U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED:
JUNE 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
Commission file number: 000-30405
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
----------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 4812
(State of (Primary Standard Industrial 860887822
Incorporation) Identification No.) (IRS Employer Classification
Code No.)
EUGENE I. DAVIS
520 Third Street, Suite 101
Oakland, CA 94607
-----------------
(Address of principal executive offices)
(510) 839-6100
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes__X__ No____
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class Outstanding as of June 30, 2001
----- -------------------------------
Common Stock, $.001 par value 118,658,025
Transitional Small Business Disclosure Format: Yes____ No__X__
Part I. FINANCIAL INFORMATION World Wide Wireless
Item 1. FINANCIAL STATEMENTS Communications, Inc. & Subsidiaries
Condensed Consolidated Balance Sheet
June 30, September 30,
2001 2000
---- ----
(unaudited) (see note 1)
----------- ------------
Current Assets:
Cash & cash equivalents $ 233,584 $ 3,111,150
Other current assets 574,746 1,653,408
------------------- ---------------------------------
Total Current Assets 808,330 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 3,447,037 2,466,736
Furniture and fixtures 159,383 91,938
Leasehold improvements 424,710 424,710
Less: Accumulated depreciation & amortization (404,759) (176,234)
------------------- ---------------------------------
Total Fixed Assets 3,626,371 2,807,150
------------------- ---------------------------------
Other assets
Security deposit for leaseback contract 1,693,914 -
Other 64,861 61,775
------------------- ---------------------------------
Total Other Assets 1,758,802 61,775
------------------- ---------------------------------
Total Assets $ 8,263,555 9,703,562
=================== =================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $ 1,149,284 $ 1,645,829
Accrued expenses 1,099,520 715,720
Current portion of contract payable - Leaseback 561,457 -
-------------------- ---------------------------------
Total Current Liabilities 2,810,261 2,361,549
-------------------- ---------------------------------
Long-term Liabilities:
Convertible debentures 5,478,041 5,227,678
Long -term portion of contract payable - Leaseback 1,135,577 -
-------------------- ---------------------------------
Total Long-term Liabilities 6,613,618 5,227,678
-------------------- ---------------------------------
Total Liabilities 9,423,879 7,589,227
-------------------- ---------------------------------
Commitments and Contingencies - -
Minority interest 115,150 115,150
-------------------- ---------------------------------
Stockholders' Equity:
Common stock, par value $.001 per share,
300,000,000 shares authorized, 118,658,025 issued and
Outstanding 118,660 86,264
Additional paid-in capital 18,538,947 17,069,330
Accumulated deficit (19,921,071) (15,155,249)
Accumulated other comprehensive (loss) (12,010) (1,160)
-------------------- ---------------------------------
Total Stockholders Equity (1,275,474) 1,999,185
-------------------- ---------------------------------
Total Liabilities and Stockholders' Equity $ 8,263,555 $ 9,703,562
==================== =================================
2
World Wide Wireless Communications, Inc. &
Subsidiaries
Condensed Consolidated Statement of
Operations
UNAUDITED
Three Months Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
------------------ ----------------- ------------------- -------------------
Revenue $ 155,347 $ 166,998 $ 556,801 $ 664,037
Cost of goods sold 43,008 62,964 313,801 284,964
------------------ ----------------- ------------------- -------------------
Gross profit 112,339 104,034 243,000 379,073
Operating expenses 1,078,030 1,488,990 4,867,169 3,981,688
------------------ ----------------- ------------------- -------------------
Operating income
(loss) (965,691) (1,384,956) (4,624,169) (3,602,615)
Interest income
(expense) (63,641) 30,885 (141,654) 31,059
------------------ ----------------- ------------------- -------------------
Net profit (loss) $ (1,029,332) $ (1,354,071) $ (4,765,823) $ (3,571,556)
================== ================= =================== ===================
Basic and diluted loss per
share $ (0.01) $ (0.02) $ (0.04) $ (0.05)
================== ================= =================== ===================
Number of shares
used in computing
basic and diluted loss
per share 118,658,025 83,450,022 118,658,025 78,306,567
================== ================= =================== ===================
3
World Wide Wireless Communications, Inc. & Subsidiaries
Condensed Consolidated Statement of Cash Flows
UNAUDITED
For the Nine For the Nine
Months Ended Months Ended
June 30, June 30,
2001 2000
------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (4,765,823) $ (3,571,556)
Adjustments to reconcile net loss from
operations to net cash used by activities:
Other comprehensive (loss) (10,850) -
