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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number: 0-20999
CHADMOORE WIRELESS GROUP, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1058165
---------------------------- ------------
(State of other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
2458 EAST RUSSELL ROAD, SUITE B, LAS VEGAS, NEVADA 89120
----------------------------------------------------------
(Address of principal executive offices)
(702) 740-5633
----------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required by Section
12, 13 or 15(d) of the Exchange Act after the distribution of securities under a
plan confirmed by a court.
Yes [ ] 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:
1
AS OF MARCH 1, 2004 ISSUER HAD 47,736,006 SHARES OF COMMON STOCK, $.001 PAR
VALUE, OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes [ ] No [X]
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2
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INDEX
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Statement of Net Assets in
Liquidation as of June 30, 2002 4
Consolidated Balance Sheet (Going Concern Basis)
as of December 31, 2001 5
Unaudited Consolidated Statement of Changes in Net
Assets in Liquidation for the Three Months ended
June 30, 2002 and for the Period January 29, 2002
through June 30, 2002 7
Unaudited Consolidated Statements of Operations
(Going Concern Basis) for the 28 Days Ended
January 28, 2002, Three Months Ended June 30, 2001,
and Six Months Ended June 30, 2001 8
Unaudited Consolidated Statements of Cash Flows for
the 28 Days Ended January 28, 2002 and Six Months
Ended June 30, 2001 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF LIQUIDATION 15-16
ITEM 3. CONTROLS AND PROCEDURES 15-16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 2B. CHANGES IN SECURITIES AND USE OF PROCEEDS 19
ITEM 6. -EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURES 20
CERTIFICATIONS
This 10-QSB is being filed in order to present the June 30, 2002 financial
statements and management's discussion and analysis in liquidation basis
accounting format.
3
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statement of Net Assets in Liquidation
as of June 30, 2002
(amounts in thousands)
ESTIMATED VALUES OF ASSETS OF THE COMPANY
Assets held for sale $ 706
Cash and cash equivalents 62,107
Accounts receivable, net 280
Other receivables, net 1,116
Other assets, net 598
Estimated value of partnership interests 1,150
Estimated future interest income 1,251
-------------
Total estimated assets 67,208
-------------
ESTIMATED LIABILITIES OF THE COMPANY
Notes payable 5,792
Accounts payable and accrued liabilities 1,215
Federal income taxes payable 3,926
Preferred dividends payable 574
Redeemable preferred stock 3,121
-------------
Total estimated liabilities 14,628
-------------
ESTIMATED FUTURE OPERATING COSTS and SETTLEMENT RESERVES DURING
LIQUIDATION PERIOD 16,118
-------------
Net assets in liquidation $ 36,462
=============
See accompanying condensed notes to unaudited consolidated interim
financial statements.
4
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Going Concern Basis)
December 31, 2001
(amounts in thousands)
ASSETS
Current assets:
Cash $ 118
Accounts receivable, net 515
Other receivables, net 33
Inventory 40
Other current assets 43
Assets held for sale 43,821
--------------
Total current assets 44,570
Property and equipment, net 815
Intangible assets, net 332
Other non-current assets, net 2,141
--------------
$ 47,858
==============
LIABILITIES, MINORITY INTERESTS, REDEEMABLE
PREFERRED STOCK
AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 53,365
Accounts payable and accrued liabilities 6,326
Unearned revenue 290
Other current liabilities 9
--------------
Total current liabilities 59,990
Long-term debt 2,395
--------------
Total liabilities 62,385
Minority Interests 1,147
Commitments and contingencies
Redeemable preferred stock:
Series C, 4% cumulative, 10,119,614 shares issued and
outstanding 3,122
Shareholders' equity/(deficit):
Preferred stock, $.001 par value, authorized 40,000,000
shares -
5
Common stock, $.001 par value, authorized 100,000,000
shares, 45,700,172 shares issued and outstanding 46
Additional paid-in capital 68,658
Accumulated deficit (87,500)
--------------
Total shareholders' deficit (18,796)
--------------
Total liabilities, minority interests, redeemable
preferred stock and shareholders' equity $ 47,858
==============
See accompanying condensed notes to unaudited consolidated interim
financial statements.
