reflecting the gross
value of the note equal to $5,024,198. Interest on the note has been
imputed at 9% giving a net present value of $1,208,869, net of
unamortized discount of $3,815,329 amortized on the straight line method
over the term of the note.
The following unaudited pro forma results of operations assume the
acquisition occurred as of January 1, 1995:
---------------------------------------- Nine Months Ended
Unaudited Pro Forma Information: September 30, 1996
------------------
Revenue Sales $ 1,739,933
Net Loss (4,710,868)
Net Loss per Common Share (0.44)
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the General acquisition
been consummated as of January 1, 1995, nor are they necessarily
indicative of future operating results.
11
14
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(2) ACQUISITIONS - CONCLUDED
JJ&D, LLC INVESTMENT
On May 23, 1996 the Company purchased a 20% investment in JJ&D, LLC by
tendering $100,000 in cash, issuing a $100,000 non-interest bearing 120
day note and issuing 298,507 options to purchase the Company's
restricted common stock. The options are exerciseable for three years at
$1.00 per share. JJ&D, LLC has obtained the exclusive rights from A
Communications, LLC to market, in the United States, A Communications'
proprietary SMR frequency agile quick start module. This investment is
being accounted for using the equity method of accounting. All
significant intercompany transactions since May 23, 1996, have been
eliminated. Condensed financial information of JJ&D, LLC for the nine
months ended September 30, 1996 is summarized below:
----------------------------------
Condensed Financial information:
Current Assets $ 195,486
Non-current Assets $ --
Current Liabilities $ 26,100
Shareholders' Equity $(221,586)
Net Income $ 177,470
AIRTEL SMR, INC. MANAGEMENT AND OPTION TO ACQUIRE AGREEMENT
On May 11, 1996, the Company completed a Management and Option to
Acquire Agreement with Airtel SMR, Inc., an operator of SMR stations.
The Company assumed a $100,000 note payable, due May 1998 with
interest at 12%. The Company received SMR equipment valued at $62,702,
Management Agreements for one year valued at $3,730 and an Option to
Acquire the common stock of Airtel SMR, Inc. valued at $33,568. The
allocated valuations of the Management Agreement and Option to Acquire
Agreement were based on management's estimates.
AIRTEL COMMUNICATIONS, INC. ASSET PURCHASE AGREEMENT
On May 11, 1996, the Company completed an Asset Purchase Agreement
with Airtel Communications, Inc., an SMR sales organization. The
Company paid $50,000 and received certain office equipment and rights
to a customer list valued at $47,788. The customer list will be
amortized on a straight-line basis over its useful life estimated to
be two years. The accumulated amortization at September 30, 1996 was
$9,957.
12
15
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(3) STOCK SUBSCRIPTIONS RECEIVABLE AND SUBSCRIBED
In the second quarter of 1996, the Company received $195,000 for the
purchase of 145,000 shares of common stock. The shares were not issued
until July 1996. As a result, the funds were held in an escrow account
at June 30, 1996. The Company received the funds when the shares were
issued in July 1996. In addition, the Company made a down payment on
approximately 8 of certain license options and agreed to issue 11,440
shares of its common stock as payment of 40% of the purchase price of
these licenses valued at $32,890. The value of these shares is recorded
as Stock Subscriptions Receivable at September 30, 1996.
The 508,000 shares pursuant to the CMRS and 800 stock purchase agreement
(see note 3), valued at $1,238,250 were also issued on July 2, 1996. The
value of the shares has been combined with other consideration and
allocated to management agreements and options to acquire stock.
The value of the above mentioned unissued shares is classified as common
stock subscribed in shareholders' equity at September 30, 1996.
(4) PROPERTY AND EQUIPMENT
Property and equipment, which is recorded at cost and depreciated over
their estimated useful lives, generally 5-10 years, consists primarily
of SMR system components and related acquisition costs. The recorded
amount of property and equipment capitalized and related accumulated
depreciation is as follows:
September 30, 1996
------------------
SMR systems and equipment $ 1,967,913
Buildings and Improvements 345,665
Land 102,500
Furniture and office equipment 156,588
-----------
2,572,666
Less accumulated depreciation (158,613)
-----------
$ 2,414,053
===========
13
16
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(5) FCC LICENSES
FCC licenses consist of the following:
September 30,
1996
-----------
FCC licenses $ 1,548,299
Less accumulated amortization (134,051)
-----------
$ 1,414,248
===========
(6) INVESTMENT IN LICENSE OPTIONS
The Company has entered into various option agreements to acquire FCC
radio licenses for SMR channels and also entered into management
agreements with the licensees of the SMR channels. Depending on the size
of the market in which the channel is located, the Company paid $100 to
$1,500 for each option. As of September 30, 1996, the Company has
invested $3,322,412 in license options. The total purchase price of the
licenses under option, including commissions, amounts to approximately
$32,593,168 and $43,000,000 at September 30, 1996 and December 31, 1995,
respectively. The agreements allow the Company to purchase licenses
within a specified period of time after the agreement is signed. On
February 2, 1996, the Company made a down payment on approximately 140
of certain license options and issued 285,860 restricted shares of its
common stock as payment of 40% of the purchase price of these licenses
(see Note 11). The issuance of the stock valued, at $821,848, is
recorded as an investment in license options on September 30, 1996. In
addition, the Company made a down payment on approximately 8 of certain
license options and agreed to issue 11,440 restricted shares of its
common stock as payment of 40% of the purchase price of these licenses.
The shares have been valued at $32,890 and have been recorded as Stock
Subscriptions Receivable at September 30, 1996.
