As filed with the Securities and Exchange Commission on March __, 2001
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
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Nevada 4812 860887822
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Identification No.) Classification Code No.)
DOUGLAS P. HAFFER
520 Third Street, Suite 101
Oakland, CA 94607
(510) 839-6100
(Name, Address and Telephone Number of Agent for Service)
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Copies to:
WILLIAM D. EVERS, ESQ.
Foley & Lardner
One Maritime Plaza, Suite 600
San Francisco, CA 94111
Phone No.: 415-434-4484
Fax No.: 415-434-4507
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462 (b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462
(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462
(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If delivery of the prospectus is expected to be made pursuant to Rule
434 check the following box. / /
CALCULATION OF REGISTRATION FEE
- ------------------------- ---------------------- ---------------------- ---------------------- ----------------------
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered (1) Offering Price per Aggregate Offering Registration Fee
Registered Share Price
- ------------------------- ---------------------- ---------------------- ---------------------- ----------------------
Common Stock, $0.001 50,000,000 (2) $0.1797 (3) $ 8,985,000 $ 2,246.25
par value
- ------------------------- ---------------------- ---------------------- ---------------------- ----------------------
Common Stock, $0.001 15,000,000 (5) $0.265 $3,975,000 $993.75
par value
- ------------------------- ---------------------- ---------------------- ---------------------- ----------------------
Common Stock, $0.001 200,000 (6) $0.1797 $35,940 $8.99
par value
- ------------------------- ---------------------- ---------------------- ---------------------- ----------------------
Total Registration
Fee (4) 65,200,000 $3,248.99
- ------------------------- ---------------------- ---------------------- ---------------------- ----------------------
(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended,
there are included in this registration such additional number of
shares of common stock that may be issuable to prevent dilution
resulting from stock splits, stock dividends and conversion price or
exercise price adjustments.
(2) Represents common stock which may be issued pursuant to the equity line
of credit contained in the common stock purchase agreement with
Grenville Finance Ltd.
(3) The proposed maximum offering price is estimated solely for the purpose
of calculating the registration fee pursuant to Rule 457(c) of the
Securities Act of 1933, as amended. The price per common share is based
on the average bid and asked price of the common stock on the Over the
Counter Bulletin Board maintained by the National Association of
Securities Dealers on March 9, 2001. The price per common share under
the common stock purchase agreement will vary according to changes in
the volume-weighted average daily price of our common stock during the
draw down periods provided for in the agreement. The purchase price
will be equal to 85% of the volume-weighted average daily price for
each trading day within such draw down pricing periods. The agreement
allows for up to 24 draws over a period of 24 months for amounts up to
$1,500,000 per draw.
(4) The maximum net proceeds we can receive is $50,000,000 less an 8%
finders fee payable to Union Atlantic, LC, $20,000 for fees and
expenses of Grenville Finance Ltd's counsel, and $750 in escrow fees
and expenses per draw down.
(5) These shares to be registered may be offered for sale and sold from
time to time during the period the registration statement remains
effective, by or for the account of Grenville Finance Ltd. These
shares consist of 15,000,000 shares issuable upon exercise of a warrant
issued to Grenville Finance Ltd. under the common stock purchase
agreement. The exercise price of these warrants is $0.265 per share.
These warrants may be exercised until February 12, 2004.
(6) These shares to be registered may be offered for sale and sold from
time to time during the period the registration statement remains
effective, by or for the account of Andrew Corporation. These shares
consist of 200,000 shares issuable upon exercise of a warrant issued to
Andrew Corporation in connection with a loan agreement. The exercise
price of these warrants is $0.23 per share. These warrants may be
exercised until January 24, 2005.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay it effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
World Wide Wireless
Communications, Inc.
65,200,000 shares of Common Stock
This prospectus is part of a registration statement that covers the
issuance of up to: (i) 50,000,000 shares of our common stock issuable by us from
time to time upon the exercise of an equity line of credit in the common stock
purchase agreement with Grenville Finance Ltd.; (ii) 15,000,000 shares issuable
by us upon the exercise of a warrant held by Grenville Finance Ltd.; and (iii)
200,000 shares underlying certain warrants issued to Andrew Corporation. We will
refer to these entities as the selling shareholders.
We will not receive any proceeds from the resale of our common stock by
the selling shareholders. However, we will receive the sale price of any common
stock that we sell to Grenville Finance Ltd. under the equity line of credit in
the common stock purchase agreement described in this prospectus and upon the
exercise for cash of the warrants held by the selling shareholders, including
the warrant we issued to Grenville Finance Ltd. We will pay the costs of
registering our common stock under this prospectus, including legal fees.
The selling shareholders may offer and sell some, all or none of their
common stock under this prospectus. The selling shareholders may determine the
prices at which they will sell their shares, which may be at market prices
prevailing at the time of the sale or some other price. The selling shareholders
may use brokers or dealers to assist them in selling their shares, who may
receive compensation or commissions for such sales. Grenville Finance Ltd. is an
"underwriter" within the meaning of the Securities Act of 1933 in connection
with its sales.
Our shares are currently traded on the OTC Bulletin Board under the
trading symbol WLGS.
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Investing in our common stock involves a great amount of risk.
See "Risk Factors" beginning on page 4.
----------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this prospectus is March ___, 2001
TABLE OF CONTENTS
Page No.
SUMMARY OF FINANCIAL DATA.....................................................3
RISK FACTORS..................................................................4
FORWARD-LOOKING STATEMENTS....................................................9
DIVIDEND POLICY...............................................................9
USE OF PROCEEDS...............................................................9
MANAGEMENT DISCUSSION AND ANALYSIS...........................................10
BUSINESS.....................................................................14
MANAGEMENT...................................................................26
PRINCIPAL AND SELLING SHAREHOLDERS...........................................32
CERTAIN RELATED PARTY TRANSACTIONS...........................................36
DESCRIPTION OF SECURITIES....................................................36
THE COMMON STOCK PURCHASE AGREEMENT..........................................39
PRICE RANGE OF COMMON STOCK..................................................47
PLAN OF DISTRIBUTION.........................................................49
LEGAL MATTERS................................................................50
EXPERTS......................................................................50
ADDITIONAL INFORMATION.......................................................50
FINANCIAL STATEMENTS.........................................................51
INFORMATION NOT REQUIRED IN PROSPECTUS.......................................52
EXHIBITS.....................................................................55
UNDERTAKINGS.................................................................60
SIGNATURES...................................................................62
Until 90 days after the effective date of this prospectus all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
You should rely only on the information contained in this prospectus.
We have not authorized any person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
document may only be accurate on the date of this document.
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PROSPECTUS SUMMARY
World Wide Wireless Communications, Inc.
We provide high-speed broadband wireless Internet service in the
United States and internationally. We are also developing a new technology,
named the distributed wireless call processing system, which we believe will
significantly enhance wireless communications. We intend to license this
technology to third parties in the future.
We are incorporated under the laws of the State of Nevada. Our offices
are located at 520 Third Street, Suite 101, Oakland, CA 94607. Our telephone
number is (510) 839-6100.
Summary of the offering
Type of security......................Common stock
Common stock registered by company....We are registering 65,200,000 shares of
common stock which includes 15,200,000
shares of common stock underlying certain
warrants for the selling shareholders
identified in this prospectus.
Common stock outstanding .............93,417,795 shares
Use of proceeds.......................For expansion of our sales force,
marketing and distribution activities,
expansion of both our domestic and
international business operations, for
acquiring spectrum, and for general
corporate purposes.
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SUMMARY OF FINANCIAL DATA
The summary financial data for the years ended September 30, 2000 and
1999 have been derived from the Financial Statements and Notes to Financial
Statements, audited by Reuben E. Price & Co., San Francisco independent
auditors. The summary financial data for the quarter ended December 31, 2000 is
derived from our unaudited financial statements which, in the opinion of
management, includes all adjustments, none of which were other than normal
recurring adjustments necessary for a fair presentation of the financial
position and results of operations for such periods. The financial information
for the quarter ended December 31, 2000 is not necessarily indicative of the
results of operations for subsequent periods or a full fiscal year. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and Notes thereto included elsewhere in this prospectus.
Statements of Income Data:
Quarter ended Year ended Year ended
December 31, 2000 Sept. 30, 2000 Sept. 30, 1999
----------------- -------------- --------------
(unaudited) (audited) (audited)
Revenue $ 316,591 $ 524,246 $ ---------
Cost of Goods Sold 256,196 336,717 ---------
------- ------- ----------
Gross Profit 60,395 187,529 ----------
------ ------- ----------
Operating Expenses 1,860,011 7,065,788 2,383,330
Impairment Loss --------- 1,500,000 --
------------ --------- ---------
Total Operating
Expenses 1,860,011 8,565,788 2,383,330
--------- --------- ---------
Operating loss (1,799,616) (8,378,259) (2,383,330)
Interest Income 52,857
Interest Expense (31,650) (70,706) ----------
-------- --------- ----------
Net loss (1,831,266) (8,396,108) (2,383,330)
Foreign Currency --------- 1,600 -----------
Translation --------- --------- -----------
Total Comprehensive $ (1,831,266) $ (8,397,268) $(2,343,330)
Loss
Balance Sheet Data:
December 31, 2000 September 30, 2000 September 30, 1999
----------------- ------------------ ------------------
(unaudited) (audited) (audited)
Working capital $ 217,128 $ 2,403,009 $ (153,646)
Total assets 8,138,554 9,703,562 1,180,777
Long-term debt, --------- ----------- 328,000
Less current portion
Minority Interest 115,150 115,150 --------
Shareowners' equity 165,033 1,999,185 361,309
-3-
RISK FACTORS
An investment in our common stock is very risky. You should be aware
that you could lose the entire amount of your investment. You should carefully
consider the following risks before you decide to buy our common stock.
Risks Related to Our Business
We will require substantial additional capital in the short term to remain a
going concern.
We will require substantial short term outside investment on a
continuing basis to finance our current operations and capital expenditures as
well as the acquisition of additional spectrum and licenses. Our revenues for
the foreseeable future may not be sufficient to attain profitability. In the two
years since we began operations, we have generated little revenue and have
incurred substantial expenditures. We expect to continue to experience losses
from operations while we develop and expand our wireless Internet service system
and other technologies. In view of this fact, our auditors have stated in their
report for the period ended September 30, 2000 that our ability to meet our
future financing requirements, and the success of our future operations, cannot
be determined at this time. In order to finance our working capital requirements
we are currently negotiating equity investments with several sophisticated
investors, but there can be no assurance that we will obtain this capital or
that it will be obtained on terms favorable to us. If we do not obtain short
term financing we may not be able to continue as a viable concern. We do not
have a bank line of credit and there can be no assurance that any required or
desired financing will be available through bank borrowings, debt, or equity
offerings, or otherwise, on acceptable terms. If future financing requirements
are satisfied through the issuance of equity securities, investors may
experience significant dilution in the net book value per share of common stock.
We may not be able to obtain permission to use two-way transmission for our
wireless service, thereby making our services significantly less attractive to
potential customers.
We believe that it is important for us to obtain the right to conduct
two-way transmissions through the radio transmission frequencies for which we
acquire licenses. None of our present channel leases in the United States allow
for two-way transmissions. Permission to conduct two-way transmissions must be
obtained from the Federal Communications Commission (FCC), and the rules of the
FCC require that we file applications with the FCC to receive permission to
conduct two-way transmissions through these frequencies. In August, we filed six
applications for permission to conduct two way transmissions with the FCC for
the areas of Vail and Aspen, Colorado, Grand Rapids, Michigan, Key West,
Florida, Pierre, South Dakota and Ukiah, California, that are currently pending.
We cannot be certain that the licenses will be granted. The application process
required us to engineer a network configuration and channel-use plan for these
frequencies in each market where we intend to launch a two-way system. The
applications must meet FCC interference protection rules or contain the consent
of other licensees in these markets and adjacent markets. We cannot be certain
that:
o We will be able to complete the necessary processes to enable us
to complete two-way applications for each of our markets.
o We will be able to obtain the necessary cooperation and consents
from licensees in our markets or adjacent markets to enable us to
use our spectrum for two-way communication services.
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o The FCC will approve our applications.
If we do not receive the required consents from the FCC and other
licensees within a market, or we are not able to design a two-way system that
will meet the FCC's interference protection rules, we will be unable to obtain
authorization to implement a two-way system in that market. If we are unable to
obtain this authorization, we might be forced to operate our service as a
one-way transmission service, which we believe would make our Internet access
services significantly less attractive to prospective customers than two-way
transmission services.
We are subject to other substantial governmental regulations that could
adversely affect our business.
Our services are subject to current regulations of the FCC with
respect to the use of our wireless access. We are required to use and maintain
our licenses for certain frequencies and file reports with the FCC. If we fail
to comply with these requirements, we may lose our licenses to operate such
frequencies. The loss of licenses to operate our frequencies could lead to
interruption of our wireless access services and materially adversely affect our
business. For example, we currently have applications pending in Aspen and Vail,
Colorado, Grand Rapids, Michigan, Key West, Florida, Pierre, South Dakota and
Ukiah, California. Our ability to provide two way broadcasting authority in any
of those markets depends on obtaining the necessary license from the FCC.
In addition, changes in the regulatory environment relating to
Internet access could affect the prices at which we may sell our services. These
include regulatory changes that, directly or indirectly, affect
telecommunications costs, limit usage of subscriber-related information or
increase the likelihood or scope of competition from the regional Bell operating
companies or other telecommunications companies. For example, regulations
recently adopted by the FCC are intended to subsidize Internet connectivity
rates for schools and libraries, which could affect demand for our services. The
FCC has also stated its intention to consider whether to regulate certain
transmission services over the Internet as "telecommunications," even though
Internet access itself would not be regulated. Additionally, a number of state
and local government officials have also asserted the right or indicated a
willingness to impose taxes on Internet-related services, including sales, use
and access taxes. We cannot predict the impact that future laws and regulations
may have on our business.
Our new distributed wireless call processing system technology is unproven and
may not function as anticipated.
Our distributed wireless call processing system technology remains in
the development phase and we have not yet developed a fully functional prototype
of that technology. We cannot be certain when we will be able to complete
development of that system and whether that system will work in the manner
anticipated when development is completed. Furthermore, we cannot be certain
whether the system will receive substantial market acceptance assuming that it
is developed. For these reasons, although we believe that our distributed
wireless call process system is promising, an investor should not assume that
the system will be available or will contribute positively to our business
prospects or financial condition.
We may be unable to protect our intellectual property rights.
Our success depends in part on our ability to protect our proprietary
technologies. We rely on a combination of patent, copyright and trademark laws,
trade secrets and confidentiality and
-5-
other contractual provisions to establish and protect our proprietary rights. We
have received one patent from the United States Patent and Trademark Office
pertaining to the distributed wireless call processing system and may file for
additional patents in the future. However, our patents may not be of sufficient
scope or strength, others may independently develop similar technologies or
products, duplicate any of our products or design around our patents, and the
patents may not provide us competitive advantages. Litigation, which could
result in substantial costs and diversion of effort by us, may also be necessary
to enforce any patents issued or licensed to us or to determine the scope and
validity of third-party proprietary rights. Any such litigation, regardless of
outcome, could be expensive and time consuming, and adverse determinations in
any such litigation could seriously harm our business.
We have not yet sought patent protection for the distributed wireless
call processing system in any country other than the United States, nor have we
sought to register our trademarks in those countries in which we currently do or
intend to do business. The laws of other countries vary with respect to
intellectual property protection, and some jurisdictions may provide
substantially less protection than those of the United States. As a consequence,
our ability to protect our intellectual property and prevent competitors from
using our intellectual property may be much more limited.
We are subject to the requirements that we receive regulatory approvals from
those countries in which we do business, the delay or denial of which can reduce
our revenues and adversely affect our foreign operations.
We anticipate that a substantial percentage of our revenues will be
derived from operations outside of the United States. Our reliance on
international operations to obtain consents of local regulatory authorities,
some of which may significantly delay or deny permitting us to operate in those
jurisdiction, might inhibit our efforts in certain markets. For example, we will
not be able to generate revenues from our operations in Argentina if and until
such time as the governmental regulatory authority, the CNC, reinstates some or
all our subsidiary's licenses. In early 2000, the government of Argentina
announced that it was placing a freeze on all license transfer applications,
which has effectively delayed consideration of our application. In September
2000, the government of Argentina revoked licenses for certain lower
transmission frequencies, for all communication carriers, including those of the
Company's subsidiary, Infotel Argentina, S.A. Although we have resubmitted the
necessary paperwork to reinstate licenses in Argentina, it is unclear at this
point when and if the licenses will be reissued. A denial of our most recent
application or a significant delay in consideration of our application could
either prevent us from conducting our planned operations in Argentina or
materially adversely affect our ability to do so. Our prospective operations in
other jurisdictions are also subject to receipt of government approval, which we
cannot ensure that we will receive.
Because we operate internationally, our operations are subject to unexpected
political changes, changes in legal requirements and fluctuations in exchange
rates, all of which may substantially increase our operating costs or make it
difficult to do business there.
In addition to these international risks, we are also subject to the
following risks in connection with our international operations that may
substantially reduce our revenues, increase our operating and capital expenses,
and otherwise materially affect our ability to conduct business:
o unexpected changes in regulatory requirements, taxes, trade laws
and tariffs, which can substantially increase the costs of doing
business in other jurisdictions;
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o changes in a specific country's or region's political or economic
conditions which may make it difficult or impossible to conduct
business there;
o lack of clear rules and regulations governing the issuance of
licenses and standards for their operation; and
o fluctuating exchange rates.
We are inexperienced in operating a business internationally, which could cause
us to fail to develop our international operations successfully.
We intend to expand our international sales efforts in the future. We
have very limited experience in marketing, selling and supporting our products
and services abroad. There is a risk that we will not be able to expand due to
this inexperience. If we are unable to grow our international operations
successfully and in a timely manner, our business and operating results could be
seriously harmed. This could be reflected in a loss in your investment.
If we do not develop system features in response to customer requirements,
customers may not wish to use our services, which would seriously harm our
business.
The broadband wireless access industry is rapidly evolving and is
subject to technological change and innovation. These changes require providers
of broadband services to adopt new technologies quickly or modify existing
technologies to maintain service and market products. Compliance with these
changes may cause us to incur unexpected expenses or lose revenues. If we are
unable to comply with diverse new or varying governmental regulations or
industry standards in each of the many worldwide markets in which we compete, we
may not be able to respond to customers in a timely manner or market our
products, which could seriously harm our business.
We are dependent on the services of key individuals and the loss of any of these
individuals could significantly effect our ability to operate our business.
Our development and success is significantly dependent upon Douglas P.
Haffer, Chairman, President. We do not currently have key man insurance for him.
Any loss of the services of Mr. Haffer could seriously harm our business.
Risks Related to this Offering
The sale of our common stock under to the equity line of credit, the exercise of
the outstanding warrants and the conversion of the convertible debentures may
substantially dilute the interests of other security holder.
The shares issuable to Grenville Finance Ltd. under the equity line
of credit will be issued at a 15% discount to the average daily price of our
common stock. Accordingly, the shares of common stock then outstanding will be
diluted. Depending on the price per share of our common stock during the 24
month period of the equity line of credit, we may need to register additional
shares for resale to access the full amount of financing available, which could
have a further dilutive effect on the value of our common stock.
We also currently have 36,336,113 shares of common stock which are
issuable under outstanding convertible debentures and warrants. The current
conversion price on the debentures is equal to the lesser of $0.64 and an amount
equal to 85% of the average of the closing price on the five trading days
immediately prior to the conversion. The floor price on the convertible
debentures is $0.50 until May 30, 2001. However, if the aggregate revenue for
the last three quarters of the year 2000 and the first quarter of 2001 is less
than $13.5 million then as of May 14, 2001 the floor price will be zero. The
potential or actual issuance of shares under the convertible debentures and upon
exercise of warrants will have a dilutive impact on other stockholders and could
have a negative impact on the market price. Moreover, if the floor price on the
shares drops to zero it will have a further dilutive effect.
The Conversion by the holders of convertible securities and our draw downs on
the equity line may result in substantial dilution to the third party holders of
our common stock since we expect immediate resale of such shares and holders may
ultimately convert and sell the full amount issuable on conversion.
Future purchases of our common stock and existing stockholders could
experience substantial dilution as the debenture holders convert and as we draw
down on the equity line and they resell the common stock. Because the conversion
price of the debentures is below market value of the common stock, we expect the
debenture holder to ultimately convert the entire principal amount and sell the
common stock. Because the shares issuable upon our drawdown on the equity line
of credit will be substantially below the market value of the common stock, we
expect Grenville Finance to resell the common stock immediately after issuance.
The issuance of shares of common stock upon the conversion of debentures and
upon our draw downs will have a dilutive impact on our common stock holders. As
a result, our income per share could be materially and adversely affected.
The sale of material amounts of our common stock under the equity line of credit
or pursuant to our convertible debentures could reduce the price of our common
stock and encourage short sales.
-7-
As we sell shares of our common stock to Grenville Finance Ltd. under
the equity line of credit and the selling shareholders are issued additional
common stock upon exercise of the warrants, and then the selling shareholders
sell the common stock, our common stock price may decrease due to the additional
shares in the market. The common stock price may also decrease if the holders of
the convertible securities elect to convert and resell their shares of common
stock. As the price of our common stock decreases, and if we decide to draw down
on the equity line of credit, or if the holders of convertible debentures elect
to convert, we will be required to issue more shares of our common stock for any
given dollar amount invested by Grenville Finance Ltd., subject to a designated
minimum threshold price specified by us. This may encourage short sales, which
could place further downward pressure on the price of our common stock.
We cannot determine the precise amount by which the interests of other security
holders will be diluted by draw downs under the equity line of credit because
our decisions on the number, size and timing of draw downs and the minimum
threshold price for each draw down depends upon a number of factors.
We have substantial discretion over the number, size and timing of the
draw downs that we will make under the equity line of credit. In addition, at
the time we make each draw down request, we have the right to limit the amount
of dilution that will occur by setting a minimum threshold price below which
shares may not be sold in that draw down. However, if we set the minimum
threshold price at a level high enough to limit the sale of our shares, the
amount of funds we can raise in the draw down will also be reduced. Some of the
factors that we will consider in determining the size and amount of each draw
down and the minimum threshold price are:
o Our short-term and long-term operating capital requirements;
o Our actual and projected revenues and expenses;
o Our assessment of general market and economic conditions;
o Our assessment of risks and opportunities in our targeted
markets;
o The availability and cost of alternative sources of financing;
and
o The trading price of our common stock and our expectations with
respect to its future trading price.
Our discretion with respect to the number, size and timing of each
draw down request is also subject to a number of contractual limitations that
are described in "The Common Stock Purchase Agreement" below.
We cannot determine the precise amount by which the interests of other security
holders will be diluted by draw downs under the equity line of credit because
the number of shares we will sell depends upon the trading price of the shares
during each draw down period.
