U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number:333-61424
US WIRELESS ONLINE, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 82-0505220
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
745 West Main Street, Suite 100, Louisville, Kentucky 40202
(Address of principal executive offices)
(502) 213-3700
(Issuer’s telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required 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 to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under plan confirmed by a court. Yes ____ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
The aggregate number of shares issued and outstanding of the issuer’s common stock as of September 30, 2004 was 19,771,520 shares of $0.001par value.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
FORM 10-QSB
U.S. WIRELESS ONLINE, INC.
INDEX
Page | ||
PART I. | Financial Information | |
Item 1. Financial Statements Consolidated Balance Sheets (Assets) – September 30, 2004 (Unaudited) and December 31, 2003. Consolidated Balance Sheets (Liabilities and Stockholders’ Equity) – September 30, 2004 (Unaudited) and December 31, 2003. Statements of Operations (Unaudited) - Three months ended September 30, 2004 and 2003 Statements of Cash Flows (Unaudited) - Three months ended September 30, 2004 and 2003 Notes to financial statements (Unaudited) Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation Item 3. Controls and Procedures | 3 3 4 5 6 7 8 10 | |
PART II. | Other Information Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K | 10 11 |
Signatures | 11 |
(Inapplicable items have been omitted)
PART I- FINANCIAL INFORMATION
ITEM 1. Financial Statements
In the opinion of management, the accompanying unaudited financial statements included in this Form 10-QSB reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
U.S. Wireless Online, Inc.
Consolidated Balance Sheets
Assets
September 30,
December 31,
2004
2003
(Unaudited)
Current Assets
Cash
$ 24,204
$ -
Accounts receivables (net of allowance of $4,784)
76,785
148,568
Prepaid expenses
17,378
22,125
Total Current Assets
118,367
170,693
Property & Equipment (Net)
425,201
683,612
Other Assets
Client Base (Net)
77,000
120,000
Deposits
26,089
2,048
Total Other Assets
103,089
122,048
Total Assets
$ 646,657
$ 976,353
The accompanying notes are an integral part of these financial statements.
U.S. Wireless Online, Inc.
Consolidated Balance Sheets
Liabilities & Stockholders’ Equity
September 30,
December 31,
2004
2003
(Unaudited)
Current Liabilities
Bank Overdrafts
$ -
$ 28,438
Accounts Payable
920,407
806,964
Accrued Expenses
110,290
75,038
Deferred Revenue
21,453
19,722
Current Portion of Long Term Debt
1,517,898
1,556,073
Total Current Liabilities
2,570,048
2,486,235
Long-Term Debt
Convertible Debentures
316,844
316,844
Notes Payable
1,312,599
1,213,838
Notes Payable – Related Party
250,000
251,636
Lease Obligation
3,831
11,639
Current Portion of Long Term Debt
(1,517,898)
(1,556,073)
Total Long-Term Debt
365,376
237,884
Total Liabilities
2,935,424
2,724,119
Stockholders’ Equity
Common Stock, Authorized 100,000,000 Shares,
$.001 Par Value, 19,771,520 and 15,485,806
Shares Issued and Outstanding
19,772
15,486
Additional Paid In Capital
3,568,972
3,423,258
Retained Earnings (Deficit)
(5,877,511)
(5,186,509)
Total Stockholders’ Equity
(2,288,767)
(1,747,766)
Total Liabilities & Stockholders’ Equity
$ 646,657
$ 976,353
The accompanying notes are an integral part of these financial statements.
U.S. Wireless Online, Inc.
