FILED PURSUANT TO RULE 424(B)(3)
FILE NUMBER 333-62216
PROSPECTUS
DIRECT WIRELESS COMMUNICATIONS, INC.
1,490,633 SHARES OF COMMON STOCK
NO PAR VALUE PER SHARE
The date of this prospectus is September 24, 2001.
UNTIL DECEMBER 26, 2001 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.
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Direct Wireless Communications, Inc. will furnish to its shareholders annual
reports containing audited financial statements and quarterly reports containing
unaudited financial statements.
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TABLE OF CONTENTS
Page
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Summary Information 2
Risk Factors 2
Risks Associated with Direct Wireless Corporation Technology 2
Risks Associated with the Operations of Direct Wireless
Communications, Inc. 3
Risks Associated with the Market for the Common Stock 4
Proposed Business 4
The Technology Direct Wireless Communications, Inc. will License 5
General Description of the Technology 5
Uniqueness of the Direct Wireless Corporation Technology 6
The Licensing Agreement 7
Management's Plan of Operations 7
Marketing Strategy 8
Employees 9
Properties 9
Plan of Distribution 9
Market for Common Equity and Related Stockholder Matters 10
Directors, Executive Officers, Promoters and Control Persons 10
Executive Compensation 12
Security Ownership of Certain Beneficial Owners and Management 13
Certain Relationships and Related Transactions 14
Description of Securities 14
Indemnification of Officers and Directors 15
Interest of Named Experts and Counsel 15
Available Information 16
Index to Financial Statements F-1
(i)
DIRECT WIRELESS COMMUNICATIONS, INC.
1,490,633 SHARES OF COMMON STOCK
NO PAR VALUE PER SHARE
This prospectus relates to 1,490,633 shares of common stock of Direct Wireless
Communications, Inc. that Direct Wireless Corporation is distributing as a stock
dividend to its shareholders of record on May 15, 2001. Recipients of the common
stock will not be required to make any payment for it.
Direct Wireless Communications, Inc. is now a wholly owned subsidiary of Direct
Wireless Corporation. It was organized with the minimum capital required under
state law and has not yet conducted any business operations. After Direct
Wireless Corporation pays the stock dividend to its stockholders, it will no
longer own any stock of Direct Wireless Communications, Inc.
At present there is no market for the common stock of Direct Wireless
Communications, Inc. SEE "RISK FACTORS" AT PAGES 2 THROUGH 4 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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SUMMARY INFORMATION
Direct Wireless Communications, Inc., a Texas corporation, is a development
stage company founded by Direct Wireless Corporation on April 6, 2001 to market
and/or license a unique, low-cost, high capacity voice and data mobile digital
wireless communications technology. This technology is designed to greatly
reduce the cost currently incurred by traditional wireless companies when
building their cell towers and related hardware. This is done primarily by
replacing their expensive hardware with software contained entirely in the
Direct Wireless Communications, Inc. mobile telephone.
The major features of this technology include:
o Extremely low cost wireless communication cell towers and support
electronics that can extend coverage to vast rural areas with quality
handset coverage in diverse topographies.
o Ability to connect quickly and efficiently with existing cellular and
personal communication networks as well as with the local public
telephone system for long distance communications.
o Phones that can operate in any part of the globe, even if the basic
cellular or personal communication system cannot. .
Direct Wireless Communications, Inc. has been granted the license by Direct
Wireless Corporation, the company that has developed and holds the patents on
the technology. As a part of the initial license fee, Direct Wireless
Communications Inc. must pay Direct Wireless Corporation during the 10 year term
of the license agreement the sum of $10,000,000, which Direct Wireless
Corporation will use to complete the development and testing of a prototype
market system utilizing the technology. Direct Wireless Communications, Inc.
will market and/or sublicense the technology in the United States. However, it
has not yet begun any operations.
The company's address is 106 E. 6th St., Suite 650, Austin, TX 78701 and its
telephone number is 512-583-4500.
RISK FACTORS
RISKS ASSOCIATED WITH THE DIRECT WIRELESS CORPORATION TECHNOLOGY.
NO WORKING PROTOTYPE HAS YET BEEN DEVELOPED. .
At the present time there is no working prototype telephone that employs the
current version of Direct Wireless technology. If a new working prototype can
not be completed Direct Wireless Communications, Inc. will not be able to derive
any income from its proposed operations.
2
THERE MAY NOT BE SUFFICIENT DEMAND FOR THE TECHNOLOGY.
When and if a new prototype is completed, the company's proposed business will
be primarily the marketing and/or licensing of the Direct Wireless Technology to
existing service providers within the wireless industry who want to economically
extend their service into rural areas and/or to rural utility companies that
want to diversify their businesses by becoming wireless service providers. If
Direct Wireless Communications, Inc. cannot find enough service providers or
utilities that anticipate sufficient demand to justify obtaining a license it
will not have profitable operations.
DIRECT WIRELESS COMMUNICATIONS, INC. DOES NOT OWN THE PATENTS. .
