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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 June 30, 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.
--------------------------------------------------
(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
- ---------------------------------------------- ------------------------------
(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 August 1, 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 June 30, 2003 and December 31, 2002 .............................................. 3
Consolidated Statements of Operations for the Three and Six Month Periods ended June 30, 2003 and 2002............ 4
Consolidated Statements of Cash Flows for the Six Month Periods ended June 30, 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.................................................... 15
Item 4 - Controls and Procedures........................................................................................ 15
Part II Other Information:
Item 1 - Legal Proceedings.............................................................................................. 16
Item 2 - Changes in Securities and Use of Proceeds...................................................................... 16
Item 3 - Default Upon Senior Securities................................................................................. 16
Item 4 - Submission of Matters to a Vote of Security Holders............................................................ 16
Item 5 - Other Information.............................................................................................. 16
Item 6 - Exhibits and Reports on Form 8-K............................................................................... 16
Signatures.............................................................................................................. 17
-2-
Part I - Financial Information
Item 1 - Financial Statements
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
June 30, December 31,
2003 2002
-------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents....................................................................... $ 1,184 $ 1,259
Accounts receivable (net of allowances of $310 and $686, respectively).......................... 368 610
Inventory, net.................................................................................. 429 356
Prepaid expenses and other current assets....................................................... 296 196
--------------- --------------
Total current assets........................................................................ 2,373 2,421
Property and equipment, net....................................................................... 2,885 3,392
FCC licenses and State certificates, net.......................................................... 1,574 1,759
Deferred charges and other assets................................................................. 42 55
--------------- --------------
Total assets.............................................................................. $ 6,874 $ 7,627
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt............................................................ $ 898 $ 912
Accounts payable and accrued expenses........................................................... 1,756 1,811
Deferred revenue................................................................................ 287 331
Customer deposits............................................................................... 191 211
-------------- --------------
Total current liabilities................................................................... 3,132 3,265
Long term debt.................................................................................... 13,153 13,708
-------------- --------------
Total liabilities................................................................................. 16,285 16,973
-------------- --------------
Commitments and contingencies
Series B Redeemable 10% Preferred Stock, $0.01 par value, 301 shares authorized,
300.01 shares issued and outstanding at June 30, 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 June 30, 2003 and December 31, 2002............................................ 184 184
Additional paid-in capital...................................................................... 17,883 17,883
Accumulated deficit............................................................................. (28,018) (27,953)
-------------- --------------
Net stockholders' equity........................................................................ (9,951) (9,886)
-------------- --------------
Total liabilities and stockholders' equity................................................ $ 6,874 $ 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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2003 2002 2003 2002
---------------- ----------------- --------------- ----------------
Revenues:
Paging services, rent and maintenance................... $ 2,900 $ 3,393 $ 5,923 $ 7,076
Equipment sales......................................... 156 68 221 130
--------------- ---------------- -------------- ---------------
Total revenues..................................... 3,056 3,461 6,144 7,206
--------------- ---------------- -------------- ---------------
Operating expenses:
Cost of paging services excluding depreciation.......... 1,323 1,596 2,752 3,235
Cost of equipment sold excluding depreciation........... 29 31 49 61
Selling and marketing................................... 539 369 938 776
General and administrative.............................. 862 912 1,747 1,867
Depreciation and amortization........................... 494 603 922 1,323
Provision for (recovery of) doubtful account expenses... (274) 221 (119) 438
--------------- ---------------- -------------- ---------------