Certain options required down payments in January 1996. The Company has
submitted an amendment to the option holders which would move the down
payment date to September 9, 1996 and increases the down payment. Of the
options the Company desires to amend, approximately 94% of the option
holders have executed the amendments. On September 6, 1996, the Company
submitted a second amendment for the option holders which would change
the down payment amounts to a series of $100 quarterly payments instead
of one lump sum. The first series was sent on September 9, 1996 and
amounted to $116,000. The next series is due in December 1996. Of these
second amendments sent, 94% of the option holders have executed the
amendment. With respect to the remaining options on which a holder has
not executed an amendment, the Company is in default of the terms
thereof. The holders of such options have not yet, however, elected to
terminate the options based on this default. Notwithstanding this
failure to act, such holders may at any time terminate their options or
exercise other remedies with respect thereto, unless the amendment is
executed or the Company is able to meet its monetary obligations
thereon.
14
17
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(6) INVESTMENT IN LICENSE OPTIONS - CONCLUDED
Upon entering into an option agreement, the Company also enters into a
management agreement with the licensee. The management agreements give
the Company the right to manage the SMR systems for the period stated in
the agreements, usually 2 to 5 years. During this period revenues
received are shared with the licensee after certain agreed upon costs to
construct the channels have been recovered. The Company has not
recognized any revenue from these agreements during the nine months
ended September 30, 1996 and 1995, as none of the systems under option
are revenue producing.
COMMISSION PAYABLE
In connection with the exercise of the options to purchase licenses, the
Company is required to pay an allocated portion of the payment to a
certain third party. As a result of the down payment made on February 2,
1996 to purchase 140 of licenses, the Company accrued $175,600 of
commissions payable which represents 40% of the total commissions to be
paid when these licenses are fully paid for by the Company.
(7) INVESTMENT IN OPTIONS TO PURCHASE STOCK OF UNDERLYING LICENSEE
CORPORATION
The Company has allocated $29,776,901 of combined consideration tendered
in the acquisition of CMRS and 800 to the options to acquire the stock
of the licensee corporations (the "Companies") held by CMRS
and 800. This allocation was based on management's estimates of fair
market value (see Note 2). The respective shareholders of the Companies
have granted to CMRS or 800, as the case may be, options to acquire all
of the stock of the Companies, at such time as all conditions of such
transfer of control have been met, as set forth in the FCC rules,
regulations and policies and as required by (beta)310 of the
Communications Act of 1934, as amended by 47 U.S.C.(beta)310.
(8) MANAGEMENT AGREEMENTS
The Company has allocated $28,300,196 of combined consideration tendered
in the acquisition of CMRS and 800 to the ten year Management Agreements
held by CMRS and 800. This allocation was based on management's
estimates of fair market value (see Note 3). The Management Companies
have entered into management agreements with certain companies, pursuant
to which CMRS or 800, as the case may be, has agreed, in accordance with
applicable Federal Communications Commission ("FCC)" rules,
regulations and policies, to construct and manage all of the Stations
for which the Companies have received licenses from the FCC. The Company
will begin amortizing the cost allocated to the management contracts
over the useful lives commencing upon the underlying Station being
placed in service not to extend past June 2006.
15
18
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(9) NOTES PAYABLE
In connection with the note payable to JJ&D, LLC at June 30, 1996, the
Company paid cash of $100,000 on September 10, 1996, in full satisfaction
of the note payable.
(10) LONG-TERM DEBT
Long-Term debt consists of the following: September 30, 1996
--------------------------
Notepayable in connection with the asset purchase of General (see note
3), payable in monthly installments of $12,500 through February
1997, $13,750 through February 1998; thereafter, monthly payments
are subject to annual CPI increases through February 2008 at which
time the monthly payments are capped through February 2021
Management has assumed annual CPI increases to be 2.5%
Non-interest bearing with interest imputed at 9%, net of
unamortized discount of $3,726,304 as of September 30, 1996
$ 1,210,394
Notes convertible to the Company's Common Stock, principal due June
1999, interest due semi-annually June and December at a rate of
8% 985,000
Notepayable to Bortex Trust in connection with asset purchase (see
note 3) payable in monthly installments of $4,707 through May 1998,
including interest at 12%
84,947
Notes Convertible to the Company's Common Stock, principal due
September 1998, interest due quarterly at a rate of 8%
3,000,000
-----------
$ 5,280,341
Less current installments 200,614
-----------
$ 5,079,727
===========
16
19
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(10) LONG-TERM DEBT - CONTINUED
Aggregate maturity of debt for the next five years is as follows:
Year ended September 30:
1997 $ 199,363
1998 3,211,740
1999 1,156,592
2000 175,881
2001 180,278
----------
$4,923,854
==========
DEBT ISSUANCE
In June 1996, the Company issued $4 million out of a $5 million offering
of 8%, three year, convertible notes. The Company received $3,585,833,
net of placement fees of $420,000. In July 1996, the Company placed the
remaining $1 million convertible notes and received $900,000, net of
placement fees of $100,000.
During the 1996 third quarter, holders tendered $3,015,000 of the three
year, 8% debentures for conversion into 1,883,049 common shares of the
Company. The value of the note conversion plus interest amounted to
$4,079,843.
In September 1996, the Company issued a new debt offering of $3 million
of 8%, two year convertible notes. The Company received $2,700,000, net
of placement fees of $300,000.
LEASE COMMITMENT
Commencing in March 1995, the Company leases its corporate offices and
warehouse facilities in Las Vegas, Nevada under a non-cancelable
operating lease agreement which expires in March 1997. Terms of the
lease provide for minimum monthly payments of $5,560 including operating
expenses. The agreement provides for one two-year renewal period in
which the lease payment shall be adjusted for changes in the consumer
price index as defined therein.