Direct Wireless Communications, Inc. does not own the patents for the
technology. If the technology covered by the patents becomes obsolete, the
company may have to rely on Direct Wireless Corporation to obtain any new
patents or improvements of the existing patents.
RISKS ASSOCIATED WITH THE OPERATIONS OF DIRECT WIRELESS COMMUNICATIONS, INC.
DIRECT WIRELESS COMMUNICATIONS, INC. HAS NO OPERATING HISTORY.
Direct Wireless Communications, Inc. was organized in April 2001 with minimum
capitalization. It is a development stage company with no operating history upon
which an evaluation of its prospects can be made.
DIRECT WIRELESS COMMUNICATIONS, INC. HAS NO OPERATING CAPITAL.
Direct Wireless communications, Inc. has no operating capital. It must raise
operating capital to begin operations. There is no assurance that it can do so.
DEPENDENCE ON MANAGEMENT.
The license agreement contains provisions that have the effect of preventing any
change in the management of Direct Wireless Communications, Inc. without the
consent of the management of Direct Wireless Corporation. Therefore the
stockholders of Direct Wireless Communications, Inc. must rely on the existing
officers and directors to operate the company.
MANAGEMENT PERSONNEL WILL NOT DEVOTE FULL TIME TO THE BUSINESS OF THE COMPANY.
The officers and directors of Direct Wireless Communications, Inc. are the same
as the officers and directors of Direct Wireless Corporation. The officers and
directors will continue to devote part of their time to the business of Direct
Wireless Corporation and therefore will not devote full time to the business of
the company.
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LIMITED EXPERIENCE OF MANAGEMENT.
The officers and directors of Direct Wireless Communications, Inc. do not have
any experience in licensing digital wireless communications equipment. The
commercial success of the company depends on the ability to successfully market
and/or sublicense the technology. The company may not be able to employ
additional personnel with the necessary experience for successful marketing
activities.
DIRECT WIRELESS COMMUNICATIONS, INC. MAY BE UNABLE TO PAY THE REQUIRED LICENSE
FEE.
The license granted to Direct Wireless Communications, Inc. requires the payment
of a license fee of $10,000,000 during the tem of the license. Direct Wireless
communications, Inc. may be unable to generate sufficient financing or income to
pay the fee. If it cannot pay the fee, it will be unable to license any
technology.
RISKS ASSOCIATED WITH THE MARKET FOR THE COMMON STOCK
NO TRADING MARKET EXISTS.
Prior to the payment of the stock dividend, all of the common stock of Direct
Wireless Communications, Inc. was owned by Direct Wireless Corporation. There
has never been a trading market in the common stock of Direct Wireless
Communications, Inc.
NO ASSURANCE A TRADING MARKET WILL DEVELOP.
The common stock of Direct Wireless Communications, Inc. will in all likelihood
be classified as a "penny stock" as that term is defined in the regulations
under the Securities Exchange Act of 1934. In that event, broker-dealers that
recommend the stock to their customers will be required to comply with
disclosure and record-keeping provisions applicable to those stocks. The effect
of those requirements may impede the development of a trading market in the
common stock.
ABSENCE OF FUTURE DIVIDENDS.
Direct Wireless Communications, Inc. does not anticipate that it will pay cash
dividends in the foreseeable future, even if its operations are profitable.
PROPOSED BUSINESS
Direct Wireless Corporation was formed in 1997 for the purpose of developing and
exploiting a wireless telephone technology intended to eliminate the need for
expensive control towers and related equipment currently in use in the cellular
communications industry. To the present its sole business has been the
development of patents relating to wireless telephone technology.
Several communications industry consultants to Direct Wireless Corporation
strongly advised that company to protect its patents and improvements on those
patents, as well as any new patents that it might obtain, from any potential
claims by completely separating the marketing
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and licensing functions from the business of developing and patenting wireless
communications technology. Specifically, they advised Direct Wireless
Corporation to transfer the marketing functions to a separate corporation.
Direct Wireless Corporation has followed this advice. In April 2001 it organized
Direct Wireless Communications, Inc. and has now licensed Direct Wireless
Communications, Inc. to market and/or sublicense in the United States the
wireless communications technology Direct Wireless Corporation has developed and
on which it holds the patents. Direct Wireless Corporation will, upon
distribution of the stock dividend, further separate itself from the marketing
function because it will no longer own any equity interest in Direct Wireless
Communications, Inc. However, Direct Wireless Corporation will be dependent upon
payment by Direct Wireless Communications Inc. of the $10,000,000 initial
licensing fee for the funds necessary to complete the development and testing of
the new prototype for the technology. Payment of this fee must be made during
the ten year term of the licensing agreement.
Owners of Direct Wireless Communications, Inc. common stock will have no
interest in Direct Wireless Corporation as a result of their stock ownership in
Direct Wireless Communications, Inc.
THE TECHNOLOGY DIRECT WIRELESS COMMUNICATIONS, INC. WILL LICENSE.
GENERAL DESCRIPTION OF THE TECHNOLOGY.
