U.S. Securities and Exchange Commission
                             Washington, D.C. 20549


                                  FORM 10-QSB/A


(Mark One)
[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 
     OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       or

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

              For the transition period from              to
                                            --------------  --------------

                         Commission File Number: 0-20999
                                                ---------

                         CHADMOORE WIRELESS GROUP, INC. 
                         ------------------------------
        (Exact name of small business issuer as specified in its charter)

             COLORADO                                            84-1058165
-------------------------------                             --------------------
(State of other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                               Identification No.)

             2875 EAST PATRICK LANE SUITE G, LAS VEGAS, NEVADA 89120
             -------------------------------------------------------
                    (Address of principal executive offices)

                                 (702) 740-5633
                           ---------------------------
                           (Issuer's telephone number)

              (Former name, former address and former fiscal year,
                          if changed since last report)

Check  whether  the  issuer  (1) filed all  reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter  period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [ X ] No [  ]
                                                       ---

          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                         DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required by Section
12, 13 or 15(d) of the Exchange Act after the distribution of securities under a
plan confirmed by a court. Yes [ ] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

AS OF AUGUST 10, 1998 ISSUER HAD  35,915,676  SHARES OF COMMON STOCK,  $.001 PAR
VALUE, OUTSTANDING.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):  Yes [  ] No [X]
<PAGE>
                                      INDEX

 PART I - FINANCIAL INFORMATION                                             PAGE

 ITEM 1.  FINANCIAL STATEMENTS

 Unaudited Consolidated Financial Statements of Chadmoore Wireless Group, Inc.
 and Subsidiaries (a developmental stage company):

           Consolidated Balance Sheets:
             As of June 30, 1998 and December 31, 1997                   3

           Consolidated Statements of Operations:
             For the Six  Months Ended June 30, 1998 and 1997 and for the
             Period January 1, 1994 (inception) through June 30, 1998      4

           Consolidated Statements of Operations:
             For the Three Months Ended June 30, 1998 and 1997             5

           Consolidated Statement of Non-Redeemable Preferred Stocks, Common
             Stocks and other Shareholders' Equity
             For the Six Months ended June 30, 1998                        6

           Consolidated Statements of Cash Flows:
             For the Six Months Ended June 30, 1998 and 1997 and for the
             Period  January 1, 1994 (inception) through June 30, 1998    7-8

           Notes to Unaudited Consolidated Financial Statements           9-16

 ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
          OF OPERATION                                                   17-26

 PART II - OTHER INFORMATION                                               27

 ITEM 1.  LEGAL PROCEEDINGS                                                27

 ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                        27

 ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                  27

 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS            27

 ITEM 5.  OTHER INFORMATION                                                27

 ITEM 6.  EXHIBITS AND CURRENT REPORTS ON FORM 8-K                       28-29

 SIGNATURES                                                                30


<PAGE>
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
<TABLE>
<CAPTION>
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997

                                                                                 JUNE 30,      DECEMBER 31,
                                                                                   1998            1997
                                                                                UNAUDITED
                                                                                 Restated        Restated       
                                     ASSETS
<S>                                                                           <C>              <C>
Current assets:                                                                               
    Cash and cash equivalents                                                 $  4,505,455     $    959,390
    Accounts receivable, net of allowance for doubtful accounts of $11,100
      and $45,000, respectively                                                    435,361          265,935
    Other receivables                                                               96,467           99,223
    Inventory                                                                      114,379           89,133
    Deposits and prepaids                                                          302,625          130,858
                                                                              ------------     ------------
              Total current assets                                               5,454,287        1,544,539

Property and equipment, net                                                      8,919,337        5,809,168
FCC licenses,  net of  accumulated  amortization  of  $330,091and  $231,917,    13,943,842        6,726,954
respectively
Debt issuance  costs,  net of  accumulated  amortization  of $15,670 and $0,       129,182               --
respectively
Management agreements and options to acquire licenses                           24,031,931       23,779,931
Investment in license options                                                    1,984,329        4,113,995
Non-current deposits and prepaids                                                   32,928           32,928
                                                                              ------------     ------------
              Total assets                                                    $ 54,495,836     $ 42,007,515
                                                                              ============     ============

                    LIABILITIES, REDEEMABLE PREFERRED STOCK AND NON REDEEMABLE 
                 PREFERRED STOCKS, COMMONS STOCKS AND OTHER SHAREHOLDERS' EQUITY                                      

Current liabilities:                                                                          
    Current installments of long-term debt and capital lease obligations      $  4,590,787     $  2,638,414
    Accounts payable                                                             2,370,485        1,165,425
    Accrued liabilities                                                            726,224        1,106,029
    Unearned revenue                                                               293,859          107,057
    Licenses - options payable                                                     350,000          350,000
    License option commission payable                                            3,412,000        3,412,000
    Accrued interest                                                               385,861          173,686
    Other current liabilities                                                      913,080          131,273
                                                                              ------------     ------------
              Total current liabilities                                         13,042,296        9,083,884
                                                                              ------------     ------------

Long-term debt, excluding current installments                                   9,199,592        4,614,157
Minority interests                                                                 411,967          352,142
                                                                              ------------     ------------
              Total liabilities                                                 22,653,855       14,050,183

Redeemable Preferred Stock:                                                                   
      Series C 4% cumulative, 10,119,614 shares issued and
          outstanding, net of discount of $3,272,784                               754,240               --

Non-Redeemable Preferred Stocks, Common Stocks, and other Shareholders Equity:
    Preferred Stock, $.001 par value. Authorized 40,000,000 shares:                           
      Series A issued and canceled 250,000 shares, 0 shares outstanding
          at June 30, 1998 and December 31, 1997                                        --               --
      Series B issued and outstanding 45,218 shares at June 30, 1998 and                    
          219,000 shares at December 31, 1997                                           45              219
    Common stock, $.001 par value.  Authorized  100,000,000  shares;  issued                  
          and outstanding  35,592,634  shares  at June 30,  1998 and  21,163,847
          shares at December 31, 1997                                               35,592           21,164
    Additional paid-in capital                                                  67,158,999       60,303,498
    Stock subscribed                                                                    --           32,890
    Deficit accumulated during the development stage                           (36,106,895)     (32,400,439)
                                                                              ------------     ------------
              Total Non-Redeemable Preferred Stocks, Common Stocks, and
                  other Shareholders Equity                                     31,087,741       27,957,332

              Total liabilities, Redeemable Preferred Stock and Non-Redeemable           
               Preferred Stocks, Common Stocks, and other Shareholders Equity $ 54,495,836     $ 42,007,515
                                                                              ============     ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.

                                       3
<PAGE>
CHADMOORE  WIRELESS GROUP,  INC. AND SUBSIDIARIES (A Development  Stage Company)
<TABLE>
<CAPTION>
Unaudited  Consolidated  Statements of Operations  For the Six Months Ended June
30, 1998 and 1997 and for the Period from January 1, 1994 (inception) through June 30, 1998

                                                                                                              PERIOD FROM
                                                                                                           JANUARY 1, 1994
                                                                         6 MONTHS ENDED JUNE 30,                THROUGH
                                                                        1998                1997            JUNE 30, 1998
                                                                      RESTATED            RESTATED             RESTATED 
                                                                ------------------- -------------------  --------------
<S>                                                                 <C>                 <C>                  <C>
     Revenues:                                                                                            
         Radio services                                             $   869,359         $   286,457          $  2,181,244
         Equipment sales                                                235,537             622,889             1,866,494
         Maintenance and installation                                   142,253             155,325               757,830
         Management fees                                                    --                  --                472,611
         Other                                                              473              17,213                58,335
                                                                    -----------         -----------          ------------
                                                                      1,247,622           1,081,884             5,336,514
                                                                    -----------         -----------          ------------
     Costs and expenses:                                                                                  
         Cost of sales                                                  401,710             545,489             2,168,616
         Salaries, wages, and benefits                                1,289,111           1,170,356             6,630,169
         General and administrative                                   1,759,189           1,407,616            18,420,935
         Depreciation and amortization                                  473,372             323,342             1,766,585
         Cost of settlement of license dispute                               --                  --               143,625
                                                                    -----------         -----------          ------------
                                                                      3,923,382           3,446,803            29,129,930
                                                                    -----------         -----------          ------------

     Loss from operations                                            (2,675,760)         (2,364,919)          (23,793,416)
                                                                    -----------         -----------          ------------
     Other income (expense):                                                                              
         Minority interest                                              (34,597)                 --               (15,231)
         Interest expense (net)                                        (813,185)           (912,715)           (5,510,652)
         Loss on reduction of management agreements and                                            
           licenses to estimated fair value                                  --          (7,166,956)           (7,166,956)
         Standstill agreement expense                                  (182,914)                 --              (182,914)
         Writedown of investment in JJ&D, LLC                                --                  --              (443,474)
         Gain on settlement of debt                                          --                  --               887,402
         Gain on sale of assets                                              --                  --               330,643
         Loss on retirement of note payable                                  --                  --               (32,404)
         Other, net                                                          --             (52,185)             (179,893)
                                                                    -----------         ------------         ------------
                                                                     (1,030,696)         (8,131,856)          (12,313,479)
                                                                    -----------         ------------         ------------

     Net loss                                                       $(3,706,456)        $(10,496,775)         (36,106,895)
                                                                    ============        ============         ============

    Calculation of net loss applicable to common shareholders:

       Preferred stock preferences                                           --                  --            (1,203,704)
       Series B Preferred stock dividend                                (56,486)                 --               (56,486)
       Series C Preferred stock dividend and accretion of 
          amount payable upon redemption                                (68,929)                 --               (68,929)
                                                                    -----------         ------------         ------------
    Net loss applicable to common shares                            $(3,831,871)        $(10,496,775)        $(37,436,014)
                                                                    ===========         ============         ============
                                                                    
    Net loss per basic and diluted share                            $     (0.14)        $      (0.54)        $      (3.10)
                                                                    -----------         ------------         ------------
     Weighted average shares number of common shares outstanding     27,321,879           19,511,640           12,076,378
                                                                    ===========         ============         ============

</TABLE>
See accompanying notes to unaudited consolidated financial statements.


                                       4
<PAGE>
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
<TABLE>
<CAPTION>
Unaudited Consolidated Statements of Operations
For the Three Months Ended June 30, 1998 and 1997



                                                                         3 MONTHS ENDED JUNE 30,
                                                                    --------------------------------
                                                                        1998                1997
                                                                      RESTATED            RESTATED
                                                                   ------------        ------------
<S>                                                                <C>                 <C>
         Radio services                                             $   497,721         $   144,966
         Equipment sales                                                150,008             371,498
         Maintenance and installation                                    83,513              56,485
         Other                                                              228              10,085
                                                                    -----------         -----------
                                                                        731,470             583,034
                                                                    -----------         -----------
     Costs and expenses:                                                             
         Cost of sales                                                  218,777             273,375
         Salaries, wages and benefits                                   755,432             594,316
         General and administrative                                   1,007,218             647,342
         Depreciation and amortization                                  279,238             162,984
                                                                    -----------         -----------
                                                                      2,260,665           1,678,017
                                                                    -----------         -----------

     Loss from operations                                            (1,529,195)         (1,094,983)
                                                                    -----------         ------------
     Other income (expense):                                                         
         Minority interest                                              (25,300)                 --
         Interest expense (net)                                        (352,815)           (606,448)
         Loss on reduction of management agreements and                       
           licenses to estimated fair value                                  --          (7,166,956)
         Other, net                                                          --             (52,500)
                                                                    -----------         ------------
                                                                       (378,115)         (7,825,904)

     Net loss                                                       $(1,907,310)        $(8,920,887)
                                                                    ===========         ===========


     Calculation of net loss applicable to common shareholders:
        Series C Preferred Stock dividend and accretion of 
           amount payable upon redemption                               (68,929)                  --
        Series B Preferred Stock dividend                               (45,754)                  --
                                                                    -----------         ------------
     Net loss applicable to common shareholders                     $(2,021,993)        $ (8,920,887)
                                                                    ===========         ============
     Net loss per basic and diluted share                           $     (0.06)        $      (0.45)        
                                                                    ===========         ============
     Weighted average number of common shares outstanding            32,236,504           19,868,119 
                                                                    ============        ============
</TABLE>

See accompanying notes to unaudited consolidated financial statements.