The number of shares that we will sell is directly related to the
trading price of our common stock during each draw down period. As the price of
our common stock decreases, and if we decide to draw down on the equity line of
credit, we will be required to issue more shares of our common stock for any
given dollar amount invested by Grenville Finance Ltd.
We do not know the precise number of shares of common stock that we may have to
issue upon the conversion of outstanding convertible securities once the floor
price is removed because the conversion price is linked to the future market
price of the common stock.
The shares issuable upon conversion of the 4% convertible debentures are linked
to a percentage discount to the market price of the our common stock at the time
of the conversion once the floor price is removed. Until then, we do not know
the precise maximum number of common stock shares that may be issued. The lower
the price of our common stock at the time of conversion, the more the shares of
common stock that we will be required to issue upon conversion, which will
further dilute holders of common stock and cause the common stock price to
decline further.
The sale of shares of the common stock covered in this prospectus could enable
third party investors to influence our Board of Directors and increase the
possibility of a change in control.
-8-
We have registered 65,2000,000 shares of our common stock for sale by
the selling stockholders under the registration statement of which this
prospectus forms a part. Under the terms of our common stock purchase agreement
with Grenville Finance Ltd., we may not issue shares of our common stock to
Grenville Finance Ltd. which would result in ownership by Grenville Finance Ltd.
of more than 9.9% of our issued and outstanding common stock. However, if all of
the shares being registered are issued under the terms of the common stock
purchase agreement and the warrants are resold by Grenville Finance Ltd. and the
other selling stockholders, third party investors could acquire a significant
percentage of our common stock. The acquisition by third party investors of a
significant percentage of our common stock could enable such investors to
influence or direct the policies, decisions and composition of our Board of
Directors and management. A potential change of control could involve a number
of risks, including the diversion of management attention and resources, the
loss of key employees, and changes in our business plan and operations. Any such
events could have a material adverse effect on our business and results of
operations.
We may be unable to access all or part of our equity line facility.
If our stock price and trading volume are at certain levels, then we
will not be able to drawdown all $50 million pursuant to the proposed equity
line facility with Grenville Finance Ltd. In addition, business and economic
conditions may not make it feasible to drawdown pursuant to this facility.
Furthermore, if we are unable to keep a registration statement effective for
those shares of common stock subject to the equity line, or if our common stock
is delisted from the OTC Bulletin Board, or if we experience a material adverse
change to our business that is not cured within 60 days, the common stock
purchase agreement may terminate, or we may not be able to drawdown any funds.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. We intend to
identify forward-looking statements in this prospectus using words such as
"believes," "intends," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," or similar statements. These statements are based
on our beliefs as well as assumptions we made using information currently
available to us. Because these statements reflect our current views concerning
future events, these statements involve risks, uncertainties and assumptions.
Actual future results may differ significantly from the results discussed in the
forward-looking statements. Some, but not all, of the factors that may cause
these differences include those discussed in the Risk Factors section of this
prospectus. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock
and do not intend to pay dividends in the foreseeable future. We intend to
invest our future earnings, if any, to fund our growth.
USE OF PROCEEDS
We will not realize any proceeds from the sale of the common stock by
the selling shareholders; rather, the selling shareholders will receive those
proceeds directly. However, we will receive cash infusions of capital if and
when Grenville Finance Ltd. purchases our common stock in accordance with the
common stock purchase agreement. We may receive additional cash upon the
exercise of warrants held by the selling shareholders if the selling
shareholders chooses to pay cash upon exercise rather than utilize the cashless
exercise provision contained in the warrant. We intend to use the proceeds from
the sale of common stock to the selling shareholders to expand our sales force,
expand our domestic and international business operations, for acquiring
spectrum and for general corporate purposes.
-9-
MANAGEMENT DISCUSSION AND ANALYSIS
The following should be read in conjunction with the "Risk Factors"
and the "Financial Statements" and the Notes thereto.
Results of Operations
Fiscal Year 2000
We did not generate any revenues by providing wireless internet
services during fiscal 1999 and we generated only approximately $524,000 in
2000, none of which was from Internet-related sources. We did not have enough
subscribers in either period to generate revenues sufficient to cover our total
operating expenses which totaled $2,383,330 and $8,565,788 respectively, in
fiscal 1999 and 2000. Our operating expenses included service costs, programming
and license fees, general and administrative expenses, and certain acquisition
expenses resulting from acquiring spectrum. Our expenses increased substantially
in 2000 over those in 1999 as we substantially increased the scope of our
business operations during that period.
Quarter Ended December 31, 2000 Compared to Quarter Ended December 31,
1999
For the three months ended December 31, 2000 we generated $361,591 in
revenue, as compared with no revenue for the quarter ended December 31, 1999.
The increase in revenue for the three months ended December 31, 2000 over the
same period in 1999 derived from the sale of telephone system integration and
engineering in our Argentine subsidiary and through the initiation of internet
service in our Peruvian subsidiary.
The costs of goods sold for the three months ended December 31, 2000
was $256,196, as compared with none for the three and nine months ended December
31, 1999. The increase in cost of goods sold is primarily attributable to labor
and material costs associated with the sale of telephone system integration and
engineering by the Argentina subsidiary and the initiation of internet service
in the Peruvian subsidiary.
Operating losses, including income attributable to a minority
interest, for the three months ended December 31, 2000 were $1,799,616 as
compared to $829,189 for the three months ended December 31, 1999. This increase
in losses is due primarily to expenses generated by our foreign subsidiary
Infotel Argentina and increased demand for the parent company in expanding the
business and managing the foreign subsidiaries.
Interest income (expense) for the three months ended December 31, 2000
was $31,650 as compared to no interest expense in the three months ended
December 31, 1999. This increase is due primarily to accrued interest expense
for the issuance of debentures.
Net losses for the three months ended December 31, 2000 was $1,831,266
as compared with $829,189 for the three months ended December 31, 1999.
Liquidity and Capital Resources
-10-
As of September 30, 2000 our total working capital was $2,403,009.
During 1999 and 2000, we experienced continuing cash shortages due to an
insufficient subscriber base. The resulting cash shortages rendered us unable to
advertise and aggressively promote our services. On December 31, 2000, the
company had cash and cash equivalents of $984,274 compared with $3,111,150 as of
September 30, 2000. The decrease during the three months in cash and cash
equivalents of $2,126,876 is due to equipment installation costs of $526,955,
and cash used in operating activities of $1,599,921. Similarly, no sales of
capital stock or other financing activities took place during the quarter.
Because we have not received sufficient revenues from operations and do not
anticipate receiving sufficient revenues for the next 12 months from operations,
we will need to obtain substantial funding from external sources over the next
twelve months to finance our current operations.
In order to finance our working capital requirements, we are currently
negotiating equity investments with several sophisticated investors, but there
can be no assurance that we will obtain this capital or that it will be obtained
on terms favorable to us. If we do not obtain short term financing we may not be
able to continue as a viable concern. In view of this fact, our auditors have
stated in their report from the period ended September 30, 2000, that there is
substantial doubt about our ability to continue as a going concern, dependent
upon our ability to meet our future financing requirements, and the success of
our future operations, the outcome of which cannot be determined at this time.
We do not have a bank line of credit and there can be no assurance that any
required or desired financing will be available through bank borrowings, debt,
or equity offerings, or otherwise, on acceptable terms. If future financing
requirements are satisfied through the issuance of equity securities, investors
may experience significant dilution in the net book value per share of common
stock.
On April 14, 2000, we entered into a Securities Purchase Agreement
with six investors, for the purchase of investment units, consisting of common
stock, common stock purchase warrants, 4% subordinated debentures and preferred
stock. Pursuant to the Securities Purchase Agreement, these investors purchased
760,000 shares of common stock, warrants to purchase 3,600,000 shares of common
stock and subordinated debentures with a principal amount of $3,280,000 for a
total price of $4,800,000.
On August 10, 2000, we agreed with the investors to modify certain
terms of the earlier funding agreement. Under the new terms of this agreement,
we agreed to issue an additional 608,000 shares of common stock to the
investors, in exchange for $1,920,000 and the investors' forbearance of certain
rights under the original agreement. The conversion price of the subordinated
debentures was amended to the lesser of 110% of the average per share market
value for the five consecutive trading days immediately preceding the original
issue date and 85% of the average per share market value for the five
consecutive trading days immediately prior to the conversion date. We also
agreed to change the floor price to $1.00 for the period between August 10, 2000
and October 14, 2000, $0.64 from the period between October 14, 2000 and April
14, 2001 and zero thereafter. Notwithstanding these changes, under this
amendment if our revenues for fiscal year 2000 fall below $13.5 million than the
floor price will be zero as of April 1, 2001. Furthermore, the exercise price of
the warrants to purchase our shares was changed to $2.00.
On November 15, 2000, the investors agreed to modify the transaction
documents in accordance with our request and agreed to waive any breach of the
original Securities Purchase Agreement and the first amendment by us which
occurred prior to the closing date of the Second Amendment. In consideration for
these concessions, we agreed to increase the principal amount of the
-11-
debentures held by the investors to $6,720,000 and to issue 3,996,113 additional
restricted shares of common stock to the investors. The investors have returned
to the company 760,000 previously issued shares of common stock in exchange for
the issuance of new debenture certificates reflecting the increase in the
principal amount. Under this agreement, the selling shareholders may convert the
debentures at a conversion price equal to the lesser of $0.64 and an amount
equal to 85% of the average of the closing trading prices of the common stock
for the five consecutive trading days immediately prior to the conversion. At no
time shall the conversion price be below the floor price. The floor price is
$0.64 for the period between October 1, 2000 and October 14, 2000, $0.50 for the
period between October 14, 2000 and September 1, 2001 and zero thereafter.
However, if our aggregate revenue for the last three quarters of the year 2000
and the first quarter of the year 2001 is less than $13.5 million then as of May
14, 2001 the floor price shall be zero. In addition, the 608,000 shares to be
issued under the first amendment were never issued and were accordingly
cancelled.
We signed a common stock purchase agreement with Grenville Finance
Ltd. dated January 26, 2001 for the future issuance and purchase of our common
stock. The common stock purchase agreement establishes what is sometimes termed
an equity line of credit or an equity draw down facility. In general, the equity
line of credit operates like this: Grenville Finance Ltd. committed up to $50
million to purchase our common stock over a twenty-four month period. Once every
22 trading days, we may request a draw down of up to $1,500,000 of the committed
money, subject to a formula based on the average common stock price and average
trading volume, setting the maximum amount of any request for any given draw
down. Each draw down must be at least $50,000. The amount of money that
Grenville Finance Ltd. will provide to us and the number of shares we will issue
to Grenville Finance Ltd. in return for that money is settled twice during a 22
day trading period following the draw down request based on the formula in the
common stock purchase agreement. Grenville Finance Ltd. will receive a fifteen
percent discount to the volume weighted average stock price for that 22 day
period We will receive the amount of the draw down less an escrow agent fee of
$750 for each draw down amount and an 8% placement fee payable to the placement
agent, Union Atlantic, LC, which introduced us to Grenville Finance Ltd. In
addition, Grenville Finance Ltd. will receive a three year warrant to purchase
up to 15,000,000 shares of our common stock at an exercise price of $0.20 per
share. See "The Common Stock Purchase Agreement" below.
On February 11, 2001, we entered into a Stock Purchase Agreement with
two investors for the purchase of four million shares of common stock we offered
at $0.125 per share through our Post Effective Amendment Form SB-2 Registration
Statement. The total purchase price was $500,000.
Plan of Operations
We are considering alternatives to our present business strategy,
which include, but are not limited to modifications of our business plan and the
possible sale or licensing of certain assets. Specific components of the
modified new business plan could include a significant reduction in our selling,
general and administrative expenses, additional equity investment,
recapitalization and additions to the current management of the company. We
cannot provide assurance that implementing the modified business plan, even with
the successful execution of all the components of the new plan, will lead the
company to profitability.
Due to the substantial operating losses we incurred during the fiscal
year ended September 30, 2000 and this past quarter, as well as the current
projected future operating losses, we will require new sources of funding in the
form of equity or debt financing in order to execute our
-12-
current business plan. However, there is no certainty that additional financing
of any kind will be forthcoming in amounts sufficient to allow the company to
continue to operate its business.
On January 14, 2001, we entered into a Loan Agreement with our systems
integrator, Andrew Corporation, to repay costs incurred in purchasing their
services and equipment. Under the Loan Agreement, we agreed to pay the company
an initial payment of $100,000 and then an additional $100,000 each month until
the loan is repaid. The amount payable each month is subject to an increase if
we receive additional financing. In addition, we issued the company a warrant to
purchase no less than 200,000 shares and no greater than 500,000 shares of
common stock. The warrants are exercisable until January 24, 2005 at an exercise
price of $0.23 per share. The warrants were issued in lieu of interest. We are
required to register the shares underlying the warrants.
During the next 12 months we intend to initiate and expand licensed
operations in Ukiah, California, South Bend, Indiana, Grand Rapids, Michigan,
Vail and Aspen, Colorado, Key West, Florida and Pierre, South Dakota.
Internationally, we intend to focus primarily in Peru, India, and Thailand, and
Argentina assuming that our licenses are restored. We are considering selling
certain limited assets. We anticipate that our expansion will involve the
purchase of significant equipment in these markets and estimate that the
expenditure will be approximately $15,000,000 to $25,000,000. We currently have
10 full-time employees at our headquarters office and approximately 30
additional full time employees in the offices of our subsidiaries. We anticipate
hiring more employees as we enter new markets.
-13-
BUSINESS
Introduction
In February of 1997, Worldwide Wireless, Inc., a Nevada corporation,
was formed to coordinate the operations of TSI Technologies, Inc., a Nevada
corporation, and National Micro Vision Systems, Inc., a Nevada corporation. Its
purpose was to complete the development of its patented advanced distributed
wireless telephone and network designs and to finance, manufacture, and market
these units and systems. TSI Technologies, Inc. was the research and development
company formed for the purpose of creating and developing the distributed
wireless call processing system. National Micro Vision Systems, Inc. was formed
to operate a network of wireless Internet sites. In April of 1998, Worldwide
Wireless, Inc., TSI Technologies, Inc. and National Micro Vision Systems, Inc.
acquired Upland Properties, Inc., a Nevada corporation, for stock and
transferred their assets to Upland Properties, Inc. Upland Properties, Inc. then
changed its name to World Wide Wireless Communications, Inc. and began trading
on the OTC Bulletin Board under the symbol WLGS. Worldwide Wireless, Inc.
remains a significant shareholder in our company, but it does not play a role in
our current operations. National Micro Vision Systems, Inc. is now completely
separate from and unrelated to us.
We have purchased, leased or otherwise have acquired an interest in a
substantial number of high-speed wireless Internet frequencies in the United
States, Peru, India and Thailand either by ourselves, or through our
subsidiaries or joint ventures. We have also applied for reinstatement of our
subsidiary's license in Argentina. We plan to purchase or lease additional
wireless Internet frequencies in the United States and abroad, should we receive
additional funding.
In addition to acquiring and developing wireless Internet frequencies,
we have received a patent on a new generation of wireless cellular telephone
technology that we have named the distributed wireless call processing system.
We believe that this technology may enhance wireless communications in the
future by increasing cellular telephone network capacity.
The Industry
Use of the Internet and private communications networks has expanded
and continues to expand rapidly. International Data Corporation estimates that
there were 142 million Internet subscribers at the end of 1998, and projects
that this number will grow to over 500 million subscribers by 2003. Businesses
increasingly depend upon data networks, not only for communication within the
office, but also to exchange information among corporate sites, remote
locations, telecommuting employees, business partners, suppliers and customers.
Consumers are also accessing the Internet to communicate, collect and publish
information and conduct retail purchases.
The growth in data traffic is resulting in an increase in the demand
for high-speed access. To accelerate the speed at which data can be transmitted,
service carriers are increasingly relying on broadband, which allows the
transmission of multiple data channels through a single medium. One broadband
medium consists of wireless frequencies which have large bandwidth, or an
ability to transmit large amounts of data in a short period of time.
The FCC has taken steps to increase the availability of frequencies
and bandwidth that may be used by wireless carriers in the United States for
such data transmission. In addition, an FCC ruling in September 1998 allowed
license holders of various frequencies within the band of 2.15 to 2.68 Gigahertz
or GHz, to offer two-way broadband wireless data services upon the opening of a
filing
-14-
window. On March 23, 2000, the FCC announced the initial filing window
for two way authorization which eventually took place between August 14, and
August 18, 2000. Previously, these frequencies had been restricted to one-way
video transmissions, which limited their effectiveness for data transmission.
The FCC has also increased the availability of various higher frequencies within
the bands of 24 to 40 GHz. Internationally, these frequencies vary slightly,
with the lower frequency services being between 2.5 to 5.0 GHz and the higher
frequency-type services being offered on frequencies similar to the higher
frequencies used in the United States.
Opportunities in broadband wireless access are increasing globally as
Europe, Latin America, Asia Pacific and Canada join the United States in
promoting competition in the local communications services market by allocating
frequencies and bandwidth and issuing transmission licenses. In this regard, at
least 26 countries have allocated broadband wireless frequency bands for use or
trials in the last mile, according to Global Telephony.
Deregulation has been a significant catalyst for increased competition
in the long-haul segment of the market and massive spending on network
infrastructure, as incumbent and emerging carriers have sought to address the
growing demand for bandwidth. In the local access segment of the market,
deregulation has also been a significant catalyst for the growing interest in
providing broadband access directly to subscribers. Data services that
historically were offered only by a single provider for a region now may be
offered by a number of competing service providers. This increased competition
has given local service providers compelling incentives to improve data
transmission rates in order to offer additional value-added services to
subscribers. However, bandwidth limitations of the existing infrastructure for
the connection to the subscriber have constrained service providers from
exploiting these opportunities. Links to subscribers typically consist of copper
wires that operate at substantially lower transmission speeds than those offered
in the long-haul segment of a network, or by some available broadband
alternatives. These copper wires were originally intended to carry only analog
circuit-switched, voice signals. As a result, the connection to the subscriber
has become a bottleneck that limits high-speed data transmission.
Alternative technologies for broadband access include:
o Digital subscriber line, or DSL, technology which improves the
data transmission rates of a telephone company's existing copper
wire network;
o Cable modems, which are designed to provide broadband Internet
access and are targeted primarily at the residential market;
o Fiber Optic-Based Solutions and high-capacity leased lines, which
offer the highest data transmission rate of any of the
alternative technologies for broadband access;
o Point-to-point wireless technology enables data transmission
using a dedicated radio link between two locations; and
o Broadband point-to-multipoint wireless networks, which consist of
a wireless hub that communicates over radio frequencies to
transmit and receive network traffic to and from wireless modems
installed at multiple subscriber locations.
Both incumbent and emerging service providers are emphasizing
broadband wireless technologies for Internet access. Established carriers are
expected to use broadband wireless technology to reach new customers to whom
they previously could not provide access, fill coverage
-15-
gaps in their existing networks and deploy value-added services in a
cost-effective manner. For example, International Data Corporation reports that
in 1999, Sprint and MCI WorldCom spent over $1.5 billion to purchase companies
holding licenses in these lower frequencies within the 2.15 to 2.68 GHz range.
Emerging carriers may use this technology to bypass existing wire-based
infrastructure and to compete with incumbent carriers. In addition, this
technology may be used to deploy broadband services in regions where there is no
wire-based communications infrastructure. Estimates of the revenue which lower
frequency licenses will generate vary substantially, but International Data
Corporation estimates that revenue generated by basic services delivered via
fixed, non-satellite based wireless technologies will grow from $767 million
last year to $7.4 billion in 2003.
Lower and Higher Frequency Wireless Transmission Systems
We have chosen to focus on acquiring licenses to transmit within the
lower frequency ranges approved by the FCC and used internationally, which are
generally between 2.15 and 5.0 GHz. Although the higher frequencies are large
enough to transmit large amounts of data at once, the higher frequencies have
severe limitations including high costs of build out, very short range of less
than 5 kilometers and severe problems with interference from weather and
atmospheric conditions. Even though they have these limitations, higher
frequency transmissions would appear to have major potential in wireless local
loops, internal wireless networks and intranets.
The lower frequencies approved by the FCC have less bandwidth than
those in the higher frequencies. Nonetheless, we believe that the lower
frequencies have more than enough bandwidth for the great majority of potential
business and residential users. In the United States, which allows 10 watts of
power in transmitting data, the range of the lower frequencies is at least 50
kilometers and transmissions within these frequencies are much less affected by
atmospheric and meteorological phenomena. It is also much less expensive to
install and operate lower frequency transmission services than at higher
frequencies, in part because the greater range of the lower frequencies require
the installation of fewer transmitters.
Both high and low frequency transmissions are transmitted over a
limited number of licensed frequencies that protect data from interference by
other forms of radio or microwave transmitters. It is critical, therefore, that
any company operating or attempting to develop a system of wireless Internet
over these frequencies acquire them as quickly and as inexpensively as possible
and for as many locations and as many channels/bands as possible in each
location.
Because of the limitations of higher frequencies as a means of
transmissions for Internet access, and because we believe that the more viable
market for wireless high-speed services is in the small to medium-size business
and residential market, we have decided to concentrate exclusively on the lower
frequencies for our Internet access service. In that context, we have been
actively engaged in the acquisition of wireless Internet frequencies in the
United States and especially abroad.
One major technical problem with wireless transmissions within the
lower FCC-approved frequencies has traditionally been that a clear line of sight
was necessary between the transmission and the receiver. This limitation allowed
these frequencies to be used only in areas with even terrain and no
obstructions, insofar as buildings and hills would often disrupt transmissions.
Although these problems persist with the lower frequencies, there have been
recent developments which have shown a potential for reducing these problems.
Cisco Systems, Inc. announced the development of Vector Orthogonal Frequency
Division Multiplexing, which purportedly has the ability to reassemble
multi-path signals at the receiving point so that they appear to arrive in a
single stream
-16-
from one location, even if obstacles are in the path of the original signal.
(Communications Daily, MMDS Industry Gears Up on Standards Issues, Spectrum
Planning, April 3, 2000). This would have the effect of significantly reducing
the line of sight problem and, we believe, will enhance lower frequency
transmissions as a medium for Internet access.
A part of the spectrum which the lower frequencies occupy consist of
frequencies referred to as Instructional Television Fixed Service. These
frequencies are reserved by federal law to television broadcasting by religious,
educational or other nonprofit groups. An increasing number of providers of data
transmission are leasing transmission rights of the holders of Instructional
Television Fixed Service licenses. As we discuss below, we have leased a number
of these frequencies from a nonprofit organization.
International Broadband Use
We believe that international markets offer enormous potential for
growth. Although use of the Internet has grown substantially internationally, we
believe that the combination of obsolete equipment and newly privatized systems
in many countries provide us with great opportunity. The technology we employ
allows countries such as Thailand and Peru to establish an up-to-date,
high-speed, broadband wireless Internet system equal to any of the most
developed nations with very little infrastructural costs. We believe the same
will be true in the many other countries throughout Asia, Latin America, the
Middle East and Europe in which we are actively seeking wireless frequencies.
