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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ________________________
Commission File Number: 000-33343
AQUIS COMMUNICATIONS GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-3281446
- ---------------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1719A Route 10, Suite 300, Parsippany, NJ 07054
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 560-8000
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if the registrant is an accelerated filer (under Exchange
Act Rule 12b-2)
Yes | | No |X|
As of May 10, 2003 there were 179,611,939 shares of the Registrant's Common
Stock outstanding.
-1-
INDEX TO FINANCIAL STATEMENTS
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
Part I Financial Information:
Item 1 - Financial Statements:
Consolidated Balance Sheets at March 31, 2003 and December 31, 2002 .......................................... 3
Consolidated Statements of Operations for the Three Month Periods ended March 31, 2003 and 2002............... 4
Consolidated Statements of Cash Flows for the Three Month Periods ended March 31, 2003 and 2002............... 5
Notes to Consolidated Financial Statements.................................................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................... 9
Item 3 - Quantitative and Qualitative Disclosures About Market Risks............................................. 14
Item 4 - Controls and Procedures................................................................................. 14
Part II Other Information:
Item 1 - Legal Proceedings....................................................................................... 15
Item 2 - Changes in Securities and Use of Proceeds............................................................... 15
Item 3 - Default Upon Senior Securities.......................................................................... 15
Item 4 - Submission of Matters to a Vote of Security Holders..................................................... 15
Item 5 - Other Information....................................................................................... 15
Item 6 - Exhibits and Reports on Form 8-K........................................................................ 15
Signatures....................................................................................................... 16
Certifications................................................................................................... 17,18
-2-
Part I - Financial Information
Item 1 - Financial Statements
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
March 31, December 31,
2003 2002
-------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents....................................................................... $999 $1,259
Accounts receivable (net of allowances of $646 and $686, respectively).......................... 329 610
Inventory, net.................................................................................. 355 356
Prepaid expenses and other current assets....................................................... 452 196
-------------- --------------
Total current assets........................................................................ 2,135 2,421
Property and equipment, net....................................................................... 3,156 3,392
Intangible assets, net............................................................................ 1,655 1,759
Deferred charges and other assets................................................................. 48 55
-------------- --------------
Total assets.............................................................................. $6,994 $7,627
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt............................................................ $907 $912
Accounts payable and accrued expenses........................................................... 1,725 1,811
Deferred revenue................................................................................ 319 331
Customer deposits............................................................................... 200 211
-------------- --------------
Total current liabilities................................................................... 3,151 3,265
Long term debt.................................................................................... 13,299 13,708
-------------- --------------
Total liabilities................................................................................. 16,450 16,973
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Commitments and contingencies
Series B Redeemable 10% Preferred Stock, $0.01 par value, 301 shares authorized,
300.01 shares issued and outstanding at March 31, 2003 and December 31, 2002..................... 540 540
-------------- --------------
Stockholders' equity:
Common stock, $0.01 par value, 451,000,000 shares authorized, 179,611,939 shares issued and
outstanding at March 31, 2003 and December 31, 2002............................................. 184 184
Additional paid-in capital...................................................................... 17,883 17,883
Accumulated deficit............................................................................. (28,063) (27,953)
-------------- --------------
Net stockholders' equity........................................................................ (9,996) (9,886)
-------------- --------------
Total liabilities and stockholders' equity................................................ $6,994 $7,627
============== ==============
The accompanying notes are an integral part of these financial statements.
-3-
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED; IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)
Three Months Ended March 31,
--------------------------------
2003 2002
-------------- --------------
Revenues:
Paging services, rent and maintenance........................................ $ 3,023 $ 3,683
Equipment sales.............................................................. 65 62
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Total revenues.......................................................... 3,088 3,745
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Operating expenses:
Cost of paging services...................................................... 1,429 1,639
Cost of equipment sold....................................................... 20 30
Selling and marketing........................................................ 399 407
General and administrative................................................... 885 957
Depreciation and amortization................................................ 428 720
Provision for doubtful accounts.............................................. 155 217
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Total operating expenses................................................ 3,316 3,970
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Operating loss................................................................. (228) (225)
Interest income(expense), net.................................................. 3 (855)
Gain (loss) on sale of equipment............................................... 115 (48)
-------------- --------------
Net loss....................................................................... (110) (1,128)
Preferred stock dividends...................................................... --- (28)
-------------- --------------
Loss attributable to common stockholders....................................... $ (110) $ (1,156)
============== ==============
NET LOSS PER COMMON SHARE:
Basic and diluted............................................................ $ (0.001) $ (0.064)
Weighted average common shares outstanding..................................... 179,611,939 18,158,767
The accompanying notes are an integral part of these financial statements.