                                       5
<PAGE>
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
<TABLE>
<CAPTION>
Unaudited Consolidated Statements of Non-Redeemable Preferred Stocks, Common Stocks, and other Shareholders' Equity
For the Six months ended June 30, 1998                                                                                
                                                                                                                       TOTAL 
                                                                                           DEFICIT                 NON-REDEEMABLE
                               PREFERRED STOCK         COMMON  STOCK                     ACCUMULATED               PREFERRED STOCKS,
                            -------------------  ----------------------    ADDITIONAL       DURING                COMMON STOCKS, AND
                            OUTSTANDING           OUTSTANDING               PAID-IN      DEVELOPMENT     STOCK   OTHER SHAREHOLDERS'
                              SHARES     AMOUNT     SHARES       AMOUNT     CAPITAL         STAGE      SUBSCRIBED     EQUITY
                              -------    ------  ------------   -------   -----------   -------------  ----------  -------------
<S>                           <C>          <C>     <C>          <C>       <C>           <C>              <C>        <C>        
Balance at December 31, 1997,  
   as restated                219,000      $219    21,163,847   $21,164   $60,303,498   $(32,400,439)    $ 32,890   $27,957,332
Shares issued under employee                                                                                             
  compensation plan                --        --       108,500       108        55,878             --           --        55,986
Shares issued for 
  subscribed stock                 --        --        11,400        11        32,879             --      (32,890)           --
Shares  issued for  exercise                                                                                             
  of license option                --        --       800,000       800       351,200             --           --       352,000
Shares issued for conversion 
  of preferred stock         (173,782)     (174)    3,618,107     3,619        (3,445)            --           --            --
Shares issued for preferred                                                                                             
  stock dividend                   --        --        69,330        69           (69)            --           --            -- 
Shares issued for standstill
 agreement                         --        --       310,023       310       182,604             --           --       182,914
Compensation expense for                                                                                             
 options issue                     --        --            --        --        15,040             --           --        15,040
Shares issued for services         --        --       290,765       290       160,635             --           --       160,925
Shares issued for exercise                                                                        
 of license option                 --        --        31,000        31        15,159             --           --        15,190
Shares  issued for  purchase
 of fixed assets                   --        --       335,000       335       188,715                                   189,050
Shares issued for cash             --        --     8,854,662     8,855     5,925,834             --          --      5,934,689
Accretion of amounts payable 
 upon redemption for 
 Series C Preferred Stock          --        --            --        --       (42,187)            --          --        (42,187) 
Accrued dividends for Series
 C Preferred Stock                 --        --            --        --       (26,742)            --          --        (26,742)
Net loss                           --        --            --        --                   (3,706,456)         --     (3,706,456)
                              -------    ------  ------------   -------   -----------   -------------  ----------  -------------
Balance at June 30, 1998,     
   as restated                 45,218    $   45    35,592,634   $35,592   $67,158,999   $(36,106,895)  $      --    $31,087,741
                              =======    ======  ============   =======    ==========   =============  ==========  =============
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



<PAGE>
CHADMOORE  WIRELESS GROUP,  INC. AND SUBSIDIARIES (A Development  Stage Company)
<TABLE>
<CAPTION>
Unaudited  Consolidated  Statements  of Cash Flows For the Six Months Ended June
30, 1998 and 1997 and for the Period from January 1, 1994 (inception) through June 30, 1998


                                                                      6 MONTHS ENDED JUNE 30,                PERIOD FROM
                                                           -------------------------------------------     JANUARY 1, 1994
                                                                                                               THROUGH  
                                                                    1998                   1997             JUNE 30, 1998
                                                                  RESTATED               RESTATED              RESTATED
                                                           ---------------------  --------------------- -----------------
<S>                                                             <C>                   <C>                    <C>
 Cash flows from operating activities:                                                                   
   Net loss                                                     $(3,706,456)          $(10,496,775)         $(36,106,895)
   Adjustments to reconcile net loss to net cash used in                                                 
     operating activities:                                                                               
        Minority interest                                            34,597                     --                15,231
        Depreciation and amortization                               473,372                400,768             1,766,585
        Non-cash interest expense                                        --                767,986             3,802,469
        Writedown of management agreements and licenses to
          estimated fair value                                           --              7,166,956             7,166,956
        Writedown of investment in JJ&D, LLC                             --                     --               443,474
        Release of license options                                       --                     --               330,882
        Writedown of prepaid management rights                           --                     --                81,563
        Gain on extinguishment of debt                                   --                     --              (839,952)
        Gain on sale of assets held for resale                           --                     --              (330,643)
        Shares issued for settlement of license dispute                  --                     --               127,125
        Standstill agreement                                        182,914                     --               182,914
        Amortization of debt discount                               539,466                     --               805,978
        Equity in losses from minority investments                       --                     --                 1,322
        Expenses associated with:                                                                        
           Stock issued for services                                     --                     --             2,605,036
           Options issued for services                               15,040                     --             4,052,504
        Changes in operating assets and liabilities:                                                     
           Increase in accounts receivable and other receivables   (125,517)              (153,699)             (322,212)
           Decrease increase in inventory                           (25,246)               (10,139)              (36,398)
           (Increase) decrease in deposits and prepaid expenses    (116,281)                50,856              (237,275)
           Increase in accounts payable and accrued liabilities     706,240                243,615             2,979,504
           Increase in unearned revenue                             186,802                     --               293,859
           Increase in license options commission payable                --                     --               524,800
           Increase in accrued interest                             212,175                 38,194               704,124
           Increase in other current liabilities                    822,278                 96,533               973,971
                                                                -----------            -----------           -----------
 Net cash used in operating activities                             (800,616)            (1,895,705)          (11,015,078)
                                                                -----------            -----------           -----------
 
Cash flows from investing activities:                                                                   
   Purchase of assets from General Communications, Inc.                  --                     --              (352,101)
   Investment in JJ&D, LLC                                               --                     --              (100,000)
   Purchase of Airtel Communications, Inc. assets                        --                     --               (50,000)
   Purchase of CMRS and 800 SMR Network, Inc.                            --                     --            (3,547,000)
   Purchase of SMR station licenses                                      --                     --            (1,398,575)
   Purchase of license options                                     (156,409)              (195,350)           (1,842,854)
   Sale of management agreements and options to acquire licenses         --                     --               500,000
   Purchase of property and equipment                            (3,073,794)              (332,064)           (7,697,969)
   Sale of property and equipment                                        --                     --               827,841
   Purchase of assets held for resale                                    --                     --              (219,707)
   Sale of assets held for resale                                        --                     --               700,000
   Increase in other non-current assets                                  --                     --               (11,123)
                                                                -----------            -----------           -----------
 Net cash used in investing activities                           (3,230,203)              (527,414)          (13,191,488)
                                                                -----------            -----------           -----------
</TABLE>


         (Continued)


<PAGE>
CHADMOORE  WIRELESS GROUP,  INC. AND SUBSIDIARIES (A Development  Stage Company)
<TABLE>
<CAPTION>
Unaudited  Consolidated  Statements of Cash Flows,  Continued For the Six Months
Ended June 30,  1998 and 1997 and for the Period  from  January 1, 1994 (inception) through
June 30, 1998

                                                                                                       PERIOD FROM
                                                                                                     JANUARY 1, 1994
                                                                  6 MONTHS ENDED JUNE 30,                THROUGH
                                                                 1998                1997             JUNE 30, 1998
                                                               RESTATED            RESTATED              RESTATED
                                                         ------------------- -------------------  ----------------
<S>                                                           <C>                 <C>                 <C>
Cash flows from financing activities:                                                              
     Proceeds upon issuance of securities                     $7,500,000          $       --          $11,816,543
     Equity issuance costs                                      (705,000)                 --             (705,000)
     Proceeds upon issuance of preferred stock                        --                  --            3,848,895
     Proceeds upon exercise of options - related parties              --                  --               62,500
     Decrease in stock subscriptions receivable, net                  --                  --             (637,193)
        of stock subscribed                                                                        
     Proceeds upon exercise of options - unrelated parties            --                  --            3,075,258
     Purchase and conversion of CCI stock                             --                  --               45,000
     Advances from related parties                                    --                  --              767,734
     Payment of advances from related parties                         --                  --              (73,000)
     Debt issuance costs                                        (144,852)                 --             (144,852)
     Payments of long-term debt and capital lease obligations   (686,284)           (195,187)          (1,655,550)
     Proceeds from issuance of notes payable                          --                  --              375,000
     Proceeds from issuance of long-term debt                  1,613,020           1,530,000           11,936,686
                                                              ----------          ----------          -----------

Net cash provided by financing activities                      7,576,884           1,334,813           28,712,021
                                                              ----------          ----------          -----------
Net increase (decrease) in cash and cash equivalents           3,546,065          (1,088,306)           4,505,455
Cash and cash equivalents at beginning of period                 959,390           1,463,300                   --
                                                              ----------          ----------          -----------
Cash and cash equivalents at end of period                    $4,505,455          $  374,994          $ 4,505,455
                                                              ==========          ==========          ===========

</TABLE>

  Supplemental disclosure of cash paid for:
    Taxes                 $       --          $       --          $        --
    Interest              $   96,945          $   17,251          $   529,502
                          ==========          ==========          ===========

Supplemental disclosure for non-cash investing and financing activities:

1998

* Issuance of 108,500 shares of Common Stock to employees.
*Issuance of $5,013,797 of notes payable,  net of discount,  to exercise options
 to purchase FCC licenses.
*Conversion of 173,782  shares of  convertible  preferred  stock into  3,618,107
 shares of common stock.
* Issuance of 69,330 shares of common stock for preferred stock dividends.
*Issuance  of 11,400  shares  of  common  stock  for  $32,890  of  common  stock
 previously subscribed.
*Issuance  of  800,000  shares of common  stock  with a value of  $352,000,  for
 exercise of license option.
*Reclassification  of minority  interest of approximately  $14,915 into property
 and equipment.
*Issuance of 31,000  shares of common stock with a value of $15,190 to a license
 holder.
*Issuance of 290,765  shares of common stock for prepaid  professional  services
 with a value of $160,925.
*Issuance  of  335,000  shares  of common  stock  with a value of  $189,050  and
 licenses with a cost of $100,000 for fixed assets.

1997

* Conversion of $1,150,000 of convertible debt to equity.
*Issuance  of  231,744  shares of  common  stock for  $255,945  of common  stock
 subscribed.
*Exercise of 323,857  options to  purchase  common  stock which had  $161,929 of
 prepaid exercise price.
* Reclassification $108,027 of deposits to property and equipment.

See accompanying notes to unaudited consolidated financial statements.




                                       9
<PAGE>
CHADMOORE WIRELESS GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 1998

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

A.  BASIS OF PRESENTATION


The  accompanying  unaudited  consolidated  financial  statements  include   the
accounts  of  Chadmoore  Wireless  Group, Inc. and subsidiaries and consolidated
partnerships (the "Company"), (a development stage  company),  which  have  been
prepared  in  accordance  with  the  rules and regulations of the Securities and
Exchange Commission Form 10-QSB. All material adjustments, consisting of  normal
recurring accruals which are, in the opinion of management, necessary to present
fairly the financial condition and related results of operations, cash flows and
Non-redeemable  preferred  stocks,  common stocks and other shareholders' equity
for the respective interim periods presented are reflected. The  current  period
results  of  operations  are  not  necessarily indicative of the results for any
other interim period or for  the  full  year  ended  December  31,  1998.  These
unaudited  consolidated  financial statements should be read in conjunction with
the audited consolidated financial statements included in the Annual  Report  on
Form 10-KSB and 10-KSB/A for the year ended December 31, 1997.

The Company has restated its previously issued Form 10-QSB for  the  six  months
ended  June  30,  1998.  As  discussed  in  Note's  5B and 6, the Company issued
mandatorily  redeemable  preferred  stock  which  was  previously  reported   in
Non-redeemable  preferred  stocks, common stocks and other shareholders' equity.
SEC Rules and Regulations require the  initial  carrying  amount  of  redeemable
preferred  stock be recorded at its fair value on date of issuance and accreted,
using the interest method, to the redemption amount.  Accordingly,  the  Company
has  recorded  the  redeemable preferred stock in the accompanying balance sheet
between the last liability account  and  the  Non-Redeemable  Preferred  Stocks,
Common  Stocks and other Shareholders' equity section. In addition, as discussed
in Note 4, the Company has restated its previously issued Form  10-QSB  for  the
six months ended June 30, 1997 in its June 30, 1998 Form 10-QSB/A to comply with
a  SEC  announcement  with  respect  to issuing convertible debentures which are
convertible into common stock at a discount.

 

B.  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the FASB issued  Statement of Financial  Accounting  Standards No.
130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 requires companies to
classify  items of other  comprehensive  income by their  nature in a  financial
statement  and display the  accumulated  balance of other  comprehensive  income
separately from retained  earnings and additional  paid-in capital in the equity
section of a statement of financial  position  and is  effective  for  financial
statements  issued for fiscal years  beginning  after  December  15,  1997.  The
Company  adopted SFAS 130 for the quarter  ended March 31, 1998.  As of June 30,
1998 the Company has no comprehensive income amounts.

In June 1997, the FASB issued  Statement of Financial  Accounting  Standards No.
131,  "Disclosure About Segments of an Enterprise and Related Information" (SFAS
131).  SFAS 131  establishes  additional  standards  for  segment  reporting  in
financial  statements and is effective for fiscal years beginning after December
15, 1997. The adoption of SFAS 131 is not expected to have a material effect on
the Company's financial position or results from operations.

Statement of Position  98-5  "Reporting  on Costs of Start-Up  Activities"  (SOP
98-5) requires the costs of start-up  activities and organizational  costs to be
expensed as incurred.  SOP 98-5 is effective  for fiscal years  beginning  after
December 15,  1998.  The adoption of SOP 98-5 is not expected to have a material
effect on the Company's financial position or results from operations.

C.  CASH EQUIVALENTS

For the purposes of the statement of cash flows the Company considers all highly
liquid debt instruments  with original  maturities of three months or less to be
cash equivalents.

D.  RECLASSIFICATIONS

Certain  amounts in the 1997 Unaudited  Consolidated  Financial  Statements have
been reclassified to conform to the 1998 presentation.

E.  LOSS PER SHARE

Basic  and  diluted loss per share were computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS  128).  Prior
years have been restated to reflect the application of SFAS 128. As discussed in
Note  4, earnings  per  share for the three and six month periods ended June 30,
1997 were restated to  comply  with  a  SEC  announcement  regarding  beneficial
conversion features embedded in convertible securities.

F.  CUSTOMER  ACQUISITION COSTS

Customer acquisition costs are expensed in the period they are incurred.


(2) FCC LICENSES AND LICENSE OPTIONS

The Company has entered into various  option  agreements to acquire FCC licenses
for SMR  channels  ("Option  Agreements").  These  Option  Agreements  allow the
Company to purchase licenses, subject to FCC approval, within a specified period
of time  after the  agreement  is signed.  During the six months  ended June 30,
1998, the Company had exercised Option Agreements for approximately 650 channels
for consideration of cash, notes payable and the Company's common stock ("Common
Stock") totaling  approximately  $5,934,366.  In relation to the exercise of the
options  for the  licenses,  the  Company  has also  incurred  commission  costs
totaling approximately $1,302,000, which are included in FCC licenses.

As of June 30, 1998, of the  approximately  4,800  licenses  under the Company's
control,  approximately  3,000  licenses  had  transferred  to the  Company  and
approximately  1,460 were in the process of being  transferred  to the  Company,
pending FCC approval.  The remaining  approximately  340 licenses continue to be
maintained under Option and/or Management  Agreements (defined below), for which
the  Company  has  decided  to delay  exercise  based on  various  economic  and
operating considerations.

The Company  amended  several Option  Agreements  whereby the Company would make
quarterly installment payments toward the purchase of channels.  With respect to
these agreements,  the Company is in default thereof.  Approximately $350,000 of
accrued  installment  payments has been recorded at June 30, 1998 in "Licenses -
options  payable".  If the holder requests remedy,  in writing,  the Company has
thirty days to remedy any deficiency by sending monies  totaling all outstanding
installment  payments due such holder.  The Company  addresses each request on a
case by case basis and determines,  based on various factors, whether to pay the
outstanding installment payments, purchase the license in full with a promissory
note or cancel  the  Option  Agreement.  As of June 30,  1998,  holders  of such
amended Option  Agreements have not elected to terminate the options or exercise
other available  remedies.  If the Company elects to cancel the Option Agreement
all consideration  paid is retained by the licensee and expensed  accordingly by
the Company.  If the Company were to exercise the remaining  outstanding  Option
Agreements for  approximately  340 channels as of June 30, 1998, the obligations
would total approximately $8 million.