Consolidated Statement of Operations
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
Revenues
$ 248,714
$ 413,556
$ 975,520
$ 1,254,088
Cost of Sales
161,017
235,466
660,484
680,213
Gross Profit (Loss)
87,697
178,090
315,036
573,875
Operating Expenses
General & Administrative
251,334
341,864
963,048
1,103,661
Total Operating Expenses
251,334
341,864
963,048
1,103,661
Net Operating Income (Loss)
(163,637)
(163,774)
(648,012)
(529,786)
Other Income (Expenses)
Acquisition Expense
-
-
-
(250,000)
Interest Expense
(14,300)
(12,708)
(42,990)
(38,699)
Total Other Income (Expenses)
(14,300)
(12,708)
(42,990)
(288,699)
Net Income (Loss)
$ (177,937)
$ (176,482)
$ (691,002)
$ (818,485)
Net Income (Loss) Per Share
$ (0.01)
$ (0.01)
$ (0.04)
$ (0.05)
Weighted Average Shares Outstanding
17,390,568
15,485,806
16,120,727
15,485,806
The accompanying notes are an integral part of these financial statements.
U.S. Wireless Online, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
2004
2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)
$ (691,002)
$ (818,485)
Adjustments to Reconcile Net Income to Net Cash Provided by
Operations:
Depreciation & Amortization
287,378
214,823
Bad Debt Expenses
-
9,084
Non-Cash Expenses Related to Merger
-
250,000
Gain on Sale of Equipment
(42,000)
-
Change in Assets and Liabilities
Increase (Decrease) in Cash Overdraft
(28,438)
-
(Increase) Decrease in Accounts Receivable
71,783
4,948
(Increase) Decrease in Deferred Revenue
1,731
(17,394)
Increase (Decrease) in Deposits and Prepaid Expenses
(19,294)
(1,779)
Increase (Decrease) in Accounts Payable/Accrued Expenses
148,695
51,101
Net Cash Provided (Used) by Operating Activities
(271,147)
(307,702)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment
(31,264)
(125,316)
Proceeds from Sale of Equipment
77,159
-
Net Cash Provided (Used) by Investing Activities
45,895
(125,316)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from subscriptions receivable
-
192,340
Payment on Long Term Debt
(68,792)
(255,253)
Proceeds from Debt Financing
318,248
500,000
Net Cash Provided (Used) by Financing Activities
249,456
437,087
Net Increase (Decrease) in Cash & Cash Equivalents
24,204
4,069
Cash & Cash Equivalents at Beginning of Period
-
3,961
Cash & Cash Equivalents at End of Period
$ 24,204
$ 8,030
Cash Paid for
Interest
$ 3,712
$ -
Income Taxes
$ -
$ -
Non-Cash Financing Activities:
Stock Issued to Settle Notes Payable
$ 150,000
$ -
The accompanying notes are an integral part of these financial statements.
U.S. Wireless Online, Inc.
Notes to the Consolidated Financial Statements
September 30, 2004
(Unaudited)
GENERAL
U.S. Wireless Online, Inc. (the Company) has elected to omit substantially all footnotes to the financial statements for the three months and nine months ended September 30, 2004 since there have been no material changes (other than indicated in other footnotes) to the information previously reported by the Company in their Annual Report filed on Form 10-KSB for the fiscal year ended December 31, 2003.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all adjustments which are, in the opinion of management, necessary to properly reflect the results of the interim period presented. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year.
COMMON STOCK TRANSACTIONS
During the quarter ending September 30, 2004, the Company issued 4,285,714 shares of common stock to settle $150,000 of notes payable.
ITEM 2. Management’s Discussion and Analysis or Plan of Operation
Safe Harbor for Forward-Looking Statements
When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed under the “Item 2. &nbs p;Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or results of operations.
Our History and Business
We were formed as a Nevada corporation under the name Llebpmac, Inc. on May 4, 1998. We originally incorporated to open and operate a restaurant. From 1998 through early 2000 we conducted initial research but ultimately did not open the restaurant. On October 2, 2000, our shareholders approved a two for one forward split of our outstanding common stock and we changed our purpose to be a wholesale snack food merchandiser. On October 10, 2000, we entered into a license agreement to market potato chips in Japan and other Asian markets under the Idaho Chips trademark. On November 1, 2000, we changed our name to Cach Foods, Inc. to reflect our change in purpose.