-4-
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
Three Months Ended March 31,
-------------------------------
2003 2002
-------------- ------------
Cash flows from operating activities:
Net loss...................................................................... $(110) $(1,128)
Adjustments to reconcile net loss to net cash provided by (used by)
operating activities:
Depreciation and amortization................................................. 428 720
Provision for doubtful accounts............................................... 155 217
Capitalized interest.......................................................... 7 7
(Gain)loss on sale of property and equipment................................. (115) 48
Changes in assets and liabilities, net of business acquisitions:
Accounts receivable........................................................ 126 25
Inventory.................................................................. (158) (255)
Prepaid expenses and other current assets.................................. (200) (317)
Accounts payable and accrued expenses...................................... (86) 583
Deferred revenues and customer deposits.................................... (23) 63
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Net cash provided by (used by) operating activities........................... 24 (37)
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Cash flows from investing activities:
Acquisition of property, equipment and licenses............................... (20) (196)
Sale of property and equipment................................................ 157 1,064
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Net cash used by investing activities......................................... 137 868
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Cash flows from financing activities:
Payments made on long term debt............................................... (421) (6)
Deferred financing and stock registration costs............................... --- (263)
-------------- ------------
Net cash used by financing activities......................................... (421) (269)
-------------- ------------
Net increase (decrease) in cash and cash equivalents............................ (260) 562
Cash and cash equivalents - beginning of period................................. 1,259 1,084
-------------- ------------
Cash and cash equivalents - end of period....................................... $999 $1,646
============== ============
The accompanying notes are an integral part of these financial statements.
-5-
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED; IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS:
Aquis Communications Group, Inc. ("Aquis" or the "Company") is a holding
company, incorporated in the State of Delaware. Through its operating companies,
Aquis provides traditional one-way wireless alpha and numeric messaging services
in the Northeast and Mid-Atlantic regions of the United States, from Boston to
Virginia, as well as the District of Columbia, covering portions of nine states.
The Company also resells nationwide and regional messaging services, and offers
alpha dispatch, news and other messaging enhancements. Its customers include
businesses, government agencies, healthcare organizations and providers,
individuals and resellers.
The accompanying statements reflect all adjustments considered necessary
by management to present fairly the consolidated financial position as of March
31, 2003 and December 31, 2002, and the consolidated results of operations and
the related consolidated cash flows for the three months ended March 31, 2003
and 2002. The balance sheet for the end of the preceding fiscal year has been
derived from the Company's audited balance sheet at December 31, 2002 contained
in the Company's Form 10K and is provided for comparative purposes. All other
financial statements are unaudited. In management's opinion, all adjustments
have been made which include only normal recurring adjustments necessary to
fairly present the financial position, results of operations and changes in cash
flows for all periods presented. All material intercompany accounts and
transactions have been eliminated in consolidation. The results of operations
for the interim periods presented are not necessarily indicative of the results
to be expected for the full year. Certain prior period amounts have been
reclassified to conform to the current period presentation.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10K for the most recent fiscal year.
Aquis' consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. However, Aquis has a history of
losses before extraordinary items, continuing working capital deficits, and its
common stock was de-listed from the NASDAQ SmallCap Market and now trades on the
OTC Bulletin Board under the symbol AQIS.OB. These factors have impaired Aquis'
liquidity, diminished Aquis' ability to raise additional funding through debt or
equity offerings, resulted in the technical and functional termination of the
right or ability of Aquis to obtain funding under its equity line of credit with
Coxton Limited, and led to the Company's defaults under its loan agreements with
FINOVA Capital Corporation ("FINOVA") and AMRO International S.A. ("AMRO"). As a
result of these historical liquidity and profitability deficiencies, Aquis and
certain creditors effected a restructuring of the Company's debt and equity in
August 2002, providing reduced debt obligations in exchange for equity
securities that provided FINOVA and AMRO with equity interests of 79.99% and
9.9%, respectively. In connection with development of its current business plan,
Aquis requested and was granted modifications to two of its financial covenants
relating to minimum required operating cash flow levels specified in its Second
Amended and Restated Loan Agreement with FINOVA dated August 12, 2002. Prior to
those modifications, which were provided in response to Aquis' letter request
dated February 5, 2003, Aquis was in default of that Agreement with FINOVA. The
Company's financial condition and history continue to limit its ability to
obtain any significant third party funding.
Aquis operates in a highly competitive wireless messaging marketplace in
which at least three of the industry's largest paging operators have sought
bankruptcy protection as a result of a shrinking market and intense price
competition. The Company has designed its business plans and sales strategies to
respond to the challenges of its industry, its service marketplace and its own
financial condition. However, Aquis can provide no assurance that its financial
restructuring, its ability to effectively gain market share in a declining
paging marketplace at sufficiently profitable margins, its ability to generate
sufficient cash from operations to meet operating obligations in a timely
manner, availability of continuing supplies of goods and services from key
vendors, or its ongoing ability to limit or reduce operating costs and capital
requirements will be adequate to ensure any ability to continue as a going
concern. In the event that cash flow needs cannot be met or that future
defaults, if any, cannot be cured and demand is made for payment of the
outstanding debt, Aquis does not believe that its resources will be sufficient
to meet such a demand, and the Company would consider appropriate responses
which could include filing a request for protection under the US Bankruptcy
Code.
-6-
2. MERGERS, ACQUISITIONS AND DISPOSITIONS:
SourceOne Wireless:
During 2001, Aquis negotiated the sale of its Midwest paging assets. A
related Escrow Agreement was funded on October 18, 2001, at which time Aquis
relinquished its rights in the subsequent revenues and expenses of that
operation. Release from escrow of the proceeds to Aquis was held pending the
FCC's approval of the transfer of the related communications licenses. Such
release was authorized in January 2002 and proceeds of $1,010 were delivered to
Aquis and are reflected in the Company's cash flows for the period ending
March 31, 2002.