6
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statement of Changes in Net Assets in Liquidation
For the Three Months Ended June 30, 2002 and the
Period January 29, 2002 through June 30, 2002
(amounts in thousands)
Three Months The Period
Ended January 29, 2002 through
June 30, 2002 June 30, 2002
---------------------- ------------------------
Accumulated deficit, January 28, 2002 $ (20,034)
Adjust assets and liabilities to estimated fair value 56,995
---------------------
Estimated net assets in liquidation as of
March 31, 2002 and January 28, 2002, respectively $ 35,764 36,961
Net gain (loss) from operations during liquidation 935 (135)
Settlement of litigation (264) (264)
Adjustment for minority interests 27 (428)
Adjustment for net exercise of warrants -- 58
---------------------- ------------------------
Net Assets in Liquidation $ 36,462 $ 36,462
====================== =======================
See accompanying condensed notes to unaudited consolidated interim
financial statements.
7
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations (Going Concern Basis)
For the 28 Days Ended January 28, 2002, Three Months Ended
June 30, 2001, and Six Months Ended June 30, 2001
(amounts in thousands, except share and per share data)
For the For the For the
28 Days Three Months Six Months
Ended Ended Ended
January 28, 2002 June 30 , 2001 June 30, 2001
------------------ ---------------- ------------------
Revenues:
Service revenue $ 324 $ 1,243 $ 2,718
Equipment sales and maintenance 8 23 43
------------------ ---------------- ------------------
Total revenues 332 1,266 2,761
------------------ ---------------- ------------------
Cost of sales:
Cost of service revenue 182 553 1,109
Cost of equipment sales and maintenance 8 9 15
------------------ ---------------- ------------------
Total cost of sales 190 562 1,124
------------------ ---------------- ------------------
Gross margin 142 704 1,637
------------------ ---------------- ------------------
Operating expenses:
Selling, general and administrative 608 1,831 3,795
Depreciation and amortization 214 599 1,199
------------------ ---------------- ------------------
Total operating expenses 822 2,430 4,994
------------------ ---------------- ------------------
Loss from operations (680) (1,726) (3,357)
------------------ ---------------- ------------------
Other income (expense):
Minority interest in earnings (14) (59) (128)
Interest income (expense), net (444) (1,353) (2,682)
Gain on sale of licenses and equipment
and other (97) ( 8) (1)
------------------ ---------------- ------------------
(555) (1,420) (2,811)
------------------ ---------------- ------------------
Net (loss) (1,235) (3,146) (6,168)
Redeemable preferred stock dividend and accretion (76) ( 265) (427)
------------------ ---------------- ------------------
Loss applicable to common shareholders $ (1,311) $ (3,411) $ (6,596)
-
================== ================ ==================
Basic and diluted loss per share of Common Stock:
Loss applicable to common shareholders $ (0.02) $ (0.06) $ (0.12)
================== ================ ==================
Basic and diluted weighted average shares outstanding 54,663,127 52,935,157 52,935,157
================== ================ ==================
See accompanying condensed notes to unaudited consolidated interim
financial statements.
8
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
For the 28 Days Ended January 28, 2002 and Six Months Ended June 30, 2001
(amounts in thousands)
28 Days Ended Six Months
January 28, Ended
2002 June 30, 2001
---------------- ----------------
Cash flows from operating activities:
Net (loss) $ (1,235) $ (6,168)
Adjustments to reconcile net loss to net cash used in
operating activities:
Minority interest 14 128
Depreciation and amortization 102 1,199
(Loss) on sale of licenses and equipment - 5
Amortization of debt discount and issuance cost 97 393
Change in operating assets and liabilities:
Decrease in accounts receivable
and other receivables 36 255
Decrease in inventory 8 4
Decrease in deposits and prepaids 6 --
Decrease in unearned revenues (27) (181)
Decrease in accounts payable and
accrued liabilities (113) (170)
---------------- ----------------
Net cash used in operating activities (1,112) (4,312)
---------------- ----------------
Cash flows from investing activities:
Purchase of license options (31) (240)
Purchases of equipment - (4)
Proceeds from sale of licenses and equipment 363 389
---------------- ----------------
Net cash provided by investing activities 332 145
---------------- ----------------
Cash flows from financing activities:
Payments of minority interests - (99)
Payments of long-term debt (191) (3,190)
Proceeds from issuance of long-term debt 972 8,708
---------------- ----------------
Net cash provided by financing activities 781 5,419
---------------- ----------------
Net increase in cash 1 1,252
Cash at beginning of period 118 108
---------------- ----------------
Cash at end of period $ 119 $ 1,360
================ ================
See accompanying condensed notes to unaudited consolidated interim
financial statements.