The Company is obligated under a capital lease for various SMR
equipment.
In addition, the Company leases certain antenna sites for transmission
of SMR services. The terms of these leases range from month to month to
5 years, with options to renew. Most of the leases provide for a
termination period of 30 to 60 days by the Company or the site owner.
17
20
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
10) LONG-TERM DEBT - CONCLUDED
Future minimum payments associated with the leases described herein,
including renewal options, are as follows:
CAPITAL OPERATING
Nine months ended LEASES LEASES
September 30: --------- ---------
1997 $ 27,114 $169,145
1998 21,390 84,730
1999 -- 48,540
2000 -- 31,042
2001 -- 6,759
-----------------------------
$ 48,504 $340,216
=============================
Total minimum lease payments 54,643
Imputed interest 6,417
-------
Present value of minimum
capitalized lease payments 48,504
Current portion 27,114
=======
Long term capitalized lease
obligations $21,390
=======
Total rent expense for the nine months ended September 30, 1996 amounted
to $50,040.
(11) EQUITY TRANSACTIONS
PREFERRED OFFERING
On April 4, 1996, the Company issued 250,000 shares of preferred stock
in exchange for $2,275,956, net of expenses of $224,044. In addition, no
later than April 15, 1996, the agreement calls for the Company to issue
warrants to purchase 50,000 shares of common stock. During June of 1996,
all 250,000 shares of the preferred stock were converted into 481,025
shares of the Company's common stock.
18
21
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(11) EQUITY TRANSACTIONS - CONTINUED
PRIVATE PLACEMENT
In August 1995, the Company prepared a Private Placement Memorandum
("PPM") and offered 1,000,000 units at a price of $2.00 per
unit. Each unit consisted of one share of the Company's common stock and
one common stock purchase warrant. One warrant entitles the holder to
purchase one share of common stock at $5.00 per share for a period of
three years from the date of issuance.
In October 1995, the Company reduced the price of the units in the PPM
to $1.50 per unit with the same warrant terms.
In connection with the PPM the Company issued 763,585 shares of
restricted common shares and received proceeds of $1,252,790 net of
issuance costs of $54,210.
The Company also sold 430,000 shares of restricted common stock to three
foreign investors and received proceeds of $600,000, net of placement
fees of $45,000. Options to purchase 400,000 shares were also issued at
strike prices ranging from $2.50 - $6.00.
PREPAID OPTIONS
In September 1996, in connection with the options granted to Libero for
the purchase of CMRS & 800 MHz, the Company booked a liability for
prepaid options in the amount of $2,082,116. Libero tendered the funds
to prepay future option exercises. The amount was tendered to a third
party to purchase back 1,514,266 shares of the Company's stock form a
former officer/director. The shares were then tendered to the Company
and subsequently canceled. The corresponding amounts were removed from
equity on the balance sheet as of September 30, 1996.
DEBT CONVERSIONS
UNRELATED PARTIES -- The Company issued 450,000 shares of unrestricted
common stock valued at $.37 per share in lieu of cash payment of
$153,000 for consulting services.
PREPAID MANAGEMENT RIGHT FEES
On December 29, 1995, in connection with an agreement for the management
of certain SMR stations, the Company issued 77,002 shares of restricted
common stock valued at $1.50 per share. The agreement called for the
Company to receive a percentage of the net revenues generated over the
next five years. The number of shares issued was determined based on the
present value of an estimate of the future cash flows to be received
under the management agreement. The expense related to this transaction
was based on the fair market value of the stock at the date of grant and
totaled $117,813 at December 31, 1995. The total amount was capitalized
as prepaid expense in the consolidated balance sheet at December 31,
1995, and will be amortized over the management agreement period. Total
amortization as of September 30, 1996 equals 27,188.
19
22
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(11) EQUITY TRANSACTIONS - CONTINUED
LICENSE PURCHASE
In February 1996, the Company issued 285,860 restricted common shares as
down payment for the exercise of the option to purchase 140 licenses
under the license option agreements (see Note 6). The issuance of the
stock represented 40% of the purchase price. The amount capitalized as
down payment of these licenses was based on the fair market value of the
stock on the date of issuance and totaled $821,848.
OPTIONS
During 1996, the Company granted stock options to purchase 9,642,364
shares of the Company's restricted common stock. The options have been
issued to shareholders, consultants, investors and third parties through
acquisitions and are exerciseable for three to ten years from date of
issuance.
STOCK OPTIONS NUMBER OF SHARES
--------------------------------------------------------------------
Outstanding at December 31, 1995 3,072,136
Granted at $0.50-$6.00 per share 10,842,364
Less -
Exercised at $0.50-$2.50 per share 2,911,666
Lapsed or canceled 330,000
----------
Outstanding at September 30, 1996 10,672,834
==========
20
23
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(11) EQUITY TRANSACTIONS - CONTINUED
WARRANTS
During the nine months ended September 30, 1996, the Company issued
warrants in conjunction with the following transactions:
o 549,471 issued in connection with the private placement unit sales
(see "private placement").
o 50,000 issued in connection with the Preferred Stock placement.