We believe that our approach to providing high-speed, broadband, fixed
wireless Internet service will make our service available to a broader customer
base than is possible with certain other fixed wireless services. By
concentrating on the acquisition of relatively low-frequency spectrum, we can
provide service over a substantially larger market of customers, with enhanced
propagation properties, and for substantially lower cost than can be offered by
higher-frequency wireless services. It is our belief that the bandwidth and
speed of our service will meet the requirements of at least 90% of the potential
high-speed wireless Internet customer base, and we hope to be able to provide
this service more economically and with greater reliability than our
competition. In the international market, we should be able to provide a quantum
leap in the quality of Internet service beyond that which currently exists and
at a price point similar to that being charged by providers of the current
service.
Our strategy
Our activities are currently divided into three categories:
o Acquisition of Wireless Internet Frequencies - Spectrum;
o Development of Wireless Frequencies - Build Out; and
o Development and Licensing of Distributed Wireless Call Processing
Systems.
Acquisition of Wireless Internet Frequencies - Spectrum
We have determined that our primary target for acquisition of wireless
frequencies will be in the frequency range within the United States of 2.5 GHz
to 3.0 GHz and in similar frequency ranges up to around 5.0 GHz internationally.
With these frequency ranges we believe that we will be able to provide the
highest quality, broadest band, and fastest service and the most reasonable
costs to the largest number of potential customers. By positioning ourselves to
provide enhanced connectivity
-17-
to the largest number of people, we believe that we will play a significant role
in the expansion of this technological development in both the short and long
term.
Prior to 1999, we controlled licenses in only three locations - the
East Bay region of San Francisco, California, northern San Diego County,
California, and South Bend, Indiana. Since the beginning of 1999, we have
acquired rights - either through long-term leases with options to purchase or
outright purchases - to additional spectrum both in the United States and
elsewhere. As of March 1, 2001, we lease, own or possess reversionary rights to
licensed frequencies in the following additional locations:
Location State/Country
Hot Springs Arkansas
Aspen Colorado
Vail Colorado
Hilo Hawaii
Grand Rapids Michigan
Key West Florida
Ukiah California
La Grande Oregon
Pierre South Dakota
Buenos Aires* Argentina, South America
Bangkok Thailand. Asia
Hat Yai Thailand, Asia
Khon Kaen Thailand, Asia
Nakhon Ratchasima Thailand, Asia
Phuket Thailand, Asia
Chiang Mai Thailand, Asia
Lima/Callao Peru, South America
- -------------------
* At this point the license in Buenos Aires, Argentina has been
revoked. Although the government in Argentina has informed us it will reissue
the licenses we cannot provide assurance that this will occur.
The licenses in the United States listed in the above table are
currently leased from Shekinah Networks. Pursuant to an Option Agreement with
Shekinah Networks, we paid $500,000 to lease nine Instructional Television Fixed
Service channels for our high-speed wireless Internet connections, as authorized
by the FCC. This agreement also provides us an exclusive option to lease excess
capacity on Shekinah's remaining thirty-two channels, as they become available.
The monthly minimum transmission fee to be paid to Shekinah for each license or
application leased will be 5% of the gross system receipts or $500, whichever is
greater. Each lease has a term of five years, which may be renewed at our
election for an additional five-year term if the FCC renews the license.
All of the United States licenses described above allow us to
broadcast over frequencies using one-way transmissions only. With the exception
of certain limited provisional licenses granted in various parts of the country,
the FCC has not yet granted long-term two-way transmission licenses for the
lower frequencies. We have submitted six applications for two way transmissions
on our existing licenses to the FCC in the following markets: Aspen, Grand
Rapids, Key West, Pierre, Ukiah and Vail. Each of those applications is
currently pending.
-18-
Development of Wireless Frequencies - Build Out
As spectrum is acquired, we plan to provide high-speed Internet
services, including telephony and videoconferencing services. We plan to join
with local partners and other entities in the industry to form strategic
alliances in connection with the use and implementation of high-speed wireless
services. We may also provide services directly to users of Internet services.
As of the date of this prospectus, and except as described below, we have not
yet entered into any strategic alliances.
We selected Andrew Corporation as our exclusive systems integrator
worldwide. We anticipate that this association with Andrew Corporation will
assist us in our effort to deploy our high speed wireless data systems
throughout the world. Most recently, Andrew Corporation has provided significant
assistance with our system build out in Lima/Callao, Peru.
We are currently operating a single system off of Mt. Diablo in
Concord, California, an area some thirty miles east of San Francisco. The
license at Mt. Diablo is one of only two one-channel licenses that we control,
with all the remaining ones being at least four channels. Commercial service
commenced in this location in December 1999. Because the high-speed wireless
component of the Mt. Diablo operations is only available in downlink mode, we
have been aware from the outset that the operations in the Concord area would
not be typical for the more conventional two-way systems. However, because the
FCC has not yet approved permit applications for two-way transmissions within
these frequencies and because of the specific demographics within the potential
Mt. Diablo transmission area, we decided to commence the limited-type of service
close to our headquarters in Oakland.
In December 1999, we entered into an amended lease agreement regarding
a lease for the license covering Concord, California and the surrounding area.
We have recently received a Notice of Default from the lessor. The Notice of
Default is based on a requirement in the amended agreement that the balance of
the purchase price for the assignment of the license be paid by December 1,
2000. Our management has been advised by counsel, that payment of the balance of
the purchase price prior to the FCC's consent to the assignment of the license
may constitute a premature assignment in violation of the FCC's rules. The
assignment application has not been filed with the FCC for the FCC to make a
definitive ruling on this issue. At this point, no formal legal action has been
taken by the Lessor.
We intend to build-out domestic systems in various areas including the
small town of Ukiah, California, some ninety miles north of San Francisco. In
addition to Ukiah, we plan to commence domestic build-out programs in northern
San Diego County, South Bend, Indiana, Grand Rapids, Michigan, Vail and Aspen,
Colorado, Key West, Florida, and Pierre, South Dakota. We recently entered into
an agreement with Shekinah Network to lease their excess airtime capacity in Hot
Springs, Arkansas and Hilo, Hawaii.
We signed an agreement to acquire 51% of Infotel Argentina, S.A. in
November, 1999. We intend to commence operations in Buenos Aires, Argentina as
soon as we obtain the necessary licenses. We have secured the necessary backbone
connections and transmitter locations in the Greater Buenos Aires metropolitan
area, which contains more than 16 million people. Our ability to begin
transmission over the frequencies is subject to approval of the Comision
Nacional de Communicaciones, or CNC, the governmental agency primarily
responsible for regulating telecommunications in Argentina. The Argentine
government recently announced that it was revoking all licenses for certain
specific lower frequencies previously granted to Infotel and others. As a result
the licenses for which we had submitted transfer requests were revoked. The
Argentine government
-19-
has set forth criteria for the return of the licenses and we have submitted the
necessary documentation. We expect that the CNC will ultimately approve our
applications and allow for us to commence offering our wireless services.
However, we have been informed that the government might not reissue the same
lower frequency licenses for those cities outside Buenos Aires, but may instead
issue a new series of licenses on a different frequency. We cannot provide
assurance that a license from the Argentine government will be forthcoming.
We acquired all of the shares of Digital Way, S.A., a Peruvian
telecommunications company earlier this year. Digital Way presently owns a
wireless transmission license in Lima/Callao and is in the process of attempting
to secure additional licenses in that area as well as licenses for five
different cities in Peru. We have received necessary governmental consent in
Peru for the transfer of the control of Digital Way's licenses.
Digital Way, S.A. recently launched its two way, high speed, broadband
wireless internet operations in metropolitan Lima/Callao Peru. This effort has
generated interest from business customers in the region. This service is to be
marketed under the name "Speedway" and is intended to provide high quality
service to currently underserved sectors of the Peruvian market. Recently,
Digital Way entered into an agreement for a pilot project with McDonalds's,
Compaq Computer, and a local Internet Service Provider to provide Internet
access to McDonald's customers at one of the restaurants locations in San
Isidro, Lima Peru. Digital Way is providing the connectivity and internet
backbone to provide the service. We expect that the pilot project will be
expanded in the future to cover additional McDonald's locations in the
Lima/Callao area.
We intend to inaugurate services in Thailand subject to funding.
Earlier this year, we entered into a joint venture with World Thai Star Company,
a Thai corporation, to provide high speed, wireless, broadband internet and
related services in Bangkok and other major areas in Thailand. World Thai Star
Company, currently owns frequencies in Bangkok and throughout "up-country"
Thailand. World Thai Star will transfer its rights to certain frequency licenses
to the joint venture and we will contribute funding.
Upon receipt of additional funding, we intend to commence a build out
of our high speed broadband fixed wireless data service system in India. We have
entered into an agreement with a group of Indian businessmen to establish such a
system. Under the agreement, World Wide Wireless Communications (India) Ltd. was
formed. World Wide Wireless Communications (India) has received internet service
provider licenses in five cities in India. The success of this venture depends
on obtaining a nationwide internet service provider license and an appropriate
frequency license from the Indian government. We recently received a frequency
license from the Indian government to provide service in nine Indian cities
subject to certain conditions imposed by the government. Our India operation
still needs to apply for a nationwide ISP license to provide service in all the
frequencies granted. We are required to contribute capital to World Wide
Wireless Communications (India) Ltd for build out and related expenses in
increments based on obtaining the internet service provider and frequency
licenses.
We expect that, in the case of any future acquisition of licensed
frequencies, we will operate the systems alone, do so in joint ventures with
local entities, or transfer the licenses to third parties for significant
consideration.
Although we initiated negotiations with businesses in Puerto Rico and
Portugal in 1999, no further negotiations or affiliations are currently pending
in those countries.
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Development and Licensing of Distributed Wireless Call Processing
System
We are completing the development of our distributed wireless call
processing system. The major feature of this system is that it allows individual
cell phones and other communication units to amplify signals, thereby reducing
the need for repeater stations. The system allows every handset itself to serve
as a mobile, low-power repeater site, and each unit facilitates the operation of
the entire local network within a radius of 10-20 miles. A whole continent
populated with these units would theoretically have no need for infrastructure
support of any kind. In practice, we or parties to whom we license the system
will build widely scattered gateway sites that will serve to introduce local
signals into long lines, international and satellite service providers and
introduce data signals into destination networks while providing a medium for
our generation of an ongoing revenue stream.
We are looking to license this technology to a third party developer
in order to potentially create a royalty stream of income. However, we cannot
guarantee that we will enter into such an agreement.
Competition
Our competitive business position is largely dependent on the various
markets in which we operate.
United States
The telecommunications market in the United States is highly
competitive and largely deregulated, although the FCC still plays a prominent
role. We are focusing our strategy on underserved rural areas that are less
economically viable for high speed wireline or cable-modem services. Although
other fixed wireless providers, such as Sprint and Worldcom/MCI, may eventually
become competitors, in the next few years these operators will likely focus on
the more lucrative opportunities offered by larger markets. We believe that
markets in which we have licenses, such as Key West and Aspen, will not be the
focus of these service providers in the near future which we hope will enable us
to establish our services in these markets before other larger companies enter
these markets. Other potential competitors such as satellite broadband and
dial-up Internet service providers currently provide less bandwidth than do
service providers using our frequencies which can result in some instances in
transmission delays and downstream service interruptions, particularly in bad
weather.
Peru
The Peruvian Internet market is still dominated by the former
monopoly, Telefonica del Peru, which provides basic dedicated, hosting and
high-speed wired services. Access connections are limited by the limited
personal computer and cable penetration rates, as well as low availability of
local content. Although Bell South and AT&T Latin America plan to enter the
Internet service provider marketplace, we believe it is a lower priority than
providing their basic telephony services. Diginet Americas has entered Peru with
a fixed wireless broadband service. Diginet Americas intends to provide "point
to multipoint" services such as ours. Most of the less prominent Internet
service provider companies are focusing on the Lima/Callao market where there
are numerous high-income and corporate customers.
Argentina
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Argentina's Internet service provider market is relatively
competitive, with four significant Internet access providers, none of which
possesses a market share greater than 25%, however, taken together, these four
companies represent about 80% of the total Internet service provider market. We
believe that some of the cable providers have entered or plan to enter, the
dial-up and cable-modem markets. In addition, Velocom and Millicom, two
Argentine companies, have recently entered the market using wireless spectrum
(3.5 GHz) in a similar range as ours. Winstar, an American company, recently
rolled out Internet service provider services in Buenos Aires using higher
bandwidth than ours. Winstar primarily plans to concentrate on large businesses.
We plan to focus our efforts on small to medium size businesses if our license
is restored. We believe that services on our frequencies, if the government
reinstates our licenses, provide for a geographically longer-range of coverage.
Thailand
Pyramid Research, a research firm, indicates that there are currently
at least four competitors for us in the Internet service provider market in
Thailand. However, it reports that none of them have more than 30% of the
market. Fixed wireless technology is not yet prevalent in Thailand providing a
good potential environment for our technology.
India
Slow deregulation has stifled competition in the Indian Internet
service provider market. The former monopoly, VSNL, still retains a significant
majority of all Internet access connections. Currently, in order to provide
internet access in India a company must first apply for an Internet service
provider license. The Indian government has indicated that it considers Internet
access a top priority and intends to increase availability of such licenses. We
anticipate that our current relationship with certain Indian contacts will
ultimately allow us to gain access to additional licenses and an Internet
service provider license. At this point, our four major competitors are the
former telephone monopoly (VSNL), Satyam Infoway, Regional Monopoly (MTNL) and
Cable Satellite Network "Zee".
Acquisitions
On November 30, 1999, we signed an agreement to acquire 51% of Infotel
Argentina, S.A., the owner of wireless transmission licenses in eight of the
largest cities in Argentina, including Buenos Aires. Under the agreement, we
will appoint the majority of Infotel's directors and will be in charge of its
management. The purchase price for Infotel Argentina S.A. consisted of $900,000
in cash and 454,545 shares of common stock. The Agreement allows us to rescind
the purchase in the event that the CNC does not approve the sale of Infotel
Argentina S.A. to us and receive repayment of the purchase price.
On February 29 , 2000, we signed an agreement to purchase Digital Way,
S.A., a Peruvian telecommunications company. Digital Way currently owns licenses
for spectrum in the 2.3 to 2.5 GHz range, and has national and international
long-distance concessions as well as value added licenses for services in Peru.
The purchase price for Digital Way consisted of $400,000 in cash and 181,100
shares of common stock. We also agreed to pay Digital Way in increments of money
and shares of common stock based on certain milestones including the transfer
and the acquisition of additional licenses. Under the agreement, Digital Way
will also receive additional shares if, on the one year anniversary of the
agreement, our share price drops below the share price on the closing date of
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the agreement. Accordingly, we will be obligated to issue sufficient shares to
assure that the total value of the shares shall equal $900,000 based on the
share price on the anniversary of the agreement. We sought and received approval
for this acquisition from the Peruvian government.
In March 2000, we signed an agreement to acquire 25% of El Salvador
Telecom, S.A. de C.V. ("SalTel") a telecommunications company in El Salvador.
Pursuant to the terms of the letter of intent, we paid $1,000,000 to that
company as an advance payment of the purchase price. The agreement provided that
the purchase was conditioned upon the company's acquisition of certain licenses
and the occurrence of certain other conditions which have not been met. As a
result we sought the return of the $1,000,000 payment. To date the company has
returned all $1,000,000.
Regulation
We intend to offer our services exclusively over licensed frequencies
in each of the countries in which we operate. In the United States, our
frequencies are licensed by the Federal Communications Commission. In Argentina,
by the Comision Nacional de Comunicaciones. In Peru by the Telecommunications
Concessions Department of the Ministry of Transport, Communciations, Housing and
Construction. We are either applying directly for licenses in some countries or
applying jointly with local partners in other countries. Some countries require,
for example, domestic control of any entity licensed to use radio frequency
within their territory.
Within the United States, we operate under licenses issued by the FCC.
These licenses are issued in the 2.5 GHz frequency range and can be revoked if
the licensee or its assignee is in violation of any of the operation provisions
under the license. The licenses are issued in the United States for a fixed time
period and can be renewed. Yearly reports are required to be filed with the FCC
to establish that the licensee or its assignee is complying with the
requirements of the license.
Outside the United States, rules and regulations are quite varied. In
Argentina, the proposed frequencies for licenses are between 2.4 GHz and 2.6 GHz
and are granted by the CNC. Licenses are granted for periods of 10 years, but
may be extended for lengthier periods at the discretion of the CNC. In Peru,
frequencies for licenses are also between 2.4 GHz and 2.6 GHz and are granted
for periods of 20 years. As in the United States, licenses may be revoked if the
licensee violates any of the license provisions. There are significant
differences in the clarity of regulations as well as in the consistency of their
enforcement by the regulatory authorities abroad, and changes in governments may
result in substantial changes in the enforcement of regulations. For example, in
September 2000, the government of Argentina revoked licenses for lower
transmission frequencies, those ranging between 2.5 and 4.0 Gigahertz or GHz for
all communication carriers, including those of the Company's subsidiary, Infotel
Argentina, S.A. Although we have resubmitted the necessary paperwork to obtain
licenses in Argentina, it is unclear at this point whether the government will
decide whether to reissue the licenses. A denial of our most recent application
or a significant delay in consideration of our application could either prevent
us from conducting our planned operations in Argentina or materially adversely
affect our ability to do so.
In addition to these laws, our business operations also make us
subject to laws pertaining to transmitters of information over the Internet. The
law relating to liability of Internet service providers and online service
providers for information carried on or disseminated through their networks is
currently unsettled. A number of lawsuits have sought to impose liability for
defamatory speech and indecent materials. A recent federal statute seeks to
impose liability, in some circumstances, for transmission of obscene or indecent
materials. In one case, a court has held that an
-23-
online service provider could be found liable for defamatory matter provided
through its service, on the ground that the service provider exercised active
editorial control over postings to its service. Other courts have held that
Internet service providers and online service providers may, under certain
circumstances, be subject to damages for copying or distributing copyrighted
materials. The Telecommunications Act of 1996 prohibits, and imposes criminal
penalties and civil liability for using, an interactive computer service for
transmitting indecent or obscene communications. Although we intend to conduct
our operations in a manner which reduces the risk of liability under these laws,
we cannot assure you that we will avoid liability entirely under these laws.
Business Locations
Our business headquarters is located at 520 Third Street, Oakland,
California, 94607. We also have offices located in Concord, California, Buenos
Aires, Argentina and Lima/Callao, Peru. Our office space at One Post Street, San
Francisco, was leased on a month-to-month basis. We vacated these offices on
August 31, 1999. The actual rent paid, for the fiscal year ended September 30,
1999, was $22,341.
In April 1999, we entered into a 5-year lease for approximately 6,000
square feet of office space in Jack London Square, Oakland, California. The
lease commenced on June 5, 1999. The triple net rental agreement is for $10,038
per month during the first year. The lease provides for an annual increase based
on the indexed cost of living adjustments. Additionally, the lease provides for
the landlord's participation in partial reimbursement over the terms of the
lease to us for leasehold improvements for which we pay. We began to occupy this
space on September 1, 1999. The minimum annual rent is $120,456 for the fiscal
years ended September 30, 2000, 2001, 2002 and 2003, and $81,642 for the period
October 1, 2003 to June 4, 2004.
We also entered into a lease for office space to operate our network
operation center at 2962 Treat Boulevard, Suite C, in Concord, California 94518.
The triple net rental agreement is for $1,890 per month. The lease provides for
an annual increase based on the indexed cost of living adjustments.
Additionally, the lease provides for the landlord's participation in partial
reimbursement over the terms of the lease to us for leasehold improvements we
make. We commenced occupation of this 1680 square foot space on May 1, 1997. The
lease expired on April 30, 2000. We are now occupying the premises on a
month-to-month basis.
We have lease space by virtue of our acquisition of Infotel Argentina,
S.A.. The lease is for approximately 1,500 square feet and is leased on a
month-to-month basis. The monthly rent is approximately $2,000 per month. The
lease started on January 1, 1999 and expires on December 31, 2003.
We have leased space in Peru by virtue of our acquisition of Digital
Way, S.A.. The lease is for three office spaces within the same building
approximately 4,350, 57.53 and 40.99 square feet respectively and is due to
expire May 1, 2010. The monthly rent is approximately $4,444.06 per month with a
nominal annual increase.
Patents/Intellectual Property
We recently received a patent from the United States Patent and
Trademark Office for our distributed wireless call processing system, which has
been issued patent number 6,055,429. We do not have other patents pending
pertaining to other technologies.
-24-
We currently use the service mark "World Wide Wireless
Communications", however, this particular name is currently not protected by any
trademark or copyright protection. We have applied to register the service mark
consisting of both the name itself and a design logo with the United States
Patent and Trademark Office. We are currently considering changing our corporate
name from World Wide Wireless Communications, Inc. to another name.
Legal Matters
On August 26, 1999, we filed suit against Credit Bancorp, in U.S.
District Court in San Francisco, regarding improprieties on the part of Credit
Bancorp relating to a loan. The case was settled on October 11, 1999. As part of
the settlement agreement, Credit Bancorp agreed to convert the original loans
granted to us to a convertible debenture in the amount of $740,000. On October
11, 1999, we issued a convertible unsecured debenture for $740,000 to Credit
Bancorp in settlement of this obligation. The terms of this convertible
unsecured debenture are 7% interest per annum payable, semiannually on the last
day of February and September, with the principal due September 30, 2002. All
amounts of unpaid principal and accrued interest of this debenture are
convertible at any time at the conversion price of $1.60 per share of
unregistered, restricted shares of our common stock. Credit Bancorp's receiver
has agreed to convert principal and accrued interest owing on the debenture into
482,734 shares of our common stock.
The Securities and Exchange Commission commenced an informal inquiry
of our company in August, 2000. We have voluntarily complied with their requests
for information and we intend to fully cooperate with the inquiry.
In December 1999, we entered into an amended lease agreement regarding
a lease for the license covering Concord, California and the surrounding area.
We have recently received a Notice of Default from the lessor. The Notice of
Default is based on a requirement in the amended agreement that the balance of
the purchase price for the assignment of the license be paid by December 1,
2000. Our management has been advised by counsel, that payment of the balance of
the purchase price prior to the FCC's consent to the assignment of the license
may constitute a premature assignment in violation of the FCC's rules. The
assignment application has not been filed with the FCC for the FCC to make a
definitive ruling on this issue. At this point, no formal legal action has been
taken by the Lessor.