9
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
NOTE 1 - BASIS OF PRESENTATION
Chadmoore Wireless Group, Inc. ("Chadmoore") was a holder of frequencies in the
United States in the 800 megahertz band for commercial specialized mobile radio
service.
On January 28, 2002, holders of Chadmoore common stock approved the asset sale
to Nextel, the dissolution of Chadmoore and a Plan of Liquidation (the "Plan").
On February 22, 2002, Chadmoore filed its Articles of Dissolution, closed its
stock transfer record book, de-listed its shares from the over-the-counter
bulletin board and began an orderly wind-up of its business operations. The key
features of the Plan are (1) the conclusion of all business activities, other
than those related to the execution of the Plan; (2) the sale or disposal of all
of Chadmoore's non-cash assets; (3) the establishment of reasonable reserves to
be sufficient to satisfy the liabilities, expenses and obligations of Chadmoore
not otherwise paid, provided for or discharged; (4) the periodic payment of per
share liquidating distributions to shareholders; and (5) the authorization of
the filing of a Certificate of Dissolution with the State of Colorado.
Chadmoore adopted the liquidation basis of accounting effective January 29,
2002, whereby assets are recorded at their estimated net realizable values,
liabilities are recorded at their estimated settlement amounts and a reserve has
been provided for potential claims. The valuation of assets and liabilities
requires many estimates and assumptions by management and actual values may vary
greatly from estimates. The amount and timing of future liquidating
distributions will depend upon a variety of factors including, but not limited
to, the ultimate settlement amounts of Chadmoore's liabilities and obligations,
actual costs incurred in connection with carrying out the Plan including
administrative costs during the liquidation period, and the time frame it takes
to complete the liquidation.
The accompanying financial statements, notes and discussions should be read in
conjunction with the consolidated financial statements, related notes and
discussions contained in Chadmoore's annual report on Form 10-KSB for the year
ended December 31, 2001.
The interim financial information contained herein is unaudited; however, in the
opinion of management, all adjustments necessary for the fair presentation of
such financial information on a liquidation basis have been included.
The December 31, 2001, year-end balance sheet data presented herein on a going
concern basis was derived from Chadmoore's audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
NOTE 2 - LIQUIDATION PLAN CHARGES, NET
10
Immediately following the sale of substantially all of its assets on February 8,
2002, Chadmoore began an orderly wind-down of its operations. The conversion
from the going concern to liquidation basis of accounting has required
management to make significant estimates and judgments. In order to record
assets at estimated net realizable value and liabilities at estimated settlement
amounts under liquidation basis accounting, Chadmoore recorded the following
adjustments to record its assets and liabilities at fair value as of January 29,
2002, the date of adoption of liquidation basis accounting (all values in
thousands).
Assets held for sale adjusted to estimated fair value $ 76,912
Estimated future interest income 1,719
Expected proceeds from sale of partnerships
net of minority interests 2,315
Adjust notes payable to expected payment amount 500
Accrual of cumulative preferred dividends (574)
Estimated future operating costs and settlement
reserves during liquidation (23,877)
----------------
$ 56,995
================
No adjustments have been recorded for future estimated operating results of the
remaining partner markets due to the inherent uncertainties. Actual operating
results are recorded as a change in net assets in liquidation when earned or
incurred. Based on these adjustments, net assets increased by $56,995.