Common stock issued for services 106,250 15,910
Depreciation and amortization expense 228,525 83,068
Interest payable added to principal of
debentures 196,036 -
Changes in operating assets and liabilities:
Decrease in accounts receivable 306,977 -
(Increase) in other assets (768,598) (361,663)
(Decrease) in accrued expenses
and accounts payable (112,743) (264,622)
------------------- --------------------
Net Cash (Used) by Operating
Activities (3,283,030) (4,098,863)
------------------- --------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Security deposit on leaseback (1,693,914) -
Acquisition of frequency licenses - (2,279,699)
Purchase of fixed assets (1,349,726) (1,327,326)
------------------- --------------------
Net Cash (Used) by Investing
Activities (3,043,640) (3,607,025)
------------------- --------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale and leaseback of assets 1,999,014 -
Proceeds from issuance of common
stock 456,741 6,540,992
Proceeds from debentures 993,349 3,280,000
Proceeds from issuance of warrants - 676,400
------------------- --------------------
Net Cash Provided by Financing Activities 3,449,104 10,497,392
------------------- --------------------
4
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (2,877,566) 2,791,504
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 3,111,150 275,082
------------------- --------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 233,584 $ 3,066,586
=================== ====================
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 $ 196,036 $ -
Debentures converted to capital
stock $ 939,022 $ -
5
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. and its subsidiaries, Infotel Argentina, S.A. and
Digital Way, S.A. We are engaged in activities related to advanced wireless
communications, including the acquisition of radio-frequency spectrum both in
the United States and internationally. We also plan to license our proprietary
Distributed Wireless Call Processing System technology.
On December 31, 1999, we 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. In September 2000, the Argentine government revoked all MMDS
licenses, including those issued to Infotel Argentina, S.A. In March 2001, the
government temporarily reinstated our licenses, and then, in May 2001, may have
issued another hold on the licenses. Although we have taken all steps necessary
to reinstate the licenses in Argentina, it is unclear at this point whether we
will satisfy all the conditions necessary for the re-issuance of our licenses.
Consequently, operations in Argentina have been temporarily suspended pending
the resolution of this matter with the Argentine government.
On February 29, 2000, we purchased 100% of Digital Way S.A., a Peruvian
telecommunications company. Digital Way holds MMDS licenses in the Lima-Callao
area, and also holds local and international long distance telephone licenses.
In June of 2001, we received a notice of default from the Sellers of Digital
Way, claiming a breach of the terms of our purchase agreement. We dispute those
claims and are currently negotiating with the Sellers to resolve the situation.
Recently, we have become aware of a series of transactions that may not have
been properly authorized and may involve the misappropriation of certain assets
by certain Peruvian affiliates of Digital Way. Although we have not yet reached
a final determination, we are investigating the matter and will take appropriate
action when necessary.
6
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
Our accounts and the accounts of our 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.
For the three months ended June 30, 2001, financial information from
Infotel Argentina, S.A. is not available; consequently, the financial
information for this period is not included in these consolidated financial
statements.
NOTE 2 - COMPREHENSIVE INCOME AND FOREIGN CURRENCY TRANSACTIONS
Total comprehensive loss was $7,928 for the three months ended, June 30,
2001. There was no comprehensive income or loss for the three months ended, June
30, 2000.
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".
NOTE 4 - LEASEBACK TRANSACTION - PERU
On May 17, 2001, our Peruvian subsidiary, Digital Way, S.A., entered into a
sale-leaseback arrangement with Bco. Continental involving virtually all of
Digital Way's fixed assets and equipment. The transaction generated a sale/use
tax refund of $360,800 less commissions and fees of approximately $55,700, for a
net benefit of $305,100. The principal amount of $1,694,000 was deposited in a
restricted interest bearing security deposit account held by Bco. Continental to
guarantee future lease payments, and from which the quarterly lease payments of
$169,387 will be paid. The first quarterly payment is due August 17, 2001 and
payments continue until May 17, 2004.
NOTE 5 - CONVERSION OF DEBENTURES
Commencing on April 10, 2001 through June 30, 2001, debenture holders
exercised their option to convert $939,022 of debentures into 23,927,730 shares
of common stock.
