================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
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:
AS OF NOVEMBER 12, 2004 ISSUER HAD 47,736,006 SHARES OF COMMON STOCK, $.001 PAR
VALUE, OUTSTANDING.
1
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes [ ] No [X]
================================================================================
2
INDEX
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Net Assets in Liquidation as of September 30, 2004 and December 31, 2003 4
Consolidated Statements of Changes in Net Assets in Liquidation for the Three Months and Nine Months 5
Ended September 30, 2004 and 2003
Condensed Notes to Unaudited Interim Consolidated Financial Statements 6-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND STATUS OF LIQUIDATION 12-13
ITEM 3. CONTROLS AND PROCEDURES 13
PART II - OTHER INFORMATION 14
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2E. DISCLOSURE OF ANY REPURCHASE OF COMPANY STOCK 15
ITEM 6. EXHIBITS 15
SIGNATURES 16
CERTIFICATIONS 17-19
3
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Net Assets in Liquidation
as of September 30, 2004 and December 31, 2003
(amounts in thousands)
Sept. 30, Dec. 31,
2004 2003
(unaudited)
--------------- ------------------
ESTIMATED VALUES OF ASSETS OF THE COMPANY
Cash and cash equivalents $14,002 $18,341
Accounts receivable, net -- 17
Other receivables, net 783 760
Other assets, net 163 250
Estimated proceeds from sale of partnerships -- 100
Estimated future interest income 368 349
--------------- ------------------
Total estimated assets 15,316 19,817
--------------- ------------------
ESTIMATED LIABILITIES OF THE COMPANY
Notes payable 433 3,199
Accounts payable and accrued liabilities 283 305
Federal income taxes payable -- 1,137
--------------- ------------------
Total estimated liabilities 716 4,641
--------------- ------------------
ESTIMATED FUTURE OPERATING COSTS and SETTLEMENT RESERVES DURING
LIQUIDATION PERIOD 9,067 9,084
--------------- ------------------
NET ASSETS IN LIQUIDATION $ 5,533 $ 6,092
=============== ==================
See accompanying condensed notes to unaudited interim
consolidated financial statements.
4
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Net Assets in Liquidation
For the Three Months Ended and Nine Months Ended September 30, 2004 and 2003
(amounts in thousands)
For the three months For the nine months
ended ended
----------------------------- ----------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------
Estimated net assets in liquidation
as of June 30, 2004 and 2003
and December 31, 2003 and
2002, respectively $ 5,722 $10,002 $ 6,092 $ 14,229
Net gain from operations
during liquidation (4) (112) 5 101
Settlement of litigation -- -- 29 --
Adjustment for minority interests -- 13 -- --
Change in estimate of:
General contingency reserve -- (500) 1,750
Future interest income 136 132 136 70
Other assets, net -- -- (53) --
Future operating costs during
liquidation period -- 7 (676) (407)
Proceeds from sale of
partnerships -- -- -- (150)
Notes payable -- 1,187 -- 1,544
Federal and state taxes -- 2,973 -- 771
Value of assets held for sale -- -- -- (13)
Cash distribution to shareholders -- -- -- (4,219)
------------- ------------- ------------- -------------
Net Assets in Liquidation $ 5,533 $ 13,676 $ 5,533 $ 13,676
------------- ------------- ------------- -------------
See accompanying condensed notes to unaudited interim
consolidated financial statements.
5
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Condensed Notes to Unaudited Interim Consolidated Financial Statements
September 30, 2004
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 Communications, Inc. ("Nextel"), the dissolution of Chadmoore and a
Plan of Liquidation (the "Plan"). On February 8, 2002, Chadmoore closed the sale
of substantially all of its assets to Nextel for $130 million in cash. Net
proceeds to Chadmoore were approximately $108 million after the payoff of
Barclays Bank debt. 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
o the conclusion of all business activities, other than those related to
the execution of the Plan;
o the sale or disposal of all of Chadmoore's non-cash assets;
o the establishment of reasonable reserves to be sufficient to satisfy
the liabilities, expenses and obligations of Chadmoore not otherwise
paid, provided for or discharged;
o the periodic payment of per share liquidating distributions to
shareholders; and
o the authorization of the filing of a Certificate of Dissolution with
the State of Colorado.
As a result of the adoption of the Plan, Chadmoore adopted the liquidation basis
of accounting effective January 29, 2002. This basis of accounting is considered
appropriate when, among other things, liquidation of a company is probable and
the net realizable value of assets are reasonably determinable. Under this basis
of accounting, assets are valued at their estimated net realizable value, and
liabilities are stated at their estimated settlement amounts. The ongoing
application of the liquidation basis of accounting requires management to make
significant estimates and judgments. 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, 2003.
