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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 September 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 November 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 September 30, 2003 and December 31, 2002 ........................................... 3
Consolidated Statements of Operations for the Three and Nine Month Periods ended September 30, 2003 and 2002....... 4
Consolidated Statements of Cash Flows for the Nine Month Periods ended September 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)
September 30, December 31,
2003 2002
---------------- ---------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ................................................................. $ 1,366 $ 1,259
Accounts receivable (net of allowances of $200 and $686, respectively) .................... 320 610
Inventory, net ............................................................................ 304 356
Prepaid expenses and other current assets ................................................. 362 196
-------- --------
Total current assets .................................................................. 2,352 2,421
Property and equipment, net ................................................................. 2,539 3,392
FCC licenses and State certificates, net .................................................... 1,519 1,759
Deferred charges and other assets ........................................................... 55 55
-------- --------
Total assets ........................................................................ $ 6,465 $ 7,627
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt ...................................................... $ 890 $ 912
Accounts payable and accrued expenses ..................................................... 1,665 1,811
Deferred revenue .......................................................................... 288 331
Customer deposits ......................................................................... 182 211
-------- --------
Total current liabilities ............................................................. 3,025 3,265
Long term debt .............................................................................. 13,031 13,708
-------- --------
Total liabilities ........................................................................... 16,056 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 September 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 September 30, 2003 and December 31, 2002 ................................. 184 184
Additional paid-in capital ................................................................ 17,883 17,883
Accumulated deficit ....................................................................... (28,198) (27,953)
-------- --------
Net stockholders' equity .................................................................. (10,131) (9,886)
-------- --------
Total liabilities and stockholders' equity .......................................... $ 6,465 $ 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 Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
Revenues:
Wireless messaging services, rent and maintenance ......... $ 2,660 $ 3,257 $ 8,583 $ 10,333
Equipment sales ........................................... 139 69 360 199
------------- ------------- ------------- -------------
Total revenues ....................................... 2,799 3,326 8,943 10,532
------------- ------------- ------------- -------------
Operating expenses:
Cost of wireless messaging services excluding depreciation 1,204 1,570 3,956 4,805
Cost of equipment sold excluding depreciation ............. 107 29 156 90
Selling and marketing ..................................... 390 377 1,328 1,153
General and administrative ................................ 835 866 2,582 2,735
Depreciation and amortization ............................. 412 580 1,334 1,903
Provision for (recovery of) doubtful account expenses ..... (48) 207 (167) 645
Recovery of communications costs .......................... _ (222) _ (222)
------------- ------------- ------------- -------------
Total operating expenses ............................. 2,900 3,407 9,189 11,109
------------- ------------- ------------- -------------
Operating income (loss) ..................................... (101) (81) (246) (577)
Interest expense, net ....................................... _ (730) (27) (2,493)
Gain (loss) on sale of assets ............................... (79) (9) 28 (82)
------------- ------------- ------------- -------------
Income (loss) before extraordinary item ..................... (180) (820) (245) (3,152)
Extraordinary item: gain on troubled debt restructuring ..... _ 22,071 _ 22,071
------------- ------------- ------------- -------------
Net income (loss) ........................................... (180) 21,251 (245) 18,919
Preferred stock dividends ................................... _ (13) _ (69)
------------- ------------- ------------- -------------
Income (loss) attributable to common stockholders ........... $ (180) $ 21,238 $ (245) $ 18,850
============= ============= ============= =============
NET LOSS PER COMMON SHARE, basic and diluted:
Extraordinary item ........................................ $ _ $ 1.22 $ - $ 1.22
Attributable to common stockholders ....................... $ (0.001) $ 1.17 $ (0.001) $ 1.04
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)
Nine Months Ended September 30,
2003 2002
------------ ------------
Cash flows from operating activities:
Net loss ...................................................................... $ (245) $ 18,919
Adjustments to reconcile net loss to net cash provided by operating activities:
Gain on restructuring of debt and equity ...................................... _ (22,071)
Depreciation and amortization ................................................. 1,334 1,903
Provision for (recovery of) doubtful accounts ................................. (167) 645
Inventory valuation allowance ................................................. (83) 150
Capitalized interest .......................................................... 22 22
(Gain)loss on sale of property and equipment ................................. (28) 82