The following is a summary of warrants outstanding and their terms as of
September 30, 1996:
WARRANTS NUMBER OF SHARES
----------------------------------------------------------------------
Outstanding at December 31, 1995 1,109,334
Granted at $5.00 per share 599,417
Less -
Exercised --
Lapsed or canceled --
----------------------------------------------------------------------
Outstanding at September 30, 1996 1,708,751
MINORITY INTEREST
Prior to the reverse merger, the Company sold restricted common stock in
its subsidiary, CCI, to a third party totaling 700,000 shares. The
holder of such shares has not yet elected to convert these shares of CCI
to shares of Chadmoore Wireless Group, Inc. As per the amended and
restated stock subscription agreement dated January 13, 1995, the third
party has options to purchase 2,100,000 shares of restricted common
stock of CCI. The options are exerciseable six months from the closing
date of the amended and restated stock subscription agreement through
eight years from this date. As such, by July 13, 1995, 700,000 options
that were exerciseable at $1.50 per share were unexercised by the third
party and thus expired on that date. Options to purchase 1,400,000
shares of CCI remained outstanding at September 30, 1996 at the
following exercise prices:
NUMBER OF OPTION EXERCISE OPTION
--------- ------ -------- ------
OPTIONS TYPE PRICE EXPIRATION
------- ---- ----- ----------
DATE
----
700,000 A $ 2.50 1/13/2000
700,000 B $ 4.00 1/13/2003
21
24
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(continued)
(11) EQUITY TRANSACTIONS - CONCLUDED
MINORITY INTEREST - CONCLUDED
In addition, subsequent to the merger, the Company sold common stock in
CCI to third parties totaling 30,000 shares with net proceeds of
$45,000. At December 31, 1995 these 30,000 shares of CCI's common stock
were converted to an equal number of Chadmoore Wireless Group, Inc.'s
restricted common stock and these shareholders were granted warrants to
purchase 30,000 shares of common stock at $5 per share.
As a result of the reverse purchase acquisition and Plan of
Reorganization as described in Note 1, the third party shareholders of
CCI shares are not considered a minority interest in the Company for
accounting purposes as CCI is treated as the acquiring entity.
However, for accounting purposes, the original shareholders of Capvest
would be a minority interest. Due to the net losses of the Company
incurred to date, no minority interest is presented in the accompanying
consolidated financial statements.
(12) COMMITMENTS AND CONTINGENCIES
LICENSE OPTION CONTINGENCIES
Once an SMR channel is operating, the Company may exercise its option to
acquire the license at any time prior to the expiration of the option.
Although, the Company presently intends to exercise all options, the
exercise is subject to a number of contingencies. These contingencies
include constructing the license within the time period allotted by the
FCC, maintaining the channel once constructed, the Company having the
ability to purchase the license and the FCC approval of the transfer.
LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position, results of
operations or liquidity.
22
25
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1996
(concluded)
(13) SUBSEQUENT EVENTS
MOTOROLA PURCHASE AND FINANCE AGREEMENTS
On October 25, 1996, the Company's subsidiary, Chadmoore Communications,
Inc. ("CCI") signed a purchase agreement with Motorola to
purchase approximately $10 million of Motorola's radio communications
equipment, including a Smartnet II radio system, within 30 months of the
effective date of the agreement. In connection with this purchase
agreement, CCI entered into a financing and security agreement with
Motorola. This agreement allows CCI to borrow up to a total of $5
million. This Loan Facility is available for draw downs during the
effective date of the purchase agreement. Principle and interest on the
Promissory Note are payable in arrears monthly from the date of each
funding for a period of 36 months from the fund date.
AMC CORP LETTER OF AGREEMENT
In October 1996, the Company entered into an agreement with American
Credit Corp to establish a $16.5 million equipment financing facility
for the purpose of purchasing analog systems and related equipment. The
equipment will be purchased by AMC Corp (the "Lessor") and
leased to the Company. The agreement calls for a basic lease term of
five years. At the expiration of the lease, the Company will have the
right to purchase all, but not less than all, of such equipment at a
purchase price equal to the fair market value of such equipment.
MUTUAL SETTLEMENT AND RELEASE AGREEMENTS
In October 1996, the Company entered into Mutual Settlement and Release
agreements (the "Settlement Agreements") with certain parties
to an SMR System Management Agreement and Option to Acquire (the
"Underlying Agreements"). The parties agreed to nullify and
render void the Underlying Agreements and as additional consideration
for the Settlement Agreements, the Company agreed to issue shares of the
Corporation's restricted common stock. Pursuant to the terms in the
Settlement Agreements, the Company has authorized the issuance of an
aggregate of 43,100 shares of its restricted common stock, the value of
which will be reflected in Other income and expenses in the Company's
income statement.
23
26
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
ITEM 2. PLAN OF OPERATION
The Company's objectives over the next 12 months are to construct analog
channels in selected markets, establish distribution, institute its marketing
plan, increase recurring revenues through the addition of subscribers in all
markets, and construct an initial digital SMR network. Through acquisition and
management of existing operating systems and construction of newly licensed SMR
stations, the Company intends to increase the customer base and corresponding
revenues within each market. The plan is to select markets where the Company
has adequate available channel density, where there is lack of current capacity
with existing operations to serve market needs, where there is immediate
distribution through existing SMR sales and service providers, and where there
is significant population base to market its services to and generate
sufficient revenues to justify the capital required to provide service.
To date, the Company's activities have been limited to raising capital for
operations and acquisitions, hiring a core team of employees, and managing and
acquiring initial operating systems. In March 1996, the Company acquired its
initial operating SMR system in Memphis, Tennessee which currently has
annualized gross revenues in excess of $2,000,000. In May 1996, the Company
acquired a sales facility and the rights to manage with an option to acquire an
SMR system in Little Rock, AR. The Company currently offers two types of
wireless communication services: SMR dispatch (two-way) and telephone
interconnect. Both services utilize analog SMR technology. The Company sells
analog SMR equipment to subscribers and provides the system and services on
which customers can use their equipment. These operations serve a population of
approximately 1,500,000.