Upon entering into Option  Agreements,  the Company also entered into management
agreements  with  the  licensees  ("Management   Agreements").   The  Management
Agreements give the Company the right to manage the SMR systems,  subject to the
direction  of the  licensees,  for a period of time prior to the transfer of the
licenses  to the  Company  as  stated in the  agreements,  usually 2 to 5 years.
During  such  period,  revenues  received  by the  Company  are shared  with the
licensee  only after  certain  agreed-upon  costs to construct the channels have
been recovered by the Company.

(3)      REVENUES AND COST OF SALES

The Company had revenues from  equipment  sales of $235,537 and $622,889 for the
six  months  ended  June 30,  1998  and  1997,  respectively.  The cost of sales
associated  with these  revenues were $175,228 and $400,750 for six months ended
June 30, 1998 and 1997,  respectively.  The Company had revenues from  equipment
sales of $150,008  and  $371,498  for the three  months  ended June 30, 1998 and
1997,  respectively.  The cost of sales  associated  with  these  revenues  were
$99,251  and  $210,924  for the  three  months  ended  June 30,  1998 and  1997,
respectively.


(4) LONG-TERM DEBT

A. DEBT ISSUANCES

In February 1997, the Company executed a Securities Placement Agreement to place
a minimum of $1,000,000  and maximum of $4,000,000 of the Company's  three year,
8% convertible Debentures. Principal and interest are convertible into shares of
the Company's common stock. In addition, the Securities Purchase Agreement calls
for the issuance of 75,000 warrants to purchase  shares of the Company's  common
stock at an  exercise  price of  $2.50  per  share  for  each  $1,000,000  of 8%
convertible Debentures placed. The warrants are exercisable for three years from
date of grant.  On February 19, 1997,  the Company  placed  $1,000,000 of the 8%
Convertible Debentures and received $860,000, net of $140,000 of placement fees.
The  Company  granted  75,000  warrants in  connection  with the  placement.  In
addition,  the Company granted 30,000 warrants at an exercise price of $1.50 per
share in connection with the placement. On February 24, 1997, the Company placed
an additional  $750,000 of the 8% Convertible  Debentures and received $670,000,
net of $80,000 in  placement  fees.  The  Company  granted  56,250  warrants  in
connection with the placement.  In addition, the Company granted 22,500 warrants
at an  exercise  price of $1.50  per  share in  connection  with the  placement.
Principal and accrued  interest are  convertible at a conversion  price for each
share of common  stock equal to the lesser of (a) $1.37 or (b) a discount of 25%
for principal  and accrued  interest held up to 90 days from the closing date, a
discount of 27-1/2% for principal  and accrued  interest held for 91 to 130 days
from the  closing  date or a  discount  of 30-1/2%  for  principal  and  accrued
interest  held for more than 131 days.  The  discount  will apply to the average
closing  bid  price  for the 5  trading  days  ending  on the  date  before  the
conversion  date,  as  represented  by the National  Association  of  Securities
Dealers and Electronic Bulletin Board.

In  a  1997  announcement,  the  staff of the Securities and Exchange Commission
("SEC") indicated that when convertible debentures are convertible at a discount
from the then current  common  stock  market  price,  a  "beneficial  conversion
feature", should be recognized as a return to the convertible debenture holders.
The SEC staff believes any discount resulting from an allocation of the proceeds
equal  to  the intrinsic value should be allocated to additional paid-in capital
and increase the effective interest rate of the security and should be reflected
as a debt discount and amortized to interest expense over the  period  beginning
on  the date of issuance of the notes and ending on the date the notes are first
convertible. A beneficial conversion feature of approximately $767,986  embedded
in  the  convertible  debentures issued during February 1997 was not recorded in
the Company's previously filed June 30, 1997 Form 10-QSB.  Because  of  the  SEC
announcement, the Company has restated its June 30, 1997 Form 10-QSB in its June
30, 1998 Form 10-QSB/A to reflect such announcement.

The  debt  discount  of  $767,986  associated  with  the issuance of convertible
debentures has been amortized to interest expense for the six months ended  June
30,  1997. For the three months ended June 30, 1997 the amortization of the debt
discount aggregated approximately  $525,705.  Interest  expense  for  the  three
months  ended June 30, 1997 has been restated from $80,743 to $606,448. Earnings
per share for the three months ended June 30, 1997 has been restated from  $0.42
to  $0.45 per share. In addition, interest expense for the six months ended June
30, 1997 has been restated from $144,729 to $912,715.  Earnings  per  share  has
been  restated  from  $0.50 to $0.54 per share for the six months ended June 30,
1997.

During the six months ended June 30, 1998 the Company entered into notes payable
with license  holders  for  approximately  $5,000,000,  net  of  a  discount  of
approximately  $1,725,000;  these  notes represent the final payment to exercise
license options for approximately 650 licenses. As of June 30, 1998 the  Company
had  entered  into  notes  payable  totaling  approximately $8,175,000, net of a
discount of approximately $2,675,000, calculated at an imputed interest rate  of
15%.

As of June 30, 1998 the total outstanding amounts of  the  MarCap  Facility  and
Motorola  Loan  Facility were $1,945,683 and $323,778, respectively. The Company
incurred debt issuance costs related to the drawdowns totaling  $144,852.  These
costs will be amortized over the lives of the loans.

(B) NEW DEBENTURE

As reported in the Company's Form 10-KSB/A for the year ended December 1997, the
Company restructured a Convertible Debenture and the holder accepted a new
debenture. The holder of the new debenture has presented the Company with a
default and acceleration notice. However, the Company believes such note holder
does not have the right to cause acceleration pursuant to such purported notice.
The Company is currently in discussions with the holder with respect to this
matter.


(5) EQUITY TRANSACTIONS

A. PREFERRED STOCK CONVERSIONS

On December 23, 1997, the Company completed a private placement of Series B
Convertible Preferred Stock (the "Series B Preferred") through Settondown
Capital International ("Settondown"). The Series B Preferred provides for
liquidation preference of $10.00 per share and cumulative dividends at 8.0% per
annum from the date of issuance, payable quarterly in cash or Common Stock, at
the then-current market price, at the option of the Company.

Holders of the Series B Preferred are entitled to convert any portion of the
Series B Preferred into Common Stock beginning 45 days from the closing date and
up to two years at the average market price of the Common Stock for the five (5)
day trading period ending on the day prior to conversion. If the difference
between the average price and the current market price is greater than 20%, the
lookback is increased to 20 days. The Series B Preferred also provides that
holders are restricted from converting an amount of Series B Preferred which
would cause them to exceed 4.99% beneficial ownership of the Common Stock. In
the event that any securities remain outstanding on the second anniversary of
the closing date, all remaining securities must be converted on such date.
During the six months ended June 30, 1998 the holders of Series B Preferred
Stock converted 173,782 shares of Series B Preferred into 3,618,107 shares of
Common Stock. Dividends on such shares of Series B Preferred were $37,340, which
was paid with 69,330 shares of Common Stock. In addition, dividends of $19,146
have accrued on the Series B Preferred as of June 30, 1998.

B. EQUITY INVESTMENT

On May 4, 1998, pursuant to an Investment Agreement ("Agreement"), dated May  1,
1998  between  the  Company  and Recovery Equity Investors II L.P. ("Recovery"),
Recovery purchased, for $7,500,000, from the Company 8,854,662 shares of  common
stock,  10,119,614 shares of mandatorily redeemable Series C preferred stock, an
eleven-year warrant to purchase up to 14,612,796 shares of common  stock  at  an
exercise price of $.001, a three-year warrant to purchase up to 4,000,000 shares
of  common  stock  at  an  exercise price of $1.25, and a five and one-half year
warrant to purchase up to 10,119,614 shares of common stock at an exercise price
of $0.3953. The warrants contain certain provisions  which  restrict  conversion
and/or  provide  adjustments  to  the  conversion price and number of shares. In
conjunction with the Agreement, the  Company  commissioned  an  appraisal  which
determined  a  fair  value  for  each security issued pursuant to the Agreement.
Consistent with this determination, the Company has allocated  the  proceeds  of
$7,500,000 to the securities based on relative fair values as follows:


               Common Stock                         $ 2,055,936
               Series C Preferred Stock                 685,312
               Eleven year warrants                   3,251,528
               Three year warrants                       38,698
               Five and one-half year warrants        1,468,526  
                                                    ------------
                                TOTAL               $ 7,500,000
                                                    ============        




(6) MANDATORILY REDEEMABLE PREFERRED STOCK

As discussed in Note 5B, on May 1, 1998, the Company issued 10,119,614 shares of
4% cumulative Series C Preferred Stock, which is madatorily redeemable by
written notice to the Company on the earlier of (i) May 1, 2003 or the
occurrence of (ii) the listing of the Company's common stock on a National
Securities Exchange or an equity financing by the Company that results in gross
proceeds in excess of $2 million. The Series C Preferred Stock has a redemption
price equal to $.3953 and is entitled to cumulative annual dividends equal to 4%
payable semi-annually. Dividends on the Series C preferred Stock shall accrue
from the issue date, without interest, whether or not dividends have been
declared. Unpaid dividends, whether or not declared, shall compound annually at
the dividend rate from the dividend payment date on which such dividend was
payable. As long as any shares of Series C Preferred Stock is outstanding, no
dividend or distribution, whether in cash, stock or other property, shall be
paid, declared and set apart for payment for any junior securities. 

The difference between the relative  fair  value  of  the  Series  C  Redeemable
Preferred  Stock  at the issue date and the mandatory redemption amount is being
accreted by charges to additional paid-in-capital using  the  interest  method.
Since  the Company had no retained earnings such amount is charged to additional
paid-in capital. At the redemption date, the carrying amount of such shares will
equal the mandatory redemption amount  plus  accumulated  dividends  unless  the
shares  are  exchanged prior to the redemption date. For the three and six month
periods ended June 30, 1998 the Company accrued dividends and recorded accretion
of amounts payable upon redemption of $26,742 and $42,187, respectivity.  


(7) RELATED PARTY TRANSACTIONS

The Company paid $604,872 to Private Equity Partners  ("PEP"),  for professional
services  associated with equity and debt  financings for the six months ended
June 30, 1998. The managing partner of PEP is a director of the Company.

On May 1, 1998, the Company and Recovery entered into a Shareholders Agreement
which stipulated that the Company and each of the Shareholders shall take all
action necessary to cause the Board to consist of two Directors to be designated
by the Recovery Shareholders, two Directors designated by the Chief Executive
Officer of the Company, and two independent Directors.

On  May  1,  1998,  the  Company and Recovery entered into an Advisory Agreement
commencing on May 1, 1998 and ending on  the  fifth  anniversary.  The  Advisory
Agreement  stipulates  the  consultant  shall devote such time and effort to the
performance of providing consulting and management  advisory  services  for  the
Company  as  deemed  necessary  by Recovery. In consideration of the consultants
provision of the services to the Company, the Company shall pay  the  consultant
an annual fee of $312,500 beginning on the first anniversary which shall be paid
in  advance,  in  equal  monthly installments, reduced by the Series C Preferred
stock dividends paid in the preceeding twelve month period.

(8) COMMITMENTS AND CONTINGENCIES

A. LICENSE OPTION AND MANAGEMENT AGREEMENT CONTINGENCIES

Goodman/Chan   Waiver.   Nationwide   Digital   Data  Corp.   and   Metropolitan
Communications Corp. among others (collectively,  "NDD/Metropolitan"), traded in
the selling of SMR  application  preparation  and filing services to the general
public.  Most of the purchasers in these  activities had little or no experience
in the wireless communications industry. Based on evidence that NDD/Metropolitan
had been unable to fulfill their construction and operation  obligations to over
4,000  applicants who had received FCC licenses  through  NDD/Metropolitan,  the
Federal Trade Commission ("FTC") filed suit against NDD/Metropolitan in January,
1993,  in the  Federal  District  Court for the  Southern  District  of New York
("District Court").

The District Court appointed  Daniel R. Goodman (the "Receiver") to preserve the
assets of NDD/Metropolitan.  In the course of the Receiver's duties, he together
with a licensee,  Dr. Robert Chan, who had received several FCC licenses through
NDD/Metropolitan's  services,  filed a request to extend the construction period
for each of 4,000 SMR stations.  At that time, licensees of most of the stations
included in the waiver  request  ("Receivership  Stations")  were  subject to an
eight-month  construction  period.  On May 24, 1995, the FCC granted the request
for extension.  The FCC reasoned that the Receivership  Stations were subject to
regulation  as  commercial  mobile  radio  services  stations,  but had not been
granted the extended  construction  period to be awarded to all CMRS  licensees.
Thus,  in an effort to be  consistent  in its  treatment of  similarly  situated
licensees,  the FCC granted an additional  four months in which to construct and
place the Receivership  Stations in operation (the "Goodman/Chan  Waiver").  The
grant of the Goodman/Chan  Waiver is to become effective upon publication in the
Federal  Register.  As of this  date,  the  Goodman/Chan  Waiver  has  not  been
published in the Federal Register.

The  Receiver  has  requested  that the  Company  replace  some of the  existing
Management and Option  Agreements  with  Goodman/Chan  licensees with promissory
notes. The Company engaged in discussions with the Receiver in this regard,  but
did not reach a final  determination  and concluded that no further  discussions
are  warranted  at this  time.  However,  there  can be no  assurances  that the
Receiver  would not  decide to take  actions  in the  future  to  challenge  the
Company's agreements with Goodman/Chan licensees, including the Company's rights
to  licenses  under such  agreements,  in an effort to enhance  the value of the
Receivership Estate.

On July 31, 1998 the Federal Communications Commission (the "Commission") issued
a  Memorandum  Opinion  and  Order  and  Order  on  Reconsideration  in which it
enunciated its final decision in the Goodman/Chan proceeding.  Initial review of
the opinion by the Company's counsel  indicates a potentially  favorable outcome
in this matter,  as it appears that the relief granted by the Commission will be
applicable  to a  significant  number  of the  Company's  owned  and/or  managed
stations.