Direct Wireless Communications, Inc. has acquired from Direct Wireless
Corporation the right to market and sublicense the technology covered by two
patents, No. 5,995,849 issued on November 30, 1999 and No. 6,141,531 issued on
October 31, 2000, and patent application No. 800416 filed on June 1, 2000.
Expenditures for Patent costs have been $68,716.77. These patents and the patent
application relate to a new wireless communication system (named Timed Shared
Full Duplex) that uses radio frequencies for transmitting and receiving voice
and data signals. The technology covered by the patents and patent application
uses a self-contained radio network with several different routes for the
wireless signals to take within that network and many different routes to
connect that self-contained network to other outside networks.
The internal network consists of telephone handsets that allow for wireless
communication that is not controlled from a central point and can travel along
multiple communication routes. If several handsets are within range, they can
communicate directly through signal extenders (radio repeaters) without the need
for a central control center, unlike cellular or other mobile wireless
communication systems. If the handsets are farther apart, they can communicate
through signal extenders (radio repeaters) and network extenders (connectors to
the public telephone network) that relay the call to destination handsets, also
eliminating the need for a central call control center. The internal network
also has the capability of communicating with outside telephone networks, such
as existing public telephone systems, satellite communication systems, or
emergency radio or paging systems.
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The Time Shared Full Duplex wireless transmission system has been proven to
operate effectively in laboratory tests performed in late 1998 through early
1999.
The technology embodied in the prototype that was developed for this initial
system transmitted data at a lower rate than the technology currently in
development and was only in single channel form. Expenditures for this phase
were $381,711.00.
To reach higher data transmission rates and greater reliability than were
achieved in the initial prototype, the wireless program was moved to Southwest
Research Institute, a large research and design company located in San Antonio,
Texas, which is not affiliated with Direct Wireless Corporation, where a
complete systems specification analysis was completed over a 12 weeks period in
late 1999 through early 2000 for $338,797.97. A system specification analysis is
a document prepared by an engineering and scientific research establishment
qualified to make such an analysis that demonstrates that from the scientific
standpoint the technology reviewed will work as designed, i.e., that the
physical principles upon which it is based are valid, and that it can be
completed using only components that are currently available. . Based on the
system specification analysis it prepared, Southwest Research Institute has now
proposed a contract to Direct Wireless Corporation for the completion and
testing of a new prototype and market ready system capable of the higher
transmission rates.
When compared to currently deployed personal wireless communications systems
that broadcast at data rates of up to 28 kilobits per second, the quality of the
Direct Wireless Time Shared Full Duplex technology is superior. The Method of
data transmission covered by Direct Wireless Corporation patents can reach
speeds of up to 200 kilobits per second. The more data that can be transmitted
in a wireless phone call, the higher quality the signal and the better the sound
a person hears. Also, because of the patented broadcasting methods, cell towers
do not control the Direct Wireless phone call. The quality of the wireless call
is then higher due to less electronic signal processing.
UNIQUENESS OF THE DIRECT WIRELESS CORPORATION TECHNOLOGY.
The method used today in the wireless communications industry evolved when the
wireless industry began to serve the public in the early 1980s. At that time
computer chips that could be included in handsets were not available;
accordingly the handsets, which are hand-held radios, had to be controlled by
electronic devices contained in control towers in order to make sure that they
stayed on the right frequencies and to prevent the overlapping of conversations.
The essential feature of this method is that the tower controls all aspects of
the wireless communication; the handset makes no broadcast decisions. This
system requires control towers and control equipment that are expensive to build
and makes it economically impractical to provide wireless service to sparsely
settled areas.
The Direct Wireless Corporation technology differs from all other wireless
communications systems because the handsets contain miniature computers that
allow the handset to make all broadcast decisions, eliminating the need for
expensive towers and associated control equipment. The handsets can communicate
directly with one another, or the range of their signals can be extended through
the use of inexpensive towers that do not have to contain expensive control
equipment. As a result, wireless service can be provided economically to
sparsely settled and remote areas.
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THE LICENSING AGREEMENT.
The technology licensing agreement under which Direct Wireless Communications,
Inc. has acquired the rights to market and sublicense the technology in the
territory of the United States provides that Direct Wireless Communications,
Inc. shall pay to Direct Wireless Corporation an initial license fee of
1,489,633 shares of its common stock and the sum of ten million dollars. The ten
million dollars must be paid according to the terms of the license agreement.
Under the license agreement Direct Wireless Communications, Inc. shall pay on a
quarterly basis sixty percent (60%) of all revenues. Payments shall commence in
the first quarter in which revenues are received by Direct Wireless
Communications, Inc. and continue until the license fee is paid in full. In
addition to the initial license fee, Direct Wireless Communications, Inc. must
also pay a royalty in the amount of thirty percent of all royalty fees it
receives. The technology license agreement is for an initial term of ten (10)
years. Direct Wireless Corporation has two (2) renewal options of ten (10) years
each.