NOTE 6 - ANALYSIS OF POSSIBLE RECEIVABLE FROM OR PAYABLE TO FORMER OFFICER
During the quarter, Douglas Haffer was replaced as CEO and Chairman of the
Board. A release from liability was given to Mr. Haffer as part of his severance
package; however, the issue of how much compensation he received during his
tenure and, thus, what should be reported to the Internal Revenue Service, is
still under review. It will not be known if any material amounts of compensation
are involved until an audit of the various accounts involved is completed.
Because this audit is still in progress no receivable or payable has been
recorded.
7
Item 2. Management's Discussion and Analysis
Forward Looking Statements
Certain statements in this Form 10-QSB, including information set forth
under this Item 2 "Management's Discussion and Analysis of Financial Condition
and Results of Operations," constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). We
desire to avail ourselves to certain "safe harbor" provisions of the Act and are
therefore including this special note to enable us to do so. Forward-looking
statements included in this Form 10-QSB or hereafter included in other publicly
available documents filed with the Securities and Exchange Commission, reports
to our stockholders and other publicly available statements issued or released
by us involve known and unknown risks, uncertainties, and other factors which
could cause our actual results, performance (financial or operating) or
achievements to differ from the prospects expressed or implied by such forward
looking statements. Such future results are based upon management's best
estimates based upon current conditions and the most recent results of
operations. We cannot assure that any of our expectations will be realized, and
actual results and occurrences may differ materially from our expectations as
stated in this document. We undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
Current Financial Condition and New Management
We will require substantial short-term outside investment on a continuing
basis to finance our current operations and capital expenditures. 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.
In addition, in May 2001, our partners in India and Thailand expressed
concerns about our ability to satisfy our contractual obligations under their
respective contracts. Due to our present financial condition as outlined above,
we may be unable to fulfill these obligations.
In light of these facts, we recently announced that we are actively engaged
in a number of efforts to revise our business plan in order to develop a viable
alternative in today's difficult funding environment. Following an extensive
review of our assets, operations and capital structure and continuing
conversations with our creditors and staff, we have come to the conclusion that
we will be best served by a redirection of our strategic plan. We plan to
de-emphasize our participation in the wireless internet market, sell assets for
cash and/or advance our remaining businesses through joint ventures, continue
our negotiations with creditors to compromise, extend, convert and/or forgive
debt, and seek new businesses that can take advantage of our extensive
shareholder base and status as a public company.
8
In keeping with this goal, our success depends to a significant extent on
the performance and continued service of our senior management and certain key
consultants. On April 20, 2001, Douglas P. Haffer resigned as our Chief
Executive Officer, Chief Financial Officer and President. Following Mr. Haffer's
resignation, Jack Cutter was appointed interim Chief Executive Officer, Chief
Financial Officer and Chairman of the Board. Mr. Cutter's goal was to find a
capable replacement for Mr. Haffer and to reduce expenses. Accordingly, on July
22, 2001, Mr. Cutter resigned and Eugene I. Davis, who has extensive experience
in work-outs, was appointed as our President and Chief Executive Officer, and
was unanimously elected to our Board of Directors and appointed as its Chairman.
In addition to serving as our CEO, Mr. Davis was appointed to serve as CEO for
all of our subsidiaries. To assist him, Mr. Davis nominated Harry R. Kraatz to
serve as a member of the Board of Directors, with such nomination being promptly
approved by the remaining Board members. The loss of services of, or a material
reduction in, the amount of time devoted to our business by Mr. Davis or other
members of our senior management could adversely affect our operations and
financial condition.
Status of Our Outstanding Capital Stock
Since our shares began trading on the OTC Bulletin Board in 1997, the
prices for our shares have fluctuated widely. Some of the factors which may
explain these variations 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.
Recently we have become aware that our stock may be delisted by the Over
the Counter Bulletin Board (OTCBB) if we are not able to comply with the
reporting requirements
9
necessary for being listed on the OTCBB. Due to our subsidiary in Argentina's
inability to provide us with appropriate financials, our financial reports may
not satisfy reporting requirements. If we are delisted, it could have an adverse
effect on the market for our stock, as well as the price of our stock.
RESULTS OF OPERATIONS
Quarter Ended June 30, 2001 Compared to Quarter Ended June 30, 2000
Revenue for the three and nine months ended June 30, 2001 was $155,347 and
$556,801 respectively, as compared with revenue of $166,998 and $664,037 for the
three and nine months ended June 30, 2000. The revenue for the three and nine
months ended June 30, 2001 is due primarily to the expansion of internet service
offered by our Peruvian subsidiary.