-25-
MANAGEMENT
Our executive officers and directors and their ages as of March 1,
2001 are as follows:
Name Age Position Period of Service
- ---- --- -------- -----------------
Douglas P. Haffer....... 52 Chairman of the Board, April 1998 to present
CEO and CFO
Dana Miller............. 39 Vice President May 1998 to present
Ramsey Sweis............ 35 Director May 1998 to present
Robert Klein............ 52 Director May 1998 to present
Sonny Rath.............. 36 Director January 2001 to present
John Cutter............. 71 Director January 2001 to present
Douglas P. Haffer has practiced law in San Francisco, Beverly Hills,
and Washington D.C. for twenty-five years. During that time he served as general
counsel and/or vice president, and on the Board of Directors, of several
corporations, including Commercial Bank of San Francisco, Aca Joe Inc., Finet
Holdings Corporation, Worldwide Wireless Inc. and Uniprise Systems,
Incorporated. His legal practice concentrated primarily on providing legal
counseling to small or start-up businesses. In addition, a significant part of
his practice contained an international aspect involving foreign investors
seeking investment platforms in the United States. Mr. Haffer attended the
University of Wisconsin, Madison from 1965 to 1969 where he received his
Bachelor of Arts degree with honors with a major in Latin American history, and
was elected to Phi Beta Kappa. He then attended the Harvard Law School from
which he graduated in 1972 with a Juris Doctor degree. Mr. Haffer lived in Latin
America for seven years and reads, writes and speaks Spanish fluently. He has
been a lecturer and adjunct professor of law at the University of San Francisco
Law School and at the Law School at the University of California at Davis.
Dana Miller was Director of Licensing and Acquisitions for National
Micro-Vision Systems, Inc. from 1995 to 1996. He worked extensively with the
Federal Communications Commission and FCC legal counsel and was responsible for
compliance with all FCC regulations. Mr. Miller also coordinated acquisitions of
microwave television licenses throughout the United States. He has negotiated
FCC lease agreements with educational institutions and nonprofit organizations.
From 1996 to 1998 Mr. Miller was a self-employed telecommunications consultant.
He is an expert in FCC license application, FCC petition, and license
acquisition and maintenance. His accomplishments include resolution of a recent
long-term, complex conflict between us and another national wireless firm,
freeing us up to implement high-speed wireless Internet operations in the San
Francisco metropolitan area.
Ramsey Sweis has had extensive experience in management and in the
product design industry. He has been a leader and developer of high performance
teams by enabling, training and motivating team members. In the recent past he
has provided computer and engineering services to General Motors and Chrysler
Corporation. In connection with those activities Mr. Sweis has developed designs
between engineering, prototype models, tooling and vendor sources. Mr. Sweis
resides in Roseville, Michigan. He currently serves as a Program Manager for
Hanke Training & Design of Clawson Michigan. From 1997 to 1999 Mr. Sweis served
as a designer for Computer and Engineering Services of Rochester Hills,
Michigan. From 1991 to 1997, Mr. Sweis was a design leader for Megatech
Engineering of Warren Michigan.
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Robert Klein's experience includes an active twenty-year career in the
securities industry handling a wide range of duties including management roles
and institutional trading. For the past fifteen years a major emphasis has been
placed on packaging complex transactions on behalf of corporate clients
resulting in the creation and sale of marketable securities. The past five years
has been spent on public company development. Since 1993, Mr. Klein has been
self-employed through Weissgeld Capital Group, Ltd, a company he founded. In the
past, he served as a director for three brokerage firms, including Yorkton
Securities. He is currently a director of Asdar Inc. Mr. Klein has a degree in
Applied Mathematics from the University of Waterloo, and an FCSI designation
from the Canadian Securities Institute.
Sonny Rath offers significant experience in the telecommunications
industry. Most recently, he served as Head of Operations and Channel Partner
Development for the Vicorp Division of Quest Communications from February 2000
to the present. Prior to that he held senior management positions at Quest from
May 1999 to February 2000 and Allegiance Telecom from Mary 1999 to May 1999. Mr.
Rath also spent eleven years at GTE Communications, now Verizon, in various
positions ultimately becoming Senior Project Manager of Information Technology
designing technology infrastructure. Mr. Rath has a degree in Mechanical
Engineering. Mr. Rath was our Chief Operating Officer from January 2001 to
February 2001, and will continue to serve as one of our consultants and as a
director.
John Cutter has a long history of initiating, developing and managing
businesses from the ground up. He currently serves as Executive Vice President
of Pacific Lasercraft, a company founded to develop and market a patented
laser-guided woodworking tool Mr. Cutter designed. He also serves as Chairman of
Seabright Laboratories, which he founded to design and produce patented
environmentally friendly pest control products. He has worked at that company
since 1995. Mr. Cutter has founded and/or managed numerous different entities
including Cutter Laboratories, Pacific Waters, The California Cystic Fibrosis
Research Foundation and Cutter Lumber Products.
Director Compensation
Directors receive no compensation for serving as directors, except
that:
o Mr. Sweis received options to purchase 250,000 shares of common
stock on October 22, 1998, at an exercise price of $0.095 per
share. All of Mr. Sweis' options vested immediately upon the date
of grant. The expiration date for Mr. Sweis to exercise the
options is October 21, 2003. To date, Mr. Sweis has not exercised
any options for shares of common stock.
o Mr. Klein received options to purchase 250,000 shares of common
stock on October 22, 1998, at an exercise price of $0.095 per
share. All of Mr. Klein's options vested immediately upon the
date of grant. The expiration date for Mr. Klein to exercise the
options is October 21, 2003. To date, Mr. Klein has not exercised
any options for shares of common stock.
o Mr. Guidfar received options to purchase 100,000 shares of common
stock in August, 2000, at an exercise price of $0.59 per share.
All of Mr. Guidfar's options vested immediately upon the date of
grant. The expiration date for Mr. Guidfar to exercise the
options is August, 2005. To date, Mr. Guidfar has not exercised
any options for shares of common stock. Mr. Guidfar resigned from
the Board in December 2000.
-27-
Employment Contracts
We have entered into an employment agreement with Mr. Haffer, which
provides for an initial term of three years commencing February 1, 2000 at an
initial annual base salary of $230,000 plus an annual performance bonus of not
less than $23,000. Any bonus in excess of $23,000 will be at the sole discretion
of our Board and will not be tied to a fixed set of objective criteria. Mr.
Haffer's employment agreement also contains a termination provision that
requires us to pay him his annual compensation and minimum bonus amounts
remaining on his three-year contract if he is terminated without cause.
Audit Committee of the Board of Directors
On January 31, 2001, the Board established an audit committee. The
audit committee of the Board of Directors consists of three non-employee
directors, John Cutter, Robert Klein and Ramsey Sweis, all of whom are
independent directors. The audit committee reviews results and recommendations
in each external audit, reviews the procedures we use to prepare financial
statements and related management commentary and meets periodically with
management to review our major financial risk exposures. The Board of Directors
adopted a written charter for the Audit Committee and elected John Cutter as its
Chairman.
Executive Compensation
The following table summarizes information regarding the salary and
bonus we paid to Mr. Haffer, our Chief Executive Officer, during the fiscal year
ended September 30, 2000. Mr. Haffer was the only officer who received a salary
plus bonus that exceeded $100,000 during that period.
Summary Compensation Table
Annual Compensation Long-Term Compensation
- --------------------------------------------------------------------------------
Awards
Securities
Underlying
Restricted Options
Name and Principal Stock and
Position Year Salary Bonus Awards Warrants
- --------------------------------------------------------------------------------
Douglas P. Haffer 2000 220,000 23,000* 0 800,000
Chairman, CEO and CFO 1999 106,000 16,017 0 800,000
- --------------------------------------------------------------------------------
* Bonus was earned in fiscal year 2000 but was received in fiscal year 2001.
Option Grants
The following table sets forth information concerning grants of stock
options to Doug Haffer, Chief Executive officer. He is the only named executive
officer for the fiscal year ended September 30, 2000. All options were granted
under the 1998 Stock Option Plan. Shareholders never approved our 1998 Stock
Option Plan, and therefore, all incentive stock options granted under the 1998
Stock Option Plan are classified and taxed as non-statutory stock options.
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Options Granted during Fiscal Year 2000
Number of Percent of
Fiscal Securities options Options
Year Underlying granted to Exercise Exercised
Options Options employees Price as of Expiration
Granted Granted from 9/30/99 ($/Share) 9/30/00 Date
------- ------- ------------ -------- ------- ----
Douglas P. Haffer 2000 800,000 50% $1.62 0 2/1/05
Chairman, Chief
Executive Officer, Chief
Financial Officer 1998 800,000 43% $0.095 0 10/22/03
In October 1998, Mr. Haffer received an option to purchase 800,000
shares of our common stock at an exercise price of $0.095 per share. All 800,000
shares vested immediately. The expiration date is 5 years from the date of
grant. The grant of shares was intended to be an incentive stock option, but our
shareholders never approved the plan and therefore, the options are being
classified as non-statutory stock options. On February 1, 2000, Mr. Haffer
received another option to purchase 800,000 shares of our common stock at an
exercise price "at the lowest price permitted under our 1998 Stock Option Plan
such that the grant or exercise of the options will not create a taxable event."
All 800,000 shares vested immediately. The expiration date of the option is 5
years from the date of grant. The option will be treated as non-statutory stock
options.
Aggregated Options/SARSs as of September 30, 2000
Number of Securities Underlying Value of Unexercised In-the
Unexercised Options/SARs at -Money Options/ SARs at
September 30, 2000 September 30, 2000
Exercisable/Unexercisable Exercisable/Unexercisable
Name
Douglas P. Haffer. 1,600,000/0 0/0
Chairman, CEO & CFO
1998 Stock Option Plan
Our Board of Directors adopted a 1998 Stock Incentive Plan in August
1998 reserving 3,000,000 shares for issuance. The Plan provided for the grant of
incentive stock options, as defined in Section 422 of the Internal Revenue Code,
to our officers and employees, and non-statutory stock options to employees,
directors and consultants. However, our shareholders never approved our 1998
Stock Option Plan, and therefore, all incentive stock options granted under the
1998 Stock Option Plan were classified and taxed as non-statutory stock options.
The exercise price of incentive stock options granted under the 1998
Stock Option Plan must be at least equal to the fair market value of our common
stock on the date of grant. However, for
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any employee holding more than 10% of the voting power of all classes of our
stock, the exercise price will be no less than 110% of the fair market value on
the date of grant. Non-statutory stock options granted to a person who at the
time the option is granted does not hold more than 10% of the voting power of
all classes of our stock will have an exercise price of no less than 85% of the
fair market value of the stock on the date of grant.
Options granted to our employees will become exercisable over a period
of no longer than 5 years, and no less than 20% of the shares covered will
become exercisable annually. No options will be exercisable prior to one year
from the date it is granted unless the Board specifically determines otherwise.
In no event will any option be exercisable after the expiration of 10 years from
the date it is granted, and no Incentive Stock Option granted to a holder of
more than 10% of the voting power of all classes of our stock will be
exercisable after the expiration of 5 years from the date it is granted.
With respect to the non-statutory options if the employee's status as
an employee with us terminates for any reason, other than death or disability,
then the optionee may exercise stock options for a period of no less than
three-months following such cessation. The three-month period is extended to
12-months for termination due to death or disability. In the event of a merger
or consolidation in which we are not the surviving entity, or a sale of all or
substantially all of our assets or capital stock, if the surviving entity does
not tender to the optionee's stock options or capital stock of substantially the
same economic benefit as optionee's unexercised options, then the Board may
grant to optionees the right to exercise any unexpired options for a period of
thirty days.
2001 Stock Option Plan
Our Board adopted a 2001 Stock Incentive Plan on January 31, 2001
reserving 7,500,000 shares of our Common Stock for issuance. The Plan will be
administered by the Board of Directors or by a Committee that the Board will
designate. The Plan provides for the grant of incentive stock options, as
defined in the Internal Revenue Code of 1986 to employees of the company and
non-statutory stock options to directors, employees and consultants of the
company. The exercise price of incentive stock options granted under the 2001
Stock Option Plan will be determined by the Board or the Committee, but shall be
no less than the fair market value of the stock on the date the option is
granted. However, for any employee holding more than 10% of the shares
outstanding of all classes of our stock, the exercise price will be no less than
110% of the fair market value on the date of grant.
Each option will be granted in the form of an agreement setting forth
the terms and conditions of the grant. Options granted to our employees will
become exercisable over a period of no longer than 10 years, and no less than
20% of the shares covered shall be exercisable annually.
If an optionee's status as an employee, director or consultant with us
terminates for any reason, other than death or disability, then the optionee may
exercise the option in the three-month period following such cessation or the
termination of the term of the Option as set out in the Option Agreement. Any
shares that are not exercisable on the date of termination shall become
available for issuance under the Plan. The three-month period is extended to
twelve months for termination due to death or disability.
Under the Plan, the Board can also grant Stock Appreciation Rights to
Employees, or Directors of or Consultants to the Company. Similarly, if we enter
into a transaction agreement with another company and the surviving entity
refuses to assume or continue the stock option awards
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previously granted, the time during which the awards may be exercised shall be
accelerated and the stock awards terminated if not exercised after such
acceleration.
The Board may from time to time amend the Plan but only with the
approval, within twelve months, of the shareholders where the amendment will
increase the shares reserved for stock awards, modify the requirements as to
eligibility for participation in the Plan or modify the Plan in any other way if
such modification requires shareholder approval in order for the Plan to comply
with Section 422 of the Code or with requirements of Rule 16b-3.
The shareholders were required to approve the Plan within twelve
months of when we received Board approval. The shareholders approved the plan on
March 1, 2001.
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PRINCIPAL AND SELLING SHAREHOLDERS
Principal Shareholders
The following table sets forth the beneficial ownership of our common
stock as of March 1, 2001 and as adjusted to reflect the sale of the shares of
common stock offered hereby:
o the chief executive officer, each of the executive officers named in
the summary compensation table and each of our directors;
o all executive officers and directors as a group;
o each person or entity who we know beneficially owns more than 5% of
our outstanding shares of common stock.
Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock held by them.
Applicable ownership is based on 93,417,795 shares of common stock
outstanding as of February 28, 2001. Beneficial ownership is determined in
accordance with the rules of the SEC. Shares of common stock subject to options
or warrants that are presently exercisable or exercisable within 60 days of
February 28, 2001 are deemed outstanding for the purpose of computing the
percentage ownership of the person or entity holding options or warrants, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or entity. If any shares are issued upon exercise
of options, warrants or other rights to acquire our capital stock that are
presently outstanding or granted in the future or reserved for future issuance
under our stock plan, there will be further dilution to new public investors.
For purposes of calculating the number of shares of common stock
beneficially owned after the offering, we have assumed the sale of all shares
covered by the registration statement of which this prospectus is a part.
Accordingly, in determining the number of shares of common stock beneficially
owned after the offering, the total number of shares of common stock deemed
outstanding includes: (1) the shares of common stock covered by the registration
statement on behalf of Grenville Finance Ltd. and (2) shares of common stock
issuable upon exercise of warrants and covered by this registration statement.
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Beneficial Ownership of Common Stock
Number of Percentage of
Shares Shares Outstanding
Beneficially Prior to After
Owned Offering Offering
----- -------- --------
Named Executive Officers and Directors(1)
Douglas P. Haffer ................................. 6,541,073 6.5% 4.4%
Ramsey Sweis ...................................... 250,000 * *
Robert Klein ...................................... 250,000 * *
John Cutter ....................................... 2,613,500 2.8% 1.8%
Sonny Rath ........................................ 0 * *
Executive Officers and Directors as a
Group..............................................10,988,573 11.6% 7.1%
Name of Beneficial Owners
- -------------------------
Michael Lynch 12,700,064 13.4% 8.1%
C/o Robert J Stemler Esquire
Keesal Young & Logan
P.O. Box 1730
Long Beach, CA 90801-1730
Amro International S.A., 8,028,000 8.0% 5.3%
C/o Ultra Finance Ltd.
Grossmuenster Platz 26
P.O. Box 4401
Zurich, Switzerland CH8022
The Endeavor Capital Fund, S.A. 5,017,857 5.1% 3.4%
14/14 Divrea Chaim Street
Jerusalem 94479, Israel
Celeste Trust Reg. 7,024,370 7.5% 4.7%
C/o Trevisa-Treuhand-Ansalt
Landstrasse 8
9496 Furstentums
Balzers, Liechtenstien
* Less than 1%.
The address for each of the named executive officers and directors is
c/o World Wide Wireless Communications, Inc., 520 Third Street, Suite 101,
Oakland, CA 94607.
Mr. Haffer's total includes 1,600,000 shares subject to options that
are immediately exercisable.
Mr. Sweis's total includes 250,000 shares subject to options that are
immediately exercisable.
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Mr. Klein's total includes 250,000 shares subject to options that are
immediately exercisable.
Amro International's total includes 1,800,000 shares issuable upon
exercise of the warrant and 4,800,000 shares underlying a principal amount of
debentures issued of $2,400,000 (based on a per share price of $0.50).
Endeavor Capital Fund's total includes 1,125,000 shares issuable upon
exercise of the warrant and 3,000,000 shares underlying a principal amount of
debentures issued of $1,500,000 (based on a per share price of $0.50).
Celeste Trust Reg. filed a Form 13(g) with the Securities and Exchange
Commission disclosing that it was the beneficial owner of 7,024,370 shares of
common stock. We are not sure how the entity acquired all its shares but we do
know Celeste Trust Reg. holds 705,000 shares issuable upon exercise of certain
warrants and approximately 3,760,000 shares underlying certain convertible
debentures that were issued pursuant to a Securities Purchase Agreement entered
into April 14, 2000 and as amended.
Selling Shareholders
Overview
The number of shares we are registering is based in part on our good
faith estimate of the maximum number of shares we may issue to Grenville Finance
Ltd. under the common stock purchase agreement. Accordingly, the number of
shares we are registering for issuance under the common stock purchase agreement
may be higher than the number we actually issue under the common stock purchase
agreement.
Grenville Finance Ltd.
Grenville Finance Ltd. is engaged in the business of investing in
publicly traded equity securities for its own account. Other than the warrants
we issued to Grenville Finance Ltd. in connection with the closing of the common
stock purchase agreement, it has no other commitments or arrangements to
purchase or sell any of our securities. There are no business relationships
between Grenville Finance Ltd. and us other than the common stock purchase
agreement and accompanying documents. Assuming Grenville Finance Ltd. sells all
shares acquired under the common stock purchase agreement and upon exercise of
the warrant, Grenville Finance Ltd. will no longer hold any of our common stock.
Andrews Corporation
Andrew Corporation received warrants to purchase shares of our common
stock in connection with a loan agreement we entered into with them. Andrew
Corporation has not held any positions or offices or had material relationships
with us or any of our affiliates within the past three years other than serving
as our systems integrator.
Selling shareholders are under no obligation to sell all or any
portion of their shares. Particular selling shareholders may not have a present
intention of selling their shares and may sell less than the number of shares
indicated. The following table assumes that the selling shareholders will sell
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all of their shares. The selling shareholders currently hold unregistered shares
of our common stock and/or warrants for the purchase of common stock.
The table below provides the names of the selling shareholders, the
number of shares and the percentage the selling shareholders beneficially own
before this offering based on our common stock outstanding of 93,417,795 as of
February 28, 2001. It also explains the number of shares of common stock the
selling shareholders may resell under this prospectus and assuming that the
selling shareholders sell all the shares they are entitled to sell under this
prospectus, how many shares of common stock and the percentage the selling
stockholders will beneficially own after completion of the offering, based on
our common stock outstanding on February 28, 2001 and the issuance of shares
included in this prospectus.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated, we believe each person
possesses sole voting power and investment power with respect to all the shares
of common stock owned by such person, subject to community property laws where
applicable. In computing the number of shares beneficially owned by a person and
the percentage of ownership of that person, shares of common stock subject to
options or warrants held by that person are currently exercisable or exercisable
within 60 days are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage of ownership of any
other person.
Number of Percentage of Number of
Shares Shares Outstanding Shares
Beneficially Being
Name of Selling Shareholder Owned Prior to After Offered
Offering Offering
Grenville Finance Ltd. (1) (2) 65,000,000 41% 0 65,000,000
P. O. Box 146
Road Town, Tortola
British Virgin Islands
Andrew Corporation (3) 200,000 * * 200,000
10500 West 153 Street
Orland Park, IL 60462
(1) Represents the shares which may be purchased by Grenville Finance
Ltd. through a private line of credit agreement, as further described in this
prospectus. We will receive the sale price of any common stock that we sell
through the private equity line of credit agreement and Grenville Finance Ltd.
may resell those shares pursuant to this prospectus.
(2) This total also includes 15,000,000 shares that are issuable upon
exercise of the warrant.
(3) This total represents 200,000 shares exercisable under their
warrants.
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CERTAIN RELATED PARTY TRANSACTIONS
Mr. Andy Reckles, a previous nominee for election to the Board of
Directors, is a partner with Union Atlantic, LC. Union Atlantic, LC served as a
placement agent for a securities purchase agreement to issue convertible
subordinated debentures which we entered into with certain investors in April,
2000. As the placement agent for the Debentures Agreement, Union Atlantic, LC
received a placement agent fee. We recently reached an agreement with the
investors whereby we amended the Debentures Agreement and the first amendment
thereto (the "Second Amendment"). As part of the Second Amendment, Union
Atlantic, LC served as a consultant to the investors and received a consultant
fee.
Union Atlantic, LC will receive certain fees every time we exercise
options as part of the equity line agreement as described in this prospectus.
In addition, Mr. Reckles also entered into a stock purchase agreement
with us wherein he purchased 2,000,000 shares of our common stock for $0.125 per
share.
Mr. Reckles withdrew his nomination for the Board prior to the
shareholder meeting held on March 1, 2001. We intend to enter into a Consulting
Agreement with Mr. Reckles whereby he will provide advisory services to
management and the Board. He will receive shares in consideration for his
services.
As of March 1, 2001, other than the discussion above and employment
agreements and stock option plans, there have been no transactions to which we
were a party involving $60,000 or more and in which any director, executive
officer or holder of more than five percent of our capital stock had a material
interest.
DESCRIPTION OF SECURITIES
General
We are authorized to issue up to 300,000,000 shares of common stock,
$.001 par value per share and 10,000,000 shares of preferred stock, $.001 par
value per share. As of March 1, 2001, 93,417,795 shares were issued and
outstanding. We have no preferred stock outstanding. All of the outstanding
capital stock is and will be, fully paid and non-assessable.
Common Stock
Previously our articles of incorporation authorized us to issue a
maximum of 100,000,000 shares of common stock. On March 1, 2001, we received
requisite shareholder approval to authorize the issuance of an additional
200,000,000 shares. Accordingly, the total number of shares currently authorized
is 300,000,000. As of February 28, 2001, the transfer agent informs us that
there were 93,417,795 shares of common stock outstanding. Owners of common stock
are entitled to one vote for each share held of record on all matters to be
voted on by shareholders, except that, upon giving the legally required notice.
Subject to the rights of any holders of preferred stock, the owners of common
stock are entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefore. In the event of a
liquidation, dissolution or winding up of our business, the common stock
shareholders are entitled to share ratably in all assets remaining which are
available for distribution to them after payment of liabilities and preferences
to holders of preferred stock. Holders of common stock have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock.
-36-
We have reserved 7,500,000 shares of common stock for issuance under
our 2001 Stock Option Plan. In addition, we had 3,000,000 shares reserved in our
1998 Stock Option Plan. We are obligated to issue additional shares of common
stock pursuant to the terms of our various common stock purchase warrants, and
an indeterminate number of additional shares of common stock to be issued
pursuant to 4% Convertible Debentures described below to the investors under
certain agreements.
