United States
Securities And Exchange Commission
Washington, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended January 31, 2002
Commission File No. 0-25614
Globus Wireless Ltd.
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(Exact name of registrant as specified in its charter)
Nevada 88-0228274
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1955 Moss Court, Kelowna, V1Y 9L3
British Columbia Canada
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (250) 860-3130
Check whether the registrant: (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 ___
Class Outstanding at March 21, 2002
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Common stock, $0.001 par value 30,687,677
Series A Preferred, $.001 1,124
Table of Contents
Part i. - financial Information.................................................................................1
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)..........................................................................
BALANCE SHEETS ...........................................................................................
STATEMENTS OF OPERATIONS..................................................................................
STATEMENT OF CASH FLOWS...................................................................................
NOTES TO FINANCIAL STATEMENTS.............................................................................
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDS............................................................................................
ITEM 2. CHANGES IN SECURITIES.....................................................................................
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...........................................................................
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................................
ITEM 5. OTHER INFORMATION.........................................................................................
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..........................................................................
PART I
Item 1. Financial Information
Consolidated Financial Statements of
GLOBUS WIRELESS LTD.
Three months ended January 31, 2002
(Unaudited)
GLOBUS WIRELESS LTD.
Consolidated Balance Sheets
$ United States
January 31, 2002 and October 31, 2001
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January 31, 2002 October 31, 2001
(Unaudited)
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Assets
Current Assets
Cash $ 21,992 $ 66,777
Accounts receivable (net of allowance of $13,587, 2001 - $nil) 194,527 135,565
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Inventories - 12,118
216,519 214,460
Fixed assets 228,516 241,562
Website development 14,412 15,355
Patents and trademarks 13,873 15,123
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$ 473,320 $ 486,500
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Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable and accrued liabilities $ 1,341,872 $ 1,127,792
Dividends payable 147,617 120,901
Notes payable (note 2) 475,000 475,000
Convertible promissory note to shareholder 68,000 68,000
Convertible promissory note (note 3) 280,000 361,000
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2,312,489 2,152,693
Convertible notes payable, net of discounts (note 4) 1,167,876 1,078,403
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4,480,365 3,231,096
Stockholders' deficiency
20,000,000 preferred shares, issuable in series with a par value of $0.001 per
share authorized, 1,124 Series A convertible preferred shares
issued
(October 31, 2001 - 1,201 issued) 1 1
100,000,000 common shares with a par value of
$0.001 per share authorized, 35,257,677 issued
(October 31, 2001 - 16,890,174 issued) 35,258 16,890
Additional paid-in capital 12,186,529 11,872,131
Discount on convertible preferred shares (61,370) (90,037)
Exchangeable shares of subsidiary 2,108,538 2,108,538
Deficit (17,263,400) (16,639,518)
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Accumulated other comprehensive income (12,601) (12,601)
(3,007,045) (2,744,596)
Subsequent events (notes 3 and 5)
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$ 473,320 $ 486,500
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See accompanying notes to consolidated financial statements.
On behalf of the Board:
_______________________ Director _______________________ Director
GLOBUS WIRELESS LTD.
Consolidated Statements of Loss and Comprehensive Loss
$ United States
Three months ended January 31, 2002 and 2001
(Unaudited)
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2002 2001
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Engineering and compliance testing revenue $ 157,338 $ 106,390
Sale of cellular phones and related accessories 166,324 11,121,652
Cost of sales of cellular phones and related accessories 125,588 10,052,135
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40,736 1,069,517
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198,074 1,175,907
Expenses
Amortization 15,239 90,113
General and administrative 429,385 1,330,481
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Research and development 30,508 12,467
Interest 284,889 473,450
760,021 1,906,511
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Loss before other income (561,947) (730,604)
Other income - 5,234
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Loss $ (561,947) $ (725,370)
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Weighted average number of common shares, basic and diluted 322,547,782 12,910,600
Loss per common share, basic and diluted (0.00) (0.06)
See accompanying notes to consolidated financial statements.
GLOBUS WIRELESS LTD.
Consolidated Statement of Stockholders' Deficiency
$ United States
Three months ended January 31, 2002
(Unaudited )
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Discount Accumulated Total
Convertible Exchangeable Additional Other Stock
Common Shares Preferred Shares Preferred Shares of Paid-in Comprehensive holders'
Number Amount Number Amount Shares Subsidiary Capital Deficit Income Deficiency
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Balance, October
31 2001 16,890,174 $16,890 1,201 $ 1 $(90,037) $ 2,108,538 $11,872,131 $(16,639,518) $(12,601) $(2,744,596)
Common shares
issued in lieu
of cash payment
for wages ....... 1,711,806 1,712 -- -- -- -- 51,998 -- -- 53,610
Common shares
issued to
settle accounts
payable ......... 175,976 176 -- -- -- -- 7,812 -- -- 7,988
Conversion of
preferred
shares .......... 2,584,249 2,584 (77) -- -- -- (2,584) -- -- --
Common shares
issued to
settle dividends
payable on
preferred shares . 215,644 216 -- -- -- -- 6,336 -- -- 6,552
Common shares
issued on
conversion of
convertible
notes payable ...13,115,001 13,115 -- -- -- 197,080 -- -- -- 210,195
Common shares
issued in
lieu of cash
payment of
interest on
convertible
notes payable ... 564,827 565 -- -- -- -- 6,874 -- -- 7,439
Fair value of
warrants granted
to non-employees
(note 4) ........ -- -- -- -- -- -- 3,491 -- -- 3,491
Amortization of
discount on
preferred shares -- -- -- -- 28,667 -- (28,667) -- -- --
Beneficial
conversion feature
of convertible
notes payable
(note 4) -- -- -- -- -- -- 43,491 -- -- 43,491
Dividends accrued
on preferred
shares .......... -- -- -- -- -- -- -- (33,268) -- (33,268)
Loss for the three
months ended
January 31, 2002 . -- -- -- -- -- -- -- (561,947) -- (561,947)
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35,257,677 $35,258 1,124 $ 1 $(61,370) $2,108,538 $12,186,529 $(17,263,400) $(12,601) $(3,007,045)
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See accompanying notes to consolidated financial statements.