The  Commission  noted that it would request  publication of its decision in the
Federal  Register as promptly as possible.  Thus,  it is expected that this item
will be published in the Federal  Register prior to August 30, 1998. At the date
of official publication,  the decision will take legal effect,  provided that no
successful  challenges  seeking a judicial stay of the  Commission's  action are
forthcoming.

B. LEGAL PROCEEDINGS

The  Company is  involved  in various  claims and legal  actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's consolidated financial position, results of operations or liquidity.

Airnet,  Inc. v. Chadmoore  Wireless Group, Inc. Case No. 768473,  Orange County
Superior Court On April 3, 1997,  Airnet,  Inc.  ("Airnet") served a summons and
complaint on the Company,  alleging  claims related to a proposed merger between
Airnet  and the  Company  that never  materialized.  In  particular,  Airnet has
alleged that a certain "letter of intent"  obligated the parties to complete the
proposed merger.  The Company denies this allegation.  In its complaint,  Airnet
has alleged the following purported causes of action against the Company: breach
of  contract,  breach of the implied  covenant  of good faith and fair  dealing,
intentional  interference  with  prospective  economic  advantage,   intentional
interference with contractual relationship,  including breach of contract, false
promise and conversion.  Airnet has also purported to seek the following  relief
from the Company:  $28,000,000 in compensatory  damages plus interest,  punitive
damages,  costs  of  suit  and  attorney's  fees.  The  Company  challenged  the
sufficiency of the complaint as to most of the purported causes of action on the
grounds that these purported  causes of action fail to state facts sufficient to
constitute a cause of action. The Company also challenged the sufficiency of the
punitive  damages  allegations on the grounds that the compliant  fails to state
facts  sufficient  to  support  these  allegations.  Rather  than  oppose  these
challenges to its complaint,  Airnet elected to file a first amended  complaint.
Believing  that Airnet's  amendments  were  immaterial  the Company  renewed its
challenges to Airnet's  pleading.  On September 9, 1997, the court sustained the
Company's  demurrers  to  Airnet's  claims for  damages  based on the  Company's
alleged failure to complete the merger and to Airnet's claims for conversion. At
Airnet's  request,  the court allowed Airnet to amend its pleading a second time
to attempt to state these claims,  and Airnet's new complaint asserts claims for
breach of contract,  anticipatory breach of contract,  intentional  interference
with prospective economic advantage, interference with contractual relationship,
inducing breach of contract and false promise. The Company again filed demurrers
challenging certain of the claims in Airnet's pleading. On January 16, 1998, the
Court overruled the Company's demurrers to the Second Amended Complaint.

On February 2, 1998, the Company  answered the Second  Amended  Complaint with a
general denial and by asserting the following affirmative  defenses:  failure to
state a claim, uncertainty,  statutes of limitations,  laches, lack of capacity,
lack of standing, waiver, estoppel,  knowledge and acquiescence,  unclean hands,
unjust  enrichment,  fraud,  misrepresentations,  res  judicata,  justification,
privilege,  no action intended or reasonably calculated to cause injury, lack of
causation,  acts of third parties,  failure to allege a contract,  no meeting of
the minds, statute of frauds, lack of privity, fraud in the inducement, mistake,
lack  of  consideration,   failure  of  consideration,   failure  of  conditions
precedent,  concurrent,   subsequent,  Airnet's  intentional  misrepresentation,
Airnet's negligent  misrepresentations,  performance excused by Airnet's failure
to  perform,   performance   excused  by   recision,   performance   excused  by
modification, antecedent breaches by Airnet, accord and satisfaction, privileged
communications,  justified  communications,  no damages, failure to mitigate and
offset.

On February 2, 1998, the Company filed a Cross-Complaint  against Airnet as well
as  three  other  named  cross-defendants   related  to  Airnet:  Uninet,  Inc.,
("Uninet") Anthony Schatzlein ("Schatzlein") and Dennis Houston ("Houston"). The
Company's  Cross-Complaint  alleges  various causes of action  including  fraud,
breach of oral contract,  fraud and  defamation  which arise out of the proposed
merger and the events surrounding it. On March 2, 1998, cross-defendants Airnet,
Uninet,  Schatzlein  and Houston  answered  the  Cross-Complaint  with a general
denial and a single  affirmative  defense -- that the  Cross-Complaint  does not
state facts sufficient to constitute a cause of action.

The Company  intends to vigorously  defend the Second  Amended  Complaint and to
pursue the claims set forth in the Cross-Complaint. Although the Company intends
to  defend  the  action  vigorously,  it is still  in its  early  stages  and no
substantial  discovery  has  been  conducted  in this  matter,  with  certainty.
Accordingly,  at this time, the Company is unable to predict the outcome of this
matter, with certainty.  A non-binding  mediation  previously scheduled for June
12, 1998 before a retired judge of the superior court, is currently scheduled to
place on August 21, 1998.

Chadmoore Communications, Inc. v. John Peacock Case No. CV-S-97-00587-HDM (RLH),
United States District Court for the District of Nevada

In  September  1994,  CCI  entered  into a two year  consulting  agreement  (the
"Consulting Agreement") with John Peacock ("Peacock") to act as a consultant and
technical  advisor to CCI concerning  certain  specialized  mobile radio ("SMR")
stations.  In May, 1997 CCI filed a complaint  against  Peacock for  declaratory
relief in the United States District Court for the District of Nevada, seeking a
declaration of the respective rights and obligations of CCI under the Consulting
Agreement.  CCI is  seeking  this  judicial  declaration  based  upon  Peacock's
contention  that  he  is  entitled  to  certain  bonus  compensation  under  the
Consulting  Agreement.  Peacock  contends  that this bonus  compensation  is due
regardless of whether an SMR license is granted  based upon his  activities as a
consultant.  CCI contends that the Consultant Agreement is clear that such bonus
compensation  is only  awarded  upon  the  "grant"  of an SMR  license.  Peacock
contends that he is entitled to bonus compensation of four hundred five thousand
($405,000).  In lieu of answering the complaint,  Peacock filed a motion seeking
dismissal  of the  action  based  on the  assertion  that he is not  subject  to
jurisdiction  in Nevada courts.  After  briefing,  that motion was denied by the
Court, and the parties are now proceeding with discovery.

On September 26, 1997, Peacock answered the Complaint and asserted the following
affirmative defenses: failure to state a claim, failure to perform,  intentional
concealment or failure to disclose material facts, estoppel, unclean hands, lack
of subject  matter,  claims  not  authorized  by  declaratory  relief  statutes,
improper venue, forum non conveniens,  rescission and reformation, and choice of
law.

On or about January 28, 1998,  Peacock filed a motion to add a  counterclaim  to
this litigation.  The counterclaim purported to allege causes of action based on
breach of the  Consultant  Agreement,  fraud and breach of fiduciary  duty.  CCI
objected to Peacock's improper attempt to add tort claims to this litigation and
Peacock  agreed  to  withdrawn   them,   amend  its  proposed   counterclaim  by
stipulating,  and assert only a breach of contract claim based on the Consulting
Agreement.  The Amended  Counterclaim  was deemed filed with the Court, on March
15, 1998. On May 11, 1998 Chadmoore cited its Reply to Peacock's Counsels claim,
denying liability and asserting  Thirty-eight  affirmative  defenses,  including
defenses based on Peacock's alleged fraud and failure to perform.  For then with
its Reply,  Chadmoore  filed a  counterclaim  against  Peacock and two  entities
related to Peacock - Peacock's  Radio and Wild's  Computer  Services,  Inc.  and
Peacock's  Radio, a  Partnership.  Chadmoore's  counterclaim  asserts claims for
Fraud,   Breech  of  Fiduciary   Duty,  and  Breech  of  Contract.   Chadmoore's
counterclaim seeks general and punitive damages.

CCI  intends  to  vigorously   pursue  its  Complaint  and  defend  against  the
counterclaim.  At this time, discovery has not been completed and the Company is
unable to predict the outcome of this matter.

Pursuant  to the FCC's  jurisdiction  over  telecommunications  activities,  the
Company is  involved  in  pending  matters  before the FCC which may  ultimately
affect the Company's operations.

(9) MANAGEMENT PLANS

The accompanying  unaudited consolidated financial statements have been prepared
assuming  that the Company  will  continue as a going  concern.  The Company has
suffered  recurring  losses from  operations,  has a negative working capital of
$7,588,009,  and has a $36,106,895  deficit  accumulated  during the development
stage that raise  substantial  doubt  about its  ability to  continue as a going
concern.  Management's plans in regard to these matters are described below. The
unaudited  consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

The  Company  believes  that over the next 12 months,  depending  on the rate of
market roll-out during such period, it will require  approximately $7 million to
$10 million in  additional  funding  for  full-scale  implementation  of its SMR
services and ongoing operating expenses. To meet such funding requirements,  the
Company  anticipates  continued  utilization of its existing  borrowing facility
with  Motorola,  Inc.  ("Motorola"),  a vendor  financing  arrangement  recently
consummated with HSI GeoTrans, Inc. ("GeoTrans"), sales of selected SMR channels
deemed  non-strategic  to its  business  plan,  and  additional  debt funding as
needed. There can be no assurances that the Company will be able to successfully
obtain  additional  debt funding or will be otherwise able to obtain  sufficient
financing to consummate the Company's business plan.


Based on the  foregoing,  the  Company  believes  that it should  have  adequate
resources  to  continue  establishing  its SMR  business  and  emerge  from  the
development stage during 1999.  However,  while the Company believes that it has
developed  adequate  contingency  plans,  the failure to obtain  additional debt
financing  could have a material  adverse  effect on the Company,  including the
risk of bankruptcy.  Such contingency  plans include pursuing similar  financing
arrangements with other institutional  investors and lenders that have expressed
interest in providing  capital to the Company,  selling selected  channels,  and
focusing solely on the 51 markets in which  full-scale  service has already been
implemented. This latter course might entail ceasing further system expansion in
such markets  (which in the  aggregate  are  generating  positive cash flow) and
reducing  corporate  staff to the minimal  level  necessary to  administer  such
markets.  The Company believes that this strategy would provide  sufficient time
and resources to raise additional  capital or sell selected channels in order to
resume its growth.  However,  there can be no assurances that this or any of the
Company's  contingency plans would adequately address the aforementioned  risks,
or that the Company will attain overall  profitability  once it has emerged from
the developmental stage.


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION

The  following is a  discussion  of the  consolidated  financial  condition  and
results of  operations  of Chadmoore  Wireless  Group,  Inc.,  together with its
subsidiaries  (collectively "Chadmoore" or the "Company"),  for the three months
ended and six months ended June 30, 1998, and 1997, respectively.

Statements  contained herein that are not historical  facts are  forward-looking
statements as that term is defined by the Private  Securities  Litigation Reform
Act of 1995.  Although the Company believes that the  expectations  reflected in
such forward-looking  statements are reasonable,  the forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
from those projected.  The Company cautions  investors that any  forward-looking
statements made by the Company are not guarantees of future performance and that
actual  results  may  differ  materially  from  those  in  the   forward-looking
statements.   Such  risks  and  uncertainties   include,   without   limitation,
fluctuations in demand, loss of subscribers, the quality and price of similar or
comparable wireless communications  services,  well-established  competitors who
have substantially  greater financial resources and longer operating  histories,
regulatory  delays or denials,  ability to complete  intended  market  roll-out,
access  to  sources  of  capital,  adverse  results  in  pending  or  threatened
litigation,  consequences of actions by the FCC, and general economics.  See the
Company's Form 10-KSB for the year ended December 1997.

During the year ended December 31, 1997, the Company's  primary  activities were
acquiring  assets (spectrum and  infrastructure),  attempting to secure capital,
performing engineering activities,  and assembling and installing infrastructure
on  antenna  sites.  To  a  far  lesser  degree  the  Company   concentrated  on
establishing  distribution,  marketing  and  building a customer  base.  Planned
principal  operations have commenced,  but there has been no significant revenue
therefrom.  The Company has  determined it is still devoting most of its efforts
to activities such as financial planning,  raising capital,  acquiring operating
assets,  training  personnel,  developing  markets and  building  its network of
licenses.  In  addition,  approximately  45% of 1997  revenue was  derived  from
non-core  business  activities which is not the primary focus of its operations.
The Company's  normal  operations  would be selling air-time to customers in 175
secondary and tertiary  markets  throughout the continental  United States,  not
selling and servicing radio equipment. Management believes the Company continues
to be a  development  stage  company,  as set forth in  Statement  of  Financial
Accounting  Standards No. 7 "Accounting  and  Reporting by  Developmental  Stage
Enterprises".  The Company will emerge from developmental stage when its primary
activities are focused on distribution, marketing and building its customer base
and there is significant  revenue  therefrom,  which the Company  anticipates to
occur during 1999.

(1) PLAN OF OPERATION

A. INTRODUCTION

The Company is the second-largest  holder of frequencies in the United States in
the 800 megahertz ("MHz") band for commercial  specialized  mobile radio ("SMR")
service.  With  control  of over  4,800  channels  in the 800 MHz  band  through
ownership of the licenses or through  generally  irrevocable  options to acquire
licenses (see Licenses and Rights to Licenses), the Company's frequencies, cover
approximately  55 million  people in 180 markets  throughout  the United States,
with focus on secondary and tertiary cities ("Operating Territory").

B. PRINCIPAL SERVICE AND MARKETS

Also known as dispatch, one-to-many, or push-to-talk, Chadmoore's commercial SMR
service enables reliable,  cost-effective,  real-time communications for smaller
and medium-sized enterprises ("SMEs") that rely on mobile workforces. For a flat
fee of  approximately  $15.00 per radio per  month,  customers  enjoy  unlimited
air-time for communicating instantaneously with their teams.

Dispatch is a two-way  wireless  communication  service  primarily  for business
users who have a need to  communicate  between a  central  dispatch  point and a
mobile  workforce.  Users  can  choose  to  communicate  with a group,  selected
sub-groups or individuals.  The customer base for dispatch  service is typically
stable,   diverse,   and   cost-conscious,   including   general  and  specialty
contractors,  HVAC  service  providers,  security  services,  courier  and other
delivery  services,  distribution  and  transportation  firms,  real  estate and
insurance agents, farmers, and other SMEs that have significant field operations
and need to provide their personnel with the ability to communicate  directly in
real-time  on a  one-to-one  or  one-to-many  basis.  Consequently,  the Company
believes that SMR represents an attractive and affordable communication solution
for  smaller and middle  market  businesses,  especially  in the  secondary  and
tertiary cities on which Chadmoore is focusing.