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.
6
NOTE 2 - LIQUIDATION BASIS OF ACCOUNTING
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
===============
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 OF THE COMPANY
The estimated assets of Chadmoore that are set forth in the September 30, 2004
"Consolidated Statement of Net Assets in Liquidation" have been presented on the
following basis:
(a) Chadmoore classifies as cash and cash equivalents amounts on deposit in
banks and cash invested temporarily in various instruments, with
maturities of three months or less at time of purchase. Cash and cash
equivalents are stated at fair value. Generally, cash balances held in
financial institutions may be in excess of federally insured amounts.
(b) Estimated future interest income was estimated by management based upon
future expected cash flows. Actual interest income will likely differ
from management's current estimate.
7
(c) Other assets, net, represent primarily prepayments on future operating
costs and cash held in escrow.
(d) Other receivables, net, are carried at their expected collectible
amounts.
NOTE 4 - ESTIMATED LIABILITIES OF THE COMPANY
The estimated liabilities of Chadmoore that are set forth in the September, 30,
2004 "Consolidated Statement of Net Assets in Liquidation" has 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 and are recorded at their estimated settlement
amounts.
(b) Accounts payable and accrued liabilities include all amounts that
remain unpaid for liquidation activities and remaining partnership
operations.
(c) Federal and state income taxes payable represent the unpaid portion of
the total estimated amount of federal income taxes that management
believed were due for the year ended December 31, 2002. During the
quarter ended September 30, 2003, Chadmoore completed and filed all
state and federal returns for the year ended December 31, 2002. Because
of the continuing operating expenses involved in managing the plan of
liquidation, and expectations of limited gains from operations and
interest income, Chadmoore does not believe that there will be future
federal income taxes due beyond the year ended December 31, 2002, and
believes that the amount of future minimum state taxes due will not be
significant. In addition, refunds, if any, resulting from the carrying
back of future taxable losses are not expected to be significant.
Accordingly, Chadmoore has not recorded a specific accrual outside of a
general reserve for known and unknown obligations of or proceeds to the
company.
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 September 30, 2004
consolidated financial statements on a liquidation basis follows:
Estimated future interest income
At September 30, 2004, the estimated value of future interest income
represented about 6.7% of Chadmoore's estimated net assets in liquidation.
The estimated future interest income of $368,000 on Chadmoore's cash
holdings represents management's estimate of future interest earnings based
on current (1.54% annual rate at October 1, 2004) market rates of interest
over the remaining liquidation period.
8
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
below summarizes the estimated amounts as of December 31, 2003 and changes
in estimates and, the actual costs that have been incurred and paid during
the period from January 1, 2004 through September 30, 2004. During the
quarter ended March 31, 2004, Chadmoore recorded a change in estimate of
$420,000 to compensation for liquidation personnel to reflect an amendment
to the employment contracts of key executive officers and to record
estimated additional personnel expenses associated with researching
background information for pending litigation. In addition, during the
second quarter of 2004, Chadmoore increased its estimated expenses for
insurance, utilities and facility expenses, and legal, audit and other
professional fees by $229,000 to reflect anticipated market rate increases
in risk management and professional fees, primarily anticipated legal and
accounting expenses associated with the expected filing of quarterly and
annual SEC reports through completion of the liquidation period. Should
Chadmoore receive relief from the SEC for future filings, it is anticipated
that the estimates for legal and accounting expenses would be significantly
reduced.
As of Change in Incurred As of
Dec. 31, 2003 estimates and paid Sept. 30,
during period 2004
----------------- ----------------- ------------- --------------
Compensation for
liquidation personnel $ 344 $ 420 $ (375) $ 389
Insurance, utilities and
facility expenses 291 4 (134) 161
Legal, audit and other
professional fees 446 225 (157) 514
General contingency
reserve
8,003 -- -- 8,003
----------------- ----------------- ------------- --------------
Total estimated future
operating costs and
settlement reserves $ 9,084 $ 649 $ (666) $ 9,067
================= ================= ============= ==============
In view of the expected duration of the liquidation period until February 22,
2007, and the provision in 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 is $8.0 million at September 30, 2004.
The majority of this general reserve at September 30, 2004, $7.0 million,
relates to contingencies involving the resolution of various federal 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
9
events which management cannot reasonably predict at this time. The outcome of
these contingencies may involve litigation, the ultimate outcome of which cannot
be determined at this time. Accordingly, management has provided the reserve at
the estimated maximum possible settlement amount.