The preparation of financial statements requires management to make certain
estimates and assumptions that affect the net realizability of assets and
estimated costs to be incurred during the liquidation period and disclosure of
contingent assets and liabilities at the date of the financial statements. These
estimates are imprecise and subject to change, among other things, the estimates
may be based on assumption about future conditions, transactions, or events
whose outcome is uncertain. It is likely, therefore, that the actual outcome and
settlement of assets and liabilities through completion of the Plan will differ
from management's estimates, and those differences may be significant.
NOTE 3 - ESTIMATED VALUES OF ASSETS AND LIABILITIES OF THE COMPANY
The estimated assets of Chadmoore that are set forth in the June 30, 2002
"Consolidated Statement of Net Assets in Liquidation" have been presented on the
following basis:
(a) Assets held for sale represent estimated net sales proceeds less
the costs of disposal.
(b) Cash and cash equivalents are stated at fair value. Generally,
cash balances held in financial institutions may be in excess of
federally insured amounts.
(c) Estimated future interest income of $1.3 million was estimated by
management based upon future expected cash flows and future
interest earnings.
(d) The estimated value of partnership interests, $1.2 million,
represent the amount of proceeds expected from the sale of the
partnership interests.
11
(e) Other assets, net, represent primarily prepayments on future
operating costs, and cash held in escrow.
(f) Accounts and other receivables, net, are carried at their
expected collectible amounts.
The estimated liabilities of Chadmoore that are set forth in the June 30, 2002
"Consolidated Statement of Net Assets in Liquidation" have been presented on the
following basis:
(a) Notes payable represent non-interest bearing amounts owed in
connection with license commissions, the purchase of assets and
the purchase of licenses from licensees.
(b) Accounts payable and accrued expenses include all amounts that
remain unpaid for liquidation activities and remaining
partnership operations.
(c) Federal income taxes payable represents that portion of the total
estimated amounts of federal income taxes that management
believes will be due when Chadmoore's federal income tax return
for the year ended December 31, 2002 is filed.
The amount and timing of future liquidating distributions will depend upon a
variety of factors including, but not limited to, the actual proceeds from the
realization of Chadmoore's assets, the ultimate settlement amounts of
Chadmoore's liabilities and obligations, actual costs incurred in connection
with carrying out the Plan, including salaries, administrative and operating
costs during the liquidation period, resolution of uncertainties and litigation,
and the timing of the liquidation and dissolution. A summary of significant
estimates and judgments utilized in preparation of the June 30, 2002
consolidated financial statements on a liquidation basis follows:
Estimated value of partnership interests and future interest income
At June 30, 2002, the estimated value of partnership interests and
future interest income represented about 6.6% of Chadmoore's estimated
net assets in liquidation. The estimated value of partnership interest,
$1.2 million, represents management's estimate of expected proceeds
from the sale of remaining partnership interests. The estimated future
interest income of $1.3 million represents management's estimate of
future interest earnings based on current (1.9% annual rate at July 1,
2002) market rates of interest over the remaining liquidation period.
Estimated future operating costs and settlement reserves during the
liquidation period.
Chadmoore recorded amounts for estimated future operating costs during
liquidation and for settlement reserves on January 29, 2002, when the
Company adopted the liquidation basis of accounting. The table
presented in Note 5 summarizes the estimated amounts as of the date of
adoption of the liquidation basis of accounting and the actual costs
that have been incurred and paid during the period from January 29,
2002 through June 30, 2002.
Estimated note payable settlement amounts.
12
Long-term debt as of June 30, 2002 is recorded at their anticipated
settlement amounts. Certain disputes have arisen in connection with
some of the underlying notes and management is in the process of
negotiating settlement with the respective note holders.
Periodic changes in estimated values of the assets of the Company are
reflected in the "Consolidated Statement of Changes in Net Assets in
Liquidation".