3. INTANGIBLE ASSETS
Aquis reviews its assets for impairment when events or changes in
circumstances indicate that such costs may not be recoverable in the normal
course of business. Accordingly, during 2000 and 2001, Aquis recognized charges
for impairment of the carrying value of its FCC licenses and State certificates,
and its Midwest paging assets in amounts totaling $14,069 during that two year
period. These charges were required as the result of the Company's ongoing
losses, its forecasts for continuing losses at the time, its defaults under its
loan agreements as described in more detail elsewhere herein, the declining
paging market, the sale of its Midwest paging assets, and the decision to
further consolidate its paging operations over time into its 900mHz network, The
amount of the losses was based on the amount of the estimated annual cash flows
through December 31, 2008 discounted to net present value using a discount rate
of 20% and the net realizable value of the Midwest assets sold. The resulting
adjusted carrying value is believed by management to approximate the realizable
value of these assets. As a result of these past write downs, amortization
expense for the three month period ended March 31, 2003 has declined from
earlier comparative periods accordingly. At March 31, 2003, Aquis' net
intangible assets consist primarily of its FCC licenses and its State
certificates.
4. DEFERRED CHARGES:
The Company deferred approximately $192 of costs during the three months
ended March 31, 2002 that were incurred in connection with the restructuring of
its debt and equity. These were fees paid for investment banking, consultation
and legal costs directly related to this effort. Such capitalized costs were
charged against earnings when its debt and equity restructuring was completed
and the related gain was recorded in 2002.
5. LONG-TERM DEBT:
Aquis recorded the debt issued pursuant to the restructuring in accordance
with the requirements of SFAS 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructurings." Accordingly, the debt recorded in connection with
this transaction included obligations for future cash payments of principal and
interest to the extent that the total of such cash flows did not exceed the
principal amount of the debt cancelled. All of the Company's assets continue to
serve as collateral for the secured notes under the restructuring.
Pursuant to the terms of the Second Amended and Restated Loan Agreement
with FINOVA dated August 12, 2002 (the "Loan Agreement"), Aquis is subject to
specified financial performance and expenditure-limiting covenants. In
connection with development of its current business plan, Aquis requested and
was granted modifications to two of its financial covenants relating to minimum
required operating cash flow levels specified in the Loan Agreement. Effective
March 29, 2003, FINOVA approved those modifications in a First Amendment to the
Second Amended and Restated Loan Agreement. Prior to those modifications, Aquis
was in default of that Agreement with FINOVA. In the event of a default that
cannot be cured by the Company, or for which a waiver or modification cannot be
obtained, the Company's creditor could make demand for payment of amounts due.
Should such a demand be made, Aquis' present financial and other resources are
not expected to be sufficient to satisfy such a demand. The Company would then
consider available alternatives, including a voluntary filing for protection
from its creditors under the US Bankruptcy Code. In the event of a bankruptcy
filing, it is unlikely that any assets would remain for distribution to any
creditors or equity holders other than our senior lender.
6. NET LOSS PER COMMON SHARE:
The Company has adopted Statement of Financial Accounting Standards
No. 128, "Earnings per Share", which requires a dual presentation of basic and
diluted earnings per share ("EPS"). Basic EPS is based on the weighted average
number of shares outstanding during the periods presented. Diluted EPS reflects
the potential dilution that could occur if options, warrants, convertible
securities or other contracts requiring the issuance of common stock were
converted into common stock during the periods presented. The Company has not
presented diluted EPS because the effect would be anti-dilutive.
-7-
7. SUPPLEMENTAL CASH FLOW DATA:
The table below provides supplemental information to the consolidated
statements of cash flows:
March 31,
2003 2002
--------------- --------------
Cash paid for interest............. $ 2 $ 158
Cash paid for taxes................ $ - $ -
In addition to the interest paid during the three months ended March 31,
2003 that is shown above, Aquis also paid $413 to FINOVA that was applied
against the outstanding balance of the Tranche A note. In accordance with SFAS
15 and as discussed elsewhere in these footnotes, the recorded balance of that
liability includes the note principal and related interest-based cash flow
requirements. The payments of $413 to FINOVA during this period included amounts
characterized as note principal totaling $250, and interest-based obligations of
$163
-8-
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors that are inherently uncertain and difficult to
predict. Therefore, no assurance can be given that financing for such
investments will be available, nor that the Company's operations will generate
positive cash flows sufficient to allow us to implement our business plan.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contain forward-looking statements made by the Company's
management that are based on current expectations, estimates and projections
about the industries in which the Company operates and management's beliefs and
assumptions. In addition, other written or oral statements that constitute
forward-looking statements may be made by or on behalf of the Company. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," or variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Organization and Basis of Presentation
We operate regional one-way paging systems in the Northeast and
Mid-Atlantic regions of the United States, providing wireless alpha and numeric
messaging services from Virginia to Boston and including the District of
Columbia, covering portions of nine states. Our networks utilize either 900mHz
or VHF frequencies under licenses subject to FCC regulations. We also resell
nationwide and regional services, offer alpha dispatch, and news and other
messaging enhancements. Customers include businesses, government agencies,
healthcare organizations and providers, individual users and resellers.