The technology license agreement may be terminated by Direct Wireless upon the
occurrence of any of the following events:
o Direct Wireless Communications, Inc. fails to make timely payments of
royalties;
o In the event Direct Wireless Communications, Inc. dissolves, ceases
active business operations, liquidates or becomes bankrupt;
o In the event management of Direct Wireless Communications, Inc. changes
from its current management.
These provisions of the technology license agreement effectively prevent any
hostile takeover of Direct Wireless Communications, Inc. by means of a proxy sol
icitation, a tender offer or any other device. Direct Wireless Communications,
Inc. will remain under control of the management of Direct Wireless Corporation.
MANAGEMENT'S PLAN OF OPERATIONS.
At the present time, Direct Wireless Communications, Inc. has no cash
requirements. It pays no compensation to its officers and directors and is being
given office space at no charge by Direct Wireless Corporation. In addition,
Direct Wireless Corporation will bear the costs of distributing the stock
dividend to its stockholders.
To begin any operations, however, it will be necessary for Direct Wireless
Communications, Inc. to raise funds in the next twelve months. The company has
begun discussions with several financial institutions concerning its financing
requirements. Within the next six months management intends to make a private
placement of shares of common stock to accredited
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investors under Regulation D promulgated under the Securities Act of 1933.
Management intends to raise $3,000,000 in this manner for payment to Direct
Wireless Corporation for the purpose of conducting field tests of the electronic
components and circuitry specified in the completed systems specification
analysis.
After field tests have begun, Direct Wireless Communications, Inc. intends to
make a public offering of its common stock to raise enough additional capital to
permit it to pay Direct Wireless Corporation the remaining $7,000,000 of the
initial license fee for the purpose of completing and testing a prototype of the
system. Management expects that the field tests and the final phase of the
testing can be completed within the next twelve months.
While direct Wireless Corporation completes development of the new
pre-production prototype, management of Direct Wireless Communications, Inc.
will begin negotiations with prospective licensees and manufacturers in
preparation for the performance testing and the manufacturing of the production
systems and handsets. Management expects this process to take the next six to
eight months to complete all the tasks necessary for a successful demonstration
of the technology. Once this phase of the development is complete, management
will concentrate its efforts for the next four months on negotiating and signing
contracts with licensees for territories and for equipment purchases. Down
payments on any contracts signed will represent the first income from operations
for the company.
Direct Wireless Communications, Inc. does not expect that it will perform any
product research and development or purchase any plant or significant equipment
in the next twelve months. However, before marketing operations begin, the
company expects to employ personnel with marketing experience.
MARKETING STRATEGY.
Many regions in the United States are too sparsely settled to justify the
expense of central call control centers required for cellular and other
wireless technology. Because the Direct Wireless Corporation technology needs
no central control center it is particularly suited to operate in these remote
or isolated areas. The company intends to market the technology in rural
areas of the United States that have limited cellular service or no wireless
services of any kind Rural, as defined by the Office of Management and Budget
in Washington, D.C., and accepted for use by the U.S. Census and other
government agencies, is generally defined as non-metropolitan areas of open
country where less than 2,500 persons live. According to the 1990 United States
census, 23% of the population was accountable to rural, non-metropolitan areas.
This figure appears to be on the rise: according to the 1998 World Bank Economic
Indicators, 34%, or 62 million people then lived in non-metropolitan, rural
areas of the United States.
The company intends to market and sublicense the technology to existing service
providers who desire to extend their service to these sparsely settled areas or
to public utility companies that have customers in these areas and desire to
provide wireless services to their existing customers. The company does not
intend to begin marketing activities until it appears that the field tests and
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final tests of the technology will be successfully completed. At that time, the
company will employ sales personnel to present to existing providers of cellular
and other telephone services the opportunity to extend their services to
sparsely populated areas their services have not yet reached.
Under this marketing strategy the company does not expect competition from
established cellular and/or other service providers, which are primarily located
in urban markets and cannot afford to enter these rural markets because of the
high cost of their equipment.. Moreover, the company is not aware of any other
existing technologies that would allow established cellular service providers to
expand their services economically into sparsely settled or rural areas.
Direct Wireless Communications, Inc. will not be required to apply for separate
FCC licenses. The technology does not set any requirements for pre-assigned
licenses from the Federal Communications Commission. Direct Wireless Corporation
has represented that the handsets may be manufactured to function normally on
cellular and other wireless communication licensed frequencies where enough
signal space and unoccupied licenses are available, as well as in ranges where
no Federal Communications Commission licenses are required. Accordingly, the
technology may be used by any existing service provider that has existing
licenses and wishes to extend the nature of its services.
EMPLOYEES
Direct Wireless Communications, Inc. employees at present are its officers and
directors, who are also officers and directors of Direct Wireless Corporation.
Bill Williams and Robert Braswell expect to spend 70% of their time working for
Direct Wireless Communications, Inc. Jerry Petermann expects to spend 50% of his
time working for Direct Wireless Communications, Inc. When the company begins
its business operations it will be necessary to hire additional personnel. The
company does not anticipate any difficulties in hiring appropriate persons.