NOTE 4 - ESTIMATED FUTURE OPERATING COSTS AND SETTLEMENT RESERVES
The Company recorded amounts for estimated future operating costs and settlement
reserves on January 29, 2002 when the Company adopted the liquidation basis. The
table presented below summarized the estimated future operating costs and
settlement reserves as of January 29, 2002, changes from initial estimates, and
the actual costs that have been incurred and paid during the period from January
29, 2002 through June 30, 2002.
As of Change in Incurred As of
Jan. 29, 2002 Estimate and paid June 30, 2002
----------------- ----------------- ------------- --------------
Compensation for
liquidation personnel $ 10,237 -- $ (5,491) $ 4,746
Insurance, utilities and
facility expenses 683 -- (250) 433
Legal, audit and other
professional fees 3,304 -- (2,018) 1,286
General contingency
reserve 9,653 -- -- 9,653
----------------- ----------------- ------------- --------------
Total estimated future
operating costs and
settlement reserves $ 23,877 -- $ (7,759) $ 16,118
================= ================= ============= ==============
In view of the expected duration of the liquidation period until February 22,
2007, and the requirement of Colorado law that Chadmoore maintain reserves
sufficient to allow for the payment of all its liabilities and obligations,
including all known and unknown contingent claims, Chadmoore established a
general contingency reserve upon the adoption of liquidation basis accounting on
January 29, 2002. The amount of the reserve initially established was $9.7
million and remains at $9.7 million at June 30, 2002.
The majority of this general reserve at June 30, 2002, $8.9 million, relates to
contingencies involving the resolution of various federal, state and local
taxation issues. Other matters covered by this reserve include existing
litigation and claims, settlement of existing liabilities, and a general reserve
for currently unidentified contingencies and unasserted claims. This reserve has
been established for matters for which there is insufficient information upon
which management can reasonably estimate a settlement amount, or where the
ultimate settlement amount will be based on future events which management
cannot reasonably predict at this time. The outcome of these contingencies may
involve litigation, the ultimate outcome of which cannot be
13
determined at this time. Accordingly, management has provided the reserve at the
estimated maximum possible settlement amount, however, the actual amount could
be higher based on the ultimate outcome of litigation matters which are subject
to inherently unpredictable risks and uncertainties.
As a result of the uncertainty regarding the estimates associated underlying the
general contingency reserve, it is likely that the actual outcome of the
resolutions of these contingencies will differ from management's estimates at
this time, and those differences may be significant. In addition, since the
resolution of these matters will inevitably involve procedural, and probably
judicial proceedings, it is likely that the resolution of the majority of these
contingencies will not occur in the near term. As more information becomes
available to management, and as future resolution events regarding these
contingencies occur, management will adjust the general contingency reserve
appropriately, if needed. See Note 6 - Commitments and Contingencies for further
discussion.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Pursuant to the FCC's jurisdiction over telecommunications activities, Chadmoore
remains involved in limited pending matters before the FCC, which may ultimately
affect Chadmoore's operations. More specifically, Chadmoore continues to hold a
limited number of licenses for operation in the 800Mhz band; and, the Company
will continue to take all actions before the FCC deemed necessary to ensure the
continuing validity of these licenses.
On October 16, 2001, some holders of licenses cancelled by the Federal
Communications Commission pursuant to the Goodman/Chan decision filed suit
against Chadmoore in the United States District Court for the Southern District
of New York. This group of ten licensees demanded through their complaint
payment from Chadmoore in the amount of $1,430,180 for payment on promissory
notes and punitive damages. On March 13, 2002, the parties reached a full
settlement of claims in this matter wherein Chadmoore paid the licensee group a
lump sum of $180,000 in exchange for dismissal of the suit by the plaintiffs and
a full release from any and all liabilities and claims asserted by the ten
licensees.
In October, 2001, Chadmoore received a demand for arbitration from Emergency
Radio Services, Inc. ("ERS") with respect to a breach of a contract claim. In
its demand for arbitration, ERS argued that an agreement executed between ERS
and Chadmoore in 1997 entitled it to certain radio channels in Fort Wayne,
Indiana. Chadmoore attempted to reach a settlement in this matter. However, no
settlement has been reached and no further settlement disucussions were
scheduled. Subsequent to March 31, 2002, the Company reached an agreement
wherein ERS released Chadmoore fully from any and all claims in exchange for
Chadmoore's transfer of title to ERS of five remaining channels in the Fort
Wayne, Indiana market and a cash payment of $375,000.