Cost of goods sold for the three and nine months ended June 30, 2001 was $43,008
and $313,801, as compared with $62,964 and $284,964 for the three and nine
months ended June 30, 2000.
Operating losses for the three and nine months ended June 30, 2001 were $956,691
and $4,624,169, as compared to $1,384,956 and $3,602,615 for the three and nine
months ended June 30, 2000. The $419,265 decrease in operating losses for the
three months ended June 30, 2001, as compared to the three months ended June 30,
2000, is due primarily to reduced payroll and other operating expenses of our
domestic operation. The $1,021,554 increase in operating losses for the nine
months ended June 30, 2001, as compared to the nine months ended June 30, 2000,
is due primarily to expenses generated by our foreign subsidiaries and increased
demand by the parent company in managing the foreign subsidiaries.
Net losses for the three and nine months ended June 30, 2001 were $1,029,332 and
$4,765,823, as compared with $1,354,071 and $3,571,556, for the three and nine
months ended June 30, 2000.
Liquidity and Capital Resources
On June 30, 2001, we had cash and cash equivalents of $233,584, compared
with $3,111,150 as of September 30, 2000. The decrease during the nine months in
cash and cash equivalents of $2,877,566 is due primarily to cash used in
operating activities. The increase in Capital Stock of $32,396 and Additional
Paid In Capital of $1,469,617 is attributable primarily to owners of debentures
converting their holdings into common stock.
Our primary capital needs are to fund the completion of our revised
business plan. 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
10
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.
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 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 85% of the average of the closing
trading prices of the common stock for the five consecutive trading days
immediately prior to the conversion.
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. 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, and
there must be a seven trading day waiting period between draw downs. The amount
of money that Grenville Finance Ltd. will provide to us and the number of shares
we will issue to Grenville
11
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 $0.265 per share.
We may not be able to draw down at all if we fail to meet certain preconditions
set out in the equity line of credit agreement.
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.
On March 29, 2001, we entered into a Senior Secured Convertible Debentures
and Warrants Purchase Agreement with several investors. The investors agreed to
purchase $750,000 principal amount of 8% convertible debentures and we agreed to
issue warrants to purchase 50,000 shares of common stock for each $100,000
principal amount purchased by the investors and issued warrants to purchase a
total of 375,000 shares. The exercise price on the warrants shall be 115% of the
average of the five bid prices immediately prior to March 29, 2001. The term of
the warrants is for three years. Under the agreement, we also agreed to remove
the floor price on the 4% convertible debentures previously issued and to
decrease the price of the warrants to $.1012. In addition, we pledged certain
U.S. licenses and leases as collateral against these debentures.
On April 20, 2001, pursuant to a settlement agreement between the company
and Douglas P. Haffer, our former chief executive officer and chairman of the
board, we repriced the exercise price for two separate grants of stock options
to Mr. Haffer. Previously, Mr. Haffer held two 800,000 grants of stock options,
with an exercise price of $1.62 and $0.095. Pursuant to the settlement
agreement, the exercise prices for these options were repriced to $0.01 and
$0.036, respectively. In addition, the company agreed to pay Mr. Haffer $77,000
in severance pay for the release of his right to a "golden parachute," which was
for an amount exceeding $1,000,000. In exchange, and upon execution of the
settlement agreement, Mr. Haffer agreed to resign from his executive positions
with us and our subsidiaries and from his seats on our boards of directors.
On June 13, 2001, we issued a drawdown notice to Grenville Finance Ltd. in
connection with the common stock purchase agreement dated January 26, 2001,
evidencing an equity draw down facility between us and Grenville Finance Ltd.
This notice offered to sell up to $130,000 of our common stock to Grenville
Finance Ltd. based on the formula in the stock purchase agreement, during the 22
day period beginning on June 13, 2001 and ending on July 16, 2001, but at not
less than $0.015 per share. As part of our drawdown notice, Grenville Finance
Ltd. Purchased 7,092,248 shares of our common stock. These purchases resulted in
aggregate proceeds of $130,000 being paid and released from escrow to us by
Grenville Finance Ltd. Additionally, as part of the purchase, Grenville Finance
Ltd. received warrants
12
to purchase up to 15,000,000 shares of our common stock with an exercise price
of $0.2650 per share. An 8% placement fee payable to the placement agent, Union
Atlantic, LC, which introduced us to Grenville Finance Ltd. was also paid, along
with a $750 escrow agent fee.