The Company's  primary  objectives are to continue  developing,  operating,  and
aggressively  loading SMR systems within its Operating Territory and to do so in
a manner that effectively  deploys  capital,  maximizes  recurring  revenues per
dollar of invested capital, and generates positive cash flow at the system level
as quickly as possible. In assessing these objectives and its spectrum position,
the  Company  adopted  its  strategy  to focus  on the  traditional  analog  SMR
business.

Several  key  factors are  believed  by the  Company to support  this  strategy,
including  (i) an  established  market  base of 18.8  million  users in the U.S.
estimated to already rely on analog SMR service for dispatch applications,  (ii)
capacity  constraints  creating pent-up demand, (iii) before the FCC's licensing
freeze, demand for SMR that had expanded consistently at a rate of approximately
15% to 18% per year for the prior 10 years,  (iv) basic businesses of the nature
served  by SMR have  endured  for  decades,  and are  expected  to  continue  to
indefinitely into the future,  particularly in the secondary and tertiary cities
focused on by Chadmoore,  (v) favorable economic and demographic conditions have
stimulated   significant   business   formation,   with  SMR   positioned  as  a
cost-effective  entry-level  productivity  tool for SMEs,  (vi)  outsourcing  to
commercial SMR providers is becoming  economical  for users on private  systems,
(vii) analog SMR technology is proven, dependable, and widely available,  (viii)
analog dispatch  service provides  unlimited  one-to-many  communications  for a
known,  flat fee of approximately  $15 per user per month, (ix) excellent system
economics are attainable as analog SMR service is simple and  cost-effective  to
deploy,   (x)  such  system   economics  enable  the  Company  to  add  capacity
incrementally  as  demand  dictates,  resulting  in a  relatively  low  cost  of
infrastructure, (xi) additional services such as sub-fleet billing, interconnect
(telephony),   automatic  vehicle  location,  mobile  data,  voice  mail,  short
messaging (paging),  and telemetry can be offered using the same infrastructure,
thereby  generating  operating  leverage,  (xii) an  experienced,  trained,  and
motivated  distribution  network was already in place  primarily  in the form of
Motorola  Sales and Service  ("MSS")  shops,  and (xiii)  nothing  precludes the
Company  from  migrating  to  digital  or other  technology  as future  capacity
requirements dictate on a market by market basis.

Prior to adopting its analog technology platform, the Company had considered but
decided against  implementing a digital  infrastructure  ("digital  SMR").  This
decision  was based,  in part,  on the  Company's  evaluation  of the  following
factors: (i) competitors  converting to digital SMR were expected by the Company
to create further segmentation and awareness in the marketplace, (ii) full-scale
digital conversion strategies generally require turning off existing SMR systems
in order to utilize frequencies within a digital  architecture,  creating a pool
of established  users which the Company believes to be potentially  available to
other  providers,  (iii) the capital costs per subscriber  associated  with such
digital technology are substantially higher than those for analog systems,  (iv)
the Company  believes that the increasingly  competitive  nature of the wireless
communications  industry  increases the risks associated with the higher capital
costs  of  such  digital  technology,  (v) a four to five  times  lower  pricing
advantage   for  analog   versus   digital   service  can  be  marketed  to  the
cost-conscious  end-user,  (vi)  other  than  digital  encryption,  the  Company
believes  that  essentially  the same feature set can be offered to the customer
using  analog   technology,   (vii)  the  Company   believes  that  it  can  add
infrastructure on an as-needed,  just-in-time  basis and for significantly  less
capital  cost,  and (viii)  nothing  precludes  the Company from  migrating to a
digital SMR  platform  as future  capacity  requirements  dictate on a market by
market basis,  although such a migration would require additional  expenditures.
Because  virtually  all of the channels  acquired by the Company were  initially
unused, with few or no existing customers on such frequencies, Chadmoore did not
need to adopt a  digital  infrastructure  in order to  create  room for  growth.
Rather,  with ample  available  frequencies  at its disposal,  the Company could
continue to offer traditional SMR users the low-cost,  fixed-rate communications
solution to which they are accustomed.

As of June 30, 1998, the Company had constructed, and based on detailed criteria
relating to  engineering,  demographics,  competition,  market  conditions,  and
dealer characteristics, had developed a prioritized roll-out plan for a total of
180 markets in the United States covering  approximately55  million people. This
population  number,  based on 1996 U.S. Census Bureau estimates for Metropolitan
Statistical  Area  figures,  represents  the  number of people  residing  in the
Operating  Territory and is not intended to be indicative of the number of users
or potential penetration rates as the Company establishes operating SMR systems.
Of these 180  markets,  the  Company  has  implemented  full-scale  systems  and
distribution,  servicing approximately 18,000 subscribers (an increase in excess
of 117% since  December 31,  1997) in the  following 51 markets as of August 14,
1998:

Abilene, TX                       Grand Rapids, MI           Mobile, AL
Atlantic City, NJ                 Greenville, NC             Naples, FL
Augusta, GA                       Greenville, SC             Nashville, TN
Austin, TX                        Harrisburg, PA             Norfolk, VA
Baton Rouge, LA                   Huntsville, AL             Omaha, NE
Bay City/Saginaw, MI              Jackson, MS                Pine Bluff, AR
Beaumont, TX                      Jacksonville, FL           Portland, ME
Bowling Green, KY                 Jacksonville, NC           Richmond, VA
Charleston, SC                    Lafayette, IN              Roanoke, VA
Charlotte, NC                     Lafayette, LA              Rochester, MN
Charlottesville, VA               Lake Charles, LA           Rockford, IL
Chattanooga, TN                   Lexington, KY              Silverhill, AL
Columbia, SC                      Little Rock, AR            South Bend, IN
Corpus Christi, TX                Madison, WI                Springfield, ILN
Fayetteville, AR                  Mankato, MN                St. Cloud, MN
Fort Myers, FL                    Memphis, TN                Tyler, TX
Fort Wayne, IN                    Milwaukee, WI              Wilmington, NC

Chadmoore generates revenue primarily from monthly billing for dispatch services
on a per  unit  (radio)  basis.  In  selected  markets,  additional  revenue  is
generated from telephone interconnect service based on air-time charges as used,
and in the case of the Memphis and Little Rock markets (in which  direct  rather
than  indirect  distribution  is  used),  from  the  sale  of  radio  equipment,
installation, and equipment service as well.

As  initial  capacity  in a market is  approached,  the  Company  can  integrate
additional  channels under its control into the main system using the same basic
controller  (system  computer),  which  reduces  the  average  capital  cost per
channel.  The Company  believes that such system economics enable the Company to
add capacity  incrementally as demand dictates and maximize  recurring  revenues
per  dollar  of  capital  invested.   At  the  same  time,   capacity  increases
geometrically as channels are added due to the greater  statistical  probability
of a channel  being  available  for any user at any given time. In the Company's
belief,  these two  factors  generate  strong  operating  leverage as the system
expands.

In general,  the Company  prioritizes  its markets based on five key parameters:
(i) the quality of the  potential  dealer,  (ii) the lack of available  capacity
from  other  SMR  providers  in  the  market,   (iii)  business  and  population
demographics, (iv) channel density, availability of tower space, topography, and
similar engineering considerations,  and (v) the overall business case including
anticipated  pricing,  demand,  infrastructure  and operating  costs,  return on
investment, and potential for value-added services.

C. DISTRIBUTION

Once  commercial   service  has  been  implemented  in  a  market,   Chadmoore's
executional focus turns to acquiring new users. In general, the Company utilizes
an indirect  distribution  network of  well-established  local dealers,  most of
which are MSS shops,  to penetrate its markets.  The Company  believes that this
distribution   channel   enables  it  to  capitalize  on  substantial   existing
infrastructure,  reduce  capital  requirements,  reduce fixed  operating  costs,
outsource  lower-margin  equipment sales and service,  enhance flexibility,  and
speed roll-out,  while also bringing the Company  immediate market knowledge and
presence,  significant industry experience, and an established base of customers
and  prospects  to sell  into.  Chadmoore  selects  its  dealers on the basis of
loading history,  infrastructure for supporting customers, motivation level, and
references from vendors and customers.  Motorola, Inc. (NYSE: MOT) has been very
helpful to the  Company in  identifying  and  introducing  Chadmoore  to quality
dealers  in  high-priority  markets as well.  In  markets  in which the  Company
operates, but where a suitable dealer or independent agent is not available, the
Company intends to establish its own marketing presence or offer such markets as
expansion  opportunities for top dealers serving the Company in other cities, in
each case to the extent the Company finds practical.  In addition, the Company's
management team  recognizes  that additional  staff will be required to properly
support marketing,  sales, engineering,  accounting,  and similar disciplines to
achieve its 1998 marketing objectives.

Through  corporate and field management,  Chadmoore  supports its dealers with a
range of selling tools and  incentives.  The Company has engaged Moscato Marsh &
Partners,  Inc.  of  New  York  ("Moscato")  for  advertising,   marketing,  and
promotional  services as well as  administering  the local market  launch in the
remaining 129 markets.  Several  elements of  Chadmoore's  customer  acquisition
strategy are incorporated into Moscato's program,  including further development
of its "Power To Talk" (PTT) service mark,  creation and  distribution  of local
dealer support kits, design and planning of local market promotional, media, and
public  relations  programs in all of the Company's  180 markets,  production of
collateral  materials and national  advertisements  in trade  publications,  and
development of a full-time  field  marketing  administrative  program on a local
market basis.

During 1997 for selected dealers in priority markets,  the Company implemented a
dealer partner program in order to finance system construction ahead of plan. In
this program,  dealers made substantial direct  contributions that financed 100%
of the initial system build-out.  Depending on the market,  the dealer generally
recoups 60% to 80% of such  investment  from  system  earnings  after  operating
expenses,  and retains a 20% to 40%  interest in the system  thereafter.  Of key
significance, the dealer is repaid only if the system is profitable. The result:
a long-term  partnering  relationship  that motivates the Company to support the
dealers,  and  that the  Company  believes  motivates  dealers  to load  systems
rapidly,   provide  excellent  service  and  customer   retention,   and  market
value-added  services to the installed base.  Company  management  believes that
such emphasis has, in part,  been  responsible  for a Chadmoore  churn rate (the
rate at which customers disconnect service) well below industry average.

To keep the  motivational  aspects of the dealer partner  program but reduce the
effective capital cost to the Company,  in selected markets for which full-scale
roll-out has yet to occur the Company has  implemented a modified dealer partner
arrangement in which the dealer contributes  approximately 25% to 60% (depending
on market  size)  towards  initial  market  roll-out  costs in return  for a 10%
interest in the local system. This investment is a capital contribution, and not
recouped  from  system  earnings.  Based on the  speed  and  extent  of  loading
subscribers onto the system, the dealer partner also has incentive opportunities
to earn up to an additional 10% interest in the system.

D. COMPETITIVE BUSINESS CONDITIONS AND COMPANY'S INDUSTRY POSITION

In management's evaluation,  key factors relevant to competition in the wireless
communication  industry  are  pricing of  service,  size of the  coverage  area,
quality of communication,  reliability and availability of service (i.e. waiting
time for a "clear" channel, absence of busy signals, and absence of transmission
disconnects or failures).  The Company's success depends in large measure on its
ability to compete  with  numerous  wireless  service  providers  in each of its
markets,  including  cellular  operators,  PCS  service  providers,  digital SMR
service providers, paging services, and other analog SMR operators. The wireless
communications  industry is highly  competitive and comprised of many companies,
most of  which  have  substantially  greater  financial,  marketing,  and  other
resources than the Company.  While the Company  believes that it has developed a
differentiated  and effective  business plan, there can be no assurances that it
will be able to compete successfully in its industry.

Since the late 1980s,  Nextel  Communications  Inc. ("Nextel") in particular has
acquired a large number of SMR systems and is in the process of  implementing  a
conversion from analog SMR technology to Motorola's digital integrated  Dispatch
Enhanced Network ("iDEN") system. Other cellular operators and PCS providers are
implementing digital transmission  protocols on their systems as well. Chadmoore
believes that Nextel is focusing on higher-end,  cellular-like  telephony users,
thereby creating a market segmentation opportunity for the Company. As a result,
the Company competes with Nextel primarily on the basis of targeted end-user and
price.

Other potential wireless  competitors for Chadmoore include Southern Company and
Geotek.  Both are implementing  digital  architectures and pursuing  Nextel-like
strategies on a regional or primary  market basis.  Southern  Company is a large
utility  focusing on wide-area  communications  for its own vehicle fleet in the
Southeastern  U.S., while selling excess capacity to other businesses  traveling
the  same  geographic  region.  Geotek  is  deploying  an  advanced  proprietary
technology  developed from Israeli military systems that operates on 900 MHz. As
with  Nextel,  Chadmoore  intends to compete  with  Southern  Company and Geotek
primarily based on targeted end-user, price and to a certain extent,  geographic
differentiation.

Most other analog SMR providers consist of local small businesses,  often passed
from  generation  to  generation,  that  Chadmoore  believes  lack the spectrum,
professional  marketing,  management  expertise,  and  resources  brought to the
marketplace by the Company.  In  Management's  opinion,  available  capacity and
operating  capabilities  of existing  SMR  providers  constitute  key factors in
Chadmoore's  market  prioritization  matrix. The Company intends to compete with
existing  analog  SMR  providers  primarily  on the basis of  customer  service,
available spectrum, capacity to meet customer growth, and professional marketing
and dealer support.

E. LICENSES AND RIGHTS TO LICENSES

Within its 180 target markets,  Chadmoore controls  approximately 4,800 channels
in the  800  MHz  band  through  ownership  of  licenses  or  through  generally
irrevocable five and ten-year options to acquire licenses ("Option Agreements"),
subject  to FCC  rules,  regulations,  and  policies,  coupled  with  management
agreements  ("Management  Agreements")  that remain in effect  until such Option
Agreements  have been exercised or expire.  The Management  Agreements  give the
Company the right to manage the SMR  systems,  subject to the  direction  of the
licensees,  for a period of time prior to the  transfer  of the  licenses to the
Company as stated in the agreements,  usually 2 to 5 years.  During such period,
revenues received by the Company are shared with the licensee only after certain
agreed-upon  costs to construct the channels have been recovered by the Company.
These like-term  Management  Agreements with the license holders are intended to
enable the Company to develop,  maintain,  and  operate  the  corresponding  SMR
channels subject to the licensee's direction.  Any acquisition of an SMR license
by the Company  pursuant to exercise of an Option  Agreement  is subject,  among
other  things,  to  approval  of the  acquisition  by the FCC.  Until an  Option
Agreement  is  exercised  and  the  corresponding   license  is  transferred  to
Chadmoore,  the Company acts under the  direction  and  ultimate  control of the
license holder and in accordance with FCC rules and regulations.