Cach Foods, Inc. became a public company on October 17, 2001. From October 2001 through April 2003, we conducted research on producing, manufacturing and distributing potato chips and other snack foods. In April of 2003, our license agreement to market Idaho Chips expired and we ceased our snack food activities.
On May 12, 2003, we entered an agreement and plan of reorganization with US Wireless Online, Inc. The agreement closed on May 19, 2003. Prior to closing, the Company effected a 0.48 to one reverse split of the then 12,152,000 currently issued and outstanding shares into 5,832,960 shares. Our former president and director then cancelled 3,820,000 post-split shares that he owned. As a result of this series of transactions, 11,492,565 post-reverse split shares of Cach Foods common stock were exchanged for all of the issued and outstanding shares of US Wireless Online, Inc. making US Wireless Online, Inc. a wholly-owned subsidiary of Cach Foods.
Pursuant to the Agreement, the former officers and directors of Cach Foods resigned and David M. Ragland, Doug Keeney, Dan Burke, Sr., and James D. Murphy became directors of the Company and the Company changed its name from Cach Foods, Inc. to US Wireless Online, Inc.
US Wireless Online incorporated in 2000 to offer high-speed, low cost Internet access to small and medium sized businesses. After six months of development and beta testing, US Wireless Online inaugurated commercial service in Atlanta, Georgia on January 1, 2001. In February 2001, US Wireless Online successfully bid for certain operating assets of SENETS, a Multiple Dwelling Unit (“MDU”) operator then undertaking reorganization under Chapter 11 of the US Bankruptcy Code. US Wireless Online used these assets to upgrade the Atlanta network. In May 2001, US Wireless Online successfully acquired the wireless operations of Darwin, Inc., a hybrid MDU/wireless operator in Kentucky then also undertaking reorganization under Chapter 11. Through the Darwin acquisition, US Wireless Online acquired markets in Kentucky and Ohio and acquired a carrier-grade Network Operations Center.
Products
US Wireless Online’s core service is high-speed, wireless Internet access for business. Services are provided to businesses in Louisville, Kentucky; Cincinnati, Columbus and Dayton, Ohio; and Atlanta, Georgia.
US Wireless Online sells three products within these areas– high-speed Internet access (priced in four tiers from 128 kilobits to 2 megabits); Wi-Fi (wireless broadband) networks; and broadband connections in two convention centers.
Results of Operations for the Three Month Periods Ended September 30, 2004 and 2003
Revenues for US Wireless for the three-month period ended September 30, 2004 were $248,714 with a cost of sales of $161,017 resulting in a gross profit of $87,697. Revenues for the three-month period ended September 30, 2003 were $413,556 with a cost of sales of $235,466 and a resulting gross profit of $178,090.
Operating expenses and general and administrative expenses during the three-month period ended September 30, 2004 were $251,334 resulting in a net operating loss of $163,637. Interest expense during this period was $14,300. As a result of the foregoing, we realized a net loss of $177,937 during the three-month period ended September 30, 2004. Operating expenses and general and administrative expenses during the three-month period ended September 30, 2003 were $341,864 and resulted in a net operating loss for the period of $163,774. Interest expense during the three-month period ended September 30, 2003 was $12,708. As a result, our net loss for the period was $176,482.
All revenues during the three-month period ended September 30, 2004 derived from US Wireless’ Internet service activities. Our predecessor, Cach Foods, did not generate any revenue from inception through May of 2003. Pursuant to the May 19, 2003 Agreement and Plan of Reorganization, U.S. Wireless became a wholly-owned subsidiary of Cach Foods, Inc. and the Company’s name was changed to U.S. Wireless Online, Inc. The financial figures reported for the three-month period ended September 30, 2003 in this report’s financial statements reflect operations conducted by US Wireless Online, the public company subsequent to the May 19, 2003 reorganization. The majority of expenses during the three-month period ended September 30, 2004 consisted of salaries, office rentals, legal, accounting and other professional fees.