Beginning in April 2000, our strategy shifted from acquiring new businesses to
focusing on internal growth, integrating acquired operations and achieving
operating efficiencies. In January 2002, we completed the sale of our paging
assets in the Midwest region of the United States and collected the proceeds due
under that transaction. In August 2002, we completed the restructuring of our
debt and equity (the "Restructuring").
Aquis' consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. However, we have a history of
losses before extraordinary items and defaults under our debt obligations,
continuing working capital deficits, and our common stock was de-listed from the
NASDAQ SmallCap Market and now trades on the OTC Bulletin Board under the symbol
AQIS.OB. These factors have impaired our liquidity, diminished our ability to
raise additional funding through debt or equity offerings, resulted in the
technical and functional termination of any right or ability to obtain funding
under our equity line of credit, and led to defaults under our loan agreements
with FINOVA and AMRO. As a result of these liquidity and profitability
deficiencies in 2002, Aquis and certain creditors effected a restructuring of
the Company's debt and equity, providing reduced debt obligations in exchange
for equity securities that provided FINOVA and AMRO with equity interests of
79.99% and 9.9%, respectively. In connection with development of our current
business plan, we requested modifications to two of the financial covenants
relating to minimum required operating cash flow levels specified in our Second
Amended and Restated Loan Agreement with FINOVA dated August 12, 2002. FINOVA
approved those modifications effective March 29, 2003. Prior to those
modifications, we were again in default of our loan agreement with FINOVA. The
Company's financial condition and history continue to limit our ability to
obtain any significant third party funding.
On August 12, 2002, after receiving FCC approval, the Restructuring took
effect resulting in the cancellation of a significant portion of our debt in
exchange for new notes and equity securities and effecting a change in control
of Aquis. As a result, our senior secured lender, FINOVA Capital Corporation,
acquired control of Aquis through our issuance of convertible preferred stock
and warrants as part of this restructuring transaction. In addition, prior
members of the Board of Directors resigned and were replaced by appointees of
FINOVA and AMRO International, S.A., an unsecured lender. Further, AMRO
International, S.A., acquired a non-controlling equity interest in our Company,
and holders of our 7.5% Redeemable Preferred Stock exchanged those shares for
shares of Aquis' Series B 10% Redeemable Preferred Stock. FINOVA and AMRO also
received notes in the combined face amount of $10 million. In exchange, all
prior existing Aquis obligations to these parties, including accrued interest
and dividends, were cancelled, resulting in the recognition during 2002 of an
extraordinary gain on this troubled debt restructuring of $22,071,000.
Consequently, as required under SFAS 15, "Accounting by Debtors and Creditors
for Troubled Debt Restructurings", Aquis recorded the debt issued pursuant to
the restructuring to include obligations for future cash payments of both
principal and interest to the extent that the total of such cash flows did not
exceed the principal amount of the debt cancelled. Accordingly, all payments of
principal and interest made toward the surviving restructured debt obligations
are applied to reduce the total recorded debt. All of the Company's assets
continue to serve as collateral for the secured notes under the restructuring.
-9-
We operate in a highly competitive wireless messaging marketplace in which
at least three of the industry's largest paging operators have sought bankruptcy
protection as a result of a shrinking market and intense price competition. We
have designed our business plans and sales strategies to respond to the
challenges of our industry, our service markets and our financial condition.
However, we can provide no assurance that our financial restructuring, our
ability to effectively gain market share in a declining paging marketplace at
sufficiently profitable margins, our ability to generate sufficient cash from
operations to meet operating obligations in a timely manner or availability of
continuing supplies of goods and services from key vendors, or our ongoing
ability to limit or reduce operating costs and capital requirements will be
adequate to ensure any ability to continue as a going concern. In the event that
cash flow needs cannot be met or that future defaults, if any, cannot be cured
and demand is made for payment of the outstanding debt, management does not
believe that its resources will be sufficient to meet such a demand, and under
such circumstances we would consider appropriate responses which could include
filing a request for protection under the US Bankruptcy Code.
General
We are a Northeastern United States provider of paging and other wireless
messaging services and we market one-way paging service and equipment to
customers directly and through resellers. Our subscribers either lease their
pagers from us or purchase their device outright from us, commonly referred to
as "COAM", or customer owned and maintained. We also offer a variety of
messaging enhancements to paging subscribers, and resell two-way paging and
cellular phone service on a small scale.
We generate a substantial majority of our revenue from fixed periodic fees
for paging services that are not generally dependent on usage. Usage sensitive
charges consist primarily of charges for messages exceeding the number included
in a customer's fixed monthly rate plan, and fees charged to resellers for
messages sent to the resellers' subscribers over Aquis' communication network on
a per-character basis under a Telocator Networking Paging Protocol ("TNPP").
During periods prior to October 2001, usage sensitive charges were also made to
subscribers using the "Calling-Party-Pays" service that we operated in
connection with our Midwest paging operations, which we sold at that time.
Our ability to recover initial operating, selling and marketing costs and
to achieve profitability is dependent on the average duration of each customer's
subscription period. For as long as a subscriber continues to utilize the
service, operating results benefit from the recurring fixed fee payments without
the requirement of any incremental selling expenses. Conversely, customer
disconnections adversely affect operating results. Each month a percentage of
existing customers have their service terminated for reasons including failure
to pay, dissatisfaction with service or coverage limitations, or switching to
competing service providers. This percentage is referred to as our churn rate.