PROPERTIES
Direct Wireless Communications, Inc. shares approximately 1,600 square feet of
office space at 106 E. 6th St., Suite 650, Austin, TX 78701 with Direct Wireless
Corporation. The monthly rental is $3,345.77, which is paid by Direct Wireless
Corporation The company believes that the amount of rent is a fair market price
for comparable space and that the facilities are adequate for the foreseeable
future. The company does not own any communications equipment.
PLAN OF DISTRIBUTION
Direct Wireless Communications, Inc. has issued 1,489,633 shares of its common
stock to Direct Wireless Corporation as partial payment for the licensing of the
technology. Direct Wireless Corporation will distribute these shares and 1000
shares obtained for initial capitalization of Direct Wireless Communications,
Inc. as a stock dividend to its stockholders of record on May 15, 2001. Each
existing Direct Wireless Corporation shareholder shall receive one share for
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every three shares of Direct Wireless Corporation stock owned on that date, but
no fractional shares will be issued. Neither company will pay any fees to any
person in connection with the distribution. Direct Wireless Corporation will pay
the costs of printing and mailing copies of the prospectus to its stockholders
and the costs of printing the stock certificates.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At the present time there is no public trading market for Direct Wireless
Communications, Inc. common stock. The company expects that when the shares of
its common stock are distributed as a stock dividend, they will be considered
"penny stock" as that term is defined in the regulations adopted by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
Those regulations impose certain disclosure and record-keeping requirements on
brokers and dealers effecting transactions in penny stocks, which could have the
effect of impeding the development of any market in the common stock. The
Company intends to take all actions necessary to have its stock eligible for
quotation on the National Association of Securities Dealers Bulletin Board.
Upon the effectiveness of the registration statement of which this prospectus is
a part, the 341,633 shares of common stock owned by control persons of the
company will become eligible for sales under Rule 144 in one year. Upon the
completion of the distribution of the stock dividend there will be 265
shareholders of record of the common stock. Since inception Direct Wireless
Communications, Inc. has never paid any cash dividends on its common stock and
it is not anticipated that it will pay cash dividends in the foreseeable future.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Executive officers and directors of the Company are:
NAME AGE POSITION
Bill G. Williams 66 Chief Executive Officer and Chairman of the Board
Robert S. Braswell, IV 46 President, Director
Jerry W. Petermann 50 Vice President and Chief Technology Officer, Director
W. Steven Walker 50 Secretary/Treasurer, Director
The present directors were appointed in May, 2001 and will serve until their
successors are elected at an annual meeting of the shareholders. Thereafter
directors will serve a term of one year.
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MR. WILLIAMS has been Chairman of the Board and CEO of Direct Wireless
Corporation since September 1997. During the period from 1995 until September
1997 he was self-employed in entrepreneurial activities that culminated in the
founding of Direct Wireless Corporation. He was previously Chairman of the Board
and Chief Executive Officer of Cafe Quick Enterprises, Inc from 1988-1995. Cafe
Quick is in the vending industry market and uses a unique patented air
impingement technology to cook fresh frozen food in a vending machine. Mr.
Williams and his management team acquired the technology, developed the
prototype and ultimately licensed the technology worldwide. From 1985 to 1988,
Mr. Williams was Chairman of the Board and CEO of Ameritron Corporation, a
multi-business public holding company. In his capacity as chairman, Mr. Williams
was instrumental in acquiring thirty-seven businesses over a period of five
years. Prior to his employment with Ameritron Corporation, Mr. Williams was
involved in real estate projects and land development. Mr. Williams is
co-inventor of the Direct Wireless Communication System.
MR. BRASWELL has been President of Direct Wireless Corporation since November
1999 and a member of the board of directors since January 1999. He was an
independent businessman with eighteen years experience in the common carrier
freight business, working for Central Freight Lines, Inc from 1974-1992. During
his tenure Mr. Braswell worked in all aspects of the Company operations. His
last position with Central Freight Lines was Director of Data Processing for
Shop Maintenance and Inventory Control. He managed the parts, tires and fuel
inventories in addition to the Maintenance Reporting System. During this period,
Mr. Braswell was a study group chairman and a committee member of the Board of
Directors for the American Trucking Association Maintenance Council. Before
joining Direct Wireless Corporation, 1992-1999 he was engaged in business
evaluations, real estate development and new home construction. Mr. Braswell
graduated from the University of Houston in 1983 with a Bachelor of Business
Administration in Organizational Behavior Management.
MR. PETERMANN has been Vice President of Direct Wireless Corporation since
January 1999. Mr. Petermann is co-inventor of the Direct Wireless Communication
System. He served as a consulting engineer to Direct Wireless Corporation from
October 1997 until January 1999, during which time he was engaged in developing
the system features and capabilities and writing the patent applications for
Direct Wireless Corporation. From 1995 until October 1997 he was a design
engineer for Ramtech Electronics, a company that was then in the business of
electronics design and assembly. Mr. Petermann has a long career, beginning in
1972, as an engineer and inventor in a variety of disciplines. As founder of
Warrington Laboratories he developed several successful concepts and inventions
for clients that include the Department of Defense, U.S. Navy, Los Alamos
National Laboratories, Housing and Urban Development and the United Nations,
among others. He has extensive experience in concept-to-patent management,
research and development firms, manufacturers and patent attorneys.