Results of Operations for the Nine Month Periods Ended September 30, 2004 and 2003
Revenues for US Wireless for the nine-month period ended September 30, 2004 were $975,520 with a cost of sales of $660,484 resulting in a gross profit of $315,036. Revenues for the nine-month period ended September 30, 2003 were $1,254,088 with a cost of sales of $680,213 and a resulting gross profit of $573,875.
Operating expenses and general and administrative expenses during the nine-month period ended September 30, 2004 were $963,048 resulting in a net operating loss of $648,012. Interest expense during this period was $42,990. As a result of the foregoing, we realized a net loss of $691,002 during the nine-month period ended September 30, 2004. Operating expenses and general and administrative expenses during the nine-month period ended September 30, 2003 were $1,103,661 and resulted in a net operating loss for the period of $529,786. Interest expense during the nine-month period ended September 30, 2003 was $38,699 and the Company recorded an acquisition expense of $250,000. As a result, our net loss for the nine-month period in 2003 was $818,485.
Liquidity and Capital Resources
At September 30, 2004, total assets were $646,657. Total current assets were $118,367 consisting of $24,204 in cash, $76,785 in accounts receivable and $17,378 in prepaid expenses. We also had property and equipment valued at $425,201. Other assets consisted of our client base valued at $77,000 and $26,089 in deposits. At December 31, 2003, total assets were $976,353 consisting of $170,693 in current assets, $683,612 in property and other assets of $122,048.
Total liabilities at September 30, 2004 were $2,935,424. Current liabilities were $2,570,048 consisting of $920,407 in accounts payable, $110,290 in accrued expenses $21,453 in deferred revenue and $1,517,898 in the current portion of long-term debt. Other liabilities at September 30, 2004 consisted of $316,844 in convertible debentures, $1,312,599 in notes payable, $250,000in notes payable to David Hayes, a shareholder, and David Ragland, the former Chairman of the Board of US Wireless, and $3,831 in long-term lease obligations. Notes payable at December 31, 2003 include a $250,000 note payable that was issued to an unrelated party in May of 2003 to help cover acquisition expenses. At December 31, 2003 the $250,000 note was in default.
Total liabilities at December 31, 2003 were $2,724,119 consisting of $2,486,235in current liabilities and $237,884in long-term debt.
Management believes that we have sufficient anticipated accounts receivable on hand to meet our immediate operating expenses. However, we will require additional funding to reduce our liabilities. We propose to fund our continuing operations through the sale of common stock, however, we cannot guarantee that we will generate sufficient proceeds to fund our operations and settle our debts. If we require additional capital, we may seek advances from officers or shareholders, or explore other debt financing strategies.
ITEM 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer/Chief Financial Officer has concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.
(b) Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
During the quarter ending September 30, 2004, the Company issued 4,285,714 shares of common stock to settle $150,000 of notes payable. The shares were issued in a private transaction without registration in reliance of the exemption provided by Section 4(2) of the Securities Act. No broker was involved and no commissions were paid on the transactions.
ITEM 5. Other Events
Subsequent to the date of this report, on November 19, 2004, pursuant to the terms of a convertible promissory note, the Company converted debt of $80,500 into 6,000,000 shares of restricted common stock to two individuals. The newly issued shares represent 23% of the Company’s total issued and outstanding common stock. The shares were issued pursuant to an exemption from registration and the Company relied upon Section 4.2 of the Securities Act of 1933 for such exemption.
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K:
Date
Form
Description
9/02/04
8K
Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers
Exhibit Number | Title | Location |
31 | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Attached |
32 | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Attached |
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
US WIRELESS ONLINE, INC.
Date: November 22, 2004
/s/ Rick E. Hughes
Rick E. Hughes
President, CEO and CFO