As a result of the uncertainty regarding the estimates associated with the
general contingency reserve, it is likely that the actual outcome of the
resolution 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 of events regarding these
contingencies occur, management will adjust the general contingency reserve
appropriately, if needed. See Note 5 - Commitments and Contingencies for further
discussion.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In late September, 2002, Chadmoore received a letter from Cindy Ashcroft,
principal of Ashcroft ITV ("Ashcroft") seeking payment for licenses which
Ashcroft purports were transferred to Chadmoore. Ashcroft requested, through its
letter, a payment in excess of $4 million from Chadmoore for the subject
licenses, or alternatively a further explanation from the Company as to why such
a payment would not be forthcoming. Chadmoore has reviewed its files and
Chadmoore management, along with outside counsel, has analyzed the matter at
considerable length. Upon review of the evidence in the light most favorable to
Ashcroft, Chadmoore believes that it could potentially be liable to Ashcroft for
approximately $23,750 in license payments. On the other hand, the Company
believes it has a valid counterclaim for approximately $89,000 against Ashcroft
for interim management fees earned while the Company managed and operated
Ashcroft's licensed facilities in order to keep them in compliance with FCC
requirements. In late 2001, the Company suggested to Ms. Ashcroft that a direct
meeting between the parties take place as promptly as practicable to resolve
this matter. At this time, management has received no reply from Ms. Ashcroft.
While Chadmoore cannot forecast the ultimate outcome of this matter, based on
management's review of the files and Ashcroft's request, as well as internal
conferences and conferences with outside counsel regarding this matter, the
Company believes that the possibility that this matter will have a substantial
adverse impact on the Company is remote.
On March 13, 2003, American Tower Corporation ("American Tower") submitted to
Chadmoore a notice of default under several license agreements which existed
earlier between American Tower and Chadmoore. American Tower sought immediate
payment of an outstanding balance of approximately $234,000. On March 19, 2003,
Chadmoore formally responded to American Tower's notice, rejected its demand,
and indicated that Chadmoore believes it has no legal duty to continue to make
any payments to American Tower on the basis of the agreements. Subsequently, on
May 23, 2003, American Tower filed suit in the Clark County Nevada District
Court seeking redress for its claims of breach of contract, without specifying
the damages sought. Chadmoore timely filed its answer on June 16, 2003 denying
American Tower's claims.
10
The parties have exchanged pre-trial documentation and witness lists for
discovery purposes. Discovery is currently ongoing. A jury trial is set for the
week of April 4, 2005. Currently, management cannot forecast the actual outcome
of this item, nor can it provide a timetable for when this matter will be
concluded.
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.
NOTE 6 - RELATED PARTY TRANSACTIONS
On January 15, 2003, Chadmoore entered into a two-year sublease with a limited
liability company owned by Robert W. Moore, president and chief executive
officer. Under the term of the sublease, Chadmoore will co-use with two other
tenants approximately 2,290 total square feet of rentable floor area at a base
rent of $1,035 per month plus one third of utilities and other normal and
ordinary expenses. The two-year sublease expires January 14, 2005.
During February 2004, the employment agreements for Robert W. Moore, Rick Rhodes
and Stephen K. Radusch were amended as the resolution of Chadmoore's outstanding
liabilities and the sale of partnership assets have taken longer than
anticipated. Additionally, Chadmoore remains subject to the reporting
requirements of the Securities Exchange Act of 1934. Accordingly, the board of
directors determined that the above employees' services would be needed for
longer than the initial employment agreements contemplated.
The employment agreements for Messrs. Moore and Radusch were amended so that
each will continue as an executive officer of Chadmoore and continue to receive
75% of his annual salary until at least 30 days after the Securities and
Exchange Commission grants relief from making filings under the Securities
Exchange Act of 1934, unless the agreement is earlier terminated by either
party.
If relief is granted by the Securities and Exchange Commission, this employment
agreement for Messrs. Moore and Radusch will be automatically extended for a
one-year period at the annual rate of $90,000. Upon expiration of this one-year
term, the employment agreements will be automatically extended until February
22, 2007, unless terminated by either party. During this final stage of
employment, Mr. Moore and Mr. Radusch will be paid $6,500 and $6,000 per month,
respectively. Mr. Rhodes employment agreement was extended through November 8,
2003, at which time he resigned from Chadmoore as Chief Regulatory Officer and
Secretary. Mr. Rhodes, per his employment agreement, will provide services to
Chadmoore on an as needed basis until November 8, 2004. For this, he will
receive $7,500 per month.
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
11
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, 2003, and Chadmore's other periodic reports filed with the SEC for
these risk factors.