The Company has also entered into five year option to acquire and management
agreements with over 1,250 licensees, comprising over 2,300 channels licensed
by the FCC, in over sixty cities throughout the mid-South and mid-West regions
of the United States covering areas with a total combined population in excess
of 40,000,000.
In June, 1996, the Company acquired all the issued and outstanding common
stock of CMRS Systems, Inc. ("CMRS") and 800 SMR Network, Inc. ("800") (jointly
the "Management Companies"). The Management Companies have entered into
management agreements with certain companies ("Companies") pursuant to which
CMRS or 800 have agreed to construct and manage all of the channels for which
the Companies have received licenses from the FCC. The respective shareholders
of the Companies have granted to CMRS or 800, as the case may be, options to
acquire all of the stock of the Companies, at such time as all conditions of
such transfer of control have been met, as set forth in the FCC rules,
regulations and policies. The Management Companies intend to engage in the
business of constructing and managing multi-channel 800 MHz SMR stations.
The acquisition is significant to the Company in that it substantially
increases the total number of channels under management to over 7,000 channels
and expands the service footprint to over two hundred markets located in
forty-seven States and the U.S. Territories of Puerto Rico and the Virgin
Islands covering areas with a total combined population in excess of
60,000,000. Additionally, the Company has formed dealer agreements with
independent SMR operators, and has begun to develop, construct and market SMR
services.
24
27
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
ITEM 2. PLAN OF OPERATION - CONTINUED
The Company plans to offer analog and digital wireless communication services
ranging from two-way dispatch, and telephone interconnect, to services
comparable in quality to those provided by current cellular telephone
operators. In addition, the Company plans to offer in a single handset,
services and combinations of services currently not previously available in its
operating areas. These services will include combined mobile telephone,
dispatch and data transmission. When Chadmoore begins the implementation of
digital technology, it plans to use Motorola's integrated Dispatch Enhanced
Network ("iDEN") technology and subscriber equipment in phased
digital network deployment. The implementation of iDEN technology will afford
the Company the benefits of dramatically expanding existing system capacity and
provide advanced features, call clarity, and call security to its subscribers.
As the Company develops its digital wireless network, it intends to selectively
convert analog SMR channels to iDEN technology as capacity shortfalls and
marketplace demands for additional features dictate.
The Company plans to use leased facilities on existing towers wherever
possible to avoid the cost of tower and shelter construction. Management
believes this approach will also expedite the construction process and avoid
time delays associated with local zoning and permit issues. The Company expects
approximately 33% of the planned sites will need to be constructed. In the
cases where construction is necessary, the Company will be required to bear the
costs of constructing a site which may include: access road development, land
acquisition, shelter costs, foundation and tower construction.
Over the next 12 months, the marketing objective is to activate customers on
the Company's channels as constructed and position the Company as a leader in
new wireless communication technology and service. Management believes that
Motorola's brand name recognition, combined with the Company's targeted
marketing approach, will assist in developing customer interest in the analog
and digital wireless services offered. The strategy is to increase Company
revenues with the smallest possible incremental marketing expense, using
existing dealers and operators in its footprint.
It is anticipated that the Company's recurring revenues will consist primarily
of subscriber network usage revenues, which consist of monthly access fees per
unit, incremental charges based on minutes of use, and lease revenues from site
operations where the Company owns or manages a transmission facility and leases
space to a third party. Lease revenues, while not a primary source of revenue,
offer increased cash flow opportunities for little additional cost. From time
to time, changes in the Company's plans may dictate that facilities, originally
acquired to be included in an operating system, will be sold, traded or used in
partnership with existing service providers in a particular market to provide
either additional cash flow for growth or to begin or strengthen specific
strategic alliances.
The Company has elected to develop two channels of distribution: independent
agents and, to a lesser extent, direct sales representatives. Independent
agents will be established in each of the markets as available. The Company
intends to attract high quality agents through innovative compensation plans.
The Company will also establish a sales presence in markets where adequate
independent agents are not available. It is anticipated that each sales office
will have a minimal retail presence for walk-in customer traffic. In addition,
the Company's management team recognizes that additional staff will be required
to properly support marketing, sales, engineering, and accounting. The Company
intends to minimize overhead costs through centralization and automation of
support services, such as activations, billing and collections.
25
28
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
ITEM 2. PLAN OF OPERATION - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of capital are the proceeds from the sale of common stock
from private placement(s), registered offering(s) of stock to the general
public, vendor financing, debt or convertible debt and the anticipated cash
from future operating revenue and the possible receipt of proceeds from the
exercise of the Company's options and warrants. There is no assurance that the
Company will be able to obtain such additional financing or, if available, that
the terms of the financing would be advantageous to the Company or its
shareholders.
On February 28, 1996, the Company executed with Motorola a purchase agreement
for its iDEN product. The agreement is conditional upon the Company acquiring
acceptable financing. The Company intends to obtain the required financing
through Motorola's Financing Division. The Company has delayed the
implementation of its initial iDEN system, due to the need for in-depth
engineering and operational analysis of the market positions it now controls as
well as the impact of possible strategic relationships. Upon completion of the
analysis, the Company has determined that the most feasible way to construct
and operate its channels on such a wide scale basis is to utilize Motorola's
advance analog equipment, including Smartnet II radio systems and has deferred
the implementation of iDEN equipment until the analog systems are unable to
accommodate market demand. On October 25, 1996, the Company's subsidiary,
Chadmoore Communications, Inc. ("CCI") signed a purchase agreement
with Motorola to purchase approximately $10 million of Motorola's radio
communications equipment, including a Smartnet II radio system. The equipment
is to be purchased within 30 months of the effective date of the agreement. In
connection with this purchase agreement, CCI entered into a financing and
security agreement ("Loan Facility") with Motorola. This agreement
allows CCI to borrow up to a total of $5 million. This loan Facility is
available for draw downs during the effective date of the purchase agreement.