Once an SMR station is operating,  the Company may exercise its Option Agreement
to  acquire  the  license  at any time  prior to the  expiration  of the  Option
Agreement.  As of June 30, 1998, the Company had exercised Option  Agreements on
approximately  4,460 channels,  of which  approximately 3,000 had transferred to
the Company and approximately  1,460 were in the process of being transferred to
the  Company,  pending FCC  approval.  The  remaining  approximate  340 channels
continue to be utilized  under Option and Management  Agreements,  for which the
Company has decided to delay exercise based on economic considerations.

The Company presently intends to exercise all such remaining Option  Agreements,
but such  exercise is subject to certain  considerations.  The Company may elect
not to exercise an Option Agreement for various business reasons,  including the
Company's  inability  to acquire  other  licenses in a given  market,  making it
economically  unfeasible  for the Company to offer an SMR system in such market.
If the Company does not exercise an Option Agreement, its grantor may retain the
consideration previously paid by the Company.  Moreover, if the Company defaults
in its  obligations  under an Option  Agreement,  the  grantor  may  retain  the
consideration previously paid by the Company as liquidated damages.  Further, if
the SMR system is devalued by the Company's  direct action,  the Company is also
liable under the Option Agreement for the full Option Agreement price,  provided
the grantor gives timely notice. The Option Agreements also authorize a court to
order  specific  performance  in  favor of the  Company  if a  grantor  fails to
transfer the license in accordance with the Option Agreement. However, there can
be no assurance that a court would order specific performance, since this remedy
is subject to various  equitable  considerations.  To the extent that Option and
Management  Agreements remain in place, no assurance can be given that they will
continue to be accepted by the FCC or will continue in force.

(2) RESULTS OF OPERATION

A. SIX MONTHS ENDED JUNE 30, 1998 VERSUS SIX MONTHS ENDED JUNE 30, 1997

Total  revenues  for the six  months  ended  June 30,  1998  increased  15.3% to
$1,247,622  from  $1,081,884 for the six months ended June 30, 1997,  reflecting
increases of $582,902,  or 203.5%,  in Radio Services  (recurring  revenues from
air-time subscription by customers),  offset in part by declines of $387,352, or
62.2%, in Equipment Sales and $13,072,  or 8.4%, in Maintenance and Installation
services.  Consistent with the Company's plan of operation to focus on recurring
revenues  by selling  its  commercial  SMR  service  through  independent  local
dealers,  the proportion of total revenues generated by Radio Services increased
to 69.7% for the six months  ended  June 30,  1998 from 26.5% for the six months
ended June 30, 1997. Where the Company sells through  independent  dealers,  the
local dealer  rather than the Company  sells,  installs,  and services the radio
equipment  and records  the  revenues  and costs  associated  therewith  and the
Company receives only the recurring revenue associated with the sale of airtime.
The Company  anticipates  that the  proportion of total  revenues from recurring
revenues will continue to increase in future  periods as additional  markets are
rolled out utilizing indirect distribution through such local dealers.

The 203.5% increase in Radio Services  revenues,  to $869,359 for the six months
ended June 30, 1998 from  $286,457 for the six months  ended June 30, 1997,  was
driven by an increase in the number of  subscribers  utilizing the Company's SMR
systems,  which measured 15,380 at June 30, 1998 versus  approximately  3,672 at
June 30, 1997,  an increase of over 319% during the twelve months ended June 30,
1998. The increase in subscribers,  was attributed to full-scale  implementation
of service  by the  Company in 31 new  markets  during the period and  continued
subscriber  growth in existing  markets.  Pricing per subscriber unit in service
remained comparable over the periods.  Further, during the six months ended June
30, 1998, the number of subscribers increased from 8,297 to 15,380, or 85.4%, as
compared to an increase from 2,135 to 3,672, or 72.0%, during the same period in
1997.

The 62.2%  decrease in revenues from  Equipment  Sales,  to $235,537 for the six
months ended June 30, 1998 from $622,889 for the six months ended June 30, 1997,
and the 8.4% decrease in revenues from Maintenance and Installation services, to
$142,253 for the six months ended June 30, 1998 from $155,325 for the six months
ended June 30, 1997,  was  partially  attributed  to the sale of lower price but
higher margin  equipment in the Company's two direct  distribution  markets.  In
addition, the Company had insufficient working capital to maintain inventory and
a full complement of salespeople during the first quarter of 1998.

The Company  anticipates  that Equipment Sales and Maintenance and  Installation
service will continue to account for a declining  share of total revenues in the
future,  because  since  acquiring  full-service  operations  in its  first  two
markets,  the Company has  utilized and intends to continue  utilizing  indirect
distribution  through  local  dealers in  substantially  all  markets.  As noted
previously,  in such cases,  the local  dealer  rather  than the Company  sells,
installs,  and services the radio  equipment  and records the revenues and costs
associated therewith.

Cost of sales  decreased by $143,779,  or 26.4%,  to $401,710 for the six months
ended June 30, 1998 from  $545,489 for the six months ended June 30, 1997.  This
decrease was due to lower Equipment and Maintenance and  Installation  revenues,
which have higher cost of sales associated with them, compared to Radio Services
revenues.  As a result, the gross margin (total revenue less cost of sales, as a
percentage of total revenue)  increased by 18.2 percentage  points, to 67.8% for
the six months  ended June 30, 1998 from 49.6% for the six months ended June 30,
1997.

Salaries,  wages,  and benefits  expense  increased by  $118,755,  or 10.1%,  to
$1,289,111  for the six months ended June 30, 1998 from  $1,170,356  for the six
months ended June 30,  1997,  primarily  due to a higher  number of employees to
support the Company's  expansion  into  additional  markets as discussed  above.
Relative to total  revenues,  salaries,  wages,  and benefits  expense  measured
103.3% for the six months ended June 30, 1998  compared  with 108.2% for the six
months ended June 30, 1997. In future years the Company expects salaries, wages,
and  benefits  expense as a percent of total  revenues to continue to decline as
the Company  realizes  economies of scale gained from an  increasing  subscriber
base managed through essentially the same infrastructure.

General and administrative expenses, increased $351,573, or 24.9%, to $1,759,189
for the six months ended June 30, 1998 from  $1,407,616 for the six months ended
June 30,  1997.  This  increase is partially  attributed  to an increase in site
expenses for non-revenue  generating sites, the majority of these site expenses,
for  1997,  were  incurred  in the  second  half of the year  when  the  Company
initiated the construction of its channels. The Company expects such general and
administrative  site costs to  decrease  as these  sites  generate  revenue  and
related   site  costs   become   cost  of  sales.   Additionally,   general  and
administrative  expenses  increased in conjunction with the Company's  expansion
into additional markets. Relative to total revenues,  general and administrative
expenses  increased  to 141.0% for the six months  ended June 30, 1998  compared
with 130.1% for the six months ended June 30, 1997. The Company  expects general
and administrative  expenses as a percent of total revenues to decline in future
years as the Company  realizes  economies  of scale  gained  from an  increasing
subscriber base managed through essentially the same infrastructure.

Depreciation and amortization  expense increased $150,030,  or 46.4% to $473,372
for the six months  ended June 30, 1998 from  $323,342  for the six months ended
June  30,  1997,   reflecting  greater  capital  expenditures   associated  with
construction and implementation of operating systems equipment.

Due to the foregoing,  total operating expenses increased $476,579, or 13.8%, to
$3,923,382  for the six months ended June 30, 1998 from  $3,446,803  for the six
months ended June 30, 1997, and the Company's loss from operations  increased by
$310,841, or 13.1%, to $2,675,760 from $2,364,919, for such respective periods.

Net interest expense decreased $99,530, or 10.9%, to $813,185 for the six months
ended June 30, 1998 from $912,715 for the six months ended June 30, 1997,  which
is attributable to the beneficial conversion feature of $767,986 embedded in the
convertible  debenture  issued  during  February  1997  partially  off-set by an
increase of  $668,456  due to higher  average  balances  outstanding  under loan
facilities and additional notes payable to licensees from the exercise of Option
Agreements.

Based on the foregoing, the Company's net loss, excluding  the  recording  of  a
one-time  charge  of $7,166,956 during the second quarter of 1997 (to reflect a
then-probable impairment of  value  to  management  agreements  and  options  to
acquire licenses for which the Company at such time was uncertain of its ability
to  construct systems prior to an FCC-mandated construction deadline of November
20, 1997 which would have resulted in forfeiture of such spectrum  back  to  the
FCC), increased $376,637, or 11.3%, to $3,706,456, or $.14 per basic and diluted
share, for the six months ended June 30, 1998 from $3,329,819, or $.17 per basic
and  diluted  share,  for  the  six  months  ended June 30, 1997. Including such
one-time charge during the second quarter  of  1997,  the  Company's  net  loss
decreased  $6,790,319, or 64.7%, during the six months ended June 30, 1998 from
$10,496,775, or $.54 per basic and diluted share, for the six months ended  June
30, 1997.

B. THREE MONTHS ENDED JUNE 30, 1998 VERSUS THREE MONTHS ENDED JUNE 30, 1997

Total  revenues  for the three  months  ended June 30, 1998  increased  25.5% to
$731,470  from  $583,034 for the three  months  ended June 30, 1997,  reflecting
increases of $352,755,  or 243.3%,  in Radio  Services and $27,028,  or 47.8% in
Maintenance and Installation  services,  offset in part by declines of $221,490,
or 59.6%, in Equipment Sales. Consistent with the Company's plan of operation to
focus on  recurring  revenues by selling  its  commercial  SMR  service  through
independent local dealers,  the proportion of total revenues  generated by Radio
Services  increased to 68.0% for the three months ended June 30, 1998 from 24.9%
for the three  months  ended June 30,  1997.  The Company  anticipates  that the
proportion of total revenues from  recurring  revenues will continue to increase
in future  periods as  additional  markets  are rolled  out  utilizing  indirect
distribution through such local dealers.

The 243.3% increase in Radio Services revenues, to $497,721 for the three months
ended June 30, 1998 from $144,966 for the three months ended June 30, 1997,  was
driven by an increase in the number of  subscribers  utilizing the Company's SMR
systems in both new and existing markets. Pricing per subscriber unit in service
remained comparable over the periods.

The 59.6% decrease in revenues from Equipment  Sales,  to $150,008 for the three
months  ended June 30, 1998 from  $371,498  for the three  months ended June 30,
1997,  was  partially  attributed  to the sale of lower price and higher  margin
equipment in the Company's two direct distribution markets.

The Company  anticipates  that Equipment Sales and Maintenance and  Installation
service will continue to account for a declining  share of total revenues in the
future,  because  since  acquiring  full-service  operations  in its  first  two
markets,  the Company has  utilized and intends to continue  utilizing  indirect
distribution  through  local  dealers in  substantially  all  markets.  As noted
previously,  in such cases,  the local  dealer  rather  than the Company  sells,
installs,  and services the radio  equipment  and records the revenues and costs
associated therewith.

Cost of sales  decreased by $54,598,  or 20.0%, to $218,777 for the three months
ended June 30, 1998 from $273,375 for the three months ended June 30, 1997. This
decrease  was due to lower  Equipment  Sales,  which have  higher  cost of sales
associated with them,  compared to Radio Services revenues.  As a result,  gross
margin increased by 16.9 percentage  points, to 70.0% for the three months ended
June 30, 1998 from 53.1% for the three months ended June 30, 1997.

Salaries,  wages,  and  benefits  expense  increased  by $161,116  or 27.1%,  to
$755,432 for the three  months  ended June 30, 1998 from  $594,316 for the three
months ended June 30,  1997,  primarily  due to a higher  number of employees to
support the  Company's  expansion  into  additional  markets.  Relative to total
revenues,  salaries,  wages,  and benefits expense measured 103.3% for the three
months ended June 30, 1998  compared with 101.2% for the three months ended June
30, 1997.  In future years the Company  expects  salaries,  wages,  and benefits
expense  as a percent of total  revenues  to  decline  as the  Company  realizes
economies of scale gained from an  increasing  subscriber  base managed  through
essentially the same infrastructure.

General and administrative expenses, increased $359,876, or 55.6%, to $1,007,218
for the three  months  ended June 30, 1998 from  $647,342  for the three  months
ended June 30, 1997.  This  increase is partially  attributed  to an increase in
site expenses for non-revenue generating sites. The Company expects such general
and  administrative  site costs to decrease as these sites generate  revenue and
related   site  costs   become   cost  of  sales.   Additionally,   general  and
administrative  expenses  inceased in conjunction  with the Company's  expansion
into additional markets. Relative to total revenues,  general and administrative
expense  increased to 137.7% for the three  months ended June 30, 1998  compared
with  111.0% for the three  months  ended June 30,  1997.  The  Company  expects
general and administrative expenses as a percent of total revenues to decline in
future  years  as the  Company  realizes  economies  of  scale  gained  from  an
increasing subscriber base managed through essentially the same infrastructure.

Depreciation and amortization expense increased $116,254,  or 71.3%, to $279,238
for the three  months  ended June 30, 1998 from  $162,984  for the three  months
ended June 30, 1997,  reflecting  greater capital  expenditures  associated with
construction and implementation of operating systems equipment.

Due to the foregoing,  total operating expenses increased $582,648, or 34.7%, to
$2,260,665  for the three  months  ended June 30, 1998 from  $1,678,017  for the
three  months  ended  June 30,  1997,  and the  Company's  loss from  operations
increased  by  $434,212,  or 39.7%,  to  $1,529,195  from  $1,094,983,  for such
respective periods.

Net  interest  expense  decreased  $253,633, or 41.8%, to $352,815 for the three
months ended June 30, 1998 from $606,448 for the three  months  ended  June  30,
1997,  due  to  the  beneficial  conversion  feature of $525,705 embedded in the
convertible debentures issued during 1997, partially off-set by an  increase  of
$272,072  due  to  higher average balances outstanding under loan facilities and
additional notes payable to licensees from the exercise  of  option  agreements.