We are currently in the process of filing an SB-2 with the SEC to register
additional shares of common stock. We plan to register 70,000,000 shares of
common stock. These shares are being registered in order to cover approximately
20% of the remaining 4% Convertible Debentures held by the debentureholders.
Plan of Operations
We recently announced that we are actively engaged in a number of efforts
to revise our business plan in order to develop a viable alternative in today's
difficult funding environment. Following an extensive review of our assets,
operations and capital structure and continuing conversations with our creditors
and staff, we have come to the conclusion that we will be best served by a
redirection of our strategic plan. We plan to de-emphasize our participation in
the wireless internet market, sell assets for cash and/or advance our remaining
businesses through joint ventures, continue our negotiations with creditors to
compromise, extend, convert and/or forgive debt, and seek new businesses that
can take advantage of our extensive shareholder base and status as a public
company.
As part of the new business strategy, Mr. Davis was appointed as our
President and Chief Executive Officer, and was unanimously elected to our Board
of Directors and appointed its Chairman. In addition to spearheading our revised
business strategy, Mr. Davis has overseen the move of our offices to a smaller
location in the same building in which we were previously located. In addition
to reducing our rent by nearly $10,000 per month, this move will also result in
return of approximately $60,000 in monies deposited to guarantee the original
lease.
In the last quarter, we negotiated a series of Forbearance Agreements with
some of our major creditors. The Agreements cover approximately $9.5 of the
approximate $10 million in debt held by such creditors. Under the terms of the
Agreements, these creditors mutually agreed not take any action with respect to
our debt for a period of not less than six (6) months, ending on January 22,
2002, subject to certain conditions, including submission and approval of a
revised strategic business plan and similar forbearance by the holders of our
other trade and related debt, currently totaling approximately $9.5 million.
In addition, we executed a new bridge loan facility with certain of our
current debentureholders. The bridge loan was for approximately $200,000, in the
form of convertible debentures and warrants. The bridge facility is due and
payable on May 21, 2002. Following the bridge loan, we entered into an equity
line of credit with Grenville Finance Ltd. The equity line gives us limited
ability to access a limited amount of additional funds. We may not be able to
draw down at all if we fail to meet certain preconditions set out in the equity
line of credit agreement. 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
13
twice during a 22 day trading period following the draw down request based on
the formula in the common stock purchase agreement.
Our convertible debentureholders have agreed to continue to fund our
operations until our evaluation of a plan for recovery is complete. They also
agreed to continue the forbearance of their rights under our present events of
default and to assist us in efforts to restructure ourselves without the need
for bankruptcy court protection.
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 us to profitability. If we cannot successfully integrate a new business
plan in the near future, our current financial condition may dictate more
drastic alternatives. As such, we may have to consider temporarily suspending
operations, or filing for Chapter 11 bankruptcy protection.
Due to the substantial operating losses we incurred during the fiscal year
ended September 30, 2000 and the past three quarters, 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 continue operations. However, there
is no certainty that additional financing of any kind will be forthcoming in
amounts sufficient to allow us to continue to operate our 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. Further, on July 23,
2001, we entered into an agreement with Andrew Corporation to resolve all our
remaining indebtedness to Andrew. This agreement requires the return of all
equipment previously shipped to Argentina, most of which has been held in the
duty free zone in La Plata, Argentina. This agreement does not require the
return of any equipment shipped by Andrew to Peru, where our subsidiary
continues to provide service to an increasing number of customers.
We currently have 2 full-time employees and 2 consultants at our
headquarters office and approximately 25 additional full-time employees in the
offices of our subsidiaries.
14
PART 2. Other Information
Item 1. Legal Proceedings
On April 19, 2001, we were served with a complaint alleging unjust
enrichment and a violation of California Business and Professions Code by Broad
Horizons, Inc., a Florida corporation. The complaint stems from allegations that
we improperly received monetary benefits from our intended acquisition of
Comunicacoes 100Fio, Ltda, a Brazilian corporation, and our subsequent relations
with Luis Cuza, a former vice-president and director of Broad Horizons, Inc.,
and a former member of our board of directors. We deny the allegations and plan
to file a response to the complaint.