Principle and interest on the Promissory Note are payable in arrears monthly
from the date of each funding for a period of 36 months from the fund date.
In April 1996, the Company issued 250,000 shares of its Convertible Series A
Preferred Stock for net proceeds of $2,275,956.
In June 1996, the Company issued $4 million out of a $5 million offering of 8%,
three year, convertible notes. The Company received $3,580,000, net of
placement fees of $420,000. In July 1996, the Company placed the remaining $1
million convertible notes and received $900,000, net of placement fees of
$100,000.
In September 1996, the Company issued a new debt offering of $3 million of 8%,
two year convertible notes. The Company received $2,700,000, net of placement
fees of $300,000.
26
29
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
ITEM 2. PLAN OF OPERATION - CONCLUDED
LIQUIDITY AND CAPITAL RESOURCES - CONCLUDED
During the next 12 months, the Company will require access to sufficient
capital to enable it to act quickly on opportunities that present themselves in
the Company's target markets. The Company believes that in the next 12 months
it will require approximately $11.0 million for capital expenditures associated
with the leased and capital assets necessary for the construction of systems.
In addition, the Company expects to require an additional $5.3 million to meet
operating expenses. When the Company commences the staged conversion of its
analog SMR systems to a Digital Mobile format, it will require significant
additional capital.
The Company intends to seek additional cash financing in exchange for one or
more of the following: financing provided by the vendor of the analog and
digital mobile equipment, incurring additional indebtedness, which may include
the issuance of debt securities convertible into shares of the Company's common
stock, issuing additional shares of preferred stock, which may include
preferred stock convertible into shares of the Company's common stock, and
issuing additional shares of common stock pursuant to one or more privately
negotiated transactions or public offerings. In the event that the Company
issues convertible debt securities or preferred stock convertible into shares
of its common stock, the effective price at which such shares of common stock
may be issued and sold by the Company may be lower than the prevailing market
prices for the Company's common stock at the time of such conversion and/or at
the time of issuance of such convertible debt or preferred stock.
In October 1996, the Company entered into an agreement with American Credit
Corp to establish a $16.5 million equipment financing facility for the purpose
of purchasing analog systems and related equipment. The equipment will be
purchased by AMC Corp (the "Lessor") and leased to the Company. The
agreement calls for a basic lease term of five years. At the expiration of the
lease, the Company will have the right to purchase all, but not less than all,
of such equipment at a purchase price equal to the fair market value of such
equipment.
Recently, the Company has held discussions with potential underwriters for a
potential public offering of the Company's securities. As of the date of this
report, however, the Company does not have a signed letter of intent from any
underwriter for a public offering of its securities, and there can be no
assurance that the Company will be able to obtain a signed letter of intent
from an underwriter or that it will be able to raise the capital necessary to
construct the channels for its proposed SMR network.
Accordingly, based on the plans and intentions set forth above, management
anticipates that through the establishment of operational SMR systems in
conjunction with the ability to provide both short term funding of operations
and long term acquisition and development activities, the Company expects to
emerge from the development stage and establish normal operations in 1996.
However, as of September 30, 1996, the success of achieving the objectives
discussed herein, as well as the overall profitability of the Company's
operations once the development stage has ended, cannot presently be
determined.
27
30
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As reported in the Company's Quarterly Report on Form 10-QSB for the Quarterly
Period Ended June 30, 1996, a lawsuit titled Key Communications Group, Inc. v.
Robert Moore, David Chadwick, Chadmoore Communications, Inc. and Chadmoore
Communications of Tennessee, Inc., Civil Action No. 94-CV-4196, was filed in
the District Court, City and County of Denver, State of Colorado, on August 31,
1994. This lawsuit was settled during the period covered by this Report and was
dismissed with prejudice pursuant to an order of the Court dated July 9, 1996.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
28
31
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
PART II - OTHER INFORMATION - CONTINUED
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Reorganization dated February 2, 1995, by and
between the Company (f/k/a Capvest Internationale, Ltd.) and Chadmoore
Communications, Inc.(1)
2.2 Addendum to the Agreement and Plan of Reorganization, dated February 21,
1995, by and between the Company (f/k/a Capvest Internationale, Ltd.) and
Chadmoore Communications, Inc.(1)
2.3 Addendum No. 2 to the Agreement and Plan of Reorganization, dated March
31, 1995, by and between the Company (f/k/a Capvest Internationale, Ltd.)