Changes in assets and liabilities, net of business acquisitions:
Accounts receivable ........................................................ 457 434
Inventory .................................................................. (374) (847)
Prepaid expenses and other current assets .................................. (110) (101)
Accounts payable and accrued expenses ...................................... (146) 1,537
Deferred revenues and customer deposits .................................... (72) (70)
-------- --------
Net cash provided by operating activities ..................................... 588 603
-------- --------
Acquisition of property, equipment and intangible assets ...................... (90) (482)
Sale of property and equipment ................................................ 357 1,234
-------- --------
Net cash provided by investing activities ..................................... 267 752
-------- --------
Cash flows from financing activities:
Payments made on long term obligations ........................................ (748) (20)
Deferred financing and stock registration costs ............................... -- (1,431)
-------- --------
Net cash used by financing activities ......................................... (748) (1,451)
-------- --------
Net increase (decrease) in cash and cash equivalents ............................ 107 (96)
Cash and cash equivalents - beginning of period ................................. 1,259 1,084
-------- --------
Cash and cash equivalents - end of period ....................................... $ 1,366 $ 988
======== ========
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, including the District of Columbia, and
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 September 30, 2003 and December 31, 2002, and the consolidated results of
operations and the related consolidated cash flows for the three and nine month
periods ended September 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, which are ongoing
through the current reporting period, 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 four of the industry's largest wireless messaging operators
have sought bankruptcy protection as a result of a shrinking market, intense
price competition and competition with other technologically advanced services,
such as cellular communications. 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 wireless messaging 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 wireless
messaging 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
September 30, 2002.
3. INTANGIBLE ASSETS:
Aquis reviews its assets for impairment annually or when events or
changes in circumstances indicate their carrying value 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 wireless messaging 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 wireless messaging market, the sale of its
Midwest wireless messaging assets, and the decision to further consolidate its
wireless messaging 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 at that time. As a result of these past write downs and certain
fully amortized customer lists, amortization expenses for the three and
nine-month periods ended September 30, 2003 have declined from earlier
comparative periods accordingly. At September 30, 2003, Aquis' net intangible
assets consist primarily of its FCC licenses and its State certificates.
4. DEFERRED CHARGES:
Through August 2002, the Company deferred all costs 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 of September 30, 2003, Aquis
has met these modified financial covenants. However, as a result of Aquis'
current financial results, recent business trends, and other factors, the
management of Aquis can give no assurance that Aquis will meet operating cash
flow covenants through December 31, 2003.
As a result of continued weak demand for wireless messaging and related
services, related pricing pressures and the slower-than-expected expansion 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, although the rate of decline has been slowed. Further, neither of
these two key indicators has met targeted results anticipated in initial
business plans for the periods ended September 30, 2003, although the Company's
cost containment and reduction efforts have enabled cash requirements to be met.
For the near-term, management expects to be able to meet debt service
requirements with cash provided by operations. Should Aquis be unable to meet
these debt service requirements or its financial covenants, if any defaults that
may arise cannot be cured timely, or if additional loan modifications cannot be
secured 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. Because Aquis'
present financial and other resources are not expected to be sufficient to
satisfy such a demand, available alternatives would be considered, 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.
-7-
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. STOCK-BASED COMPENSATION:
The Company follows the intrinsic method of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation" (FAS 123) requires use of option
valuation models that were not developed for use in valuing employee stock
options. FAS 123 permits a company to elect to follow the intrinsic method of
APB 25 rather than the alternative fair value accounting provided under FAS 123,
but requires pro forma net income and earnings per share disclosures as well as
various other disclosures not required under APB 25 for companies following APB
25. The company has adopted the disclosure provisions required under Financial
Accounting Standards Board Statement No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" (FAS 148). Under APB 25, because the
exercise price of the company's stock options equals the market price of the
underlying stock on the date of grant, no compensation expense was recognized.
Pro forma information regarding net income and earnings per share is required by
FAS 123 and FAS 148, and will be determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. No
options were granted during the nine-month periods ended September 30, 2003 or
2002. Accordingly, the pro forma net income or loss and the basic and diluted
earnings or loss per share are identical to those as actually reported for both
periods presented.