On March 30, 2001, a Notice of Lien attaching our bank account was served
by Management Recruiters of the Silicon Valley, Inc., in the amount of $63,900.
We hired MRI to recruit a Chief Operating Officer. Pursuant to that agreement,
we were obligated to pay $63,900, provided that the officer remain employed by
us for a defined time period. Due to the termination of the officer's employment
prior to the expiration of the defined time period, the fee is not due. We have
not yet responded with legal action to the Notice of Lien.
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.
We have not been served with any other lawsuits at this time.
Item 2. Changes in Securities and Use of Proceeds
On January 14, 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 July 23, 2001, we entered into an agreement with Andrew Corporation to
resolve all the remaining indebtedness we owed to Andrew. This agreement
requires the return of all equipment previously shipped to Argentina, most of
which has been held in the duty free zone
15
in La Plata, Argentina. This agreement does not require the return of any
equipment shipped by Andrew to Peru where our subsidiary continues to provide
service to an increasing number of customers.
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. 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, and
there must be a seven trading day waiting period between draw downs. 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 $0.265 per share. We may not be able to draw down at all if we
fail to meet certain preconditions set out in the equity line of credit
agreement.
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.
On March 29, 2001, we entered into a Senior Secured Convertible Debentures
and Warrants Purchase Agreement with several investors. The investors agreed to
purchase $750,000 principal amount of 8% convertible debentures and we agreed to
issue warrants to purchase 50,000 shares of common stock for each $100,000
principal amount purchased by the investors and issued warrants to purchase a
total of 375,000 shares. The exercise price on the warrants shall be 115% of the
average of the five bid prices immediately prior to March 29, 2001. The term of
the warrants is for three years. Under the agreement, we also agreed to remove
the floor price on the 4% convertible debentures previously issued and to
decrease the price of the warrants to $.1012. In addition, we pledged certain
U.S. licenses and leases as collateral against these debentures.
On April 20, 2001, pursuant to a settlement agreement between the company
and Douglas P. Haffer, our former chief executive officer and chairman of the
board, we repriced the exercise price for two separate grants of stock options
to Haffer. Previously, Haffer held two 800,000 grants of stock options, with an
exercise price of $1.62 and $0.095. Pursuant to the settlement agreement, the
exercise prices for these options were repriced to $0.01 and $0.036,
respectively. In addition, the company agreed to pay Haffer $77,000 in severance
pay
16
for the release of his right to a "golden parachute," which was for an amount
exceeding $1,000,000. In exchange, and upon execution of the settlement
agreement, Haffer agreed to resign from his executive positions with us and our
subsidiaries and from his seats on our boards of directors.
On June 13, 2001, we issued a drawdown notice to Grenville Finance Ltd. in
connection with the common stock purchase agreement dated January 26, 2001,
evidencing an equity draw down facility between us and Grenville Finance Ltd.
This notice offered to sell up to $130,000 of our common stock to Grenville
Finance Ltd. based on the formula in the stock purchase agreement, during the 22
day period beginning on June 13, 2001 and ending on July 16, 2001, but at not
less than $0.015 per share. As part of our drawdown notice, Grenville Finance
Ltd. Purchased 7,092,248 shares of our common stock. These purchases resulted in
aggregate proceeds of $130,000 being paid and released from escrow to us by
Grenville Finance Ltd. Additionally, as part of the purchase, Grenville Finance
Ltd. received warrants to purchase up to 15,000,000 shares of our common stock
with an exercise price of $0.2650 per share. An 8% placement was also paid to
the placement agent, Union Atlantic, LC, which introduced us to Grenville
Finance Ltd., along with a $750 escrow agent fee.
Item 3. Defaults Upon Senior Securities
On April 20, 2001, we entered into a Settlement Agreement and Mutual
Release with our former CEO Douglas P. Haffer. Under the terms of the agreement,
we are required to pay a severance package in the amount of $77,000 to Haffer,
of which $30,000 was to be paid at the time the agreement was executed, then
$10,000 per month for the next four months with a final payment of $7,000 on the
fifth month. The monthly payments are due on the 15 of each month. If no payment
is made by the 20 of any given month in which a payment is due, the entire
balance is immediately due and payable with interest in the amount of 4% per
month. We are currently in default of the Settlement Agreement with Haffer.
Sonny Rath, our former employee and board member, claims that we owe him an
alleged obligation of roughly $10,000. Rath maintains that we are in default of
an agreement he has with us. We are currently investigating this matter.