Mr. Petermann holds a Bachelor of Applied Science in Telecommunications
from the University of Mary Hardin-Baylor, 1972.
MR. WALKER is Secretary/Treasurer of Direct Wireless Corporation and acts as
principal legal advisor to the Company. For approximately twenty-five years
Mr. Walker has been engaged in the private practice of law with emphasis in
commercial and business litigation and corporate finance.
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He has been a board member of several public companies and represents a number
of corporations. Mr. Walker received a Bachelor of Arts Degree with Honors
from the University of Texas, Austin, Texas, and a Doctor of Jurisprudence
Degree from the University of St. Mary's School of Law, San Antonio, Texas.
He received his law license in November of 1976.
EXECUTIVE COMPENSATION
At the present time Direct Wireless Communications, Inc. does not have any
operations. Even after operations have begun it may be some period of time
before revenues are sufficient to pay executive salaries. When the Company has
sufficient revenues it intends to pay executive salaries as set forth in the
following compensation table.
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NAME SALARY
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Bill G. Williams $100,000
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Robert S. Braswell, IV $70,000
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Jerry W. Petermann $60,000
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W. Steven Walker $42,000
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In addition, Direct Wireless Communications, Inc. will issue 1,000,000 shares of
common stock to these officers as follows: Bill G. Williams: 350,000; Robert S.
Braswell IV: 300,000; Jerry W. Petermann: 200,000; W. Steven Walker: 150,000. At
the present time, there are no other cash or stock bonus, stock option plans,
pension plans or similar compensation plans.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Prior to the payment of the stock dividend by Direct Wireless Corporation, that
company was the sole stockholder of Direct Wireless Communications, Inc. After
payment of the stock dividend, the following persons will be the beneficial
owners of 5% or more of the common stock of Direct Wireless Communications, Inc.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF CLASS
OF BENEFICIAL OWNERSHIP
Shirley Williams 154,920 Direct 10.39%
4800 Ridgeview
Waco, TX 76710
Bill G. Williams 154,920 Indirect (1) 10.39
106 E. 6th Street
Austin, TX 78701
Robert S. Braswell IV 78,879 Direct (2) 5.29
106 E. 6th Street
Austin, TX 78701
Diana Callan Braswell 96,528 Direct and Indirect (3) 6.48
3913 Old Mill Road
Waco, TX 76710
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(1) These are the shares that will be owned of record by Shirley Williams,
Mr. Williams' wife.
(2) 1,667 of these shares will be owned by Mr. Braswell and his wife as
joint tenants.
(3) Includes 87,444 shares that will be owned as trustee of various trusts
Diana Callan Braswell is Mr. Braswell's mother.
After the stock dividend is paid, the officers and directors of Direct Wireless
Communications, Inc., will own shares of the company's common stock as shown in
the following table.
NAME AND POSITION NUMBER OF SHARES PERCENT OF CLASS
BENEFICIALLY OWNED
Bill G. Williams 154,920 Indirect 10.39%
Chairman and CEO
106 E. 6th Street, Suite 645
Austin, TX 78701
Robert S. Braswell IV 78,879 Direct 5.29
President and Director
106 E. 6th Street, Suite 645
Austin, TX 78701
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Jerry W. Petermann 61,216 Direct 4.11
Vice President and Director
106 E. 6th Street, Suite 645
Austin, TX 78701
W. Steven Walker 46,648 Direct 3.13
Secretary, Treasurer
And Director
800 Airport Freeway
Irving, TX 76710
All officers and directors as 341,663 22.92
a group ( four persons)
Information as to the nature of the security holdings of officers and directors
is given in the notes to the preceding table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Direct Wireless Communications, Inc. was organized by Direct Wireless
Corporation on April 6, 2001. On that date the company issued 1000 shares of
common stock to Direct Wireless Corporation in consideration of the furnishing
of initial capitalization of $1000. Direct Wireless Corporation can therefore be
considered to be a promoter of the company.
On May 15, 2001, Direct Wireless Communications, Inc. entered into an agreement
with Direct Wireless Corporation under which it was licensed to market and/or
sublicense the Direct Wireless Corporation technology for the United States. As
partial payment for the license agreement, Direct Wireless Communications, Inc.
issued to Direct Wireless Corporation 1,489,633 shares of its common stock. In
addition, the license agreement requires Direct Wireless Communications, Inc. to
pay royalties and an aggregate of ten million dollars cash to Direct Wireless
Corporation.
DESCRIPTION OF SECURITIES
Direct Wireless Communications, Inc. is authorized to issue ten million shares
of common stock, no par value. There are presently outstanding 1,490,633 shares.