8. SUPPLEMENTAL CASH FLOW DATA:
The table below provides supplemental information to the consolidated
statements of cash flows:
September 30,
2003 2002
--------------- --------------
Cash paid for interest ...................................................... $ 38 $ 170
Cash paid for taxes ......................................................... $ _ $ _
Vehicle acquired for debt ................................................... $ 27 $ 54
Obligations cancelled in connection with restructuring ..................... $ _ $38,265
Obligations incurred in connection with restructuring ....................... $ _ $14,621
Value ascribed to stock and warrants issued in connection with restructuring $ _ $ 179
In addition to the interest of $6 and loan modification fees of $32 paid
during the nine months ended September 30, 2003 that is shown above, Aquis also
paid $718 to FINOVA that was applied against the outstanding balance of the
Tranche A note. In accordance with SFAS 15, the recorded balance of that
liability includes the note principal and related interest-based cash flow
requirements. The payments of $718 to FINOVA during this period included amounts
characterized as note principal totaling $250, and interest-based obligations of
$468. Subsequent to the balance sheet date, the payment due in October 2003 of
$155 was also paid to FINOVA.
Obligations incurred in connection with the restructuring during the
quarter ended September 30, 2002 included $4,320.7 million as required under
SFAS 15 representing capitalized interest costs. Accordingly, such liabilities
are reduced at the time related payments are made, as noted above.
-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 quarterly report on Form 10-Q contains 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 wireless messaging 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 one-way and two-way services, offer alpha dispatch, and
news and other messaging enhancements, and have begun to offer consulting and
technical services related to Internet connectivity, interactive messaging, and
data circuitry. Customers include businesses, government agencies, healthcare
organizations and providers, individual users and resellers.
We have adapted our business plans and strategies to the declining
wireless messaging 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 wireless messaging 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, the recent launch of the aforementioned new service
offerings, acquisition of reseller customer bases without significant cash
outlays when advantageous to both our resellers and our own objectives,
continued strategic development of our sales organization, continued
right-sizing of our internal support and administrative organizations, and other
cost-containment and 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 combined 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-
In 2002, as a result of these liquidity and profitability deficiencies
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. 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 continued, and in February
2003 we requested further modifications to our restructured financial covenants
with FINOVA that would enable us to return to compliance. 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. As of September
30, 2003, we met these modified financial covenants. However, as a result of
Aquis' current financial results, recent business trends, and other factors, the
management of Aquis can provide no assurance that we will meet operating cash
flow or other covenants through December 31, 2003, although we do expect to meet
our existing debt service requirements for the near-term and into 2004.
We operate in a highly competitive wireless messaging marketplace in
which at least four of the industry's largest wireless messaging 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. Throughout the periods covered by this report,
continued weak demand for wireless messaging and related messaging services,
related pricing pressures and the slower-than-expected development of our sales
force and 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 September 30, 2003. Accordingly, we can provide no
assurance that our financial restructuring, our ability to effectively gain
market share in a declining wireless messaging marketplace at sufficiently
profitable margins, our 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 our ongoing ability to limit
or reduce operating costs and capital requirements will be adequate to ensure
our 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. 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.
General
We are a Northeastern United States provider of wireless messaging and
other wireless messaging services and we market one-way wireless messaging
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 wide variety of messaging enhancements to wireless messaging
subscribers, resell two-way wireless messaging services on a small scale, and
offer consulting and technical services related to Internet connectivity,
interactive messaging, and data circuitry.
We generate a substantial majority of our revenue from fixed periodic
fees for wireless messaging 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
Wireless messaging 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 wireless messaging
companies.
-10-
RESULTS OF OPERATIONS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
Units in Service
Units in service totaled 129,000 and 178,000 at September 30, 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 20,000 units to
approximately 11,000 units as the industry continued to decline. In addition,
our low-cost, low-margin TNPP units declined similarly, from 18,000 units to
approximately 10,000. Our overall average monthly churn rates during the nine
months ended September 30, 2003 and 2002, were 4.5% and 5.2%, respectively.
These rates were influenced by industry trends in a nationwide declining
wireless messaging market, our own limited ability to procure and market
wireless messaging units, and our ongoing efforts to consolidate our wireless
messaging networks.
Revenues
Service revenues for the nine months ended September 30, 2003 and 2002,
were $8,583,000 and $10,333,000, respectively, a decrease of approximately
$1,750,000 or about 16.9%. For the three months ended September 30, 2003 and
2002, respectively, the decline totaled approximately $597,000, or 18.3%.