A complaint was filed by Third Mobile Ltd., a Texas limited liability company
and shareholder of Chadmoore, naming Chadmoore as defendant, on December 13,
2001 in the United States
14
District Court for the District of Nevada. The complaint was served on Chadmoore
on January 31, 2002. The complaint seeks monetary damages relating to certain
oral misrepresentations Robert Moore or other Chadmoore representatives
allegedly made to Third Mobile around January 1995 that induced Third Mobile to
invest $700,000 in Chadmoore Communications, Inc. Chadmoore believes the
complaint is without substantive merit, and is also likely barred by the
applicable statue of limitations since it related to events that took place
seven years ago in January and February of 1995. Chadmoore has filed its first
response in this matter with the District Court; and, no settlement discussion
are in progress. Initial discovery has commenced in this matter and on May 14,
2002 Chadmoore caused outside counsel to file a Motion to Dismiss Third Mobile's
complaint. Subsequent to March 31, 2002, the parties settled the case for a
one-time payment from Chadmoore of $25,000 and an exchange of full mutual
releases by the parties.
Chadmoore may also be subject to various legal proceedings and claims that may
arise during liquidation. Chadmoore currently believes that any such proceedings
and potential claims will not have a material adverse impact on Chadmoore's
estimate of net assets in liquidation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND STATUS
OF LIQUIDATION
Statements contained herein that are not historical facts are forward-looking
statements as that term is defined by the Private Securities Litigation Reform
Act of 1995. These statements contain words such as "intends", "plan", "future",
"will", "anticipates", and "believes" and include statements regarding
Chadmoore's dissolution and liquidation. Although Chadmoore believes that the
expectations reflected in such forward-looking statements are reasonable, the
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ from those projected. Chadmoore cautions
investors that any forward-looking statements made by Chadmoore are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. See Chadmoore's annual report on
Form 10-KSB for the year ended December 31, 2001.
PLAN OF OPERATIONS FOR DISSOLUTION
Chadmoore is continuing to wind up its affairs as quickly and as efficiently as
possible to maximize the liquidating distributions to all shareholders. Our goal
is to minimize the length of time necessary to resolve or satisfy our known
liabilities while also minimizing the risks to shareholders by conserving
corporate assets.
Chadmoore is continuing in its efforts to liquidate its interest in the three
remaining partner markets in which it has an interest, and to settle all
remaining claims of Goodman/Chan licensees (about 500 license claims).
In order to reduce liquidation costs, Chadmoore's full-time staff has been
reduced to four remaining officers who will handle all remaining liquidation
issues. Under Colorado law, Chadmoore will remain in existence as a
non-operating entity for five years from February 22,
15
2002 and will maintain liquid assets to cover any remaining liabilities and pay
operating costs during the dissolution period. During the dissolution period,
Chadmoore will attempt to convert its remaining assets to cash and settle its
liabilities as expeditiously as possible.
STATUS OF LIQUIDATION
On February 8, 2002, Chadmoore sold substantially all of its assets to Nextel
Communications, Inc. ("Nextel") for $130 million in cash resulting in a gain of
about $88 million, terminated its operations and began an orderly liquidation of
Chadmoore, including laying off most of its employees.
LIQUIDITY AND CAPITAL RESOURCES
Chadmoore's primary objectives are to liquidate its assets in the shortest time
period possible while realizing the maximum values set these assets and to
settle all claims on terms most favorable to Chadmoore. The liquidation is
expected to be concluded prior to the fifth anniversary of the filing of the
Certificate of Dissolution in Colorado by a final liquidating distribution
directly to shareholders of record. The initial cash distribution to
shareholders under the Plan was made on July 12, 2002 in the aggregate amount of
$22.7 million, or about $.3323 per equivalent share. Remaining net assets
available for distribution to shareholders as of June 30, 2002, less the July
12, 2002 distribution of $22.7 million, are currently estimated to be about
$13.8 million. Subsequent to July 12, 2002, Chadmoore has distributed $11.3
million, or $.1634 per equivalent shares.