Preferred Stock
On March 1, 2001 our shareholders approved the issuance of 10,000,000
shares of preferred stock. The Board is vested with the authority to designate
one or more series of preferred stock with powers, preferences, rights,
restrictions, qualifications and other terms and conditions as the Board may
determine from time to time.
If the board of directors creates a new series of preferred stock any
effect on the common stock holders will not be determinable until the rights
accompanying the series have been designated. The issuance of preferred stock
could adversely affect the voting power, liquidation rights or other rights of
the common stock owners or other series of preferred stock.
Warrants/Options
Under our Securities Purchase Agreement dated April 14, 2000, as
amended, we issued warrants to purchase an aggregate of 3,600,000 shares of
common stock to certain shareholders. In addition, the shareholders have the
right to acquire warrants to purchase an additional 1,440,000 shares of common
stock as of the date of this prospectus. The warrants allow the holders to
purchase shares of our common stock at a price of $2.00 per share. The warrants
allow for the holders to exercise their warrants without the payment of cash by
surrendering shares otherwise purchasable upon exercise of the warrant with a
fair market value equal to the exercise price for the shares they are
purchasing. The exercise price is subject to adjustments if we declare a stock
split or dividend of our common stock and will be adjusted lower on a weighted
average basis if we issue shares of our common stock at below the exercise price
of the warrant then in effect. The warrants are exercisable when issued and have
a term of five years.
On January 14, 2001 we issued a warrant to purchase no less than
200,000 shares of our common stock at an exercise price of $0.23 in connection
with our loan agreement with Andrew Corporation. Andrew Corporation may exercise
the warrants until January 24, 2005. In addition, Andrew Corporation is entitled
to additional warrants to purchase up to 300,000 shares of our common stock if
we obtain a bridge loan where we distribute warrants to the potential investor
in excess of the warrants issued to Andrew.
As consideration for the opening of the equity line of credit, on
January 26, 2001 we granted Grenville Finance Ltd. a warrant to purchase 15
million shares of common stock. Grenville Finance Ltd. may exercise this warrant
at any time prior to February 12, 2004 for $0.20 per share of common stock. The
common stock issuable upon exercise of those warrants is included in this
registration statement.
As of March 1, 2001 we have issued stock options to purchase up to
4,284,917 shares of our common stock through our stock option plan to employees,
directors and officers. These option
-37-
holders will not assume any of the privileges of our shareholders until they
have exercised their options.
Subordinated Debentures
We originally entered into a securities purchase agreement dated April
14, 2000 to issue 4% Convertible Subordinated Debentures to certain investors
with a principal amount of $1,312,000 subject to certain conditions. On November
14, 2000 we reached an agreement with these investors whereby we amended the
original securities agreement and the first amendment thereto. In exchange for a
waiver by the investors of any breach of the original securities agreement and
the first amendment, we agreed to increase the principal amount of the
debentures by $2,128,000 and to issue an additional 3,996,113 restricted shares
of common stock to them. Under this agreement, the investors may convert the
debentures at a conversion price equal to the lesser of $0.64 and an amount
equal to 85% of the average of the closing trading prices of the common stock
for the five consecutive trading days immediately prior to the conversion. At no
time shall the conversion price be below the floor price. The floor price is
$0.64 for the period between October 1, 2000 and October 14, 2000, $0.50 for the
period between October 14, 2000 and May 30, 2001 and zero thereafter. However,
if our aggregate revenue for the last three quarters of the year 2000 and the
first quarter of year 2001 is less than $13.5 million then as of May 14, 2001
the floor price shall be zero. Each debenture has an interest rate of 4.0% per
year on the aggregate price of the principal. The interest shall be due and
payable upon conversion, redemption or maturity of this debenture and any
interest that has accrued will be deemed to be part of the aggregate principal
amount for purposes of determining interest thereafter payable and amounts
thereafter convertible into common stock.
If during any period a holder is unable to immediately trade any
common stock issued or issuable upon conversion of the debentures due to the
postponement of filing, or delay or suspension of effectiveness of the
registration statement, the investors have the option of using the conversion
price applicable on any conversion date within ten trading days following the
black out period or any price that would have been applicable on any conversion
date earlier in the black out period or within the ten trading days thereafter.
Under the amended agreement, we reserve the right to redeem the
debentures if the per share market value of the common stock is less than $1.00.
The redemption price is calculated at 120% of the principal amount and 100% of
the unpaid interest accrued on those debentures being redeemed. To effect the
redemption we must provide five days notice to the investors. The total
principal amount of debentures to be redeemed shall not be less than $1,000,000.
To qualify for the redemption we must have the full amount of the redemption
price in cash or cash equivalents available.
Registration Rights
As part of our equity line of credit financing with Grenville Finance
Ltd. we agreed to file a registration statement within forty-five (45) days of
the agreement. Under the registration rights agreement, we agreed to register
all the shares purchasable pursuant to the equity line of credit as well as any
shares underlying the warrants. The purchasers may purchase up to $50,000,000
worth of shares of our common stock and 15,000,000 shares underlying the
warrants. We shall incur all costs related to the registration statement and
shall use our best efforts to cause the registration to become effective within
ninety (90) days.
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We are required to register the shares underlying the warrants issued
to Andrew Corporation. Under the registration rights agreement, Andrew
Corporation at its option may elect to piggy back the registration of its shares
on the registration statement prepared and filed for another selling shareholder
or for us. If the shares are not registered within six months of the agreement,
we are required to prepare and file a shelf registration covering all
registrable securities for an offering to be made on a continuous basis.
THE COMMON STOCK PURCHASE AGREEMENT
Summary
On January 26, 2001, we entered into a common stock purchase agreement
with Grenville Finance Ltd., a British Virgin Island corporation, for the future
issuance and purchase of shares of our common stock. The common stock purchase
agreement establishes what is sometimes referred to as an equity line of credit
or an equity draw down facility.
In general, the equity line of credit operates as follows: the
investor, Grenville Finance Ltd., has committed to provide us with up to $50
million as we request it over a twenty-four month period, in return for common
stock, as well as warrants to purchase shares of common stock. Once every 22
trading days, we may request a draw down of up to $1,500,000 of the committed
money, subject to a formula based on the average common stock price and average
trading volume. Each draw down must be at least $50,000.
The amount of money that Grenville Finance Ltd. will provide to us and
the number of shares we will issue to Grenville Finance Ltd. in return for that
money is settled twice during a 29 day trading period following the draw down
request based on the formula in the stock purchase agreement. Grenville Finance
Ltd. will receive a fifteen percent discount to the volume weighted average
stock price for that 29 day period We will receive the amount of the draw down
less an escrow agent fee of $750 for each draw down amount and an 8% placement
fee payable to the placement agent, Union Atlantic, LC, which introduced us to
Grenville Finance.
As consideration for the opening of the equity line of credit, we
granted Grenville Finance Ltd. a warrant to purchase 15 million shares of common
stock. Grenville Finance Ltd. may exercise this warrant at any time prior to
February 12, 2004 for $0.265 per share of common stock. The common stock
issuable upon exercise of those warrants is included in this registration
statement.
Based on a review of our trading volume and stock price history and
the number of draw downs we estimate making, we are registering 50,000,000
shares of common stock for possible issuance under the common stock purchase
agreement and 15,000,000 shares underlying the warrants for common shares
delivered to Grenville Finance Ltd.
The common stock purchase agreement does not permit us to draw down
funds if the issuance of shares of common stock to Grenville Finance Ltd.
pursuant to the draw down would result in Grenville Finance Ltd. owning more
than 9.9% of our outstanding common stock on the draw down exercise day.
-39-
The Draw Down Procedure And The Stock Purchases
We may request a draw down by faxing a draw down notice to Grenville
Finance Ltd., setting our the amount of the draw down we wish to exercise and
the minimum threshold price, if any, at which we are willing to sell the shares.
Amount Of The Draw
No draw may exceed the lesser of: (i) $1,500,000; or (ii) the amount
that is derived from the following formula:
o The total trading volume for the 60 calendar days immediately
prior to the date we give notice of the draw down;
multiplied by
o The average of the volume-weighted average daily prices for the
60 calendar days immediately prior to the date we give notice of
the draw down;
multiplied by
o 10%
Number Of Shares
The next 22 trading days immediately following the draw down notice
are used to determine the actual amount of money Grenville Finance Ltd. will
provide and the number of shares we will issue in return. The amount of the draw
down and the number of shares to be issued is determined and settled twice for
the 22 trading days period, on the 13th and 24th trading days following the draw
down notice, and is calculated based on the following formula:
Number of shares of common stock = Sum over each of the 22 trading days
over 1/22 of the draw down amount
divided by 85% of the volume-weighted
average daily price for our shares on
each trading day.
If the daily price for any given trading day during the draw down
period is below the threshold price we set in the draw down notice, then that
day is not included in the calculation of the number of shares to be issued and
the draw down amount that Grenville Finance Ltd. is to pay us is correspondingly
reduced by 1/22 for that day. Thus, if the daily price for that day is below the
threshold price, we will not issue any shares and Grenville Finance Ltd. will
not purchase any shares for that day. In addition, if the trading of our common
stock on the OTC Bulletin Board has been suspended for more than three hours in
the aggregate, we will not issue any shares and Grenville Finance Ltd. will not
purchase any shares for that day.
Sample Calculation Of Stock Purchases
The following is an example of the calculation of the draw down amount
and the number of shares to be issued to Grenville Finance Ltd. in connection
with that draw down based on certain assumptions.
-40-
Sample Draw Down Amount Calculation
Suppose we provide a draw down notice to Grenville Finance Ltd. and we
specified in the notice a threshold price of $0.18. Assume that: (i) the total
trading volume of our common stock for the 60 calendar days prior to the draw
down notice is 20,000,000 shares; and (ii) the average of the volume-weighted
average daily price for the 60 calendar days prior to the draw down notice is
$0.20. You can apply the formula to these hypothetical numbers as follows:
o The total trading volume for the 60 calendar days immediately
prior to the date we give notice of the draw down (20,000,000);
multiplied by
o The average of the volume-weighted average daily prices for the
60 calendar days immediately prior to the date we give notice of
the draw down ($0.20);
multiplied by
o 10%
On these assumed facts, the maximum amount that can be drawn down
under the formula would be capped at $400,000, subject to further adjustments if
the volume-weighted average daily price of our common stock for any of the 22
trading days following the draw down notice is below the threshold price we set
at $0.18. For example, if the volume-weighted average daily price of our common
stock is below $0.18 on two of those 22 trading days, the $400,000 would be
reduced by 1/22 for each of those days and our draw down amount would be 20/22
of $400,000 or $363,636.
Sample Calculation Of Number Of Shares
Assume that we have made a draw down request of $400,000, the maximum
amount based on the foregoing sample draw down amount calculation. In addition,
assume we set a threshold price of $0.18 and that the volume-weighted average
daily price for our common stock is set forth in the table below.
The number of shares to be issued based on any trading day during the
draw down period is calculated from the formula:
o 1/22 of the draw down amount of $400,000;
divided by
o 85% of the volume-weighted average daily price.
For the first trading day in the example in the table below, the
calculation is as follows: 1/22 of $400,000 is $18,182. Divide $18,182 by 85% of
the volume-weighted average daily price for that day of $0.2188 per share, to
get 97,763 shares. Perform this calculation for each of the 22 trading
-41-
days, excluding any day on which the volume-weighted average daily price is
below the $0.18 threshold price, and add the results to determine the number of
shares to be issued. In the table below, there are two days which must be
excluded: days 16 and 17.
After excluding the days that are below the threshold price, the
amount of our draw down in this example would be $363,636 and the total number
of shares we would issue to Grenville Finance Ltd. would be 1,858,707, so long
as those shares would not cause Grenville Finance Ltd. to beneficially own more
than 9.9% of our then outstanding common stock. Grenville Finance Ltd. would pay
$0.1956 per share for those shares.
NUMBER OF SHARES
VOLUME-WEIGHTED 1/22 OF REQUESTED OF COMMON STOCK
AVERAGE DAILY STOCK DRAW DOWN TO BE ISSUED FOR
TRADING DAYS PRICE AMOUNT THE TRADING DAY
- --------------------------------------------------------------------------------
1 $0.2188 $18,182 97,763
- --------------------------------------------------------------------------------
2 $0.2188 $18,182 97,763
- --------------------------------------------------------------------------------
3 $0.2031 $18,182 105,320
- --------------------------------------------------------------------------------
4 $0.25 $18,182 85,562
- --------------------------------------------------------------------------------
5 $0.2969 $18,182 72,046
- --------------------------------------------------------------------------------
6 $0.3125 $18,182 68,450
- --------------------------------------------------------------------------------
7 $0.25 $18,182 85,562
- --------------------------------------------------------------------------------
8 $0.2344 $18,182 91,257
- --------------------------------------------------------------------------------
9 $0.2969 $18,182 72,046
- --------------------------------------------------------------------------------
10 $0.2031 $18,182 105,320
- --------------------------------------------------------------------------------
11 $0.2031 $18,182 105,320
- --------------------------------------------------------------------------------
12 $0.2344 $18,182 91,257
- --------------------------------------------------------------------------------
13 $0.2656 $18,182 80,537
- --------------------------------------------------------------------------------
14 $0.2188 $18,182 97,763
- --------------------------------------------------------------------------------
15 $0.2031 $18,182 105,320
- --------------------------------------------------------------------------------
16 $0.1719 -- **
- --------------------------------------------------------------------------------
17 $0.1562 -- **
- --------------------------------------------------------------------------------
18 $0.2031 $18,182 105,320
- --------------------------------------------------------------------------------
19 $0.2188 $18,182 97,763
- --------------------------------------------------------------------------------
20 $0.2188 $18,182 97,763
- --------------------------------------------------------------------------------
21 $0.2344 $18,182 91,257
- --------------------------------------------------------------------------------
22 $0.2031 $18,182 105,320
- --------------------------------------------------------------------------------
TOTAL $363,636 1,858,709
- --------------------------------------------------------------------------------
* The share prices are illustrative only and should not be interpreted as a
forecast of share prices or the expected or historical volatility of the share
prices of our common stock.
** Excluded because the volume-weighted average daily price is below the
threshold specified in our hypothetical draw down notice.
In this fictitious example, we would receive the amount of our draw
down ($363,636) less an 8% finder's fee paid to Union Atlantic, LC, less a $750
escrow fee, for net proceeds to us of $333,795. The delivery of the requisite
number of shares and payment of the draw will take place
-42-
through an escrow agent, Epstein, Becker & Green, P.C. The escrow agent pays 92%
of the draw to us, after subtracting its escrow fee, and 8% to Union Atlantic,
LC in satisfaction of the finder's fee. Only one draw down can occur during this
22 day period.
Necessary Conditions Before Grenville Finance Ltd. Is Obligated To Purchase Our
Shares
The following conditions must be satisfied before Grenville Finance
Ltd. is obligated to purchase the common stock that we wish to sell:
o A registration statement for the shares we will be issuing must be
declared effective by the Securities and Exchange Commission and must
remain effective and available as of the draw down settlement date for
making resales of the common stock purchased by Grenville Finance
Ltd.;
o There can be no material adverse effect on our business, operations,
properties, prospectus or financial condition that is material and
adverse to us, taken as a whole or any condition, circumstance or
situation that would prohibit or otherwise materially interfere with
our ability to perform our material obligations under the common stock
purchase agreement or the registration rights agreement or to perform
our obligations under any other material agreement;
o We must not have merged or consolidated with or into another company
or transferred all or substantially all of our assets to another
company unless the acquiring company has agreed to honor the stock
purchase agreement;
o No statute, rule, regulation, executive order, decree, ruling or
injunction may be in effect which prohibits consummation of the
transaction contemplated by the common stock purchase agreement;
o No litigation or proceeding involving us or any of our affiliates, can
be pending, nor any investigation by any governmental authority
threatened against us or any of our affiliates which seeks to
restrain, prevent or change the transaction contemplated by the common
stock purchase agreement or seeking damages in connection with the
transaction;
o Trading in our common stock must not have been suspended by the
Securities and Exchange Commission or the OTC Bulletin Board nor shall
minimum prices have been established on securities whose trades are
reported by the OTC Bulletin Board.
On each draw down settlement date for the sale of common stock, we
must deliver an opinion from our counsel about these matters.
As a further condition under the common stock purchase agreement, we
may not draw down funds if the issuance of shares of common stock to Grenville
Finance Ltd. in that draw down would result in Grenville Finance Ltd. and its
affiliates owning more than 9.9% of our common stock outstanding as of the draw
down settlement date.
Restrictions On Our Future Financings
The common stock purchase agreement limits our ability to raise money
by selling our securities for cash at a discount to the current market price
until the earlier of (i) twenty-four months
-43-
from the effective date of the registration statement; or (ii) sixty days after
the entire $50 million commitment amount has been purchased by Grenville
Finance Ltd.
There are important exceptions to this limitation. We can sell our
shares for cash at a discount to the current market price:
o In a registered public offering of our securities underwritten by one
or more established investment banks;
o In one or more private placements where the purchasers do not have
registration rights;
o Under any employee benefit plan approved by our shareholders;
o Under any compensatory plan for directors, officers, full-time
employees or key consultants;
o In connection with a strategic partnership or other business
transaction, the principal purpose of which is not simply to raise
money;
o In one or more private placements with registration rights; provided
that for each such private placement, we have drawn down the maximum
amount allowed under the agreement for two consecutive months
immediately prior to the month during which such financing is entered
into, and we agree to exercise draw downs for each month thereafter
until the aggregate purchase price of such draw downs equals the
aggregate gross proceeds received by us in the private placement; and
o In a transaction for which Grenville Finance Ltd. has given its
written approval.
The Warrant Issued To Grenville Finance Ltd.
As consideration for the opening of the equity line of credit, we
granted Grenville Finance Ltd. a warrant to purchase 15 million shares of common
stock. Grenville Finance Ltd. may exercise this warrant at any time prior to
February 12, 2004 for $0.265 per share of common stock. The common stock
issuable upon exercise of those warrants is included in this registration
statement.
Costs Of Closing The Transaction
At the initial closing of the transaction on January 26, 2001, we
delivered the requisite opinion of counsel to Grenville Finance Ltd. and paid
the escrow agent, Epstein, Becker & Green P.C., $20,000 for Grenville Finance
Ltd.'s legal, administrative and escrow costs and for the ordinary services of
the escrow agent for the closing of the draw downs. In addition, we issued a
warrant to purchase 15 million shares of our common stock to Grenville Finance
Ltd.
Upon the closing of each draw down, we are required to pay the escrow
agent $750 as escrow expenses, and 8% of each draw down to Union Atlantic, LC as
a finder's fee.
Termination Of The Common Stock Purchase Agreement
The equity line of credit under the common stock purchase agreement
shall terminate if any of the following events occurs:
-44-
o We suffer a material adverse change in our business, operations,
properties, prospectus or financial condition and we have not cured
the condition within sixty days;
o Our common stock is delisted from the OTC Bulletin Board unless the
delisting is in connection with the listing of such shares on the
Nasdaq National Market, SmallCap Market, the American Stock Exchange
or the New York Stock Exchange; or
o We file for protection from creditors
Indemnification Of Grenville Finance Ltd.
Grenville Finance Ltd. is entitled to customary indemnification from
us on any losses or liabilities suffered by it based on material misstatements
or omissions contained in the registration statement and the prospectus, except
as they relate to information supplied by Grenville Finance Ltd. to us for
inclusion in the registration statement and prospectus.
Grenville Finance Ltd.'s Resale Of The Common Stock
To permit Grenville Finance Ltd. to resell the common stock issued to
it under the common stock purchase agreement and under the warrant, we agreed to
register those shares and to maintain that registration. To that end, we will
prepare and file such amendments and supplements to the registration statement
and the prospectus as may be necessary in accordance with the Securities Act and
the rules and regulations thereunder, in order to keep it effective until the
earlier of:
o The date that all of the shares of common stock covered by the
registration statement of which this prospectus is a part have been
disposed of pursuant to the registration statement;
o The date that all of the shares of common stock have been sold
pursuant to the registration statement;
o The date that all of the shares of common stock have been otherwise
transferred to persons who trade such shares without restriction under
the Securities Act of 1933 and we have delivered new certificates or
other evidences of ownership of such common stock without any
restrictive legend; or
o Subject to the securities laws, the dates that all of the shares of
common stock may be sold without any time, volume or manner
limitations under Rule 144(k), any volume limitations under Rule 144
or similar provisions then in effect under the Securities Act of 1933.
The Number Of Shares We Will Issue To Grenville Finance Ltd.
The number of shares of common stock that we will issue to Grenville
Finance Ltd. is limited by the terms of the agreement and depends on six
factors:
o The number of draw downs we exercise;
o The total trading volume of our common stock for the 60 calendar days
before each draw down period;
-45-
o The volume-weighted average daily prices of our common stock for the
60 calendar days before each draw down period;
o The volume-weighted average daily price of our common stock on each of
the 22 days during a draw down period; and
o The limitation that following the purchase of the shares issued in a
draw down, Grenville may not hold more than 9.9% of our outstanding
shares.
The fewer the number of draw downs we exercise, the fewer the shares
we will issue to Grenville Finance Ltd. The common stock purchase agreement
provides for one draw down for each draw period consisting of 22 trading days.
Thus, any decision by us to delay or forego any draw down opportunity may result
in our being unable to exercise all draw downs available in the 24 month period.
The volume-weighted average daily prices and the average daily trading
volume prior to a draw down period determine the maximum amount of the draw down
for the period. A decline in the trading volume or price of our common stock may
result in a reduction in the amount of money we are able to draw down and a
corresponding reduction in the number of shares we must issue for that period.
The volume-weighted average daily price of our common stock for each
of the 22 trading days within a draw down period and the draw down amount
determine the number of shares we will issue to Grenville Finance Ltd. Grenville
Finance Ltd. will purchase those shares at a 15% discount to the volume-weighted
average daily price. For any given draw down period, the lower the
volume-weighted average daily price, the more shares of common stock Grenville
Finance Ltd. will receive for the draw down amount.
Based on a review of our trading volume and stock price history, a
consideration of the factors above and the number of authorized but unissued
shares, we are registering 65,000,000 shares of common stock for possible
issuance under the common stock purchase agreement, including shares underlying
the warrants for common stock that will be granted to Grenville Finance Ltd. We
may file addition registration statements to register additional shares at some
future date for issuance under the common stock purchase agreement.
In addition to the 50,000,000 shares that we may sell to Grenville
Finance Ltd. through the draw down, we are registering an additional 15,000,000
shares that are issuable under the warrant.
Transfer Agent
The transfer agent for our common stock is Manhattan Transfer Register
Co., Post Office Box 361, Holbrook, New York, 11741-0361.