This discussion should be read in conjunction with Aquis' consolidated
financial statements and the notes thereto. Some of the following financial data
is presented on a per subscriber or unit basis. Management believes that such a
presentation is useful in understanding year-to-year comparative results by
providing a meaningful basis for comparison, given the differences in business
management and in the number of subscribers of other paging companies.
RESULTS OF OPERATIONS-THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002
Units in Service
Units in service totaled 157,000 and 204,000 at March 31, 2003 and 2002,
respectively. During this period, approximately 36,000 net units in service with
resellers were disconnected. Verizon Wireless, one of our largest resellers,
reduced its units in service with us from about 24,000 units to less than 14,000
units as the industry grew smaller and this segment of their paging business was
de-emphasized. In addition, our low-cost, low-margin TNPP units declined
similarly, from 29,000 units to approximately 14,000. Our overall average
monthly churn rates during the three months ended March 31, 2003 and 2002, were
4.7% and 5.9%, respectively. These rates were influenced by industry trends in a
nationwide contracting paging market and our own limited ability to procure and
market paging units, negatively affecting our ability to secure new subscribers
or to replace units for our customers who have lost or damaged their paging
devices.
-10-
Revenues
Service revenues for the three months ended March 31, 2003 and 2002, were
$3,023,000 and $3,683,000, respectively, a decrease of approximately $660,000 or
about 17.9%. Continuing churn, described above, and ongoing industry-wide
pricing pressures were factors contributing to this result. The units
disconnected by Verizon and those aforementioned TNPP units were reseller units
producing low average monthly revenue per unit, or ARPU, and accounted for
approximately $254,000 of this service revenue decline. This decline in our
reseller business brought our average reseller base during the quarter ended
March 31, 2003 to approximately 46% of our total subscriber base, compared to
approximately 54% for the three months ended March 31, 2002. Resellers purchase
Aquis' services in bulk and maintain their own billing, collections and customer
service organizations and are therefore provided rates lower than those made
available to Aquis' direct subscribers. The balance of the decrease in service
revenue is attributed to the decline of our direct or end-user business.
Revenues from sales of paging equipment increased slightly to $65,000 for
the three months ended March 31, 2003 from $62,000 for the same period in 2002.
Aquis continued its strategy of marketing lower-cost units at reduced sales
prices in 2003, selling about 300 more units at slightly lower average pricing
than during the first quarter of 2002.
Cost of Equipment Sales
The cost of equipment sold during the three months ended March 31, 2003
and 2002, respectively, was $20,000 and $30,000. The previously described
low-cost pager strategy and continued sales of some pre-owned units combined to
produce this result.
Cost of Paging Services
Cost of service consists principally of fees paid to third party carriers,
and, to a lesser extent, to message dispatch companies. Third party carriers are
utilized when a customer requires service outside of Aquis' service area, and
are most commonly used to provide nationwide coverage. Also included are
technical operating expenses. Technical operating expenses include transmission
site rentals, telephone interconnect services and the costs of network
maintenance and engineering.
Total services costs decreased from $1,639,000 for the three months ended
March 31, 2002 to $1,429,000 during the corresponding period in 2003. Costs of
third party paging carriers and dispatch service providers declined
approximately 39.4%, or $183,000, to $281,000 from levels incurred during the
three-month period ended March 31, 2002. This cost reduction was achieved in
part as the result of the continued focusing of our sales efforts more strictly
on units serviced by our own networks and in part as a normal result of
subscriber churn for these third party paging networks. We also reduced service
costs by about $106,000 through our continuing efforts to consolidate our paging
networks. Such consolidation provides reductions of trunking costs and tower
site rental expenses. This savings was partially offset by increased costs
associated with maintenance of our now-older paging networks and for repairs of
company-owned paging devices.
Sales and Marketing
Selling and marketing expenses include the cost to acquire and retain
subscribers, operating costs associated with the sales and marketing
organization, and other advertising and marketing expenses. Total costs during
each of the three month periods were comparable, reaching $399,000 and $407,000
during 2003 and 2002, respectively. Cost savings effected as the result of lower
commission costs were offset by higher marketing costs associated with our study
and design of a marketing plan to further define and target our key potential
target markets during the first quarter of 2003.
General and Administrative
General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. These costs decreased
7.5% or $72,000, from $957,000 during the three months ended March 31, 2002 to
$885,000 for the corresponding period of 2003. Continued support and customer
service staff reductions along with lower costs to bill and distribute to a
smaller customer base combined to produce cost savings of about $105,000. These
savings were partially offset by increased fees and expenses associated with the
strategic oversight of our business plans and operations.
-11-
Depreciation and Amortization
Depreciation and amortization decreased to $428,000 for the three months
ended March 31, 2003 from $720,000 in the prior year three-month period.