Total operating expenses........................... 2,973 3,732 6,289 7,700
--------------- ---------------- -------------- ---------------
Operating income (loss)................................... 83 (271) (145) (494)
Interest expense, net..................................... (30) (908) (27) (1,765)
Gain (loss) on sale of assets............................. (8) (25) 107 (73)
--------------- ---------------- -------------- ---------------
Net income (loss)......................................... 45 (1,204) (65) (2,332)
Preferred stock dividends................................. _ (28) _ (56)
--------------- --------------- -------------- --------------
Income (loss) attributable to common stockholders......... $ 45 $ (1,232) $ (65) $ (2,388)
=============== ================ ============== ===============
NET LOSS PER COMMON SHARE:
Basic and diluted....................................... $ (0.000) $(0.068) $(0.001) $(0.132)
Weighted average common shares outstanding................ 179,611,939 18,158,767 179,611,939 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)
Six Months Ended June 30,
2003 2002
-------------- ------------
Cash flows from operating activities:
Net loss...................................................................... $ (65) $ (2,332)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................. 922 1,323
Provision for (recovery of) doubtful accounts................................. (119) 438
Capitalized interest.......................................................... 15 15
(Gain)loss on sale of property and equipment................................. (107) 73
Changes in assets and liabilities, net of business acquisitions:
Accounts receivable........................................................ 361 300
Inventory.................................................................. (376) (608)
Prepaid expenses and other current assets.................................. (139) (262)
Accounts payable and accrued expenses...................................... (55) 1,240
Deferred revenues and customer deposits.................................... (64) (89)
------------- -----------
Net cash provided by operating activities..................................... 373 98
------------- -----------
Cash flows from investing activities:
Acquisition of property, equipment and intangible assets...................... (48) (371)
Sale of property and equipment................................................ 184 1,176
------------- -----------
Net cash provided by investing activities..................................... 136 805
------------- -----------
Cash flows from financing activities:
Payments made on long term obligations........................................ (584) (14)
Deferred financing and stock registration costs............................... --- (695)
------------- -----------
Net cash used by financing activities......................................... (584) (709)
------------- -----------
Net increase (decrease) in cash and cash equivalents............................ (75) 194
Cash and cash equivalents - beginning of period................................. 1,259 1,084
------------- -----------
Cash and cash equivalents - end of period....................................... $ 1,184 $ 1,278
============= ===========
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
June 30, 2003 and December 31, 2002, and the consolidated results of operations
and the related consolidated cash flows for the three and six month periods
ended June 30, 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 10-K 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
10-K 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. Effective March 29, 2003, Aquis 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 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 June
30, 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
expenses for the three and six-month periods ended June 30, 2003 have declined
from earlier comparative periods accordingly. At June 30, 2003, Aquis' net
intangible assets consist primarily of its FCC licenses and its State
certificates.
4. DEFERRED CHARGES:
The Company deferred approximately $623 of costs during the six months
ended June 30, 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") as modified by the
First Amendment to the Second Amended and Restated Loan Agreement effective
March 29, 2003, Aquis is subject to specified financial performance and
expenditure-limiting covenants. Those March 2003 modifications primarily
effected two financial covenants relating to minimum required operating cash
flow levels specified in the Loan Agreement. Prior to those modifications, Aquis
was in default of that Agreement with FINOVA.
As a result of continued weak demand for paging and related messaging
services, related pricing pressures and the slower-than-expected growth of its
sales force and development of its marketing strategies and tools, the declining
trend of Aquis' subscriber base and revenue targets has not been reversed.
Further, neither of these two key indicators has met targeted results
anticipated in initial business plans for the periods ended June 30, 2003.
Accordingly, Aquis' business plans are undergoing modifications to more closely
reflect continued weak demand and slower reclamation of the customer base and to
reflect appropriate strategic responses. For the near-term, management expects
to be able to meet debt service requirements with cash provided by operations,
and to meet Aquis' debt covenants. However, should Aquis be unable to meet these
requirements or to secure additional loan modifications as may be needed, the
Company could again fail to meet the requirements of its Loan Agreement, as
amended, and FINOVA could, in its sole discretion, make demand for immediate
payment of all outstanding obligations. 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 FINOVA.