and Chadmoore Communications, Inc.(1)
3.1 Articles of Incorporation(2)
3.2 Articles of Amendment to the Articles of Incorporation filed November 1,
1988(3)
3.3 Articles of Amendment to the Articles of Incorporation filed April 28,
1995(4)
3.4 Articles of Amendment to the Articles of Incorporation filed April 1,
1996(5)
3.5 Articles of Amendment to the Articles of Incorporation filed April 11,
1996(6)
3.6 Bylaws(2)
4.1 Form of Warrant Certificate, together with the Terms of Warrants(7)
4.2 Registration Rights Agreement(8)
4.3 Certificate of Designation of Rights and Preferences of Series A
Convertible Preferred Stock of the Company(9)
10.1 Amended Non-qualified Stock Option Plan dated October 12, 1995 (employee
stock option plan covering 1,500,000 shares)(10)
10.2 Employee Benefit and Consulting Services Plan dated July 7, 1995(11)
10.3 First Amendment to the Employee Benefit and Consulting Services Plan dated
December 8, 1995(12)
- -----------------------------
(1) Incorporated by reference to Exhibit 1 in the Company's Form 8-K, under
Item 2, date of earliest event reported February 21, 1995
(2) Incorporated by reference to Exhibit 3 to the Company's Registration
Statement on Form S-18 (33-14841-D)
(3) Incorporated by reference to Exhibit 3.2 to the Company's Form 10-KSB for
the year ended December 31, 1995
(4) Incorporated by reference to Exhibit 3.3 to the Company's Form 10-KSB for
the year ended December 31, 1995
(5) Incorporated by reference to Exhibit 3.4 to the Company's Form 10-KSB for
the year ended December 31, 1995
(6) Incorporated by reference to Exhibit 3.5 to the Company's Form 10-KSB for
the year ended December 31, 1995
(7) Incorporated by reference to Exhibit 4.1 to the Company's Form 10-KSB for
the year ended December 31, 1995
(8) Incorporated by reference to Exhibit 4.2 to the Company's Form 10-KSB for
the year ended December 31, 1995
(9) Incorporated by reference to Exhibit 3.4 to the Company's Form 10-KSB for
the year ended December 31, 1995
(10) Incorporated by reference to Exhibit 10.1 to the Company's Form 10-KSB for
the year ended December 31, 1995
(11) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective July 12, 1995 (file no.-94508)
(12) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective December 14, 1995 (file no. 33-80405)
29
32
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
PART II - OTHER INFORMATION - CONTINUED
(a) Exhibits - concluded
10.4 Employment Agreement between the Company'and Robert W. Moore effective as
of April 21, 1995(13)
10.5 Employment Agreement between the Company'and David J. Chadwick effective
as of April 21, 1995(14)
10.6 Employment Agreement between the Company'and William C. Bossung effective
as of April 21, 1995(15)
10.7 Integrated Dispatched Enhanced Network ("iDEN") Purchase Agreement dated
February 28, 1996, by and between the Company'and Motorola, Inc.(16)
10.8 Amendment Number 001 to the Integrated Dispatched Enhanced Network
("iDEN") Purchase Agreement dated March 25, 1996(17)
10.9 Asset Purchase Agreement dated November 2, 1994 by and between Chadmoore
Communications, Inc. and General Communications Radio Sales and Service,
Inc., General Electronics, Inc. and Richard Day with Exhibits(18)
10.10 Modification to Asset Purchase Agreement dated March 8, 1996, by and
between Chadmoore Communications, Inc., the Company'and Chadmoore
Communications of Tennessee, Inc. and General Communications Radio Sales
and Service, Inc., General Electronics, Inc. and Richard Day with
Exhibits(19)
10.11 Stock Purchase Agreement dated June 14, 1996, by and between Chadmoore
Wireless Group, Inc. and Libero Limited(20)
11.1 Earnings Per Share (see notes to Consolidated Financial Statements)(21)
27.1 Financial Data Schedule
- -----------------------
(13) Incorporated by reference to Exhibit 10.4 to the Company's Form 10-KSB for
the year ended December 31, 1995
(14) Incorporated by reference to Exhibit 10.5 to the Company's Form 10-KSB for
the year ended December 31, 1995
(15) Incorporated by reference to Exhibit 10.6 to the Company's Form 10-KSB for
the year ended December 31, 1995
(16) Incorporated by reference to Exhibit 10.7 to the Company's Form 10-KSB for
the year ended December 31, 1995
(17) Incorporated by reference to Exhibit 10.8 to the Company's Form 10-KSB for
the year ended December 31, 1995
(18) Incorporated by reference to Exhibit 2.2 in the Company's Form 8-K, under
Item 2, date of earliest event reported March 8, 1996
(19) Incorporated by reference to Exhibit 2.1 in the Company's Form 8-K, under
Item 2, date of earliest event reported March 8, 1996
(20) Incorporated by reference to Exhibit 10.11 in the Company's Form 8-K,
under Item 2, date of earliest event reported June 14, 1996
(21) Incorporated by reference to Exhibit 11.1 to the Company's Form 10-KSB for
the year ended December 31, 1995
30
33
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
PART II - OTHER INFORMATION - CONTINUED
(b) Reports on Form 8-K
(i) Current Report Form 8-K filed March 22, 1996 reporting
consummation of the Modification to Asset Purchase Agreement dated
March 8, 1996 by and between Chadmoore Communications of Tennessee,
Inc. and General Communications Radio Sales and Service, Inc., General
Electronics, Inc. and Richard Day with Exhibits
(ii) Current Report of Form 8-K filed May 14, 1996 reporting the
resignation, effective April 30, 1996, of David Chadwick as Executive
Officer and Director of the Company'and similar positions with
affiliates of the Company with Exhibit.
(iii) Current Report on Form 8-K filed June 28, 1996, reporting the
execution of the Stock Purchase Agreement dated June 14, 1996 by and
between Chadmoore Wireless Group, Inc. and Libero Limited with
Exhibit, and amendment thereto, on Form 8-K/A-1 filed July 30, 1996
31
34
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CHADMOORE WIRELESS GROUP, INC.