Continuing churn described above, and ongoing industry-wide pricing pressures
contributed 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 September 30, 2003 and 2002, respectively, made up
approximately 41% and 50% of the total units serviced and the resulting revenue
decline accounted for about 32% of the total revenue decrease of $597,000 for
the three-month periods, and approximately 37% for the nine-month periods.
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 wireless messaging equipment increased to
$360,000 for the nine months ended September 30, 2003 from $199,000 for the same
period in 2002. Approximately $110,000 of revenue was recorded during the second
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 competitively-priced lower-cost units in 2003, selling approximately
400 more units during the three months ended September 30, 2003 at higher
average pricing than during the third quarter of 2002. During the nine-month
periods, nearly 1,300 more units were sold currently at higher average unit
sales prices under this strategy.
Cost of Equipment Sales
The cost of equipment sold during the periods ended September 30, 2003
and 2002, respectively, was $156,000 and $90,000 during the nine-month periods
and $107,000 and $29,000 during the three-month periods. The previously
described low-cost pager strategy and a greater proportion of sales of brand-new
higher cost units combined to produce these results.
Cost of Wireless Messaging 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 $4,805,000 for the nine months
ended September 30, 2002 to $3,956,000 during the corresponding period in 2003.
Costs of third party wireless messaging carriers and dispatch service providers
declined approximately 38.0%, or $462,000, to $755,000 from levels incurred
during the nine-month period ended September 30, 2002. During the three months
ended September 30, 2003, this third party service operating cost was reduced by
approximately 40.8% 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 wireless
messaging networks. We also reduced internal technical operating costs by about
$387,000 during the nine-month periods through our continuing efforts to
consolidate our wireless messaging networks and reduce such operating expenses.
These cost savings resulted primarily 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 leased wireless messaging 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 nine-month period increased, reaching $1,328,000 during 2003 from
$1,153,000 during 2002, respectively. During the three-month periods, these
expenses increased from $377,000 to $390,000. 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 recruiting and 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 5.5% or $151,000, from $2,735,000 during the nine months ended
September 30, 2002 to $2,582,000 for the corresponding period of 2003.
Similarly, a 3.6% expense reduction was realized during the three month period
ended September 30, 2003 compared to the corresponding period in 2002. Continued
customer support and service staff reductions, elimination of other
administrative staff positions, lower liability insurance costs and lower costs
to bill and distribute to a smaller customer base were all reduced as our
customer base declined and our operations were correspondingly trimmed. 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 $1,334,000 for the nine
months ended September 30, 2003 from $1,903,000 during the prior year nine-month
period. During the three-month periods ended September 30, 2003 and 2002,
respectively, such expenses totaled $412,000 and $580,000. 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 wireless messaging 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- month periods ended September 30 and
June 30, 2003, we recognized the reversal of these excess collections
allowances, resulting in the recoveries reported in our statement of operations
for the three-month and nine-month periods ended September 30, 2003.
Recovery of Communications Costs
During the quarter ended September 30, 2002, we settled certain claims
under the Telecommunications Act of 1996 with two of our communications services
providers. Net of our costs to effect this settlement, we recovered $222,000.
All such claims available to us were settled during 2002 or prior.
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 $9,000 for the three months ended September 30, 2003 from $740,000 for the
comparable period of 2002, and to approximately $60,000 for the nine months
ended September 30, 2003 from about $2,567,000 for the nine months ended
September 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.
-12-
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 an expected annual loss
for the year ended December 31, 2003.
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
compensation of 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 17 as measured as of
and for the nine-month period ended September 30, 2003 (exclusive of any advance
billings for periods beginning on or after October 1, 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 wireless messaging 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, July and
October 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 wireless
messaging networks with the intent to reduce both our tower lease costs and our
telecommunications expenses. We have made substantial progress toward
decommissioning thirty to forty targeted underutilized tower sites that we
planned for 2003. In addition, our business plans provide for capital
expenditures for subscriber wireless messaging devices, network infrastructure
and information systems upgrades. However, the actual amount of such
expenditures will be dependent on actual subscriber levels, actual demand for
wireless messaging device features and actual demand in the marketplace for
network enhancements. None of these planned capital expenditures are subject to
minimum purchase agreements with wireless messaging device suppliers or other
vendors.