6. NET INCOME OR 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 in periods resulting in net losses 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:
June 30,
2003 2002
--------------- --------------
Cash paid for interest.................. $ 36 $ 162
Cash paid for taxes..................... $ _ $ _
In addition to the interest paid during the six months ended June 30, 2003
that is shown above, Aquis also paid $565 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 $565 to FINOVA during this period included amounts characterized
as note principal totaling $250, and interest-based obligations of $315.
Subsequent to the balance sheet date, the payment due in July, 2003 of $154 was
also paid to FINOVA.
-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. These
forward-looking statements are subject to risks and uncertainties including
those related to availability of cash from operations when needed in sufficient
amounts, availability of credit at acceptable terms as may be required, reliance
on other messaging companies that themselves have experienced significant
financial challenges, price and technological competition, satellite failures,
dependence on key management personnel, regulatory changes, litigation and other
factors that may effect the implementation of our business plans. 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.
Overview
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.
We have adapted our business plans and strategies to the declining paging
market and our own limited resources. 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 used the proceeds to pay down creditors and for other
operating and working capital purposes. In August 2002, we completed the
restructuring of our debt and equity (the "Restructuring"). Current plans
include continuing consolidation of our network frequencies and supporting
infrastructure, acquisition of reseller customer bases without significant cash
outlays when advantageous to both our resellers and our own objectives,
continued growth of our sales organization, continued right-sizing of our
internal support and administrative organizations, and other cost-containment or
reduction initiatives. We continue efforts to best tailor our plans to meet the
requirements of our senior lender, other creditors and the markets in which we
operate. However, our lack of any historical operating profitability and
resulting lack of any new available sources of external third party funding have
contributed to limit our ability to grow this business and execute prior
business plans to the extent or within the timeframes planned.
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, and
continuing working capital deficits. 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.
-9-
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, and which resulted in a change in control of Aquis. 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, 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 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.
Accordingly, all payments of principal and interest made toward the surviving
restructured debt obligations have been 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. This restructuring improved our financial
condition and reduced our debt service requirements, thereby allowing free cash
flows to be reinvested in our business. However, significant financial risks
continue, and in February 2003 we requested further modifications to our
restructured financial covenants with FINOVA. Effective March 29, 2003, we were
granted 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. Prior to those modifications,
we were again in default of our loan agreement with FINOVA.
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 and modified our business plans and sales strategies to respond to
the challenges of our industry, our service markets and our financial condition.
Continued weak demand for paging and related messaging services, related pricing
pressures and the slower-than-expected growth of our sales force and development
of our marketing strategies and tools have combined to extend the declining
trend of our subscriber base and revenue targets. Neither of these two key
indicators has met targeted results anticipated in initial business plans for
the periods ended June 30, 2003. Accordingly, 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").
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.
-10-
RESULTS OF OPERATIONS FOR THE PERIODS ENDED JUNE 30, 2003 AND 2002
Units in Service
Units in service totaled 144,000 and 189,000 at June 30, 2003 and 2002,
respectively. During this period, approximately 31,000 net units in service with
resellers were disconnected. Verizon Wireless, one of our largest resellers,
reduced its units in service with us from about 21,000 units to less than 12,000
units as the industry contracted. In addition, our low-cost, low-margin TNPP
units declined similarly, from 22,000 units to approximately 13,000. Our overall
average monthly churn rates during the six months ended June 30, 2003 and 2002,
were 4.3% and 5.2%, respectively. These rates were influenced by industry trends
in a nationwide declining paging market, our own limited ability to procure and
market paging units, and our ongoing efforts to consolidate our paging networks.
Revenues
Service revenues for the six months ended June 30, 2003 and 2002, were
$5,923,000 and $7,076,000, respectively, a decrease of approximately $1,153,000
or about 16.3%. For the three months ended June 30, 2003 and 2002, respectively,
the decline totaled approximately $493,000, or 14.5%. Continuing churn described
above, and ongoing industry-wide pricing pressures were factors contributing to
this result. Declines were experienced in both our reseller business and our
direct or end-user business. Reseller units in service during the three months
ended June 30, 2003 and 2002, respectively, made up approximately 45% and 52% of
the total units serviced and the resulting revenue decline accounted for about
40% of the total revenue decrease of $493,000. 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 end-user business.