Holders of the common stock are entitled to one vote per share for the election
of directors and on all other matters submitted to a vote of shareholders. They
are also entitled to dividends declared by the directors out of funds legally
available for payment of dividends. Holders of the common stock do not have any
cumulative voting rights or any preemptive or similar rights.
The Transfer Agent for Direct Wireless Communications, Inc. is Nancy Heel, Post
Office Box 151599, Austin, Texas 78715-1599; telephone: 512-442-2379.
-14-
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Direct Wireless Communications, Inc. does not have any provision of its Articles
of Incorporation or its By-Laws that require the company to indemnify its
officers and directors on account of any liability they incur as a result of
their actions as officers or directors. However, Section 2.02-1 of the Texas
Business Corporation Act permits the indemnification of directors, officers,
agents and employees of a corporation if the person seeking indemnity acted in
good faith and reasonably believed, if a director, that his conduct was in the
corporation's best interests, and, if not a director, that his conduct was not
opposed to the corporation's best interests, and in the case of a criminal
proceeding, had no reasonable cause to believe his conduct was unlawful.
Indemnity is not permitted if a person is found liable to the corporation and is
limited to expenses actually incurred in the case of a person found liable on
the basis of personal benefit improperly received by him. Section 2.02-1 also
provides that a corporation shall indemnify directors and officers against
reasonable expenses incurred in connection with a proceeding if they are wholly
successful, on the merits or otherwise, in the defense of the proceeding.
A determination whether to pay indemnity in any proceeding may be made by a
majority of a quorum of the board of directors, or a by committee of the board
of directors appointed for such purpose, or by special legal counsel, or by a
vote of the stockholders, but directors who are defendants or respondents in a
proceeding may not vote on the matter.
Section 2.02-1 also authorizes a corporation to purchase insurance on behalf of
directors, officers and employees against liability asserted against them as a
result of their capacities as such. Direct Wireless Communications, Inc. does
not have any insurance on behalf of directors, officers or employees.
We have been informed that in the opinion of the Securities and Exchange
Commission indemnification for liabilities arising under the Securities Act of
1933, which may be permitted to our officers and directors or control persons
pursuant to the provisions of the Texas Business Corporation Act, is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
INTEREST OF NAMED EXPERTS AND COUNSEL
The financial statements of Direct Wireless Communications, Inc. included in
this prospectus and the registration statement have been included in reliance on
the report of Darilek, Butler & Co., P.C., independent certified public
accountants, included in this prospectus, and on the authority of that firm as
experts in accounting and auditing.
W. Steven Walker, Esq., who has rendered an opinion on the validity of the
Company's common stock, is Secretary/Treasurer and General Counsel of the
Company.
-15-
AVAILABLE INFORMATION
Direct Wireless Communications, Inc. has filed a registration statement with the
Securities and Exchange Commission on Form SB-2 under the Securities Act of 1933
with respect to the shares of its common stock being distributed as a stock
dividend to the shareholders of Direct Wireless Corporation. This prospectus
does not contain all of the information described in that registration statement
and the related exhibits. Statements in this prospectus concerning the contents
or provisions of contracts or other documents are not necessarily complete, and
in each instance the refers you to the copy of the document on file as an
exhibit to the registration statement.
A copy of the registration statement and the related exhibits may be inspected
without charge at the Commission's office at 450 Fifth Street, NW, Washington,
D.C. 20549. Copies of all or any part of the registration statement may be
obtained from these offices upon payment of the fees specified by the
Commission. Information on the operations of the Commission may be obtained by
calling 1-800-SEC-0300.
Direct Wireless Communications, Inc. has filed the registration statement
electronically with the Commission. The Commission maintains a website that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
that website is http://www.sec.gov.
-16-
INDEX TO FINANCIAL STATEMENTS
Page
--------
Independent Auditors' Report F-2
Balance Sheet at August 31, 2001 F-3
Statement of Income from date of inception F-4
April 6, 2001 to August 31, 2001
Statement of Changes in Stockholders' Equity from date of inception
April 6, 2001 to August 31, 2001 F-5
Statement of Cash Flows from date of inception
April 6, 2001 to August 31, 2001 F-6
Notes to Financial Statements F-7
F-1
DARILEK, BUTLER & CO., P.C.
622 Isom Road, Suite 100
San Antonio, Texas 78216
210-979-0055 phone
210-979-0058 fax
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Direct Wireless Communications, Inc.
San Antonio, Texas
We have audited the accompanying balance sheet of Direct Wireless
Communications, Inc. (a Texas Corporation) as of August 31, 2001 and the related
statements of income and cash flows for the period from inception (April 6,
2001) to August 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Direct Wireless Communications,
Inc. as of August 31, 2001 and the results of its operations and its cash flows
for the initial period then ended in conformity with accounting principles
generally accepted in the United States of America.
"Darilek, Butler & Co., P.C."
