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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
1) FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2006
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.)
7390 W. SAHARA AVENUE, SUITE 290, LAS VEGAS, NEVADA 89117
(Address of principal executive offices)
(702) 740-5633
(Issuer's telephone number)
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 [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2of the Exchange Act).
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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
AS OF JULY 31, 2006 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
INDEX
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Statements of Net Assets in Liquidation as of June 30, 2006
and December 31, 2005 4
Statements of Changes in Net Assets in Liquidation for the
Three and Six Months Ended June 30, 2006 and 2005 5
Condensed Notes to Unaudited Interim Financial Statements 6-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF LIQUIDATION 11-12
ITEM 3. CONTROLS AND PROCEDURES 13
PART II - OTHER INFORMATION 14
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2C. DISCLOSURE OF ANY REPURCHASE OF COMPANY STOCK 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
3
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Statements of Net Assets in Liquidation
as of June 30, 2006 and December 31, 2005
(amounts in thousands)
June 30, December 31,
2006 2005
(unaudited)
------------------ ------------------
ESTIMATED VALUES OF ASSETS OF THE COMPANY
Cash and cash equivalents $ 2,996 $ 1,823
Investment in debt securities 11,537 11,537
Other receivables, net 630 819
Federal income tax receivable -- 1,290
Other assets 35 98
Estimated future interest income 375 501
------------------ ------------------
Total estimated assets 15,573 16,068
------------------ ------------------
ESTIMATED LIABILITIES OF THE COMPANY
Notes payable -- 313
Accounts payable and accrued liabilities 220 254
Estimated future operating costs and settlement reserves
during the liquidation period 8,037 9,167
------------------ ------------------
Total estimated liabilities 8,257 9,734
------------------ ------------------
NET ASSETS IN LIQUIDATION $ 7,316 $ 6,334
================== ==================
See accompanying condensed notes to unaudited interim financial statements.
4
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Unaudited Statements of Changes in Net Assets in Liquidation
For the Three and Six Months Ended June 30, 2006 and 2005
(amounts in thousands)
For the three months ended For six months
ended
------------------------------- --------------------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
(restated) (restated)
----------------------------------------------------------------
Net assets in liquidation as previously
reported $ 6,491 $ 5,689 $ 6,334 $ 5,474
Change in income taxes -- 1,290 -- 1,290
Net loss from operations during
liquidation (25) (25) (57) (37)
Change in Estimate of:
Settlement reserve 650 -- 650 --
Future interest income -- -- 189 264
Notes payable 200 -- 200
Future operation costs during
liquidation period -- (59) -- (96)
--------------- --------------- ---------------- ---------------
Net Assets in Liquidation $ 7,316 $ 6,895 $ 7,316 $ 6,895
=============== =============== ================ ===============
See accompanying condensed notes to unaudited interim financial statements.
5
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
Condensed Notes to Unaudited Interim Financial Statements
June 30, 2006
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. Under Colorado law, Chadmoore is required to manage its liquidation
process through February 22, 2007, at which time the orderly liquidation is
expected to be completed. 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, 2005.
6
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.
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. Accordingly,
management has presented its financial statements on the liquidation basis of
accounting.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles 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 initial estimates, and those differences may be significant.
ESTIMATED VALUES OF ASSETS OF THE COMPANY
The estimated assets of Chadmoore that are set forth in the June 30, 2006
"Statements 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) Investment in debt securities include both held-to-maturity securities
and available-for-sale securities. Securities with maturities prior to
February 22, 2007 are considered held-to-maturity securities and total
$10,935,857 at June 30, 2006. They are carried at par value with an
accrual in future estimated income for expected earnings to the total
settlement amount. Management intends to hold these securities until
their maturity due dates. These securities mature as follows:
June 30, 2006
Par Value Market Value
------------------------ --------------------------------------------
Within one year $10,935,857 $10,894,555
------------------------ --------------------------------------------
Those debt securities with maturities after February 22, 2007 are classified as
7
available-for-sale securities and total $601,142 at June 30, 2006.
Available-for-sale securities are carried at market value with any periodic
unrealized gain or loss recorded as an adjustment in the Statement of Changes in
Net Assets in Liquidation and an accrual for estimated income for expected
earnings through February 22, 2007. These securities mature as follows:
--------------------------------------- -----------------------------
Within one year $0
--------------------------------------- -----------------------------
One year to three years $0
--------------------------------------- -----------------------------
Over three years $601,142
--------------------------------------- -----------------------------
(c) Estimated future interest income is reviewed quarterly by management
based upon future expected cash flows. As a result of the review at
March 31, 2006, estimated future interest income was increased by
$189,000 to reflect recent increases in the average market interest
rates and an anticipated increase in available cash as a result of the
federal income tax receivable. At June 30, 2006, the estimated future
interest income represented about 5.1% of Chadmoore's estimated net
assets in liquidation. The estimated future interest income of $375,000
on Chadmoore's cash holdings and investment in debt securities
represents management's estimate of future interest earnings based on
an average market rates of interest over the remaining liquidation
period. Actual interest income will likely differ from management's
current estimate.