Revenues from sales of paging equipment increased to $221,000 for the six
months ended June 30, 2003 from $130,000 for the same period in 2002.
Approximately $110,000 of revenue was recorded during the current quarter as a
result of the recognition of previously-deferred charges to former subscribers
for fully depreciated leased units that were not returned to us upon termination
of service. Excluding these units, Aquis continued its strategy of marketing
lower-cost units at reduced sales prices in 2003, selling almost 600 more units
during the three months ended June 30, 2003 at lower average pricing than during
the second quarter of 2002. During the six-month periods, nearly 900 more units
were sold currently at lower average unit sales prices under this strategy.
Cost of Equipment Sales
The cost of equipment sold during the periods ended June 30, 2003 and
2002, respectively, was $49,000 and $61,000 during the six-month periods and
$29,000 and $31,000 during the three-month periods. The previously described
low-cost pager strategy and continued sales of some pre-owned units combined to
produce these results.
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 $3,235,000 for the six months ended
June 30, 2002 to $2,752,000 during the corresponding period in 2003. Costs of
third party paging carriers and dispatch service providers declined
approximately 36.7%, or $312,000, to $537,000 from levels incurred during the
six-month period ended June 30, 2002. During the three months ended June 30,
2003, this third party service operating cost was reduced by approximately 33.5%
compared to the corresponding year-earlier period. These cost reductions were
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 internal technical operating costs by about $286,000 during the
six-month periods through our continuing efforts to consolidate our paging
networks. Such consolidation provides cost savings resulting from 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.
-11-
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
the current six-month period increased, reaching $938,000 during 2003 from
$776,000 during 2002, respectively. During the three-month periods, these
expenses increased from $369,000 to $539,000. During 2003, we invested in the
development of our sales efforts by re-examining and re-designing our marketing
plan to further define and target our key potential target markets during the
first quarter of 2003 and by hiring additional sales representatives. We also
incurred approximately $83,000 of expenses during the quarter ended June 30,
2003 in connection with the conclusion of employment of our Vice-President of
Sales. Partially offsetting these added expenses were lower commission expenses
resulting from lower overall gross subscriber connection volume during the
periods in 2003.
General and Administrative
General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. These costs decreased
6.4% or $120,000, from $1,867,000 during the six months ended June 30, 2002 to
$1,747,000 for the corresponding period of 2003. Similarly, a 5.5% expense
reduction was realized during the three month period ended June 30, 2003
compared to the corresponding period in 2002. Continued customer support and
service staff reductions, elimination of other administrative staff positions
along with lower costs to bill and distribute to a smaller customer base
combined to produce cost savings of about $215,000 during the six month
comparative periods. These savings were partially offset by increased fees to
Board members and other professionals for the strategic oversight of our
business plans and operations.
Depreciation and Amortization
Depreciation and amortization decreased to $922,000 for the six months
ended June 30, 2003 from $1,323,000 during the prior year six-month period.
During the three-month periods ended June 30, 2003 and 2002, respectively, such
expenses totaled $494,000 and $603,000. Amortization of intangible assets
decreased 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 resulting
primarily from the disposal of excess transmitters and terminals that became
available as we consolidated our paging networks.
Provision for (Recovery of) Doubtful Accounts
Estimates used in determining the allowance for doubtful accounts are
based on several factors, including receivable aging statistics and related
historical trends, historical collections experience, write-off history, and
other information that may be available and specific to any major account
balances. Although write-offs of subscriber account balances have historically
fallen within our estimates, we must adjust these estimates when actual
collections or other circumstances change and support such adjustments. During
2003, we settled and collected certain charges for services that had aged beyond
typical aging standards. As a result, previously estimated collections
allowances were proven to be in excess of actual collections allowances
required. Accordingly, during the three months ended June 30, 2003, we
recognized the reversal of these excess collections allowances, resulting in the
recoveries reported in our statement of operations for the periods ended
June 30, 2003.