Amortization of intangible assets decreased by approximately 53% as a result of
the full amortization during 2002 of certain intangible assets acquired in the
merger with Paging Partners effected in March 1999. Depreciation expenses were
also reduced during this time period. This reduction resulted primarily from the
disposal of excess transmitters and terminals that became available as we
consolidated our paging networks
Interest Expense
As a result of the August 2002 restructuring of our debt and equity,
interest expense was substantially eliminated. Gross interest expenses declined
from about $886,000 for the three months ended March 31, 2002 to $9,000 for the
corresponding period in 2003. This is attributed to both the lower amount of
outstanding debt obligations as well as the effects of SFAS 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings", that required the
recording of the debt issued pursuant to the restructuring to include
obligations for future cash payments of both principal and interest to the
extent that the total of such cash flows did not exceed the principal amount of
the debt cancelled. Accordingly, all payments of principal and interest made
toward the surviving restructured debt obligations are applied to reduce the
total recorded debt, rather than as interest expense.
Income Taxes
No provision for income taxes is reflected in either period as a result of
the Company's net losses in both periods.
Liquidity and Capital Resources
Our financial position, liquidity and available cash balances are impacted
by our operating margins, the timing of our billings to customers and related
collection of those billings, our disbursements to vendors and payments to our
employees. The substantial majority of our customers are billed monthly in
advance of their service period, and the number of days sales in average
receivables outstanding was 43 as measured as of and for the period ended March
31, 2003. We have customary trade terms with most of our vendors, and we
typically pay our telecommunications services providers and tower site landlords
on a monthly basis. Fixed and hourly employee compensation is paid twice each
month and commissions are paid monthly in arrears. Aquis' operating expenditures
for employment and occupancy costs have been subject to normal inflationary
pressures. Systems equipment and paging device costs have trended downward in
recent years, allowing Aquis to offer lower unit prices to customers who wish to
purchase their units.
Of the contractual financial obligations that are outstanding and that
were involved in the Restructuring that we completed in 2002, only the Tranche A
note due to FINOVA Capital Corporation in the original principal amount of
$7,000,000 requires current debt service payments. The interest rate for this
Tranche A note is set at the greater of the base rate plus 3.5% or a minimum of
9% and payment requirements include interest payments due quarterly in arrears
that are expected to average about $155,000 during each quarter of 2003. We paid
our lender the interest payments that were due in January and April 2003. We
also made a mandatory prepayment of principal in the amount of $250,000 in
January 2003, and another such payment is due annually each January until the
scheduled balloon payment becomes due in June 2006. This debt may also require
us to make additional principal repayments in amounts determined by excess cash
flows as defined in the underlying loan agreements. No cash payments are due in
the normal course of business under the Tranche B note due to FINOVA, the
Unsecured Promissory note due to AMRO, or for dividends or redemption payments
due to our Redeemable Preferred stockholders at any time prior to the maturity
date of the Tranche A note.
Other significant commitments include those related to our leases for
tower sites and office locations. For 2003, aggregate future minimum rental
commitments under non-cancelable operating leases were estimated at
approximately $2,025,000. We are continuing to consolidate our paging networks
with the intent to reduce both our tower lease costs and our telecommunications
expenses. For 2003, our business plan includes the decommissioning of thirty to
forty targeted underutilized tower sites. Current business plans provide for
capital expenditures of approximately $1 million annually for the next three
years. These expenditures are planned for subscriber paging devices, network
infrastructure and information systems upgrades, and will be dependent on actual
subscriber growth, actual demand for paging device features and actual demand in
the marketplace for network enhancements. None of these planned capital
expenditures are subject to minimum purchase agreements with paging device
suppliers or other vendors.
Our operations provided about $24,000 of net cash during the quarter ended
March 31, 2003 compared to the use of about $37,000 of net cash during the three
months ended March 31, 2002. Excluding the effects of changes in our working
capital accounts, operations produced cash totaling $365,000 during the current
three month period compared to the use of $136,000 during the three-month period
ended March 31, 2002. Uncertainty among our vendors caused by the publicized
bankruptcy filings of many of our major competitors, as well as our own
restructuring efforts, resulted in continued pressure from our vendors to keep
our accounts with them current and the use of $86,000 to reduce our current
payables. In addition, as the result of our restructuring, no interest accruals
were required on our debts to FINOVA or AMRO during 2003, in contrast to the
large interest costs of the three months ended March 31, 2002.
-12-
Cash flows from investing activities during the first three months of 2003
declined from those of the period ended March 31, 2002. During the three months
ended March 31, 2002 we realized proceeds from sales of assets totaling
$1,064,000, primarily provided by the release from escrow of the proceeds from
our sale of the Midwest paging assets. During the three months ended March 31,
2003, proceeds of $157,000 were derived primarily from the sales of excess
paging equipment that became underutilized as we consolidated our paging
networks.
Financing activities consumed $421,000 of cash during the three months
ended March 31, 2003. This total included all payments made to FINOVA totaling
$413,000 required under our loan agreement with them, as well as other required
payments under other installment obligations for pagers and vehicles. During the
same period in 2002, $269,000 of cash was used, primarily to pay fees incurred
with our investment banker and other consultants in connection with our pending
restructuring.
Our business plans for 2003 and beyond require capital to be available to
service our debt, to purchase paging equipment for new and existing subscribers,
and to optimize, operate and maintain our communications and information
services networks. We expect to be able to service our debt and fund our capital
requirements with cash provided by operations, proceeds from sales of
communications equipment that becomes available as we continue to consolidate
our paging networks, and from existing working capital balances. Our principal
source of liquidity at March 31, 2003 was $999,000 of cash and cash equivalents.