(d) Other assets represent primarily prepayments of future operating costs.
(e) Other receivables, net, are carried at their expected collectible
amounts and pertain, primarily, to funds held by Nextel to offset any
potential liabilities that might occur from any unknown or
unanticipated, unpaid state taxes. During the quarter ended June 30,
2006, Chadmoore collected $191,960 from the escrow account and is
working with counsel to obtain tax certificates of good standing in
about 10 remaining states in which Chadmoore operated. Though a
somewhat lengthy and detailed process, management believes it will
collect substantially all of the funds held by Nextel.
(f) Federal income tax receivable at December 31, 2005 represents the
refund amount received during the second quarter of 2006 for losses
incurred for years 2003 and 2004 carried back and applied against the
gain recorded in 2002 as a result of the sale of assets to Nextel.
ESTIMATED LIABILITIES OF THE COMPANY
The estimated liabilities of Chadmoore that are set forth in the June 30, 2006
"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 the purchase of licenses from licensees and are recorded at their
estimated settlement amounts. Chadmoore originally recorded notes
payable of about $6.7 million for purchase of the Goodman/Chan
licenses. (See Form 10-QSB for the Company, dated June 30, 2002, for
detail disclosure of the Goodman/Chan proceedings,) That
8
amount was reduced to $4.7 million through payments and settlement of
outstanding balances prior to the initial liquidation accounting. A
liquidation trust was established for the purpose of settling the
remaining outstanding Goodman/Chan claims. The liquidation trust
resolved the bulk of these contingent claims by distributing $1,039,000
to 546 license holders. Approximately 60 potential claimants, with
estimated potential claims of $200,000, could not be found or did not
respond to settlement letters mailed to them. Chadmoore has made every
effort to locate these remaining potential claimants, including the
hiring of a skip/trace firm. The liquidation trust was dissolved during
the quarter ended March 31, 2006, the remaining balance in the trust
account of $932,659 was returned to Chadmoore and the estimated
liability of $200,000 for Goodman/Chan notes payable was reduced to
$-0- during the quarter ended June 30, 2006.
(b) Accounts payable and accrued liabilities include all amounts that
remain unpaid for liquidation activities.
(c) 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,
2005, changes in estimates, and the actual costs that have been
incurred and paid during the period from January 1, 2006 through June
30, 2006.
Change in
As of estimates Incurred As of
Dec. 31, 2005 during period and paid June 30, 2006
---------------- ---------------- ------------- --------------
Compensation for
liquidation personnel $ 407 $ -- $ (182) $ 225
Insurance, utilities and
facility expenses 140 -- (62) 78
Legal, audit and other
professional fees 317 -- (236) 81
Settlement reserve 8,303 (650) -- 7,653
---------------- ---------------- ------------- --------------
Total estimated future
operating costs and
settlement reserves $ 9,167 $ (650) $ (480) $ 8,037
================ ================ ============= ==============
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
settlement reserve upon the adoption of liquidation basis accounting on January
29, 2002. The amount of the settlement reserve is $7.7 million at June 30, 2006.
The majority of this settlement reserve at June 30, 2006, $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,
and settlement of existing liabilities. This reserve has been established for
matters for which there
9
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 determined at this time. During the quarter ended June 30, 2006,
management, relying on input from outside litigation counsel, reduced the
settlement reserve by $650,000 for potential litigation claims. Accordingly,
management believes the range of possible estimated settlements is from $0 to
$7.7 million.
As a result of the uncertainty regarding the estimates associated with the
settlement 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 settlement reserve appropriately, if needed. See Note 4 -
Commitments and Contingencies for further discussion.
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.
NOTE 3 - RESTATEMENT
During the quarter ended September 30, 2005, Chadmoore discovered that operating
and capital losses incurred during fiscal 2004 could be carried back to offset
taxes paid on the gain on sale from 2002. Chadmoore further discovered that
capital losses from fiscal 2003 could be carried back to recover taxes paid on
the gain on sale from 2002. Chadmoore has restated its financial statements as
of June 30, 2005 and for the period ended June 30, 2005 for the items discussed
above. The correction of the error resulted in an adjustment that increased Net
Assets in Liquidation by $1,290,000.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
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.
10
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, and depositions have
been taken. Discovery is now closed. A bench trial is set for August 2006.