-46-
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the OTC Bulletin Board from
January 1998 to present under the symbol WLGS. The security traded under the
symbol UPPI from October 1997 through July 1998. However, there were no inside
quotes reported for 1997. The market for our common stock has often been
sporadic and limited.
The following table sets forth in the periods indicated the range of
high and low bid prices per share of our common stock traded as reported by the
OTC Bulletin Board.
----------------------------------------------------------------
Quarter End Low Bid High Bid
----------------------------------------------------------------
3/31/98 0.25 1.31
----------------------------------------------------------------
6/30/98 0.25 2.05
----------------------------------------------------------------
9/30/98 0.11 0.60
----------------------------------------------------------------
12/31/98 0.09 0.51
----------------------------------------------------------------
3/31/99 0.12 0.51
----------------------------------------------------------------
6/30/99 0.25 3.99
----------------------------------------------------------------
9/30/99 0.875 1.73
----------------------------------------------------------------
12/31/99 0.62 2.01
----------------------------------------------------------------
3/31/00 1.06 7.78
----------------------------------------------------------------
6/30/00 1.45 5.31
----------------------------------------------------------------
9/30/00 0.78 3.065
----------------------------------------------------------------
12/31/00 0.1719 0.8438
----------------------------------------------------------------
Since our shares began trading on the OTC Bulletin Board in 1997, the
prices for our shares have fluctuated widely. There may be many factors which
may explain these variations, but we believe that among these factors include
the following:
o the demand for our common stock;
o the number of market makers for our common stock;
o developments in the market for broadband Internet access and wireless
transmission in particular; and
o changes in the performance of the stock market in general.
In recent years, the stock market has experienced extreme price and
volume fluctuations that have had a substantial effect on the market prices for
many telecommunications, Internet and emerging growth companies such as ours,
which may be unrelated to the operating performances of the specific companies.
Companies that have experienced volatility in the market price of their stock
have been the object of securities class action litigation. If we become the
object of securities class action litigation, it could result in substantial
costs and a diversion of our management's attention and resources and have an
adverse effect on our business, financial condition and results of operations.
In addition, holders of shares of our common stock could suffer substantial
losses as a result of fluctuations and declines in the stock price.
-47-
There are approximately 309 holders of record of our common stock as
of March 1, 2001.
We have never declared or paid any dividends on our common stock, and
we do not expect to declare or pay any cash dividends in the forseeable future.
The payment of dividends, if any, in the future is within the discretion of our
board of directors and will depend upon our earnings, if any, our capital
requirements and financial condition and other factors.
The trading of our shares is subject to limitations set forth in Rule
15g-9 of the Securities Exchange Act. This rule imposes sales practice
requirements on broker-dealers who sell so-called penny stocks to persons other
than established customers, accredited investors or institutional investors.
Accredited investors are generally defined to include individuals with a net
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouses during the previous two years and expected annual
income of that amount during the current year. For sales of shares to other
persons broker-dealers must make special suitability determinations, must obtain
the written consent of the purchaser to the sale prior to consummating the sale
and is generally prohibited from making cold-calls or other unsolicited
inquiries to purchasers without complying with these rules. These rules may
adversely affect the ability of broker-dealers and others to sell our shares or
to sell shares in the secondary market.
-48-
PLAN OF DISTRIBUTION
General
Grenville Finance Ltd. is offering the shares of common stock for its
account as a statutory underwriter, and not for our account. We will not receive
any proceeds from any sale by Grenville Finance Ltd. of shares of our common
stock. Grenville Finance Ltd. may offer for sale up to $50,000,000 of common
stock acquired by it pursuant to the terms of the common stock purchase
agreement more fully described under the section above entitled "Common Stock
Purchase Agreement" and the warrant that we issued to Grenville Finance Ltd. in
connection with the equity line of credit. Grenville Finance Ltd. is deemed to
be a statutory underwriter within the meaning of the Securities Act of 1933 in
connection with such sales of shares of common stock and will be acting as an
underwriter in its resales of the shares of common stock under this prospectus.
In addition, Andrew Corporation and any broker-dealers that act in connection
with the resale of common stuck offered by this prospectus may also be deemed to
be underwriters. Grenville Finance Ltd. has, prior to any sales, agreed not to
effect any offers or sales of the shares of common stock in any manner other
than as specified in the prospectus and not to purchase or induce others to
purchase shares of common stock in violation of any applicable state and federal
securities laws, rules and regulations and the rules and regulations of the OTC
Bulletin Board.
To permit Grenville Finance Ltd. to resell the common shares issued to
it under the common stock purchase agreement, we agreed to register those shares
and to maintain that registration. To that end, we have agreed with Grenville
Finance Ltd. that we will prepare and file such amendments and supplements to
the registration statement and the prospectus as may be necessary in accordance
with the Securities Act of 1933 and the rules and regulations promulgated
thereunder, to keep it effective until the earliest of any of the following
dates:
o The date that all of the common stock has been disposed of pursuant to
the registration statement;
o The date that all of the common stock has been sold pursuant to the
registration statement;
o The date the holders receive an opinion from our counsel, which shall
be reasonably acceptable to Grenville Finance Ltd., that the common
stock may be sold under the provisions of Rule 144 without limitation
to volume;
o All common stock has been otherwise transferred to persons who may
trade such common stock without restrictions under the Securities Act
of 1933, and we delivered a new certificate or other evidence of
ownership of such common stock not bearing a restrictive legend; or
o All common stock may be sold without any time, volume or manner
limitations pursuant to Rule 144(k) or any similar provisions then in
effect under the Securities Act of 1933 in the opinion of our counsel,
which counsel shall be reasonably acceptable to Grenville Finance Ltd.
Shares of common stock offered through this prospectus may be sold
from time to time by the selling shareholders, or by pledgees, donees,
transferees or other successors in interest to the selling shareholders. We will
supplement this prospectus to disclose the names of any pledgees, donees,
transferees or other successors in interest that intend to offer common stock
through this prospectus.
Sales may be made on the OTC Bulletin Board or otherwise at prices and
at terms then prevailing or at prices related to the then current market price,
or in private negotiated transactions, or in a combination of these methods. The
selling shareholders will act independently of us in making decisions with
respect to the form, timing, manner and size of each sale. (We have been
informed by the selling shareholders that there are no existing arrangements
between either of them and any other stockholder, broker, dealer, underwriter or
agent relating to the sale or distribution of shares of common stock which may
be sold by the selling shareholders through this prospectus. Grenville Finance
Ltd. is an underwriter and Andrew Corporation may be deemed to be an underwriter
in connection with resales of their shares.)
-49-
The common shares may be sold in one or more of the following manners:
o a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker or dealer for its account under this prospectus;
or
o ordinary brokerage transactions and transactions in which the broker
solicits purchases.
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Except as
disclosed in a supplement to this prospectus, no broker-dealer will paid more
than a customary brokerage commission in connection with any sale the common
shares by the selling shareholders. Brokers or dealers may receive commissions,
discounts or other concessions from the selling shareholders in amounts to be
negotiated immediately prior to the sale. The compensation to a particular
broker-dealer may be in excess of customary commissions. Profits on any resale
of the common shares as a principal by such broker-dealers and any commissions
received by such broker-dealers may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. Any broker-dealer participating in
such transactions as agent may receive commissions from the selling shareholders
(and, if they act as agent for the purchaser of such common shares, from such
purchaser).
Broker-dealers who acquire common shares as principal may thereafter
resell such common shares from time so time in transactions (which may involve
crosses and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions or otherwise at market
prices prevailing at the time of sale or at negotiated prices, and in connection
with such resales may pay to or receive from the purchasers of such common
shares commissions computed as described above. Brokers or dealers who acquire
common shares as principal and any other participating brokers or dealers may be
deemed to he underwriters in connection with resales of the common shares.
In addition, any common shares covered by this prospectus which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this prospectus. We will not receive any of the proceeds from the
sale of these common shares, although we have paid the expenses of preparing
this prospectus and the related registration statement of which it is a part.
Grenville Finance Ltd. is subject to the applicable provisions of the
Securities Exchange Act of 1934, including without limitation, Rule 10b-5 and
Regulation M thereunder. Under applicable rules and regulations under the
Exchange Act of 1934, any person engaged in a distribution of the common shares
may not simultaneously purchase such securities for a period beginning when such
person becomes a distribution participant and ending upon such person's
completion of participation in a distribution. In addition, in connection with
the transactions in the common shares, Grenville Finance Ltd. and we will be
subject to applicable provisions of the Exchange Act of 1934 and the rules and
regulations under that Act, including, without limitation, the rules set forth
above. These restrictions may affect the marketability of the common shares.
The selling shareholders will pay all commissions and their own
expenses, if any, associated with the sale of the common shares, other than the
expenses associated with preparing this prospectus and the registration
statement of which it is a part.
Underwriting compensation and expenses
The underwriting compensation for Grenville Finance Ltd. will depend on
the amount of financing that we are able to obtain under the common stock
purchase agreement. Grenville Finance Ltd. will purchase shares under the stock
purchase agreement at a price equal to 85% of the volume-weighted average daily
price of our common stock reported on the OTC Bulletin Board, for each day in
the pricing period with respect to each drawdown request.
We also issued to Grenville Finance Ltd. a warrant to purchase
15,000,000 shares of our common stock at an exercise price of $0.265, which was
115% of the average closing bid price for our common stock during the fifteen
trading days prior to January 26, 2001, the date on which the common stock
purchase agreement was signed. The closing price for our common stock on the OTC
Bulletin Board on February 28, 2001 was $0.1875. The warrant expires February
12, 2004.
-50-
In addition, we are obligated to pay Union Atlantic, LC, as
compensation for its services as Grenville Finance Ltd.'s placement agent, a
cash fee equal to 8% of the gross proceeds received from Grenville Finance Ltd.
under the common stock purchase agreement for drawdowns under the equity line of
credit. Union Atlantic, LC previously received shares of common stock underlying
certain warrants in connection with a Securities Purchase Agreement entered into
April 14, 2000 with certain investors. Two of Union Atlantic, LC's partners
purchased shares of common stock through our public offering. One of those
partners, Andrew Reckles was formerly a nominee for our Board of Directors,
however, he withdrew from consideration prior to the shareholders meeting.
LEGAL MATTERS
Certain legal matters in connection with the common stock being
offered hereby will be passed upon by Foley & Lardner, One Maritime Plaza, Sixth
Floor, San Francisco, California 94111.
EXPERTS
The summary financial data for the fiscal years ended September 30,
2000, and 1999 have been derived from the Financial Statements and Notes to
Financial Statements, audited by Reuben E. Price & Co., San Francisco,
independent auditors. The summary of financial data for the first quarter of
fiscal year 2001 was derived from the Unaudited Financial Statements and Notes
to Financial Statements by Reuben E. Price & Co, San Francisco, independent
auditors. These financial statements are included in reliance upon the authority
of that firm as an expert in accounting and auditing.
ADDITIONAL INFORMATION
A registration statement on Form SB-2, including amendments, relating
to the shares offered has been filed with the Securities and Exchange
Commission, Office of Small Business Policy, Washington, D.C. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules to the registration statement. Statements made in
this prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, we refer you to the copy of the
contract or other document filed as an exhibit to the registration statement.
Each statement about those contracts and other documents is qualified in all
respects. The registration statement and exhibits and schedules can be inspected
without charge and copies can be made at proscribed rates, at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0300. In addition the Commission maintains a World Wide Web site on
the Internet at http://www.sec.gov that contains reports, proxy and information
statements and other documents filed electronically with the Commission,
including the registration statement.
We file a 10-KSB for each fiscal year and 10-QSB reports for the first
three quarters of each year. We intend to furnish our shareholders with annual
reports containing financial statements audited by our independent public
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year.
-51-
FINANCIAL STATEMENTS
Index to Consolidated financial statements
Independent Auditor's Report................................................F-2
Consolidated Balance Sheet..................................................F-3
Consolidated Statements of Operations and Comprehensive Income..............F-4
Statements of Shareholders' Equity..........................................F-5
Consolidated Statements of Cash Flows.......................................F-6
The accompanying notes are an integral part of these financial statements...F-6
Notes to Consolidated Financial Statements..................................F-7
Unaudited Financial Statements for the First Quarter of
Fiscal Year 2001............................................................F-17
F-1
Independent Auditor's Report
INDEPENDENT AUDITORS' REPORT
Board of Directors
World Wide Wireless Communications, Inc.
We have audited the accompanying consolidated balance sheet of World
Wide Wireless Communications, Inc., as of September 30, 2000, and the related
consolidated statements of operations, consolidated statements of cash flows,
and statement of stockholders' equity for the years ended September 30, 2000 and
1999. We did not audit the balance sheet and related statement of income, cash
flows and shareholders equity of Infotel Argentina and Digital Way. These
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to amounts included for Infotel
Argentina and Digital Way, is based solely upon the reports of the other
auditors. Infotel Argentina was purchased on December 31, 1999 and Digital Way
was purchased on February 29, 2000, in transactions accounted for as purchases.
The financial statements of the newly acquired subsidiaries are included in the
consolidated financial statements of World Wide Wireless Communications, Inc.
and reflect total assets of 5% for Infotel Argentina and 5% for Digital Way for
the year ended September 30, 2000. These financial statements are the
responsibility of World Wide Wireless Communications, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of World
Wide Wireless Communications, Inc. as of September 30, 2000 and the consolidated
results of its operations, cash flows, and stockholder's equity for the years
ended September 30, 2000 and 1999 in conformity with generally accepted
accounting principles of the United States.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2, the
Company has suffered recurring losses that raises substantial doubt about its
ability to continue as a going concern. Realization of a major portion of the
assets is dependent upon the Company's ability to meet its future financing
requirements, and the success of future operations, the outcome of which cannot
be determined at this time. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Reuben E. Price & Co.
December 13, 2000
F-2
World Wide Wireless Communications, Inc.
Consolidated Balance Sheet
Assets
Current Assets: September 30, 2000
Cash and cash equivalents $ 3,111,150
Refund receivable 500,000
Inventory 750,458
Prepaid and other 402,950
------------
Total Current Assets 4,764,558
------------
Frequency licenses 1,175,067
------------
Option on frequency licenses 500,000
------------
Deposits in Acquisition 395,012
------------
Fixed Assets:
Equipment 2,466,736
Furniture and fixtures 91,938
Leasehold improvements 424,710
Less: Accumulated depreciation and amortization (176,234)
Total Fixed Assets 2,807,150
------------
Other Assets 61,775
------------
Total Assets $ 9,703,562
============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,645,829
Accrued expenses 715,720
------------
Total Current Liabilities 2,361,549
Convertible debentures 5,227,678
------------
Total Liabilities 7,589,227
------------
Commitments and Contingencies -
Minority interest 115,150
------------
Stockholders' Equity:
Common stock, par value $ .001 per share,
100,000,000 shares authorized,
86,264,163 issued and outstanding 86,264
Additional paid-in capital 17,069,330
Accumulated deficit (15,155,249)
Other comprehensive income (loss) (1,160)
------------
Total Stockholders' Equity 1,999,185
------------
Total Liabilities and Stockholders' Equity $ 9,703,562
============
The accompanying notes are an integral part of these financial statements.
F-3
World Wide Wireless Communications Inc.
Consolidated Statements of Operations and Comprehensive Income
For the Year Ended For the Year
September 30, 2000 Ended
September 30, 1999
Revenue $ 524,245 $
Cost of revenue 336,716
------------ -----------
Gross profit 187,529
------------ -----------
Operating Expenses
General and administrative 7,065,788 2,383,330
Impairment Loss 1,500,000
------------ -----------
Total Operating Expenses (8,565,788) (2,383,330)
------------ -----------
Operating (Loss) (8,378,259) (2,383,330)
------------ -----------
Other Income (Expense)
Interest income 52,857 -
Interest (expense) (70,706) -
------------ -----------
Total Other (Expense) (17,849)
------------ -----------
Net Loss (8,396,108) (2,383,330)
------------ -----------
Other Comprehensive Income (Loss)
Foreign currency translation (1,160)
------------ -----------
Total Other Comprehensive
Income (Loss) (1,160)
------------ -----------
Total Comprehensive Income (Loss) (8,397,268) (2,383,330)
============ ============
Loss Per Share (Basic and Diluted) $ (0.10) $ (0.04)
============ =============
Basic and Diluted Weighted Average
Shares Outstanding 81,656,614 56,113,645
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
World Wide Wireless Communications, Inc.
Consolidated Statements of Cash Flows
For the Year For the Year
Ended Ended
September 30, 2000 September 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Total Comprehensive Income (Loss) $ (8,397,268) $ (2,383,330)
Adjustments to reconcile net loss
from operations to net cash used
by operating activities:
Common stock issued for services 1,142,445 615,996
Impairment loss 1,500,00
Depreciation and amortization
expense 164,450 13,506
Changes in operating assets and
liabilities:
(Increase) in inventory (750,458)
(Increase) in prepaid and other (336,560) (62,740)
(Increase) in other assets (5,742) (20,077)
Increase in accounts payable, trade 1,645,829
Increase in accrued expenses 224,251 4,321
------------ ------------
Net Cash (Used) by Operating
Activities (4,813,053) (1,832,324)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,531,850) (336,384)
Refund receivable (500,000)
Deposits in acquisition (395,012)
Acquisition of frequency licenses (1,175,067)
Acquisition of intangible assets (41,327)
Acquisition of option on
frequency licenses - (500,000)
------------ ------------
Net Cash (Used) by Investing
Activities (4,643,256) (836,384)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debentures 5,639,678 328,000
Proceeds from issuance of common stock 6,652,699 2,614,074
------------ ------------
Net Cash Provided by Financing
Activities 12,292,377 2,942,074
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,836,068 273,366
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 275,082 1,716
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,111,150 $ 275,082
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid $ - $ -
Income taxes paid $ - $ -
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Interest accrued on debentures, added
to the principal of the debentures $ 27,678 $ -
Debentures converted to capital stock $ 740,000 $ -
Capital stock issued in acquisition
of subsidiaries $ 1,500,000 $ -
The accompanying notes are an integral part of these financial statements
F-5
World Wide Wireless Communications, Inc.
Statements of Shareholders' Equity
Common Stock
Accumulated
Additional Other
Paid-in Accumulated Comprehensive Total
Shares Amount Capital Deficit Income Equity
---------- --------- ----------- ------------- ------------- ------------
Balance, September 30, 1998 47,341,993 $ 47,342 $ 3,843,038 $ (4,375,811) $ - (485,431)
Common stock issued in
private placement between
$0.05 and $0.435 per share 19,303,950 19,304 2,594,770 2,614,074
Common stock issued for
services 4,538,000 4,538 611,458 615,996
Net loss for the fiscal year
ended, September 30, 1999 (2,383,330) (2,383,330)
---------- --------- ----------- ------------ -------- -----------
Balance, September 30, 1999 71,183,943 71,184 7,049,266 (6,759,141) - 361,309
Common stock issued in
private Placement between
$0.25 and $6.125 per share 11,548,745 11,549 6,641,150 6,652,699
Common stock issued in
Conversion of debentures
at $0.625 per share 462,500 462 739,538 740,000
Common stock issued for
services 2,433,330 2,433 1,140,012 1,142,445
Common stock issued for
acquisition of
subsidiaries 635,645 636 1,499,364 1,500,000
Net loss for the fiscal year
ended, September 30, 2000 (8,396,108) (8,396,108)
Other comprehensive income:
Foreign currency adjustment (1,160) (1,160)
---------- --------- ----------- ------------ -------- -----------
Balance, September 30, 2000 86,264,163 $ 86,264 $17,069,330 $(15,155,249) $ (1,160) $ 1,999,185
========== ========= =========== ============ ======== ===========
The accompanying notes are an integral part of these financial statements.
F-6
Notes to Consolidated Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The consolidated financial statements presented are those of World Wide
Wireless Communications, Inc., (the Company) and its subsidiaries, Infotel
Argentina, S.A. (Argentina) and Digital Way, S.A. (Peru). The Company is
engaged in activities related to advanced wireless communications,
including the acquisition of radio-frequency spectrum both in the United
States and internationally. The Company also plans to license its
Distributed Wireless Call Processing System technology.
Consolidated Financial Statements
The accounts of the Company and its consolidated subsidiaries are included
in the consolidated financial statements after elimination of significant
intercompany accounts and transactions. The consolidated subsidiaries are
Infotel Argentina, S.A. of Argentina and Digital Way S.A. of Peru.
Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents. Balances in bank accounts may, from time to time,
exceed federal insured limits. The Company has never experienced any loss,
and believes its credit risk to be limited.
Inventory
Inventory is entirely made up of equipment intended to be sold to customers
as part of the Company's fixed wireless internet services. Inventory is
valued at the lower of cost or market.
Operating Intangible Assets
The frequency licenses are not yet placed in service and consequently are
not being amortized.
Fixed Assets
Furniture, fixtures and equipment are depreciated over their useful lives
of 5 to 10 years, using the straight-line method of depreciation. Leasehold
improvements are amortized over a 5-year period that coincides with the
initial period of the lease, using the straight-line method of
amortization. Amortizable intangibles, consisting primarily of software,
are amortized over a two year period.
Long-Lived Assets
The Company reviews its long-lived assets on a quarterly basis to determine
any impairment in accordance with Statement of Financial Accounting
Standards No. 121.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
For cash and cash equivalents and accrued expenses, the carrying amounts in
the Balance Sheet represent their fair market value. The carrying amount of
the debentures payable approximates fair value because of similar current
rates at which the Company could borrow funds with consistent remaining
maturities.
F-7
NOTE 1-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Segment Information
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
No. 131) in 1999. This statement establishes standards for the reporting of
information about operating segments in annual and interim financial
statements and requires restatement of prior year information. The company
has three geographic reportable operating segments: United States, Peru,
and Argentina. Operating segments are defined as components of an
enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. SFAS No. 131 also
requires disclosures about products and services, geographic areas and
major customers.
Comprehensive Income and Foreign Currency Transactions
As of October 1, 1999 the Company adopted FASB Statement No. 130, Reporting
Comprehensive Income. The financial statements of the Company's foreign
subsidiaries are measured using the local currency as the functional
currency. Assets and liabilities of these subsidiaries are translated at
exchange rates as of the balance sheet date. Revenues and expenses are
translated at average rates of exchange in effect during the year. The
resulting cumulative translation adjustments have been recorded as a
separate component of stockholder's equity. The sole component of other
comprehensive income is a foreign currency translation adjustment related
to the subsidiary Digital Way in Peru.
Recent Accounting Pronouncements
In June 1998 and June 1999 respectively, the Financial Accounting Standards
Board issued SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" (SFAS No. 133), and SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities- Deferral of the Effective
Date of FASB No. 133" (SFAS no.137). The Company is required to adopt SFAS
No. 133 and SFAS no. 137 in the year ended September 30, 2001. These
pronouncements establish methods of accounting for derivative financial
instruments and hedging activities related to those instruments as well as
other hedging activities. To date, the Company has not entered into any
derivative financial instruments or hedging activities.
Basic and Diluted Net Loss Per Share
The calculation of basic and diluted net loss per share is in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings Per
Share".