Based  on  the  foregoing,  the Company's net loss (excluding the recording of a
one-time charge of $7,166,956 during the second quarter of 1997  to  reflect  a
then-probable  impairment  of  value  to  management  agreements  and options to
acquire licenses for which the Company at such time was uncertain of its ability
to construct systems prior to an FCC-mandated construction deadline of  November
20,  1997  which  would have resulted in forfeiture of such spectrum back to the
FCC), increased $153,379, or 8.7%, to $1,907,310, or $.06 per basic and  diluted
share,  for  the  three  months ended June 30, 1998 from $1,753,931, or $.09 per
basic and diluted share, for the three months ended  June  30,  1997.  Including
such  one-time charge during the second quarter of 1997, the Company's net loss
decreased $6,487,872, or 77.3%, during the three months ended June 30, 1998 from
$8,395,182, or $.45 per basic and diluted share, for the three months ended June
30, 1997.

(3) LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 1998 and 1997, the Company used net cash in
operating activities of $800,616.  The  Company  continues  to  fund  operations
through  financing  activities as the Company continues to be in the development
stage. The major use of cash for the six months ended June 30, 1998 and 1997 was
the acquisition of communication assets. The major  source  of  cash  for  six
months ended June 30, 1998 and 1997 were proceeds from the issuance of long-term
debt and equity.

The  Company  believes  that over the next 12 months,  depending  on the rate of
market roll-out during such period, it will require  approximately $7 million to
$10 million in  additional  funding  for  full-scale  implementation  of its SMR
services and ongoing operating expenses. To meet such funding requirements,  the
Company  anticipates  continued  utilization of its existing  borrowing facility
with  Motorola,  Inc.  ("Motorola"),  a vendor  financing  arrangement  recently
consummated with HSI GeoTrans, Inc. ("GeoTrans"), sales of selected SMR channels
deemed  non-strategic  to its  business  plan,  and  additional  debt funding as
needed. There can be no assurances that the Company will be able to successfully
obtain  additional  debt funding or will be otherwise able to obtain  sufficient
financing to consummate the Company's business plan.

On June 8, 1998, the Company held an initial closing on the sale of selected SMR
channels deemed  non-strategic to its business plan for approximately  $975,000.
Final closing remains subject to prior FCC approval.

On May 1,  1998,  the  Company  closed a $7.5  million  equity  investment  with
Recovery Equity Investors II, L.P. ("Recovery"), an institutional private equity
fund.  In addition to such  investment,  Recovery has an option to purchase from
the Company up to an additional $5 million in equity at a  significantly  higher
price,  and the  Company  has the ability to buy back such option if the Company
meets  certain  performance  criteria.  Exercise of the option would result in a
total equity infusion from Recovery of $12.5 million.

The Company has entered into discussions with various institutional debt funding
sources,  but has not entered into any commitments for additional debt financing
as of the date of this filing.

On March 9, 1998, the Company entered into a vendor  financing  arrangement with
GeoTrans,  a wholly owned  subsidiary of Tetra Tech,  Inc.,  whereby GeoTrans is
performing  turn-key  implementation of full-scale SMR operating systems for the
Company  in up to 10  markets  per month and 145 total  markets.  The  financing
mechanism  in  the  Company's  arrangement  with  GeoTrans  specifies  a  $4,000
down-payment per market by the Company and  approximately  $18,000 per market to
be drawn by the Company  under its Motorola  financing  facility,  with GeoTrans
financing  the balance of  approximately  $49,000 per market on 120-day  payment
terms,  with incentives to the Company of up to a 3% discount for early payment.
Collateral  for such  financing  arrangement  consists  of 183  channels in nine
primarily  non-strategic  markets  with a fair  market  value  estimated  by the
Company of $4.4 million.

On October 30, 1997, two subsidiaries of the Company, CCI and CMRS, entered into
a First Amendment and Financing and Security  Agreement with MarCap  Corporation
("MarCap")  which amended that certain  Financing and Security  Agreement  dated
October 29, 1996 between CCI and Motorola (the  "Motorola Loan  Facility"),  the
interest of Motorola  therein having been assigned to MarCap,  pursuant to which
MarCap  extended  to CCI and  CMRS an  additional  loan  facility  (the  "MarCap
Facility")  in a  maximum  amount of  $2,000,000  (plus  certain  fees and legal
expenses  payable to MarCap).  The MarCap Facility is secured by (i) a pledge of
all the  stock of two  subsidiaries  and  assignment  of all  limited  liability
company  membership  interests  in  three  limited  liability  companies,  which
collectively  hold  licenses or rights to  licenses in up to 452  channels in 12
markets having a value (per a third-party appraiser) of approximately $8,800,000
(subsequently  valued  at  approximately  $10,400,000  by the  same  third-party
appraiser),  (ii) a first lien on all non-Motorola equipment used in systems for
such markets,  and (iii) a cross-pledge of all collateral  previously granted in
favor of Motorola relating to the Motorola Facility,  which cross-pledge,  until
modified by letter  agreement  dated  February  25, 1998 between the Company and
MarCap as described  further  below,  would  unwind with  respect to  collateral
pledged  under  either  the  Motorola  Facility  or  MarCap  Facility  upon full
repayment  by  the  Company  of  all  outstanding  balances  under  either  such
respective  Facility.  The MarCap  Facility is further  guaranteed  by Chadmoore
Wireless Group, Inc. and by Chadmoore  Communications of Tennessee,  Inc. to the
extent  of its  interest  in the  collateral  previously  pledged  in  favor  of
Motorola.

On October 31, 1997, the initial draw under the MarCap  Facility was made in the
amount of $481,440  and  evidenced  by a  promissory  note  executed in favor of
MarCap.  Subsequent draws of $250,000,  $650,000 and $663,000 (plus certain fees
and legal  expenses  payable to MarCap) were made on February 6, 1998,  March 6,
1998, and March 27, 1998, respectively.

On February 25,  1998,  the Company and MarCap  entered into a letter  agreement
relating to the Motorola and MarCap  Facilities  which provided for (i) complete
cross-collateralization  of the  Motorola  and  MarCap  Facilities  without  the
aforementioned  unwinding  provision,  (ii) a revised borrowing base formula for
the  Motorola  and  MarCap  Facilities,  (iii)  notification  by the  Company to
Motorola of the modifications being made pursuant to such letter agreement, (iv)
affirmation  by the Company to utilize  its  diligent  best  efforts to raise at
least $5 million of equity and $15 million of  aggregate  financing by April 30,
1998,  (v) waiver of existing  covenants for the Motorola and MarCap  facilities
through April 30, 1998 so long as the Company  continues to utilize its diligent
best efforts to raise at least $5 million of equity and $15 million of aggregate
financing by such date,  (vi)  affirmation  by MarCap that it will not object to
the  Company  incurring  $10  million in  additional  senior debt so long as the
Company is not in material default on the Motorola or MarCap  facilities,  (vii)
new  covenants  for the Motorola and MarCap  facilities as of April 30, 1998. On
March 5, 1998, Motorola provided the Company with written  acknowledgment of the
notification  required by the Company as described in clause (iii) above, and as
a result,  the  Company  is in full  compliance  with the  Motorola  and  MarCap
facilities.

On April 30, 1998, the Company and  MarCap  agreed  upon  modifications  to  the
provisions  of  the  MarCap Facility. Such modifications included (i) a shifting
out of existing covenants by one quarter to account for elapsed  time  that  had
been  dedicated  to  securing  financing rather than systems implementation, and
(ii) affirmation by the Company to utilize its diligent best efforts  to  obtain
the  then-proposed  $7.5  million  of  equity  financing without the $15 million
aggregate financing requirement. The Company remains in full compliance with the
Motorola and MarCap Facilities,  and  has  classified  the  appropriate  portion
(maturing after one year) as long-term debt.

In October  1996,  CCI signed a purchase  agreement  with  Motorola  to purchase
approximately $10,000,000 of Motorola radio communications equipment,  including
Motorola  Smartnet II trunked radio systems.  Such purchase  agreement  required
that the  equipment  be purchased  within 30 months of its  effective  date.  In
conjunction with such purchase agreement, CCI entered into the Motorola Facility
permitting CCI to borrow during the term of the purchase  agreement up to 50% of
the value of Motorola equipment purchased under the purchase agreement, or up to
$5,000,000.  On August  18,  1997,  Motorola,  with the  Company's  concurrence,
assigned  all of its  interest in the  Motorola  Facility  to MarCap.  By way of
letter agreement dated March 10, 1998 among MarCap,  Motorola,  and the Company,
the  effective  period  of the  Motorola  purchase  agreement  and the  Motorola
Facility  was  extended  from 30 months to 42 months  from the  effective  dates
thereof.  Depending on the Company's ability to continue funding its minimum 50%
down-payment  requirement  under the Motorola  purchase  agreement,  the Company
anticipates  funding  approximately  $2.5  million  to-$3  million  of  Motorola
equipment  for its SMR  systems  under  the  Motorola  Facility  for the next 12
months.

YEAR 2000 ISSUES

The  Company is  currently  awaiting a proposal  from a large  computer  systems
vendor  about  acquiring  a fully  integrated  and  scalable  system  (hardware,
software and service  contract)  ("System")  to load  subscribers,  capture call
records and generate  customer bills. The System will be Year 2000 compliant and
the Company expects it to be fully implemented in the second quarter of 1999. If
the Company does not acquire the System,  it has a  contingency  plan to upgrade
its current computer systems or purchase individual software products to address
its needs. The Company has contacted the necessary  software vendors,  about its
contingency  plan,  and  Management  believes that all the  necessary  Year 2000
compliant software is currently available and can be implemented quickly.

The  Company's  current  accounting  software is not Year 2000  compliant.  This
problem will be addressed  either by phase II of the System or by upgrading  its
current  accounting  software,  a Year 2000 compliant version which is currently
available.  The Company  exclusively  uses Microsoft  products for internal data
storage and  communications.  The Company has  contacted  Microsoft and has been
assured that these products are Year 2000 compliant.

The  Company  relies on third  party  switching  systems to monitor  its systems
usage,  these systems are primarily  manufactured  by Motorola.  The company has
contacted  Motorola and has been assured that the Motorola switching systems are
Year 2000 compliant. Also, to a lesser extent, the Company relies on third party
communication lines, such as internet providers and long distance providers,  to
transfer  data. The Company has not contacted  these  providers and is unable to
assess the impact of Year 2000 issues related to these systems.

At the current  time  Management  is unable to estimate  the cost of the System,
however  the  Company  estimates  the  cost  of  its  contingency  plans  to  be
approximately $50,000.



Based on the  foregoing,  the  Company  believes  that it should  have  adequate
resources  to  continue  establishing  its SMR  business  and  emerge  from  the
development stage during 1999.  However,  while the Company believes that it has
developed  adequate  contingency  plans,  the failure to obtain  additional debt
financing  could have a material  adverse  effect on the Company,  including the
risk of bankruptcy.  Such contingency  plans include pursuing similar  financing
arrangements with other institutional  investors and lenders that have expressed
interest in providing  capital to the Company,  selling selected  channels,  and
focusing solely on the 51 markets in which  full-scale  service has already been
implemented. This latter course might entail ceasing further system expansion in
such markets  (which in the  aggregate  are  generating  positive cash flow) and
reducing  corporate  staff to the minimal  level  necessary to  administer  such
markets.  The Company believes that this strategy would provide  sufficient time
and resources to raise additional  capital or sell selected channels in order to
resume its growth.  However,  there can be no assurances that this or any of the
Company's  contingency plans would adequately address the aforementioned  risks,
or that the Company will attain overall  profitability  once it has emerged from
the developmental stage.

The Company's  unaudited  consolidated  financial  statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
9 to the unaudited consolidated  financial statements,  the Company has suffered
recurring  losses from operations,  has a negative  working  capital,  and has a
deficit  accumulated  during the development  stage that raise substantial doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these  matters  are also  described  in Note 9.  The  unaudited  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

<PAGE>
PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The  Company is  involved  in various  claims and legal  actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's consolidated  financial position,  results of operations or liquidity.
These include the following:

Pursuant  to the FCC's  jurisdiction  over  telecommunications  activities,  the
Company is  involved  in  pending  matters  before the FCC which may  ultimately
affect the  Company's  operations.  These pending  matters  include the "Goodman
Chan" decision.  Details  concerning the status of these  proceedings at the FCC
are given above. (Part I, Item 1 Footnote 7A).
The  Company is  involved  in various  claims and legal  actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's consolidated financial position, results of operations or liquidity.

Airnet,  Inc. v. Chadmoore  Wireless Group, Inc. Case No. 768473,  Orange County
Superior Court On April 3, 1997,  Airnet,  Inc.  ("Airnet") served a summons and
complaint on the Company,  alleging  claims related to a proposed merger between
Airnet  and the  Company  that never  materialized.  In  particular,  Airnet has
alleged that a certain "letter of intent"  obligated the parties to complete the
proposed merger.  The Company denies this allegation.  In its complaint,  Airnet
has alleged the following purported causes of action against the Company: breach
of  contract,  breach of the implied  covenant  of good faith and fair  dealing,
intentional  interference  with  prospective  economic  advantage,   intentional
interference with contractual relationship,  including breach of contract, false
promise and conversion.  Airnet has also purported to seek the following  relief
from the Company:  $28,000,000 in compensatory  damages plus interest,  punitive
damages,  costs  of  suit  and  attorney's  fees.  The  Company  challenged  the
sufficiency of the complaint as to most of the purported causes of action on the
grounds that these purported  causes of action fail to state facts sufficient to
constitute a cause of action. The Company also challenged the sufficiency of the
punitive  damages  allegations on the grounds that the compliant  fails to state
facts  sufficient  to  support  these  allegations.  Rather  than  oppose  these
challenges to its complaint,  Airnet elected to file a first amended  complaint.
Believing  that Airnet's  amendments  were  immaterial  the Company  renewed its
challenges to Airnet's  pleading.  On September 9, 1997, the court sustained the
Company's  demurrers  to  Airnet's  claims for  damages  based on the  Company's
alleged failure to complete the merger and to Airnet's claims for conversion. At
Airnet's  request,  the court allowed Airnet to amend its pleading a second time
to attempt to state these claims,  and Airnet's new complaint asserts claims for
breach of contract,  anticipatory breach of contract,  intentional  interference
with prospective economic advantage, interference with contractual relationship,
inducing breach of contract and false promise. The Company again filed demurrers
challenging certain of the claims in Airnet's pleading. On January 16, 1998, the
Court overruled the Company's demurrers to the Second Amended Complaint.