Currently, management cannot forecast the actual outcome of this litigation, nor
can it provide a timetable for when this matter will be concluded.
On October 11, 2005, Chadmoore received a demand letter from SBA Leasing, Inc.
("SBA Leasing") claiming that Chadmoore was in default on various leases and
that Chadmoore owed SBA Leasing $274,592 in overdue lease payments. Chadmoore
has formally responded to SBA Leasing denying that any sum of money is currently
owed by Chadmoore. 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. Chadmoore has, however, included in its
settlement reserve an accrual, at the higher end of the range of estimated loss,
for these matters.
NOTE 5- RELATED PARTY TRANSACTIONS
On March 1, 2006, Chadmoore entered into a one-year sublease with a limited
liability company in which Robert W. Moore and Stephen K. Radusch are members.
Under the terms of the sublease, Chadmoore will co-use with one other tenant
approximately 2,300 total square feet of rentable floor area at a base rent of
$2,152 per month plus one half of utilities and other normal and ordinary
expenses. The one-year sublease expires February 28, 2007.
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.
PLAN OF OPERATIONS FOR DISSOLUTION
11
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 are handling 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. During the first quarter of 2006,
Chadmoore recorded an increase in the estimated value of future interest income
of $189,000 to reflect rising interest rates and an anticipated increase in
available cash as a result of the federal income tax receivable. During the
quarter ended June 30, 2006, Chadmoore recorded a decrease in its estimated
liabilities by reducing the estimate for notes payable related to Goodman/Chan
from $200,000 to $-0- and its settlement reserve from $8.3 million to $7.7
million, or $650,000, to reflect changes in anticipated settlement of previously
recorded litigation claims.
LIQUIDITY AND CAPITAL RESOURCES
Chadmoore's primary objectives are to liquidate its assets in the shortest time
period possible while realizing the maximum values for such assets and to settle
all claims on terms most favorable to Chadmoore. The liquidation of remaining
assets 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
under the Plan was made on July 12, 2002 in the aggregate amount of $22.7
million, or about $.3323 per
12
share. On February 28, 2003, a second distribution of cash in the aggregate
amount of $4.3 million, or $.061967 per share, was initiated. On December 5,
2003, a third distribution of cash in the aggregate amount of $7.0 million, or
$.101464 per share was made to shareholders of record. As of June 30, 2006,
Chadmoore had distributed an aggregate of about $34 million, or $.4957 per
share. Remaining net assets available for distribution to shareholders as of
June 30, 2006, assuming assets are realized and liabilities are settled at their
estimated amounts, are currently estimated to be about $7.3 million, or $.11 per
equivalent share. Should Chadmoore not have to payout any of the settlement
reserves, shareholders could expect to receive up to an additional $7.7 million,
or $.11 per equivalent share. The actual nature, amount and timing of future
distributions will be determined by the board of directors in its sole
discretion, and will depend primarily upon a variety of factors, including, but
not limited to, the resolution of those items included in the settlement reserve
and actual costs incurred in carrying out the Plan.
Chadmoore's liquidation should be concluded on or before February 22, 2007, with
a final liquidating distribution directly to the shareholders. Complete details
regarding the Plan to liquidate and dissolve Chadmoore can be found in the
Company's December 14, 2001 Proxy Statement filed with the Securities and
Exchange Commission, and mailed to shareholders on December 15, 2001.
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 June 30, 2006 (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 going forward for purposes of recording,
processing, summarizing and timely reporting material information required to be
disclosed in reports that it files under the Exchange Act.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING.
There was no change in the Company's internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange
Act of 1934, as amended) during the Company's most recently completed fiscal
quarter that has materially affected, or is reasonable likely to materially
affect, the Company's internal control over financial reporting.
13
2. PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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, and depositions have been taken. Discovery
is now closed. A bench trial is set for August 2006. Currently, management
cannot forecast the actual outcome of this litigation, nor can it provide a
timetable for when this matter will be concluded.
On October 11, 2005, Chadmoore received a demand letter from SBA Leasing, Inc.
("SBA Leasing") claiming that Chadmoore was in default on various leases and
that Chadmoore owed SBA Leasing $274,592 in overdue lease payments. Chadmoore
has formally responded to SBA Leasing denying that any sum of money is currently
owed by Chadmoore. 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. Chadmoore has, however, included in its
settlement reserve an accrual, at the higher end of the range of estimated loss,
for these matters.
ITEM 2C. DISCLOSURE OF ANY REPURCHASE OF COMPANY STOCK
There were no repurchases of Chadmoore common stock during the three months
ended June 30, 2006.
ITEM 6. EXHIBITS
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
14
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: August 14, 2006
15