At that date, we had a working capital deficit totaling approximately $1,016,000
and we have experienced operating losses since our inception, although we have
steadily been producing EBITDA since then. Audit opinions as to the results
reported during our last three fiscal years include going concern qualifications
that suggest that we may be unable to meet obligations as they become due in the
normal course of business. Our common stock was de-listed from the NASDAQ
SmallCap Market in October 2000, and this de-listing technically and
functionally terminated our equity line of credit provided under a Common Stock
Purchase Agreement with Coxton Limited. Prior to modifications effective on
March 29, 2003 to two financial covenants relating to minimum required operating
cash flow levels specified in our Second Amended and Restated Loan Agreement
with FINOVA dated August 12, 2002, we were in default of that Agreement with
FINOVA. These factors have prevented us, and continue to prevent us, from
obtaining any additional significant external funding. Accordingly, we can
provide no assurance that we will be able to meet our reduced debt service
requirements, that we will be able to acquire sufficient pagers to fully meet
demand for either new business or retention of existing subscribers who require
replacement units from time to time, that we will be able to optimize our
communications network, or to invest in marketing initiatives for paging or
other communications services. We believe that our business plan as a niche
one-way paging carrier in an industry that is moving toward other communications
services is sound, yet our ability to execute this plan is heavily dependent on
the factors noted above which are largely beyond our unilateral control.
In consideration of our ongoing losses, limited liquid resources, and the
ongoing lack of available additional funding, we can provide no assurance that
the terms and requirements of our financial restructuring, and future amendments
that may be agreed between the parties, if any, will be sufficient to the extent
necessary to execute our current business plan or ensure our ability to continue
as a going concern. Our ability to continue as a going concern and execute our
one-way paging business plan is dependent on industry and technological factors
that are beyond our unilateral control. That ability to continue operating is
heavily dependent on our ongoing ability to generate sufficient cash flows to
service our debt and pay our vendors in a timely manner, to continue to be
provided with uninterrupted supplies and services from our vendors, to retain
employees and to continue to reduce operating expenses and limit capital
expenditures. Although the recent completion of the realignment of our debt and
equity structure provides Aquis and its primary lender/equity holders with an
attractive opportunity to maximize the return on invested funds, it does not
guarantee future profitability or cash flows sufficient to ensure our ability to
carry out our business plan.
Seasonality
Retail sales were subject to seasonal fluctuations that affect retail
sales generally. Otherwise, the results were generally not significantly
affected by seasonal factors.
-13-
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
Our $7,000,000 Senior Secured Promissory Note carries a floating interest
rate that is 3.5% over the Citibank Corporate Base Rate, subject to a minimum of
9%. As of March 31, 2003, the effective rate on this debt was that 9% minimum.
Based on the outstanding principal balance of $6,750,000 at that date, an
interest rate increase or decrease of 2% over the minimum rate would result in a
change in annual interest expenses of about $135,000. All other debt obligations
at March 31, 2003 provide fixed interest rates. Aquis has not, and does not plan
to, enter into any derivative financial instruments for trading or speculative
purposes. As of March 31, 2003, Aquis had no other significant material exposure
to market risk.
Item 4 - Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures. Within 90 days before the
filing date of this quarterly report (the "Evaluation Date") the Company
carried out an evaluation, under the supervision and with the participation
of the Company's management, including, its Chief Executive Officer and its
Chief Financial Officer, of the effectiveness of the design and operation of
the Company's "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c)). Based upon that
evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, the Company's disclosure
controls and procedures were effective to ensure that material information
relating to the Company is recorded, processed, summarized and reported in a
timely manner.
b) Changes in Internal Controls. The Company has reviewed its internal controls
and there have been no significant changes in such internal controls or, to
the Company's knowledge, in other factors that could significantly affect
such controls, subsequent to the Evaluation Date.
-14-
Part II - Other Information
Item 1 Legal Proceedings.
There were no significant legal proceedings involving the Company at May 14,
2003.
Item 2 Changes in Securities and Use of Proceeds. None.
Item 3 Defaults Upon Senior Securities.
Effective March 29, 2003, Aquis received approval from FINOVA of its earlier
request to modify two of its financial covenants relating to minimum required
operating cash flow levels specified in its Second Amended and Restated Loan
Agreement with FINOVA dated August 12, 2002 (the "Loan Agreement"). Prior to
FINOVA's agreement to grant those modifications, Aquis was in default of that
Loan Agreement. The modifications included a change in the maximum permitted
senior leverage ratio for 2003 from 2.35 to 1as originally specified by Section
7.19 of the August 2002 Loan Agreement, to 4.60 to 1 for that time period. Also
included was a change in minimum operating cash flows required for each quarter
by Section 7.20 of the Loan Agreement to more closely match the expected
capabilities of the Company's 2003 business plan. Additional details are
included in the First Amendment to the Second Amended and Restated Loan
Agreement that is filed as an exhibit to this Form 10Q. All payments of interest
and principal due during 2003, to the date of this filing, have been made as
scheduled.