Our principal source of liquidity at September 30, 2003 was $1,366,000
of cash and cash equivalents. At that date, we had a working capital deficit
totaling approximately $673,000. Although we have experienced operating losses
since our inception, we have steadily been producing EBITDA, a measure of cash
flows from operations, 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. Although we met those modified covenants through September 30, 2003, we
can provide no assurance that we will meet them through December 31, 2003. 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 for
the foreseeable future, 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 continue to reduce costs
as we optimize our communications network, or that we can continue to invest in
marketing initiatives for wireless messaging or other communications services.
-13-
Our operations provided approximately $588,000 of net cash during the
nine months ended September 30, 2003 compared to approximately $603,000 of net
cash provided during the same period in 2002. Excluding the effects of changes
in our working capital accounts, operations produced cash totaling $833,000
during the current nine month period compared to the use of $350,000 during the
nine month period ended September 30, 2002. Our vendors continued pressure to
keep our accounts with them current and we used $146,000 to reduce our
liabilities to them during the nine months ended September 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 $2,400,000 accrued during the nine months ended September
30, 2002.
Cash flows from investing activities during the first nine months of
2003 declined from those of the nine-month period ended September 30, 2002.
During the nine months ended in 2002, we realized proceeds from sales of assets
totaling $1,234,000, primarily provided by the release from escrow of the
proceeds from our sale of the Midwest wireless messaging assets. During the nine
months ended September 30, 2003, proceeds of $357,000 were derived primarily
from the sales of excess wireless messaging equipment that became underutilized
as we consolidated our wireless messaging networks and our customer base
declined. Our capital investments in communications infrastructure also declined
from $482,000 in 2002 to $90,000 in 2003.
Financing activities consumed $748,000 of cash during the nine months
ended September 30, 2003 and consisted primarily of debt service payments made
to FINOVA totaling $720,000 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, $1,451,000 of cash was used,
primarily to pay fees incurred with our investment banker and other consultants
in connection with our then-pending financial restructuring.
Our business plans for 2003 and beyond require capital to be available
to service our debt, to purchase wireless messaging equipment for new and
existing subscribers, and to optimize, operate and maintain our communications
and information services networks. We intend 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 wireless messaging networks, and from existing working capital balances. We
believe that our business plan as a niche wireless messaging 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.
Our ability to continue as a going concern and execute our wireless
messaging 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. 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.
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 September 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 September 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 September 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. During the period covered
by this quarterly report, there has not occurred any change in the Company"
internal control over financial reporting that has materially affected, or is
reasonably likely to affect, the Company's internal control over financial
reporting.
-15-
Part II - Other Information
Item 1 Legal Proceedings.
There were no significant legal proceedings involving the Company at November
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.:
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3.1 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (incorporated by reference
to Aquis' Proxy Statement dated March 11, 1999)
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3.2 Bylaws of the Registrant (incorporated by reference to Aquis' Registration Statement on Form SB-2, Registration
No. 33-76744)
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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)
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4.1 Form of Common Stock Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
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4.2 Form of Warrant Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
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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)
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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)
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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)
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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)
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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)
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31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
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31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
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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)
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(b) Reports on Form 8-K: On September 2, 2003, Aquis filed a press
release dated August 27, 2003 announcing certain changes to Aquis' management
team as an exhibit to its Form 8-K.
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/ Brian M. Bobeck
- -----------------------------------------------------
Brian M. Bobeck Chief Executive Officer and Director November 14, 2003
/s/ D. Brian Plunkett
- -----------------------------------------------------
D. Brian Plunkett Chief Financial Officer November 14, 2003
Exhibit Index
Exhibit Number
- --------------
(Referenced to
Item 601 of
Regulation S-K) Description
------------
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3.1 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (incorporated by reference
to Aquis' Proxy Statement dated March 11, 1999)
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3.2 Bylaws of the Registrant (incorporated by reference to Aquis' Registration Statement on Form SB-2, Registration
No. 33-76744)
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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)
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4.1 Form of Common Stock Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
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4.2 Form of Warrant Certificate (incorporated by reference to Aquis' Registration Statement on Form SB-2,
Registration No. 33-76744)
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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)
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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)
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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)
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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)
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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)
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31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
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31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
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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)
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