ITEM 2A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2002, none of Chadmoore's long-term debt bears interest. Cash is
maintained primarily in an uninsured money market account, which earns interest
at the current market rate.
16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pursuant to the FCC's jurisdiction over telecommunications activities, Chadmoore
remains involved in limited pending matters before the FCC, which may ultimately
affect Chadmoore's operations. More specifically, Chadmoore continues to hold a
limited number of licenses for operation in the 800Mhz band; and, the Company
will continue to take all actions before the FCC deemed necessary to ensure the
continuing validity of these licenses.
On October 16, 2001, some holders of licenses cancelled by the Federal
Communications Commission pursuant to the Goodman/Chan decision filed suit
against Chadmoore in the United States District Court for the Southern District
of New York. This group of ten licensees demanded through their complaint
payment from Chadmoore in the amount of $1,430,180 for payment on promissory
notes and punitive damages. On March 13, 2002, the parties reached a full
settlement of claims in this matter wherein Chadmoore paid the licensee group a
lump sum of $180,000 in exchange for dismissal of the suit by the plaintiffs and
a full release from any and all liabilities and claims asserted by the ten
licensees.
In October, 2001, Chadmoore received a demand for arbitration from Emergency
Radio Services, Inc. ("ERS") with respect to a breach of a contract claim. In
its demand for arbitration, ERS argued that an agreement executed between ERS
and Chadmoore in 1997 entitled it to certain radio channels in Fort Wayne,
Indiana. Chadmoore attempted to reach a settlement in this matter. However, no
settlement has been reached and no further settlement disucussions were
scheduled. Subsequent to June 30, 2002, the Company reached an agreement wherein
ERS released Chadmoore fully from any and all claims in exchange for Chadmoore's
transfer of title to ERS of five remaining channels in the Fort Wayne, Indiana
market and a cash payment of $375,000.
A complaint was filed by Third Mobile Ltd., a Texas limited liability company
and shareholder of Chadmoore, naming Chadmoore as defendant, on December 13,
2001 in the United States District Court for the District of Nevada. The
complaint was served on Chadmoore on January 31, 2002. The complaint seeks
monetary damages relating to certain oral misrepresentations Robert Moore or
other Chadmoore representatives allegedly made to Third Mobile around January
1995 that induced Third Mobile to invest $700,000 in Chadmoore Communications,
Inc. Chadmoore believes the complaint is without substantive merit, and is also
likely barred by the applicable statue of limitations since it related to events
that took place seven years ago in January and February of 1995. Chadmoore has
filed its first response in this matter with the District Court; and, no
settlement discussion are in progress. Initial discovery has commenced in this
matter and on May 14, 2002 Chadmoore caused outside counsel to file a Motion to
Dismiss Third Mobile's complaint. Subsequent to June 30, 2002, the parties
settled the case for a one-time payment from Chadmoore of $25,000 and an
exchange of full mutual releases by the parties.
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Chadmoore may also be subject to various legal proceedings and claims that may
arise during liquidation. Chadmoore currently believes that any such proceedings
and potential claims will not have a material adverse impact on Chadmoore's
estimate of net assets in liquidation.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14a
and 15d-14a.
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14a
and 15d-14a.
32.0 Certification pursuant to Section 1350
(b) Reports on Form 8-K
Chadmoore filed a Current Report on Form 8-K on April 11, 2002, setting
forth in Item 5 a press release dated April 9, 2002, announcing that
Chadmoore was continuing with its analysis of the appropriate reserve
amounts required under Colorado law for all claims and liabilities
against Chadmoore.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Chadmoore Wireless Group, Inc.
By: /s/ STEPHEN K. RADUSCH
-------------------------------------
Stephen K. Radusch
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 16, 2004
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