San Antonio, Texas
September 10, 2001
F-2
DIRECT WIRELESS COMMUNICATIONS, INC. Page 2
Balance Sheet
August 31, 2001
ASSETS:
Current Assets
Cash $ 688
-------------
Total Current Assets 688
=============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities
Accounts Payable - Related Party $ 1,820
-------------
Total Current Liabilities 1,820
Stockholders' Equity
Common Stock, No Par Value, 10,000,000 Shares
Authorized, 1,000 Issued and Outstanding 1,000
Additional Paid-In Capital 8,217
Retained Earnings (Deficit) (10,349)
-------------
Total Stockholders' Equity (1,132)
-------------
Total Liabilities and Stockholders' Equity $ 688
=============
The Accompanying Notes are an Integral Part of These Financial Statements.
F-3
DIRECT WIRELESS COMMUNICATIONS, INC. Page 3
Statement of Income and Retained Earnings
From the Date of Inception (April 6, 2001) to August 31, 2001
Revenue $ 0
Expenses
Legal Fees 1,500
License Fees 320
Administrative Fees 8,529
--------------------
10,349
Net Loss $ (10,349)
Retained Earnings (Deficit)- Beginning of Period 0
--------------------
Retained Earnings (Deficit)- End of Period $ (10,349)
====================
The Accompanying Notes are an Integral Part of These Financial Statements.
F-4
DIRECT WIRELESS COMMUNICATIONS, INC. Page 4
Statement of Changes in Stockholders' Equity
From the Date of Inception (April 6, 2001) to August 31, 2001
ADDITIONAL
COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
---------- ------------ -------------- ------------- ------------
Balance - Inception 0 $ 0 $ 0 $ 0 0
Stock Issued 1,000 1,000 0 0 1,000
Paid-In Capital - Services Contributed 0 8,217 0 8,217
Net Income 0 0 (10,349) (10,349)
---------- ------------ -------------- ------------- ------------
Balance - August 31, 2001 1,000 $ 1,000 $ 8,217 $ (10,349) (1,132)
========== ============ ============== ============= ============
The Accompanying Notes are an Integral Part of These Financial Statements.
F-5
DIRECT WIRELESS COMMUNICATIONS, INC. Page 5
Statement of Cash Flows
From the Date of Inception (April 6, 2001) to August 31, 2001
Cash Flows From Operating Activities $
Net Income (Loss) (10,349)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used for) Operating Activitites:
Services Contributed 8,217
Increase in:
Accounts Payable 1,820
-----------------
Net Cash Provided (Used) by Operating Activities (312)
Cash Flows From Investing Activities 0
Cash Flows From Financing Activities
Cash from Stock Issued 1,000
-----------------
Net Increase (Decrease) in Cash 688
Cash, at Beginning of Period 0
-----------------
Cash, at End of Period $ 688
=================
The Accompanying Notes are an Integral Part of These Financial Statements.
F-6
DIRECT WIRELESS COMMUNICATIONS, INC. Page 6
Notes to Financial Statements
August 31, 2001
Note A - Summary of Significant Accounting Policies
NATURE OF OPERATIONS
Direct Wireless Communications, Inc. (the Company) is a development stage
company that was incorporated on April 6, 2001. On May 15, 2001, the Company
entered into a Technology Licensing Agreement with Direct Wireless Corporation
(Direct Wireless). Under this agreement, Direct Wireless was granted a license
to market and/or sublicense in the United States the wireless telephone
communications technology on which Direct Wireless holds the patents. The
Company has not yet begun operations. Upon completion of the working prototype
telephone employing the technology, the Company intends to market and sublicense
the technology primarily to existing service providers who desire to extend
their services to sparsely settled areas or to public utilities who have
customers in such areas and desire to provide wireless services to them.
BASIS OF ACCOUNTING
The financial statements of the Company have been prepared on the accrual basis
of accounting. As such, revenue is recognized as earned and expenses are
recorded when accrued. This basis of accounting conforms to generally accepted
accounting principles.
INTERIM FINANCIAL STATEMENTS
The accompanying financial statements are prepared as of August 31, 2001, which
is an interim reporting period for the Company. The Company's fiscal year ends
on the last day of the calendar year for financial reporting purposes. The
Company's first fiscal year will be ending as of December 31, 2001.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions effect the reported amounts on assets and
liabilities, disclosure of contingent assets and liabilities, and the reported
revenue and expenses. Actual results could differ from those estimates.
Note B - Related Party Transactions
During the period ended August 31, 2001, the Company incurred legal expenses and
license fees related to incorporating and organizing the startup operations of
the Company. These expenses were paid for by Direct Wireless Corporation, an
entity related to the Company through common ownership. Total expenses incurred
were $1,820.
F-7
DIRECT WIRELESS COMMUNICATIONS, INC. PAGE 7
Notes to Financial Statements
August 31, 2001
Note B - Related Party Transactions (Continued)
Direct Wireless Corporation also provided office space and administrative
services to the Company for the period ended August 31, 2001. The estimated
value for the services provided totaled $8,217 for the period ended August 31,
2001 and are recorded as administrative services in the accompanying financial
statements.
F-8