NOTE 2 -- GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The Company has experienced losses since inception, and had an
accumulated deficit of $15,155,249 at September 30, 2000. Net losses are
expected for the foreseeable future. Management plans to continue the
implementation of its business plan to place the Company's assets in
service to generate related revenue. Simultaneously, the Company is
continuing to secure additional capital through sales of common stock
through the current operating cycle. There is no assurance that management
will be successful in its efforts.
NOTE 3 -- ACQUISITIONS
Argentina
On December 31, 1999, the Company acquired a 51% interest in Infotel
Argentina S.A., a Buenos Aires based company which owns Multi-channel
Multipoint Distribution Service (MMDS) licenses in eight of the largest
Argentine cities including Buenos Aires. The price was $1,500,000, made up
of $900,000 in cash and $600,000 paid in 454,545 shares of company stock.
Infotel also engages in telephone system integration and
F-8
NOTE 3 -- ACQUISITIONS (continued)
engineering projects. The minority interest in net loss is not recognized,
because the Company anticipates being fully responsible for the
subsidiaries losses.
Impairment Loss
The Argentine government has revoked all MMDS licenses, including those
held by the Company's subsidiary, Infotel. The Company and Infotel have
taken all prescribed steps in order to secure the re-issuance of the
licenses, and talks are on-going with the appropriate Argentine government
agencies. However, there is no guarantee that the licenses will be reissued
to Infotel. Therefore, management is recognizing an impairment of the
frequency licenses asset in the amount of the Company's investment of
$1,500,000.
Peru
On February 29, 2000, the Company purchased 100% of Digital Way S.A., a
Peruvian telecommunications company. The price was $1,300,000, made up of
$400,000 cash and $900,000 paid in 181,100 shares of company stock. Digital
Way S.A., holds MMDS licenses in the Lima-Callao area. It holds local and
international long distance telephone licenses.
India
In June 2000, the Company entered into an agreement with a group of Indian
businessmen to establish a joint venture, World Wide Wireless
Communications (India) Ltd., to establish fixed wireless data service in
India. A refundable deposit of $248,350 (shown as part of Deposits in
Acquisitions) was posted with the Indian government as part of the process
of applying for both frequency and internet service provider licenses.
These license applications are pending.
Thailand
In May 2000, the Company entered into a joint venture with World Star T.V.
Communication Co. Ltd. (WSTV), a Thai corporation, to provide fixed
wireless data services in Thailand. WSTV currently owns frequency licenses
in Bangkok and other major areas in Thailand. As of September 30, 2000,
$146,662 has been invested, and is shown as part of Deposits in
Acquisition. In August 2000, the Company entered into a Letter of Intent
with E-Z Net Co. Ltd. of Bangkok for E-Z Net to provide internet service
provider services to the new joint venture. The required governmental
approvals are pending.
El Salvador
On March 11, 2000, the Company entered into a letter of intent with El
Salvador Telecomuniciones S.A. de C.V. for the purpose of acquiring a 25%
ownership interest in that company in El Salvador. Pursuant to the terms of
the letter of intent, the Company paid $1,000,000 to that company as an
advance payment of the purchase price, which was to total $3,500,000. The
agreement provided that the purchase was conditioned upon the company's
acquisition of certain licenses, and the occurrence of certain other
conditions that were not met. As a result, the Company has entered into an
agreement for the refund of the advance payment. The Company has received
$500,000, and is scheduled to receive the remainder in January 2001. This
amount is shown as an account receivable and is secured by a bank letter of
credit.
Pro Forma Data
The following pro forma data is presented on a combined basis, as if
Infotel Argentina S.A. and Digital Way S.A.(Peru) had been acquired at the
date of their formation, January 18, 1999 and March 28, 1999, respectively:
F-9
NOTE 3 -- ACQUISITIONS (continued)
September 30,
2000 1999
---- ----
Total Assets $ 9,703,562 $ 1,472,125
Total Liabilities 7,633,671 979,553
Total Shareholders Equity 2,069,891 3,492,572
For the Year Ended September 30,
2000 1999
---- ----
Revenues $ 671,907 $ 135,690
Expenses 9,010,946 2,479,874
----------- -----------
Net (Loss) $(8,339,039) $(2,344,184)
Basic and Diluted Loss Per Share (0.10) (0.04)
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
Litigation
In November 1998, the Company and its predecessor affiliates filed an
action against the lessor of its leases for the Concord and San Marcos,
California multipoint distribution service channels. The complaint alleged
breach of contract as well as intentional and negligent interference with
prospective economic advantage. The Company also sought a preliminary
injunction as a result of the lessor's assertion that the predecessor
companies and the Company were in default on said leases. The Superior
Court of California for the County of Los Angeles issued a preliminary
injunction against the lessor to restrain it from taking any further action
against the Company and its predecessors. Thereafter, the lessor
cross-complained against the Company and its predecessors alleging breach
of contract. The preliminary injunction of the Company against the lessor
remained in effect until December 9, 1999, when a settlement agreement was
signed.
The settlement provided for the Company to pay $27,375 to the lessor,
relating to lease obligations. This amount is recorded as an expense in the
financial statements for the fiscal years ended September 30 1998 and 1999.
The Company further agreed to sign a consulting agreement with the lessor
for one year, whereby the Company will issue the equivalent of $20,000 of
its restricted common stock, the value of which is to be computed at 80% of
the market value of the Company's unrestricted shares. Additionally, under
this consulting agreement, the Company agreed to execute a promissory note
in favor of the lessor in the amount of $40,000, payable at $1,000 per
month, commencing December 1, 1999, with a final payment of $28,000 on
December 1, 2000.
Under terms of the settlement agreement, the Company also has option to
purchase the Concord and San Marcos leases for a price of $250,000 each,
less lease payments already made. The Company elected to exercise the
option to purchase the Concord lease, and the appropriate transfer
procedure has been initiated with the U.S. Federal Communications
Commission (FCC). The Company believes that under current FCC regulations
it is not required to pay the $250,000 purchase price until such time as
the FCC has approved the transfer of the license.
The Company borrowed from Credit Bancorp $328,000 in August 1999 and
$412,000 in October 1999. The terms of this loan are 7% interest per annum
payable, semiannually on the last day of February and September, with the
principal due September 30, 2002. On August 6, 1999, the Company filed suit
against Credit Bancorp, in U.S. District Court in San Francisco, regarding
improprieties on the part of Credit Bancorp relating to the August 1999
loan. The case was settled on October 11, 1999. As part of the settlement
agreement, Credit Bancorp agreed to convert the original loans granted to
the Company to a convertible debenture in the amount of $740,000. On
October 11, 1999, the Company issued a convertible unsecured debenture for
$740,000 to Credit Bancorp in settlement of this obligation. The terms of
this convertible unsecured debenture are 7% interest per annum payable
semiannually on the last day of February and September, with the principal
due September 30, 2002. Credit Bancorp notified the Company that it wants
to convert the debentures into common stock. As of December 2000, the
Company has not issued the securities.
F-10
NOTE 4 -- COMMITMENTS AND CONTINGENCIES (continued)
principal and accrued interest of this debenture are convertible at any
time at the conversion price of $1.60 per share of unregistered, restricted
shares of the Company's stock, adjusted for any stock splits.
In November 1999, the Securities and Exchange Commission (SEC) filed suit
against Credit Bancorp alleging violations of various securities laws in
connection with its actions in relation to the Company (and others), and
seeking various forms of relief including disgorgement of its illegal
gains. At this time, management believes that if the suit is successful,
certain benefits may accrue to the Company, including the cancellation of
the $740,000 convertible debenture.
Operating Leases
The Company's office space at One Post Street, San Francisco, was leased on
a month to month basis. The Company vacated these offices on August 31,
1999. The actual rent paid, for the fiscal year ended September 30, 1999,
was $22,341.
In April 1999, the Company entered into a 5-year lease for approximately
6,000 square feet of office space in Jack London Square, Oakland,
California. The lease commenced on June 5, 1999. The triple net rental
agreement is for $10,038 per month during the first year, with a rental
deposit of $20,077 shown as an Other Asset on the financial statements. The
lease provides for an annual increase based on the indexed cost of living
adjustments. Additionally, the lease provides for the landlord's
participation in partial reimbursement over the terms of the lease to the
Company for leasehold improvements paid by the Company. The Company
commenced its occupancy of this space on September 1, 1999. The minimum
annual rent is $120,456 for the fiscal years ended September 30, 2001, 2002
and 2003, and $81,642 for the period October 1, 2003 to June 4, 2004.
The Company leases (under assignment) all of the channel capacity for
certain multipoint distribution service (MDS) and multi-channel multipoint
distribution service (MMDS) channels from three carriers that are licensed
by the FCC as specified in 47 C.F.R. Paragraph 21.901(b). These MDS/MMDS
leases provide for a monthly lease fee of 2% of gross subscriber revenue or
a minimum monthly rental aggregating approximately $1,150. The minimum
aggregate annual rent is $13,800 for 1999, $67,160 for 2000, and $9,500 for
2001, adjusted annually by changes in the Consumer Price Index. Each of the
leases contain three ten-year renewal options, and an option to purchase
each license for $225,000, adjusted upon changes in the Consumer Price
Index since lease inception.
In conjunction with the multi-point distribution service and multi-channel
multi-point distribution service licenses, the Company has acquired (under
assignment) transmission sites in the geographical areas covered by the
licenses. These site leases have varying terms and conditions, and at
September 30, 2000, the minimum annual rental is $42,000 per fiscal year
ending September 30, 2001 through 2004.
The company has based eight Instructional Television Fixed Service channels
for use as MMDS channels from the Shekinah Network, as described more fully
in Note 5 below. These leases provide for a monthly lease fee of 5% of
gross system receipts, with a minimum of $500 per channel. The minimum
aggregate annual fee is $60,000 per fiscal year ending September 30, 2001
through 2004.
Administrative
The Securities and Exchange Commission (SEC) commenced an informal inquiry
of the Company in August 2000. Management has voluntarily complied with
their requests for information and intends to fully cooperate with the
inquiry.
F-11
NOTE 4 -- COMMITMENTS AND CONTINGENCIES (continued)
Rents paid for fiscal years ended September 30, 2000 and 1999 are as
follows:
2000 1999
---- ----
Former office location, San Francisco $ - $ 22,341
Current office location, Oakland 128,460 38,814
Current office location, Concord 22,412 -
Distribution service channel leases 98,110 21,300
Transmission sites 85,501 42,000
--------- ---------
Total $ 334,483 $ 124,455
========= =========
The minimum annual rentals under current lease obligations for future
fiscal years ended September 30 are as follows:
2001 2002 2003 2004 Remainder
---- ---- ---- ---- ---------
Office location, Oakland $128,460 $128,460 $128,460 $ 74,935 None
Office location, Concord 23,916 23,916 13,951 None None
Distribution service
channel leases 69,600 60,000 60,000 60,000 None
Transmission sites 42,000 42,000 42,000 42,000 None
-------- -------- -------- --------
Total $263,976 $254,376 $244,411 $176,936 None
NOTE 5 -- STOCKHOLDERS EQUITY
During the fiscal year ended September 30, 2000, the Company sold
11,548,745 shares of its common stock for net cash proceeds of $6,652,699.
The company issued 2,598,602 shares of its common stock for services at an
aggregate value of $1,142,445. Stock issued for services was at the cash
price for the shares at the time of issuance. The Company issued 470,373
shares of its common stock for the acquisition of subsidiaries at an
aggregate value of $1,500,000. Stock issued for assets was at the cash
price for the shares at the time of issuance.
During the fiscal year ended September 30, 1999, the Company sold
19,303,950 shares of its common stock for net cash proceeds of $2,614,074.
The Company also issued 4,538,000 shares of its common stock for services
at an aggregate value of $615,996. Stock issued for services was at the
cash price for the shares at the time of issuance.
NOTE 6 -- OPTIONS ON FREQUENCY LICENSES
On November 25, 1998, the Company entered into an option agreement with
Shekinah Network to pay $500,000 to lease eight Instructional Television
Fixed Service channels for the Company's high-speed wireless internet
connections, as authorized by the Federal Communication Commission. This
agreement also provides the Company an exclusive option to lease excess
capacity on Shekinah's remaining thirty-two Instructional Television Fixed
Service channels, as they become available. The
F-12
NOTE 6 -- OPTIONS ON FREQUENCY LICENSES (continued)
monthly minimum transmission fee to be paid to Shekinah for each license or
application optioned, will be five percent (5%) of the gross system
receipts or five hundred dollars, whichever is greater. Amortization of the
licenses will begin when the available channels are placed in service.
Instructional Television Fixed Service licenses can only be owned by
Federal Communication Commission approved educational, religious or
non-profit entities. In the event that the Federal Communication Commission
rules and regulations change to allow commercial companies to own these
licenses or the Company establishes an educational, religious or non-profit
affiliate, the agreement also provides the Company an option to pay
Shekinah $150,000 per-market or channel group on an individual basis or
$3,500,000 for all forty channels. The option period extends for ten years,
with three additional ten-year term renewals.
NOTE 7 -- INCOME TAXES
A reconciliation between the actual income tax benefit and the federal
statutory rate follows:
Fiscal years ended September 30,
2000 1999
---- ----
Amount % % %
------ - - -
Computed income tax benefit
at statutory rate $ 2,848,407 (34)% $ 810,332 $(34)
Operating loss with no
current tax benefit (2,848,407) (34)% ($810,332) (34)%
----------- ---------
Income tax benefit None None
At September 30, 1999, the Company had a net operating loss carryforward
for federal tax purposes of approximately $6,760,000 which if unused to
offset future taxable income, will expire between the years 2010 to 2019,
and approximately $2,154,000 for state tax purposes, which will expire if
unused in 2004 and 2005. A valuation allowance has been recognized to
offset the related deferred tax assets due to the uncertainty of realizing
any benefit therefrom. During 2000 and 1999, no changes occurred in the
conclusions regarding the need for a 100% valuation allowance in all tax
jurisdictions.
Under section 382 of the Internal Revenue Code, the utilization of net
operating loss carryforwards is limited after an ownership change, as
defined, to an annual amount equal to the market value of the loss
corporation's outstanding stock immediately before the date of the
ownership change multiplied by the highest Federal long-term tax exempt
rate in effect for any month in the 3 calendar month period ending in the
calendar month in which the ownership change occurred. Due to the ownership
changes as a result of the May 1998 reorganization and subsequent stock
issuances, any future realization of the Company's net operating losses
will be severely limited.
Significant components of the Company's deferred tax assets are as follows:
2000 1999
---- ----
Net operating loss carryforwards $ 14,999,561 $ 6,759,141
Valuation allowance (14,999,561) (6,759,141)
----------- ----------
Net deferred tax assets None None
NOTE 8 -NET LOSS PER COMMON SHARE
Net loss per common share, basic and diluted, has been computed using
weighted average common shares outstanding. The effect of outstanding stock
options and warrants has been excluded from the dilutive computation, as
their inclusion would be anti-dilutive.
F-13
NOTE 8 -NET LOSS PER COMMONS SHARE (continued)
Fiscal Year Ended
September 30,
2000 1999
---- ----
Net Income (Loss) $(8,397,268) $(2,383,330)
=========== ===========
Weighted average number of common shares 81,656,614 56,113,645
=========== ==========
Basic and diluted loss per share
$ (0.10) $ (0.04)
=========== ===========
The following common stock equivalents have been excluded from the
dilutive computation, as their inclusion would be anti-dilutive.
Stock Options 3,750,000 2,950,000
Convertible warrants 3,600,000 -
----------- -----------
7,350,000 2,950,000
=========== ===========
NOTE 9 - STOCK OPTION PLANS
Nonstatutory Stock Options
The Company has issued stock options under nonstatutory stock option
agreements. The options are granted at the fair market value of the shares
at the date the option is granted. The options are granted for a period of
5 years, and are fully exercisable during the term of the option period or
within thirty (30) days of the participant's resignation or termination.
Combined transactions in non-employee options for the fiscal years ended
September 30, 2000 and 1999 are as follows:
2000 1999
---- ----
Average Average
Number of Exercise Number of Exercise
Shares Price Shares Price
Options outstanding October 1 500,000 0.095 - -
Granted - - 500,000 0.095
Cancelled/Expired - - - -
Exercised - - - -
------------------------------------------
Options outstanding, September 30 500,000 0.095 500,000 0.095
======= ===== ======= =====
Incentive Stock Plan
The Company adopted an incentive stock plan on August 5, 1998, which has
not yet been approved by the shareholders. The options are granted at the
fair market value of the shares at the date that the option is granted. The
options are granted for a period of 10 years, and are exercisable after one
year from the date of grant, at a vested rate of 20% per year during the
term of the option period or within thirty (30) days of the participant's
resignation or termination. The Company has limited the number of shares
under this plan to 3,000,000 shares of its capital stock for this plan. The
number of shares of stock covered by each outstanding option, and the
exercise price per share thereof set forth in each such option, shall be
proportionately adjusted for any stock split, and or, stock dividend. All
such options are being treated as nonstatutory stock options until the
incentive stock plan is approved by the shareholders.
Combined transactions in employee options for the fiscal years ended
September 30, 2000 and 1999 are as follows:
F-14
NOTE 9 - STOCK OPTION PLANS (continued)
2000 1999
---- ----
Average Average
Number of Exercise Number of Exercise
Shares Price Shares Price
Options outstanding October 1 2,450,000 $0.095 800,000 $0.095
Granted 1,600,000 1.125 1,650,000 0.095
Cancelled/Expired (800,000) 0.095 - -
Exercised - - - -
-------------------------------------------
Options outstanding, September 30 3,250,000 0.602 2,450,000 0.095
========= ====== ========= ======
Compensation Costs
The Company applies APB Opinion 25 in accounting for its stock compensation
plans discussed above. Accordingly, no compensation costs have recognized
for these plans in 2000 or 1999. Had compensation costs been determined on
the basis of fair value pursuant to FASB Statement No. 123, net loss and
loss per share would have been increased as follows:
2000 1999
Net loss: $(8,396,108) $(2,383,330)
=========== ==========
Pro forma $(8,391,562) $(2,441,575)
=========== ===========
Basic and Diluted loss per share:
As reported
$ (0.10) $ (0.04)
=========== ===========
Pro forma $ (0.10) $ (0.04)
=========== ===========
The fair value of each option granted is estimated on the grant date using
the Black-Scholes model. The following assumptions were made in estimating
fair value:
Assumption Plans
Dividend yield 0%
Risk-free interest rate 7%
Expected life 5 years
Expected volatility 97%
NOTE 10 - SEGMENT INFORMATION
September 30, 2000
------------------
USA Argentina Peru
Total Assets $ 9,691,532 $ 544,692 4494,430
Total Liabilities & Minority Interest 7,170,914 485,492 764,273
Total Shareholders Equity 2,520,617 59,200 (269,843)
For the Year Ended September 30, 2000
-------------------------------------
Revenue 2,903 521,343 -
Cost of Sales - 336,717 -
---------- -------- --------
Gross Profit 2,903 184,626 -
Expenses 7,875,836 (360,426) 274,926
---------- -------- --------
Net Loss $(7,875,836) $(175,800) $(274,926)
F-15
NOTE 11 - SECURITIES PURCHASE AGREEMENT
On April 14, 2000, the Company entered into a Securities Purchase Agreement
with six investors, for the purchase of investment units, consisting of
common stock, common stock purchase warrants, 4% subordinated debentures
and preferred stock. Pursuant to the Securities Purchase Agreement, the
investors purchased 760,000 shares of common stock, warrants to purchase
3,600,000 shares of common stock, and subordinated debentures with a
principal amount of $3,280,000, for a total amount of $4,800,000. The
investors have the option to purchase additional shares of common stock,
warrants and series A preferred stock (when authorized) from the Company
for a maximum amount of $1,920,000. The investors will be required to
purchase these securities if an effective registration statement under the
Securities Act is in effect with respect to all the common stock issued and
issuable upon the exercise of the warrant and conversion of the
subordinated debentures and series A preferred stock.
On August 10, 2000, the Company agreed with the investors to modify certain
terms of the earlier funding agreement. Under the new terms of this agreement,
the Company agreed to issue 608,000 shares of common stock to the investors, in
exchange for $1,920,000 and the investors' forbearance of certain rights under
the original agreement. The conversion price of the subordinated debentures was
amended to the lesser of 110% of the average per share market value for the five
consecutive trading days immediately preceding the original issue date, and 85%
of the average per share market value for the five consecutive trading days
immediately prior to the conversion date. The Company also agreed to change the
floor price to $1.00 for the period between August 10, 2000 and October 14,
2000, $0.64 from the period between October 14, 2000 and April 14, 2001, and
zero thereafter. Notwithstanding these changes, under this amendment, if the
Company's revenues for fiscal year 2000 fall below $13.5 million, then the floor
price will be zero as of April 1, 2001. Furthermore, the exercise price of the
warrants to purchase the Company's shares was changed to $2.00.
On November 15, 2000, the Company reached an agreement with the investors
amending the original securities agreement and the first amendment thereto. In
exchange for a waiver by the investors for any breach of the original agreement
and the first amendment, the Company agreed to increase the principal amount of
the debentures by $2,128,000, and to issue an additional 3,996,113 restricted
shares of common stock to them. The investors returned to the Company the
760,000 shares previously issued under the original Securities Purchase
Agreement and agreed to cancel the 608,000 shares that were never issued under
the first amendment. Under this agreement, the investors may convert the
debentures at a conversion price equal to the lesser of $.64 and an amount equal
to 85% of the average of the closing trading prices of the common stock for the
five consecutive trading days immediately prior to the conversion. At no time
shall the conversion price be below the floor price. The floor price is $.64 for
the period between October 1, 2000 and October 14, 2000, $.50 for the period
between October 14, 2000 and September 1, 2001, and zero thereafter. However, if
the Company's aggregate revenue for the last three quarters of the year 2000 and
the first quarter of the year 2001 is less than $13.5 million, then as of May
14, 2001, the floor price shall be zero.
Under the amended agreement, the Company reserves the right to redeem the
debentures if the per share market value of the common stock is less than $1.00.
The redemption price is calculated at 120% of the principal amount, and 100% of
the unpaid interest accrued on those debentures being redeemed.
Pursuant to the most recent amended agreement, the Company must file a SB-2
registration statement on December 15, 2000 which must be made effective by May
15, 2001. If the Company fails to abide by these amendments, the Company will be
required to pay certain liquidated damages.