By: /s/ Gary L. Killoran
--------------------------------------
Gary L. Killoran, Chief Financial Officer
DATE: November 19, 1996
32
35
EXHIBIT INDEX
Exhibit
No. Exhibit Description Page
- ------- ------------------- ----
2.1 Agreement and Plan of Reorganization dated February 2, 1995, by and
between the Company (f/k/a Capvest Internationale, Ltd.) and Chadmoore
Communications, Inc.(1)
2.2 Addendum to the Agreement and Plan of Reorganization, dated February 21,
1995, by and between the Company (f/k/a Capvest Internationale, Ltd.) and
Chadmoore Communications, Inc.(1)
2.3 Addendum No. 2 to the Agreement and Plan of Reorganization, dated March
31, 1995, by and between the Company (f/k/a Capvest Internationale, Ltd.)
and Chadmoore Communications, Inc.(1)
3.1 Articles of Incorporation(2)
3.2 Articles of Amendment to the Articles of Incorporation filed November 1,
1988(3)
3.3 Articles of Amendment to the Articles of Incorporation filed April 28,
1995(4)
3.4 Articles of Amendment to the Articles of Incorporation filed April 1,
1996(5)
3.5 Articles of Amendment to the Articles of Incorporation filed April 11,
1996(6)
3.6 Bylaws(2)
4.1 Form of Warrant Certificate, together with the Terms of Warrants(7)
4.2 Registration Rights Agreement(8)
4.3 Certificate of Designation of Rights and Preferences of Series A
Convertible Preferred Stock of the Company(9)
10.1 Amended Non-qualified Stock Option Plan dated October 12, 1995 (employee
stock option plan covering 1,500,000 shares)(10)
10.2 Employee Benefit and Consulting Services Plan dated July 7, 1995(11)
10.3 First Amendment to the Employee Benefit and Consulting Services Plan dated
December 8, 1995(12)
- -----------------------------
(1) Incorporated by reference to Exhibit 1 in the Company's Form 8-K, under
Item 2, date of earliest event reported February 21, 1995
(2) Incorporated by reference to Exhibit 3 to the Company's Registration
Statement on Form S-18 (33-14841-D)
(3) Incorporated by reference to Exhibit 3.2 to the Company's Form 10-KSB for
the year ended December 31, 1995
(4) Incorporated by reference to Exhibit 3.3 to the Company's Form 10-KSB for
the year ended December 31, 1995
(5) Incorporated by reference to Exhibit 3.4 to the Company's Form 10-KSB for
the year ended December 31, 1995
(6) Incorporated by reference to Exhibit 3.5 to the Company's Form 10-KSB for
the year ended December 31, 1995
(7) Incorporated by reference to Exhibit 4.1 to the Company's Form 10-KSB for
the year ended December 31, 1995
(8) Incorporated by reference to Exhibit 4.2 to the Company's Form 10-KSB for
the year ended December 31, 1995
(9) Incorporated by reference to Exhibit 3.4 to the Company's Form 10-KSB for
the year ended December 31, 1995
(10) Incorporated by reference to Exhibit 10.1 to the Company's Form 10-KSB for
the year ended December 31, 1995
(11) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective July 12, 1995 (file no.-94508)
(12) Incorporated by reference to Exhibit 4.1 in the Registration Statement on
Form S-8 effective December 14, 1995 (file no. 33-80405)
36
EXHIBIT INDEX
Exhibit
No. Exhibit Description Page
- ------- ------------------- ----
10.4 Employment Agreement between the Company'and Robert W. Moore effective as
of April 21, 1995(13)
10.5 Employment Agreement between the Company'and David J. Chadwick effective
as of April 21, 1995(14)
10.6 Employment Agreement between the Company'and William C. Bossung effective
as of April 21, 1995(15)
10.7 Integrated Dispatched Enhanced Network ("iDEN") Purchase Agreement dated
February 28, 1996, by and between the Company'and Motorola, Inc.(16)
10.8 Amendment Number 001 to the Integrated Dispatched Enhanced Network
("iDEN") Purchase Agreement dated March 25, 1996(17)
10.9 Asset Purchase Agreement dated November 2, 1994 by and between Chadmoore
Communications, Inc. and General Communications Radio Sales and Service,
Inc., General Electronics, Inc. and Richard Day with Exhibits(18)
10.10 Modification to Asset Purchase Agreement dated March 8, 1996, by and
between Chadmoore Communications, Inc., the Company'and Chadmoore
Communications of Tennessee, Inc. and General Communications Radio Sales
and Service, Inc., General Electronics, Inc. and Richard Day with
Exhibits(19)
10.11 Stock Purchase Agreement dated June 14, 1996, by and between Chadmoore
Wireless Group, Inc. and Libero Limited(20)
11.1 Earnings Per Share (see notes to Consolidated Financial Statements)(21)
27.1 Financial Data Schedule
- -----------------------
(13) Incorporated by reference to Exhibit 10.4 to the Company's Form 10-KSB for
the year ended December 31, 1995
(14) Incorporated by reference to Exhibit 10.5 to the Company's Form 10-KSB for
the year ended December 31, 1995
(15) Incorporated by reference to Exhibit 10.6 to the Company's Form 10-KSB for
the year ended December 31, 1995
(16) Incorporated by reference to Exhibit 10.7 to the Company's Form 10-KSB for
the year ended December 31, 1995
(17) Incorporated by reference to Exhibit 10.8 to the Company's Form 10-KSB for
the year ended December 31, 1995
(18) Incorporated by reference to Exhibit 2.2 in the Company's Form 8-K, under
Item 2, date of earliest event reported March 8, 1996
(19) Incorporated by reference to Exhibit 2.1 in the Company's Form 8-K, under
Item 2, date of earliest event reported March 8, 1996
(20) Incorporated by reference to Exhibit 10.11 in the Company's Form 8-K,
under Item 2, date of earliest event reported June 14, 1996
(21) Incorporated by reference to Exhibit 11.1 to the Company's Form 10-KSB for
the year ended December 31, 1995