On February 2, 1998, the Company  answered the Second  Amended  Complaint with a
general denial and by asserting the following affirmative  defenses:  failure to
state a claim, uncertainty,  statutes of limitations,  laches, lack of capacity,
lack of standing, waiver, estoppel,  knowledge and acquiescence,  unclean hands,
unjust  enrichment,  fraud,  misrepresentations,  res  judicata,  justification,
privilege,  no action intended or reasonably calculated to cause injury, lack of
causation,  acts of third parties,  failure to allege a contract,  no meeting of
the minds, statute of frauds, lack of privity, fraud in the inducement, mistake,
lack  of  consideration,   failure  of  consideration,   failure  of  conditions
precedent,  concurrent,   subsequent,  Airnet's  intentional  misrepresentation,
Airnet's negligent  misrepresentations,  performance excused by Airnet's failure
to  perform,   performance   excused  by   recision,   performance   excused  by
modification, antecedent breaches by Airnet, accord and satisfaction, privileged
communications,  justified  communications,  no damages, failure to mitigate and
offset.

On February 2, 1998, the Company filed a Cross-Complaint  against Airnet as well
as  three  other  named  cross-defendants   related  to  Airnet:  Uninet,  Inc.,
("Uninet") Anthony Schatzlein ("Schatzlein") and Dennis Houston ("Houston"). The
Company's  Cross-Complaint  alleges  various causes of action  including  fraud,
breach of oral contract,  fraud and  defamation  which arise out of the proposed
merger and the events surrounding it. On March 2, 1998, cross-defendants Airnet,
Uninet,  Schatzlein  and Houston  answered  the  Cross-Complaint  with a general
denial and a single  affirmative  defense -- that the  Cross-Complaint  does not
state facts sufficient to constitute a cause of action.

The Company  intends to vigorously  defend the Second  Amended  Complaint and to
pursue the claims set forth in the Cross-Complaint. Although the Company intends
to  defend  the  action  vigorously,  it is still  in its  early  stages  and no
substantial  discovery  has  been  conducted  in this  matter,  with  certainty.
Accordingly,  at this time, the Company is unable to predict the outcome of this
matter, with certainty.  A non-binding  mediation  previously scheduled for June
12, 1998 before a retired judge of the superior court, is currently scheduled to
place on August 21, 1998.

Chadmoore Communications, Inc. v. John Peacock Case No. CV-S-97-00587-HDM (RLH),
United States District Court for the District of Nevada

In  September  1994,  CCI  entered  into a two year  consulting  agreement  (the
"Consulting Agreement") with John Peacock ("Peacock") to act as a consultant and
technical  advisor to CCI concerning  certain  specialized  mobile radio ("SMR")
stations.  In May, 1997 CCI filed a complaint  against  Peacock for  declaratory
relief in the United States District Court for the District of Nevada, seeking a
declaration of the respective rights and obligations of CCI under the Consulting
Agreement.  CCI is  seeking  this  judicial  declaration  based  upon  Peacock's
contention  that  he  is  entitled  to  certain  bonus  compensation  under  the
Consulting  Agreement.  Peacock  contends  that this bonus  compensation  is due
regardless of whether an SMR license is granted  based upon his  activities as a
consultant.  CCI contends that the Consultant Agreement is clear that such bonus
compensation  is only  awarded  upon  the  "grant"  of an SMR  license.  Peacock
contends that he is entitled to bonus compensation of four hundred five thousand
($405,000).  In lieu of answering the complaint,  Peacock filed a motion seeking
dismissal  of the  action  based  on the  assertion  that he is not  subject  to
jurisdiction  in Nevada courts.  After  briefing,  that motion was denied by the
Court, and the parties are now proceeding with discovery.

On September 26, 1997, Peacock answered the Complaint and asserted the following
affirmative defenses: failure to state a claim, failure to perform,  intentional
concealment or failure to disclose material facts, estoppel, unclean hands, lack
of subject  matter,  claims  not  authorized  by  declaratory  relief  statutes,
improper venue, forum non conveniens,  rescission and reformation, and choice of
law.

On or about January 28, 1998,  Peacock filed a motion to add a  counterclaim  to
this litigation.  The counterclaim purported to allege causes of action based on
breach of the  Consultant  Agreement,  fraud and breach of fiduciary  duty.  CCI
objected to Peacock's improper attempt to add tort claims to this litigation and
Peacock  agreed  to  withdrawn   them,   amend  its  proposed   counterclaim  by
stipulating,  and assert only a breach of contract claim based on the Consulting
Agreement.  The Amended  Counterclaim  was deemed filed with the Court, on March
15, 1998. On May 11, 1998 Chadmoore cited its Reply to Peacock's Counsels claim,
denying liability and asserting  Thirty-eight  affirmative  defenses,  including
defenses based on Peacock's alleged fraud and failure to perform.  For then with
its Reply,  Chadmoore  filed a  counterclaim  against  Peacock and two  entities
related to Peacock - Peacock's  Radio and Wild's  Computer  Services,  Inc.  and
Peacock's  Radio, a  Partnership.  Chadmoore's  counterclaim  asserts claims for
Fraud,   Breech  of  Fiduciary   Duty,  and  Breech  of  Contract.   Chadmoore's
counterclaim seeks general and punitive damages.

CCI  intends  to  vigorously   pursue  its  Complaint  and  defend  against  the
counterclaim.  At this time, discovery has not been completed and the Company is
unable to predict the outcome of this matter.

Pursuant  to the FCC's  jurisdiction  over  telecommunications  activities,  the
Company is  involved  in  pending  matters  before the FCC which may  ultimately
affect the Company's operations.

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 SECURITIES HOLDERS.

None.

ITEM 5.  OTHER INFORMATION.

None.

ITEM 6.  EXHIBITS AND CURRENT REPORTS ON FORM 8-K

    (a)(1) A list of the financial  statements and schedules thereto as filed in
this report reside at Item 1.

    (a)(2)     The following exhibits are submitted herewith:

     4.10   Original Articles of Incorporation

     4.11  Certificate  of  Designation  of Rights and  Preferences of Series C
        Preferred Stock of the Registrant  (incorporated by reference to Exhibit

     4.1 of Registrant's Current Report on Form 8-K filed with the Securities
        and Exchange Commission on May 15, 1998 (the "Form 8-K")).

     4.2 Form of Series C Preferred Stock Certificate (Incorporated by reference
        to Exhibit 4.2 of the Form 8-K).

    10.20 Form of Amendment No. 1 to Offshore Subscription  Agreement for Series
        B 8%  Convertible  Preferred  Stock dated on or about  February 17, 1998
        (Incorporated by reference to Exhibit 10.16 of the form 8-K)

    10.21 Investment  Agreement  dated May 1, 1998,  between the  Registrant and
        Recovery  Equity  Investors  II,  L.P.  ("Recovery")   (incorporated  by
        reference to Exhibit 10.1 of the Form 8-K).

    10.22  Registration  Rights  Agreement,  dated  May  1,  1998,  between  the
        Registrant  and Recovery  (incorporated  by reference to Exhibit 10.2 of
        the Form 8-K).

    10.23 Stock Purchase Warrant,  dated May 1, 1998, issued to Recovery for the
        purchase of 4,000,000 shares of Common Stock  (incorporated by reference
        to Exhibit 10.2 of the Form 8-K).

    10.24 Stock Purchase Warrant,  dated May 1, 1998, issued to Recovery for the
        purchase of 14,612,796 shares of Common Stock (incorporated by reference
        to Exhibit 10.2 of the Form 8-K).

    10.25 Stock Purchase Warrant,  dated May 1, 1998, issued to Recovery for the
        purchase of 10,119,614 shares of Common Stock (incorporated by reference
        to Exhibit 10.2 of the Form 8-K).

    10.26 Shareholders Agreement, dated May 1, 1998, by and among the Registrant
        Recovery and Robert W. Moore  (incorporated by reference to Exhibit 10.2
        of the Form 8-K).

    10.27 Advisory  Agreement,  dated May 1, 1999,  between the  Registrant  and
        Recovery (incorporated by reference to Exhibit 10.2 of the Form 8-K).

    10.28  Indemnification  Letter  Agreement,  dated May 1, 1998,  between  the
        Registrant  and Recovery  (incorporated  by reference to Exhibit 10.2 of
        the Form 8-K).

    11         Computation of per share amounts (1)

    27.1       Financial Data Schedule 1998 (1)

    27.2       Financial Data Schedule 1997 (1)

(1)      Filed herewith.


<PAGE>
(b)      Current Reports on Form 8-K

(i) Current Report on Form 8-K filed on February 24, 1998,  reported pursuant to
    the SEC's Division of Corporation Finance's interpretation of the disclosure
    requirements  set  forth  in SEC  Release  No.  34-37801,  reporting  (a) On
    December 23, 1997, the Company  concluded a private  placement  conducted in
    accordance with Regulation S in which the Company sold (i) 219,000 shares of
    Series B  Convertible  Preferred  Stock  (the  "Preferred  Stock")  and (ii)
    warrants  ("Warrants")  to purchase  300,000 shares of the Company's  Common
    Stock,  with the  Company  receiving  proceeds of  $1,650,000;  and (b) with
    respect to certain  conversions of the Preferred  Stock,  the Company issued
    shares of its  Common  Stock to various  holders  of some of such  Preferred
    Shares.

(ii) Current  Report on Form 8-K filed on March 16, 1998 reporting (a) the terms
     of  amendments  (the  "Amendments")  of the terms of the private  placement
     described in the Company's Current Report on Form 8-K filed on February 24,
     1998 (the "Prior  8-K"),  which  Amendments  extended  the  holding  period
     applicable to  purchasers  of the Preferred  Stock (as defined in the Prior
     8-K) and provided for the issuance of  additional  shares of Common  Stock,
     Warrants (as defined in the Prior 8-K) and Common Stock underlying Warrants
     to such purchaser; (b) with respect to certain conversions of the Preferred
     Stock,  the Company issued shares of its Common Stock to various holders of
     some of such  Preferred  Shares;  and (c) the Company's  agreement to issue
     800,000  shares of its Common Stock in  accordance  with  Regulation S to a
     single investor (the "Investor") who is not a U.S. Person,  in exchange for
     the delivery to the Company of 5,032  shares of common stock of CMRS.  CMRS
     had previously  agreed to issue the CMRS Shares to the Investor in exchange
     for the agreement of the Investor to pay, on behalf of CMRS, a fee to a LDC
     Consulting, Inc.

(iii)Current  report  on Form 8-K on April 1,  1998  reporting  (a) the sales of
     equity securities pursuant to Regulation S and (b) the conversion of Series
     B Convertible Preferred Stock.

(iv) Current  report on Form 8-K on April 14,  1998  reporting  (a) the sales of
     equity securities pursuant to Regulation S and (b) the conversion of Series
     B Convertible Preferred Stock.

(v) Current  report on Form 8-K on April  29,  1998  reporting  (a) the sales of
    equity securities  pursuant to Regulation S and (b) the conversion of Series
    B Convertible Preferred Stock.

(vi)Current  report on Form 8-K filed on May 15, 1998,  reporting a $7.5 million
    equity investment which closed on May 4, 1998.

(vii) Current  report  on Form 8-K on May 27,  1998  reporting  (a) the sales of
    equity securities  pursuant to Regulation S and (b) the conversion of Series
    B Convertible Preferred Stock.


<PAGE>
                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the  registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      Chadmoore Wireless Group, Inc.
                                      (formerly CapVest International, Ltd.)


                                     By: /s/ Robert W. Moore                  
                                          Robert W. Moore
                                          President and CEO

                                     By: /s/ Richard C. Leto
                                          Richard C. Leto
                                          Chief Financial Officer

                                     By: /s/ Rick D. Rhodes          
                                          Rick D. Rhodes
                                          Chief Regulatory Officer

                                     By: /s/ Jan S. Zwaik                     
                                          Jan S. Zwaik
                                          Chief Operating Officer

                                      Date: November 24, 1998




<PAGE>
                                  EXHIBIT INDEX

   EXHIBIT         
   NUMBER                    DESCRIPTION

     11           Computation of per share amounts (1)

   27.1           Financial Data Schedule 1998 (1)

   27.2           Financial Data Schedule 1997 (1)

(1)      Filed herewith.
<TABLE>
<CAPTION>
(11) COMPUTATION OF PER SHARE AMOUNTS

                                               Six Months Ended                        Three Months Ended
                                        ------------------------------           ------------------------------
                                          June 30                                   June 30
                                        ------------------------------           ------------------------------
                                            1998              1997                   1998              1997
                                        -----------        -----------           -----------
<S>                                     <C>                <C>                    <C>               <C>        
Net loss                                (3,706,456)        (10,496,775)            (1,907,310)      (8,920,887)
Series B preferred stock dividend          (56,486)                 -                (45,754)                -
Series C Preferred stock accretion 
  and dividends                            (68,929)                 -                (68,929)                -  
                                        -----------        -----------           -----------       -----------
Adjusted net loss applicable to                                                              
common shares                           (3,831,871)        (10,496,775)           (2,021,993)       (8,920,887)
                                        ===========        ===========           ===========       -----------
Weighted average common shares                                                              
outstanding                             27,321,879         19,511,640             32,236,504        19,868,119

Common equivalent shares representing
shares issuable upon exercise of stock   37,519,693         8,249,292             37,519,693         8,249,292
options

Add   back  of   common   equivalent                                                              
shares due to antidilutive shares       (37,519,693)       (8,249,292)           (37,519,693)       (8,249,292)
Weighted   average   common   shares                                                              
outstanding                              27,321,879        19,511,640             32,236,504        19,868,119
                                        ===========        ===========           ===========       -----------

Basic net loss  per share                  (0.14)            (0.54)                 (0.06)            (0.45)
                                        -----------        -----------           -----------                         
Diluted net loss per share                 (0.14)            (0.54)                 (0.06)            (0.45)
                                        -----------        -----------           -----------                          
</TABLE>