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.
Chadmoore's goal is to minimize the length of time necessary to resolve or
satisfy its known liabilities while also minimizing the risks to shareholders by
conserving corporate assets.
In order to reduce liquidation costs, Chadmoore's full-time staff has been
reduced to two 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, 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. 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
majority of Chadmoore's assets have been liquidated and the amounts 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 cost 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.
LIQUIDITY AND CAPITAL RESOURCES
Chadmoore's primary objectives are to liquidate its assets in the shortest time
period possible while realizing the maximum values of these assets and to settle
all claims on terms most favorable to Chadmoore. The liquidation is expected to
be concluded prior to the fifth
12
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. On
February 28, 2003, Chadmoore made a second distribution of cash to shareholders
in the aggregate amount of $4.2 million, or $.0620 per equivalent share. On
December 5, 2003, a third distribution of cash in the aggregate amount of $7
million, or $.101404 per share, was made to shareholders of record. As of
November 12, 2004, Chadmoore has distributed an aggregate of about $34 million,
or $.4957 per equivalent share. Remaining net assets available for distribution
to shareholders as of September 30, 2004 are currently estimated to be about
$5.5 million.
ITEM 3. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Chadmoore, under the supervision and with the participation of its management,
including its Chief Executive Officer and Chief Financial Officer, carried out
an evaluation of the effectiveness of the design and operation of Chadmoore's
disclosure controls and procedures as of September 30, 2004 (the "Evaluation
Date"). Based upon this evaluation, the Chief Executive Officer and Chief
Financial Officer concluded as of the Evaluation Date that Chadmoore's
disclosure controls and procedures were effective for purposes of recording,
processing, summarizing and timely reporting material information required to be
disclosed in reports that it files under the Securities Exchange Act of 1934, as
amended.
CHANGES IN INTERNAL CONTROLS.
There were no changes in our internal control over financial reporting that
occurred during our quarter ended September 30, 2004 that has materially
affected or is reasonably likely to materially affect, our internal control over
financial reporting.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In late September, 2002, Chadmoore received a letter from Cindy Ashcroft,
principal of Ashcroft ITV ("Ashcroft") seeking payment for licenses which
Ashcroft purports were transferred to Chadmoore. Ashcroft requested, through its
letter, a payment in excess of $4 million from Chadmoore for the subject
licenses, or alternatively a further explanation from the Company as to why such
a payment would not be forthcoming. Chadmoore has reviewed its files and
Chadmoore management, along with outside counsel, has analyzed the matter at
considerable length. Upon review of the evidence in the light most favorable to
Ashcroft, Chadmoore believes that it could potentially be liable to Ashcroft for
approximately $23,750 in license payments. On the other hand, the Company
believes it has a valid counterclaim for approximately $89,000 against Ashcroft
for interim management fees earned while the Company managed and operated
Ashcroft's licensed facilities in order to keep them in compliance with FCC
requirements. In late 2001, the Company suggested to Ms. Ashcroft that a direct
meeting between the parties take place as promptly as practicable to resolve
this matter. At this time, management has received no reply from Ms. Ashcroft.
While Chadmoore cannot forecast the ultimate outcome of this matter, based on
management's review of the files and Ashcroft's request, as well as internal
conferences and conferences with outside counsel regarding this matter, the
Company believes that the possibility that this matter will have a substantial
adverse impact on the Company is remote.
On March 13, 2003, American Tower Corporation ("American Tower") submitted to
Chadmoore a notice of default under several license agreements which existed
earlier between American Tower and Chadmoore. American Tower sought immediate
payment of an outstanding balance of approximately $234,000. On March 19, 2003,
Chadmoore formally responded to American Tower's notice, rejected its demand,
and indicated that Chadmoore believes it has no legal duty to continue to make
any payments to American Tower on the basis of the agreements. Subsequently, on
May 23, 2003, American Tower filed suit in the Clark County Nevada District
Court seeking redress for its claims of breach of contract, without specifying
the damages sought. Chadmoore timely filed its answer on June 16, 2003 denying
American Tower's claims. The parties have exchanged pre-trial documentation and
witness lists for discovery purposes. Discovery is currently ongoing. A jury
trial is set for the week of April 4, 2005. Currently, management cannot
forecast the actual outcome of this item, nor can it provide a timetable for
when this matter will be concluded.
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.
14
ITEM 2E. DISCLOSURE OF ANY REPURCHASE OF COMPANY STOCK
There were no repurchases of Chadmoore common stock during the three months
ended September 30, 2004.
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
15
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: November 12, 2004
16