Item 4 Submission of Matters to a Vote of Security Holders. None
Item 5 Other Information. None
-15-
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No.:
- ----------------- ------------------------------------------------------------------------------------------------------------------
3.1 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (incorporated by reference
to Aquis' Proxy Statement dated March 11, 1999)
- ----------------- ------------------------------------------------------------------------------------------------------------------
3.2 Bylaws of the Registrant (incorporated by reference to Aquis' Registration Statement on Form SB-2, Registration
No. 33-76744)
- ----------------- ------------------------------------------------------------------------------------------------------------------
3.3 Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Aquis Communications Group,
Inc. dated as of December 11, 2002 (incorporated by reference to Aquis' Annual Report on Form 10-K for the year
ended December 31, 2002, filed with the Commission as Exhibit 3.3)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.1 Form of Common Stock Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.2 Form of Warrant Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.3 Certificate of Designation, Preferences and Rights of 7 1/2% Redeemable Preferred Stock of Aquis Communications
Group, Inc. (incorporated by reference to Aquis' Current Report on Form 8-K dated February 15, 2000)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.4 Form of Series A Common Stock Purchase Warrant of Aquis Communications Group, Inc. issued to Desert
Communications I, LLC (incorporated by reference to Aquis' Annual Report on Form 10-K for the year ended
December 31, 2002, filed with the Commission as Exhibit 4.4)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.5 Form of Series B Common Stock Purchase Warrant of Aquis Communications Group, Inc. issued to Desert
Communications I, LLC (incorporated by reference to Aquis' Annual Report on Form 10-K for the year ended
December 31, 2002, filed with the Commission as Exhibit 4.5)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.6 Form of Common Stock Purchase Warrant of Aquis Communications Group, Inc. issued to AMRO International, S.A.
(incorporated by reference to Aquis' Annual Report on Form 10-K for the year ended December 31, 2002, filed with
the Commission as Exhibit 4.6)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.7 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock and Series B
Redeemable Preferred Stock of Aquis Communications Group, Inc. dated August 6, 2002 (incorporated by reference
to Aquis' Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Commission as
Exhibit 4.7)
- ----------------- ------------------------------------------------------------------------------------------------------------------
10.17 First Amendment to Second Amended and Restated Loan Agreement effective March 29, 2003 by and among Aquis
Wireless Communications, Inc. and FINOVA Capital Corporation (filed herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
(b) Reports on Form 8-K: none
-16-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized:
Name Title Date
---- ----- ----
/s/ Alex E. Stillwell
- --------------------------
Alex E. Stillwell Chief Executive Officer and Director May 14, 2003
/s/ D. Brian Plunkett
- --------------------------
D. Brian Plunkett Chief Financial Officer May 14, 2003
-17-
CERTIFICATIONS
I, Alex E. Stillwell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Aquis Communications
Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditor and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003
/s/ Alex E. Stillwell
------------------------------
Name: Alex E. Stillwell
Title: Chief Executive Officer
-18-
CERTIFICATIONS
I, D. Brian Plunkett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Aquis Communications
Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditor and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003
/s/ D. Brian Plunkett
------------------------------
Name: D. Brian Plunkett
Title: Chief Financial Officer
-19-
Exhibit Index
Exhibit Number
- --------------
(Referenced to
Item 601 of
Regulation S-K) Description
-------------
- ----------------- ------------------------------------------------------------------------------------------------------------------
3.1 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (incorporated by reference
to Aquis' Proxy Statement dated March 11, 1999)
- ----------------- ------------------------------------------------------------------------------------------------------------------
3.2 Bylaws of the Registrant (incorporated by reference to Aquis' Registration Statement on Form SB-2, Registration
No. 33-76744)
- ----------------- ------------------------------------------------------------------------------------------------------------------
3.3 Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Aquis Communications Group,
Inc. dated as of December 11, 2002 (incorporated by reference to Aquis' Annual Report on Form 10-K for the year
ended December 31, 2002, filed with the Commission as Exhibit 3.3)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.1 Form of Common Stock Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.2 Form of Warrant Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.3 Certificate of Designation, Preferences and Rights of 7 1/2% Redeemable Preferred Stock of Aquis Communications
Group, Inc. (incorporated by reference to Aquis' Current Report on Form 8-K dated February 15, 2000)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.4 Form of Series A Common Stock Purchase Warrant of Aquis Communications Group, Inc. issued to Desert
Communications I, LLC (incorporated by reference to Aquis' Annual Report on Form 10-K for the year ended
December 31, 2002, filed with the Commission as Exhibit 4.4)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.5 Form of Series B Common Stock Purchase Warrant of Aquis Communications Group, Inc. issued to Desert
Communications I, LLC (incorporated by reference to Aquis' Annual Report on Form 10-K for the year ended
December 31, 2002, filed with the Commission as Exhibit 4.5)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.6 Form of Common Stock Purchase Warrant of Aquis Communications Group, Inc. issued to AMRO International, S.A.
(incorporated by reference to Aquis' Annual Report on Form 10-K for the year ended December 31, 2002, filed with
the Commission as Exhibit 4.6)
- ----------------- ------------------------------------------------------------------------------------------------------------------
4.7 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock and Series B
Redeemable Preferred Stock of Aquis Communications Group, Inc. dated August 6, 2002 (incorporated by reference
to Aquis' Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Commission as
Exhibit 4.7)
- ----------------- ------------------------------------------------------------------------------------------------------------------
10.17 First Amendment to Second Amended and Restated Loan Agreement effective March 29, 2003 by and among Aquis
Wireless Communications, Inc. and FINOVA Capital Corporation (filed herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
-20-