F-16
World Wide Wireless Communications, Inc. &
Subsidiaries
Condensed Consolidated Balance Sheet
December 31, September 30,
2000 2000
---- ----
(unaudited) (see note 1)
----------- ------------
Assets
Current Assets:
Cash & cash equivalents $ 984,274 $ 3,111,150
Other current assets 1,768,023 1,653,408
-------------------- ---------------------
Total Current Assets 2,752,297 4,764,558
-------------------- ---------------------
Frequency licenses 1,175,067 1,175,067
-------------------- ---------------------
Option on frequency licenses 500,000 500,000
-------------------- ---------------------
Deposit in acquisition 395,012 395,012
-------------------- ---------------------
Fixed Assets:
Equipment 2,993,691 2,466,736
Furniture and fixtures 91,938 91,938
Leasehold improvements 424,710 424,710
Less: Accumulated depreciation & amortization (258,110) (176,234)
-------------------- ---------------------
Total Fixed Assets 3,252,229 2,807,150
-------------------- ---------------------
Other assets 63,949 61,775
-------------------- ---------------------
Total Assets $ 8,138,554 $ 9,703,562
==================== =====================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $ 1,962,598 $ 1,645,829
Accrued expenses 572,571 715,720
-------------------- ---------------------
Total Current Liabilities 2,535,169 2,361,549
Convertible debentures 5,323,202 5,227,678
-------------------- ---------------------
Total Liabilities 7,858,371 7,589,227
-------------------- ---------------------
Commitments and Contingencies - -
Minority interest 115,150 115,150
-------------------- ---------------------
Stockholders' Equity:
Common stock, par value $.001 per share,
100,000,000 shares authorized, 89,880,276 issued
and outstanding at December 31, 2000 89,881 86,264
Additional paid-in capital 17,065,714 17,069,330
Accumulated deficit (16,986,514) (15,155,249)
Accumulated other comprehensive loss (4,048) (1,160)
-------------------- ---------------------
Total Stockholders Equity 165,033 1,999,185
-------------------- ---------------------
Total Liabilities and Stockholders' Equity $ 8,138,554 $ 9,703,562
==================== =====================
F-17
World Wide Wireless Communications, Inc. &
Subsidiaries
Condensed Consolidated Statement of Operations
UNAUDITED
Three Months Three Months
Ended December 31, Ended December
2000 1999
------------------ -------------------
Revenue $ 316,591 $ -
Cost of goods sold 256,196 -
------------------ -------------------
Gross profit 60,395 -
Operating expenses 1,860,011 829,189
------------------ -------------------
Operating income (loss) (1,799,616) (829,189)
Other income (expense) (31,650) -
------------------ -------------------
Net profit (loss) $ (1,831,266) $ (829,189)
================== ===================
Basic and diluted loss per
share $ (0.02) $ (0.01)
================== ===================
Number of shares used in
computing basic and diluted
loss per share 89,880,276 71,791,046
================== ===================
F-18
World Wide Wireless Communications, Inc. &
Subsidiaries
Condensed Consolidated Statement of Cash Flows
UNAUDITED
For the For the
Three Months Three Months
Ended Ended
December 31, December 31,
2000 1999
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,831,266) $ (829,189)
Adjustments to reconcile net loss from operations
to net cash used by operating activities:
Other comprehensive (loss) (2,888) -
Common stock issued for services - 15,910
Depreciation and amortization expense 86,352 21,903
Interest payable added to principal of
debentures 95,524 -
Changes in operating assets and liabilities:
(Increase) decrease in prepaid and other (185,239) 60,580
Decrease in accounts receivable 63,974 -
(Decrease) in accrued expenses (143,149) (132,317)
Increase in accounts payable 316,771 -
------------------ -----------------
Net Cash (Used) by Operating Activities (1,599,921) (263,113)
------------------ -----------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of frequency licenses - (1,200,000)
Purchase of fixed assets (526,955) (114,520)
------------------ -----------------
Net Cash (Used) by Investing Activities (526,955) (1,314,520)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 1,827,654
Proceeds from loan - 412,000
------------------ -----------------
Net Cash Provided by Financing Activities - 2,239,654
------------------ -----------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,126,876) 62,021
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 3,111,150 275,082
------------------ -----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $984,274 $337,103
================== =================
SUPPLEMENTAL DISCLOSURES OF CASH:
Interest paid $ - $ -
Income taxes paid $ - $ -
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Interest accrued on debentures, added to
the principal of the debentures $ 95,524 $ -
F-19
WORLD WIDE WIRELESS COMMUNICATIONS, INC & SUBSIDIARIES
NOTES TO THE INTERIM UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - NOTES TO THE INTERIM UNAUDITED FINANCIAL STATEMENTS.
Basis of Presentation
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with
instructions to Form 10-QSB. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete consolidated financial
statements included in this Form 10-QSB. The results of
operations for any interim period are not necessarily indicative
of results for the full year. These statements should be read in
conjunction with the audited financial statements and
accompanying notes for the year ended September 30, 2000.
The balance sheet at September 30, 2000 has been derived from
audited financial statements, but does not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements.
Organization
The consolidated financial statements presented are those of
World Wide Wireless Communications, Inc., (the Company) and its
subsidiaries, Infotel Argentina, S.A. and Digital Way, S.A.. The
Company is engaged in activities related to advanced wireless
communications, including the acquisition of radio-frequency
spectrum both in the United States and internationally. The
Company also plans to license its Distributed Wireless Call
Processing System technology.
On December 31, 1999, The Company acquired a 51% interest in
Infotel Argentina S.A., a Buenos Aires based company which owns
Multi-channel Multipoint Distribution Service (MMDS) licenses in
eight of the largest Argentine cities including Buenos Aires.
Infotel also engages in telephone system integration and
engineering projects. Recently, the Argentine goverment revoked
all MMDS licenses including those issued to Infotel Argentina.
All proscribed steps have been taken to secure the reissuance of
the licenses and talks are ongoing with the appropriate Argentine
govermental agencies.
On February 29, 2000, the Company purchased 100% of Digital Way
S.A. a Peruvian telecommunications company. Digital Way holds
MMDS licenses in the Lima-Callao area. It holds local and
international long distance telephone licenses.
Consolidated Financial Statements
The accounts of the Company and its consolidated subsidiaries are
included in the consolidated financial statements after
elimination of significant intercompany accounts and
transactions. The consolidated subsidiaries are Infotel Argentina
of Argentina and Digital Way S.A. of Peru.
NOTE 2 COMPREHENSIVE INCOME AND FOREIGN CURRENCY TRANSACTIONS
Total comprehensive loss was $2,888 for the three months ended
December 31, 2000. There was no comprehensive income or loss for
the three months ended December 31, 1999.
NOTE 3 - BASIC AND DILUTED NET LOSS PER SHARE CALCULATION
The calculation of basic and diluted net loss per share is in
accordance with Statement of Financial Accounting Standard No.
128 "Earnings Per Share".
F-20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Bylaws provide that we may indemnify any director, officer, agent
or employee against all expenses and liabilities, including counsel fees,
reasonably incurred by or imposed upon them in connection with any proceeding to
which they may become involved by reason of their being or having been a
director, officer, employee or agent of our Company. Moreover, our Bylaws
provide that we shall have the right to purchase and maintain insurance on
behalf of any such persons whether or not we would have the power to indemnify
such person against the liability insured against. Insofar as indemnification
for liabilities arising under the Securities Act, we have been informed that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and
distribution of the securities being registered are estimated as follows:
Securities and Exchange Commission filing fee $ 3,250
Accountant's fees and expenses $10,000
Legal fees and expenses $25,000
Postage $ 1,000
Miscellaneous $ 1,000
--------
Total $40,250
The Registrant will bear all expenses shown above.
Item 26. Recent Sales of Unregistered Securities
The following is a list of our sales of our common stock during the
past three years which were not registered under the Securities Act. None of
these sales involved the use of or payments to an underwriter. In all instances
in which we issued shares under the exemption from the registration requirements
of the Securities Act under Section 4(2) of the Securities Act, all purchasers
had access to the type of information found in a registration statement and all
purchasers were sophisticated investors.
On July 21, 1998, as part of a corporate reorganization, we issued
1,724,138 shares of our common stock to TSI Technologies, Inc., 5,275,662 shares
to Worldwide Wireless, Inc., 1,586,300 shares to Ken Olson and 1,413,900 to
Douglas Haffer all in exchange for the assets of Worldwide Wireless Inc. and TSI
Technologies. These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act. No underwriters
were involved in the issuance and no commissions were paid.
On October 15, 1998, under terms of a Settlement and General Release,
we issued 50,000 shares of common stock to a former consultant in compensation
for services rendered,
-52-
approximating $2,450, at a per share price of $0.050. The shares were issued in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act.
Also on October 15, 1998, as part of a corporate reorganization, we
issued 1,724,138 shares of our common stock to TSI Technologies, Inc., 5,275,662
shares to Worldwide Wireless, Inc., 1,586,300 shares to Ken Olson and 1,413,900
to Douglas Haffer all in exchange for the assets of Worldwide Wireless Inc. and
TSI Technologies. These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act.
On December 8, 1998, we completed a private placement of 16,285,000
shares of our common stock to a group of accredited investors. Our common stock
was sold for between $0.0027 and $0.1394 per share. In addition, approximately
1,543,000 shares of the total number of shares issued were granted to one
individual in consideration of consulting services. We raised approximately
$736,380. No underwriters were used in completing these transactions. We believe
that we have satisfied the exemption from the securities registration
requirements provided by Section 3(b) of the Securities Act and Rule 504 of
Regulation D promulgated thereunder in that offering. The aggregate offering
price received in the offering did not exceed $1,000,000 within the twelve
months before the start of and during the offering. The securities were sold in
a private placement to only accredited investors, all of whom had a pre-existing
personal or business relationship with us or our officers or directors and each
of whom provided representations that they were accredited investors and were
purchasing for investment and not with a view to resale in connection with a
public offering.
On April 2, 1999, under terms of a Settlement and General Release, we
issued 800,000 shares of common stock to a former employee in compensation for
services rendered, approximating $75,200, at a per share price of $0.095. This
per share price is in line with the sale of common stock for cash at this period
of time. The shares were issued in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act.
On April 2, 1999, under terms of a Settlement and General Release, we
issued 25,000 shares of common stock to another former employee in compensation
for services rendered, approximating $2,350, at a per share price of $0.095.
This per share price is in line with the sale of common stock for cash at this
period of time. The shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act. No underwriters
were involved in the issuance and no commissions were paid.
On April 12, 1999, under terms of a Settlement and General Release, we
issued 825,000 shares of common stock to a former director and a former employee
in compensation for services rendered, approximating $81,000, at a per share
price of $0.098. This per share price is in line with the sale of common stock
for cash at this period of time. The shares were issued in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act. No
underwriters were involved in the issuance and no commissions were paid.
On May 6, 1999, as part of a corporate reorganization, we issued
2,593,744 shares of our common stock to TSI Technologies, Inc., 8,969,355 shares
to Worldwide Wireless, Inc., 3,033,660 shares to Ken Olson and 2,403,232 to
Douglas Haffer all in exchange for the assets of Worldwide Wireless Inc. and TSI
Technologies. These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act. No underwriters
were involved in the issuance and no commissions were paid.
-53-
On May 14, 1999, under terms of a Compromise and Settlement Agreement,
we issued 600,000 shares of common stock to cover approximately $56,400 of
various outstanding obligations to Corporate Architects for consulting services
rendered, at a per share price of $0.095. The shares were issued in reliance
upon the exemption from registration provided by Section 4(2) of the Securities
Act. No underwriters were involved in the issuance and no commissions were paid.
On May 25, 1999, under terms of a Compromise and Settlement Agreement,
we issued 750,000 shares of common stock as settlement of obligations owing to
Corporate Solutions, LLC for consulting services rendered. The amount of the
outstanding claims was approximately $310,000, at a per share price of $0.40.
The shares were issued in reliance upon the exemption from registration provided
by Section 4(2) of the Securities Act.
On December 31, 1999, we completed a private placement of 19,164,452
shares of our common stock to a group of accredited purchasers as defined under
Rule 502 of Regulation D. Our common stock was sold for between $0.05 and $0.435
per share. No underwriters were used in completing these transactions. We raised
approximately $4,310,505. In addition, approximately 2,377,340 shares of the
total number of shares issued were granted to one individual in consideration of
consulting services. The shares were issued in reliance upon the exemption to
registration provided by section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder.
On March 1, 2000, we issued 181,100 shares of common stock to four
individuals in connection with the purchase of all outstanding shares of Digital
Way, S.A., a Peruvian company. These shares were issued in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act.
On March 17, 2000, we issued 1,763,372 shares of common stock to
Douglas Haffer. Mr. Haffer was entitled to receive a similar number of shares
for services rendered to Worldwide Wireless, Inc. in 1998. Mr. Haffer
transferred his right to receive those shares from Worldwide Wireless, Inc. to
us in exchange for the 1,763,372 shares of common stock we issued to him. We
retain the right to receive shares from Worldwide Wireless, Inc. - Worldwide
Wireless, Inc. has yet to satisfy this obligation. The shares we issued to Mr.
Haffer were issued in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act.
On March 21, 2000, we completed a private placement of 3,687,000
shares of our common stock to a group of accredited investors. Our common stock
was sold for between $0.30 and $3.20 per share. We raised $3,861,280. We believe
that we have satisfied the exemption from the securities registration
requirements provided by section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder in this offering. The securities were sold
in a private placement to only accredited investors.
On April 14, 2000, we sold $1,312,000 of 4% convertible subordinated
debentures and related warrants to seven investors pursuant to the exemption
from the securities regulation requirement provided by section 4(2) of the
Securities Act. The convertible debentures are convertible at the election of
the holders into shares of common stock. In connection with this offering, the
seven investors also received warrants to purchase a total of 3,600,000 shares
of our common stock at an exercise price equal to 120% of the market price of
our common stock as of the date the warrants were issued. The warrants are
exercisable when issued and have a term of five years. The securities were sold
in a private placement to only accredited investors pursuant to 4(2) of the
Securities Act.
-54-
On August 10, 2000, we amended the Securities Purchase Agreement. We
agreed to issue an additional 608,000 shares of common stock in exchange for
$1,920,000 and the investors' forbearance of certain rights under the original
agreement. These shares were never issued due to the Second Amendment on
November 15, 2000. These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act. No underwriters
were involved in the issuance and no commissions were paid. These shares were
ultimately registered.
On November 15, 2000, we agreed to amend the Securities Purchase
Agreement to issue 3,996,113 restricted shares of common stock to the selling
shareholders and to increase the principal amount of the debentures held by the
selling shareholders in consideration for the selling shareholders' waiver of
any of our defaults and breaches of the prior Securities Purchase Agreement.
These shares were issued in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act. No underwriters were involved in
the issuance and no commissions were paid. These shares were ultimately
registered.
On January 24, 2001, we agreed to issue warrants to Andrew Corporation
in connection with the Loan Agreement signed with them. We agreed to issue
warrants to purchase no more than 500,000 and no less than 200,000 shares of
common stock in lieu of interest on the loan. The exercise price is $0.23 and
the warrants are exercisable until January 24, 2005. These shares were issued in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act. No underwriters were involved in the issuance and no commissions
were paid. These shares were ultimately registered.
On January 26, 2001, we signed a common stock purchase agreement with
Grenville Finance Ltd. for the future issuance and purchase of our common stock.
The common stock purchase agreement establishes what is sometimes termed an
equity line of credit or an equity draw down facility. Grenville Finance Ltd.
committed up to $50 million to purchase our common stock over a twenty-four
month period. The amount of securities issued will be based on various draw
downs described in further detail in the prospectus under the section "Common
Stock Purchase Agreement". We also granted Grenville Finance Ltd. a warrant to
purchase 15 million shares of common stock. Grenville Finance Ltd. may exercise
this warrant at any time prior to February 12, 2004 for $0.265 per share of
common stock. These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act.
During the period from our incorporation through the present we have
granted options to purchase common stock to our employees, officers and
consultants pursuant to our 1998 stock option plan. These options were granted
pursuant to the exemption from the registration requirements set forth in
Section 3(b) of the Securities Act and Rule 701 promulgated thereunder. The
option share exercise prices between $0.095 and $1.62 per share. No payment was
received by the company in connection with the grant of the options.
Item 6. Exhibits
EXHIBITS
EXHIBIT NO. DOCUMENT
------------ --------
* 3.1 Articles of Incorporation.
-55-
EXHIBIT NO. DOCUMENT
------------ --------
* 3.2 Amendment to Articles of Incorporation
* 3.3 Amendment to Articles of Incorporation.
* 3.4 By-laws.
* 4.1 Form of Certificate Evidencing shares of Common
Stock of World Wide Wireless Communications,
Inc.
* 4.2 Convertible Unsecured Debenture for $740,000
issued by World Wide Wireless
Communications, Inc. to Credit Bancorp.
5.1 Opinion Letter of Foley & Lardner regarding the
Legality of the Shares being Registered
* 10.1 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network.
* 10.2 South Bend MMDS Lease Agreement.
* 10.3 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Vail, Colorado.
* 10.4 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Aspen, Colorado
* 10.5 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Grand Rapids, Michigan.
* 10.6 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
La Grande, Oregon,
* 10.7 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Pierre, South Dakota.
* 10.8 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Ukiah, California.
* 10.9 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Key West, Florida.
*** 10.10 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Hilo, Hawaii.
*** 10.11 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network
Hot Springs, Arkansas.
*** 10.12 Supply Agreement between World Wide Wireless
Communications, Inc. and Andrew
Corporation dated March 13, 2000.
* 10.13 Stock Purchase Agreement dated November 30,
1999 Between Infotel Argentina S.A. and
World Wide Wireless Communications, Inc.
* 10.14 Agreement for Purchase of All Outstanding
Shares of Digital Way, S.A. by World Wide
Wireless Communications, Inc., dated
February 29, 2000.
* 10.15 Letter of Intent dated March 22, 2000 Between
SALTEL and World Wide Wireless
Communications, Inc.
* 10.16 Security Purchase Agreement Among World Wide
Wireless Communications, Inc. and the
Purchasers Named Therein.
-56-
EXHIBIT NO. DOCUMENT
------------ --------
* 10.17 Registration Rights Agreements Among World
Wide Wireless Communications, Inc. and the
Purchasers Named Therein.
* 10.18 Escrow Agreement Among the Purchasers Named
Therein, the Representative of the
Purchasers and the Escrow Agent.
* 10.19 Form of Debenture of World Wide Wireless
Communications, Inc. with Respect to the 4%
Convertible Debenture Due 2005.
* 10.20 Form of Warrant to Purchase Shares of World
Wide Communications, Inc. Issued in the
Offering.
**** 10.21 Amendment to the Securities Purchase
Agreement dated August 10, 2000 entered into
between World Wide Wireless Communications and
the selling shareholders named therein.
*** 10.22 Second Amendment dated November 15, 2000 to
the Securities Purchase Agreement between
World Wide Wireless Communications, Inc. and
the Purchases Named Therein.
**** 10.23 Agreement between World Wide Wireless
Communications, Inc. and Mr. Neelam Kumar
Oswal.
**** 10.24 Joint Venture Agreement between World Wide
Wireless Communications, Inc. and World Thai
Star Co. Ltd.
** 10.26 Compromise and Settlement Agreement between
World Wide Wireless Communications, Inc.
and Corporate Solutions LLC, dated May 25,
1999.
*** 10.27 Written Agreement between Jorge Emilio Zedan
and Wide Wireless Communications, Inc.
*** 10.28 Employment Agreement between Douglas Haffer
and World Wide Wireless Communications, Inc.
***** 10.29 Non-statutory Stock Option Agreement between
World Wide Wireless Communications, Inc.
and Douglas Haffer dated October 22, 1998
***** 10.30 Non-statutory Stock Option Agreement between
World Wide Wireless Communications, Inc.
and Douglas Haffer dated February 1, 2000.
***** 10.31 Non-statutory Stock Option Agreement between
World Wide Wireless Communications, Inc.
and Wayne Caldwell dated October 27, 1999.
***** 10.32 Non-statutory Stock Option Agreement between
World Wide Wireless Communications, Inc.
and Wayne Caldwell dated October 27, 2000.
***** 10.33 Non-statutory Stock Option Agreement between
World Wide Wireless Communications, Inc.
and Ramsey Sweis.
***** 10.34 Non-statutory Stock Option Agreement between
World Wide Wireless Communications, Inc.
and Robert Klein.
***** 10.35 Non-statutory Stock Option Agreement between
World Wide Wireless Communications, Inc.
and Mohammad Ali Guidfar.
*** 10.36 World Wide Wireless Communications, Inc.
Incentive Stock Option Plan
-57-
EXHIBIT NO. DOCUMENT
------------ --------
****** 10.37 Common Stock Purchase Agreement between World
Wide Wireless Communications, Inc. and
Grenville Finance Ltd. dated January 26, 2001.
****** 10.38 Escrow Agreement between World Wide Wireless
Communications, Inc., Grenville Finance
Ltd. and Epstein, Becker & Green.
****** 10.39 Form of Warrant to Purchase Shares of World
Wide Wireless Communications, Inc. Provided
in the Offering.
****** 10.40 Registration Rights Agreement between World
Wide Wireless and Grenville Finance.
****** 10.41 Draw Down Notice/ Compliance Certificate.
****** 10.42 Stock Purchase Agreement between World Wide
Wireless Communications, Inc. and Andrew S.
Reckles.
****** 10.43 Stock Purchase Agreement between World Wide
Wireless Communications, Inc. and Paul
Mannion.
10.44 Loan Agreement between Andrew Corporation and
World Wide Wireless Communications, Inc.
10.45 Registration Rights Agreement between Andrew
Corporation and World Wide Wireless
Communications, Inc.
10.46 Form of Warrant to Purchase Shares of Common
Stock of World Wide Wireless
Communications, Inc. for Andrew Corporation.
* 21.1 Subsidiaries
23.1 Please refer to Exhibit 5.1.
23.2 Consent of Reuben E. Price & Co.
-58-
* Filed with the registration statement on Form SB-2 filed
with the Securities and Exchange Commission on May 31, 2000.
** Filed will the registration statement on Form SB-2 filed
with the Securities and Exchange Commission on June 30,
2000.
*** Filed with the registration statement on Form SB-2 filed
with the Securities and Exchange Commission on December 15,
2000.
**** Filed with the annual report on Form 10-KSB filed with the
Securities and Exchange Act on December 28, 2000.
***** Filed with the Post Effective Amendment on Form SB-filed
with the Securities and Exchange Commission on January 26,
2001.
****** Filed with the quarterly report filed on Form 10-QSB filed
with the Securities and Exchange Commission on February 20,
2001.
-59-
UNDERTAKINGS
a) The Registrant hereby undertakes that it will:
1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the bona fide
offering.
3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.
b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
c) The Registrant hereby undertakes that:
1) For the purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe the registrant
meets all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned on March
14, 2001.
World Wide Wireless Communications, Inc.
By /s/ Douglas Haffer
-----------------------------
Douglas P. Haffer
President, Chief Executive Officer and Chief Financial Officer
In accordance with the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Douglas Haffer President & CEO, CFO and Chairman March 14, 2001
- -------------------------- (Principal Accounting Officer)
Douglas P. Haffer
/s/ Ramsey Sweis Director March 14, 2001
- --------------------------
Ramsey Sweis
/s/ Robert Klein Director March 14, 2001
- --------------------------
Robert Klein
Director March ___,2001
- --------------------------
Jack Cutter
Director March __, 2001
- --------------------------
Sonny Rath
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