Item 5. Other Information
On July 22, 2001, our Board of Directors appointed Eugene I. Davis as Chief
Executive Officer and Chairman of the Board of Directors. Our board of directors
also appointed Harry R. Kraatz to fill the vacancy created by the resignation of
Robert Bowman. There is no other information to report on at this time.
17
Item 6. Exhibits
EXHIBIT NO. DOCUMENT
----------- --------
* 3.1 Articles of Incorporation.
* 3.2 Amendment to Articles of Incorporation
* 3.3 Amendment to Articles of Incorporation.
* 3.4 By-laws.
** 4.1 World Wide Wireless Communications, Inc. Incentive Stock
Option Plan
* 4.2 Security Purchase Agreement Among World Wide Wireless
Communications, Inc. and the Purchasers Named Therein.
* 4.3 Registration Rights Agreements Among World Wide Wireless
Communications, Inc. and the Purchasers Named Therein.
*** 4.4 Amendment to the Securities Purchase Agreement dated
August 10, 2000 entered into between World Wide Wireless
Communications and the selling shareholders named therein.
** 4.5 Second Amendment dated November 15, 2000 to the
Securities Purchase Agreement between World Wide Wireless
Communications, Inc. and the Purchases Named Therein.
****** 4.6 Senior Secured Convertible Debenture and Warrant
Purchase Agreement between World Wide Wireless
Communications, Inc. and the Purchases Named Therein dated
March 27, 2001.
**** 4.7 Common Stock Purchase Agreement between World Wide
Wireless Communications, Inc. and Grenville Finance Ltd.
dated January 26, 2001.
**** 4.8 Registration Rights Agreement between World Wide
Wireless Communications, Inc. and Grenville Finance.
***** 4.9 Loan Agreement between Andrew Corporation and World Wide
Wireless Communications, Inc.
**** 4.10 Common Stock Purchase Agreement between World Wide
Wireless Communications, Inc. and Andrew Reckles and Paul
Mannion.
***** 4.11 Registration Rights Agreement between Andrew
Corporation and World Wide Wireless Communications, Inc.
****** 4.12 Stock Purchase Warrant to Purchase Shares of World Wide
Wireless Communications, Inc. for Keshet Fund, L.P.
****** 4.13 Stock Purchase Warrant to Purchase Shares of World Wide
Wireless Communications, Inc. for Splendid Rock Holdings
Ltd.
****** 4.14 Stock Purchase Warrant to Purchase Shares of World Wide
Wireless Communications, Inc. for Endeavor Capital
Management Fund, S.A.
****** 4.15 Stock Purchase Warrant to Purchase Shares of World Wide
Wireless Communications, Inc. for Alpha Capital, A.G.
* 10.1 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network.
18
EXHIBIT NO. DOCUMENT
----------- --------
* 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 Casper, Wyoming.
* 10.6 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network Grand Rapids,
Michigan.
* 10.7 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network La Grande, Oregon.
* 10.8 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network Pierre, South
Dakota.
* 10.9 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network Ukiah, California.
* 10.10 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network Key West, Florida.
** 10.11 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network Hilo, Hawaii.
** 10.12 Lease Agreement Between World Wide Wireless
Communications, Inc. and Shekinah Network Hot Springs,
Arkansas.
** 10.13 Supply Agreement between World Wide Wireless
Communications, Inc. and Andrew Corporation dated March 13,
2000.
10.14 Settlement Agreement between World Wide Wireless
Communications, Inc. and Andrew Corporation dated July 23,
2001.
******* 19.1 2001 World Wide Wireless Communications, Inc. Proxy
Statement.
19
* Filed with the registration statement on Form SB-2 filed
with the Securities and Exchange Commission on May 31, 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 quarterly report filed on Form 10-QSB filed
with the Securities and Exchange Commission on February 20,
2001.
***** Filed with the registration statement on Form SB-2 filed
with the Securities and Exchange Commission on March 15,
2001.
****** Filed with the Form 8-K filed with the Securities and
Exchange Commission on April 5, 2001.
******* Filed with the Securities and Exchange Commission on
February 15, 2001.
20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
World Wide Wireless Communications, Inc.
- ----------------------------------------
Registrant
Date: August 17, 2001 By: /s/ Eugene I. Davis
-------------------
Eugene I. Davis
Chief Executive Officer
Chief Financial Officer
21