Interest Expense
As a result of the August 2002 restructuring of our debt and equity,
interest expense was substantially eliminated. Gross interest expenses declined
to $51,000 for the six months ended June 30, 2003 from $1,827,000 for the
comparable period of 2002, and to approximately $42,000 for the three months
ended June 30, 2003 from about $941,000 for the three months ended June 30,
2002. This is primarily attributed to 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. During 2003, $32,500 was
paid to FINOVA in connection with the modifications of certain financial
covenants specified in our loan agreements with them.
Income Taxes
No provision for income taxes is reflected in either period as a result of
the Company's net losses in the periods presented and expected annual loss for
the year ended December 31, 2003.
-12-
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 gross
billed trade receivables outstanding was 34 as measured as of and for the period
ended June 30, 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, April and July 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. Our business plan also includes the decommissioning of thirty to forty
targeted underutilized tower sites. In addition, our plans provide for capital
expenditures of approximately $1 million annually for subscriber paging devices,
network infrastructure and information systems upgrades. However, the actual
amount of such expenditures will be dependent on actual subscriber levels,
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 approximately $373,000 of net cash during the six
months ended June 30, 2003 compared to approximately $98,000 of net cash
provided during the same period in 2002. Excluding the effects of changes in our
working capital accounts, operations produced cash totaling $646,000 during the
current six month period compared to the use of $483,000 during the six month
period ended June 30, 2002. Our vendors continued pressure to keep our accounts
with them current and we used $55,000 to reduce our liabilities to them during
the six months ended June 30, 2003. 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 approximately $1,665,000
accrued during the six months ended June 30, 2002.
Cash flows from investing activities during the first six months of 2003
declined from those of the six-month period ended June 30, 2002. During the six
months ended in 2002, we realized proceeds from sales of assets totaling
$1,176,000, primarily provided by the release from escrow of the proceeds from
our sale of the Midwest paging assets. During the six months ended June 30,
2003, proceeds of $184,000 were derived primarily from the sales of excess
paging equipment that became underutilized as we consolidated our paging
networks.
Financing activities consumed $584,000 of cash during the six months ended
June 30, 2003 and consisted primarily of all debt service payments made to
FINOVA totaling $565,000 required under our loan agreement with them. We also
made all other required payments under other installment obligations for pagers
and vehicles. During the same period in 2002, $709,000 of cash was used,
primarily to pay fees incurred with our investment banker and other consultants
in connection with our then-pending financial restructuring.
-13-
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 June 30, 2003 was $1,184,000 of cash and cash
equivalents. At that date, we had a working capital deficit totaling
approximately $759,000. Although we have experienced operating losses since our
inception, 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, that we will be able to optimize our communications network,
or can continue 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 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
provided 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.
-14-
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 June 30, 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 June 30, 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 June 30, 2003, Aquis had no other significant material exposure
to market risk.
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As of the end of the period
covered by 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.
-15-
Part II - Other Information
Item 1 Legal Proceedings.
There were no significant legal proceedings involving the Company at August 14,
2003.
Item 2 Changes in Securities and Use of Proceeds. None.
Item 3 Defaults Upon Senior Securities. None.
Item 4 Submission of Matters to a Vote of Security Holders. None
Item 5 Other Information. None
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)
- ----------------- ------------------------------------------------------------------------------------------------------------------
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
32 Certification of Chief Executive Officer and 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 August 14, 2003
/s/ D. Brian Plunkett
- --------------------------
D. Brian Plunkett Chief Financial Officer August 14, 2003
-17-
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)
- ----------------- ------------------------------------------------------------------------------------------------------------------
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
- ----------------- ------------------------------------------------------------------------------------------------------------------
32 Certification of Chief Executive Officer and 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)
- ----------------- ------------------------------------------------------------------------------------------------------------------
-18-