GLOBUS WIRELESS LTD.
Consolidated Statements of Cash Flows
$ United States
Three months ended January 31, 2002 and 2001
(Unaudited)
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2002 2001
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Cash flows from operating activities:
Loss $ (561,947) $ (725,370)
Non cash items:
Amortization 15,239 90,113
Amortization of deferred financing costs 70,338 -
Amortization of discount on convertible notes payable 138,812 -
Common shares issued for services - 63,899
Common shares issued for wages 53,610 100,625
Common shares issued in lieu of cash payment of interest on
convertible notes payable 7,439 -
Compensation cost of options issued to employees - 95,318
Conversion feature of bridge financing payable - 50,500
Fair value of warrants issued to non-employees - 304,000
Changes in non cash working capital:
Decrease (increase) in accounts receivable (58,962) 3,174,103
Decrease (increase) in inventory 12,118 (2,730,602)
Decrease in loans and other advances - 82,508
Increase in prepaid expenses - (18,329)
(Decrease) increase in accounts payable 222,068 (2,568,778)
Increase in unearned rebate - 1,965,233
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(101,285) (116,780)
Cash flows from financing activities:
Proceeds from convertible notes payable 160,000 -
Repayment of loans payable to related parties - (151,962)
Reduction of due to stockholders - (166,231)
Proceeds from bridge financing - 1,000,000
Financing costs paid (22,500) -
Repayment of convertible promissory note (81,000) -
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56,500 681,807
Cash flows used in investing activities:
Purchase of fixed assets - (104,760)
Purchase of patents and trademarks - (3,554)
Advances to former shareholders of PCI Marketing & Communications Inc. - (152,682)
Business combination (note 2) - (58,978)
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- (319,974)
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Increase (decrease) in cash (44,785) 245,053
Cash, beginning of period 66,777 319,511
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Cash, end of period $ 21,992 $ 564,564
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GLOBUS WIRELESS LTD.
Consolidated Statements of Cash Flows (continued)
$ United States
Three months ended January 31, 2002 and 2001
(Unaudited)
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2002 2001
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Supplementary information
Interest paid $ 21,874 $ 60,810
Income taxes paid - -
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See accompanying notes to consolidated financial statements.
Non-cash financing and investing activities:
Exchangeable shares of subsidiary issued upon business combination - 2,215,354
Preferred shares issued upon conversion of bridge financing - 1,500,000
Common shares issued for notes receivable - 108,333
Common shares issued for wages 53,610 100,625
Common shares issued for share issue costs - 36,822
Common shares issued for services - 63,899
Common shares issued for prepaid leasehold improvements - 73,917
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Beneficial conversion feature of bridge financing - 215,900
Beneficial conversion feature of convertible preferred shares - 231,100
Fair value of warrants granted to non-employees 3,491 124,500
Amortization of discount on convertible preferred shares 28,667 61,084
Compensation cost of options granted to employees - 95,318
Common shares issued to settle accounts payable 7,988 -
Common shares issued to settle dividends payable on preferred shares 6,552 -
Common shares issued on conversion of convertible notes payable 210,195 -
Common shares issued in lieu of cash payment of interest on convertible
notes payable 7,439 -
Beneficial conversion feature of convertible notes payable 43,491 -
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GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements
$ United States
Three months ended January 31, 2002
(Unaudited)
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1. Significant accounting policies:
(a) Going concern
These financial statements have been prepared on the going concern basis,
which assumes the realization of assets and liquidation of liabilities and
commitments in the normal course of business. As at January 31, 2002, the
Company was in default of certain debt obligations, had a significant working
capital deficiency and deficit and has suffered recurring losses from
operations. The application of the going concern concept is dependent upon
the company's ability to generate future profitable operations and receive
continued financial support from its suppliers, shareholders and other
investors. These consolidated financial statements do not give effect to any
adjustment should the Company be unable to continue as a going concern and
therefore, be required to realize its assets and discharge its liabilities in
other than the normal course of business and at amounts differing from those
reflected in the consolidated financial statements. Management plans to
continue to negotiate with creditors and to pursue debt and equity financing
to support operations until operations become profitable. Management
anticipates equity financing to occur during the second quarter of fiscal
2002. Further, during the three months ended January 31, 2002 management
decided to discontinue certain areas of the business including the wholesale
and retail distribution of cellular phones and related accessories, which
comprised all of the Company's product sales in the periods presented.
As a result, the Company is now focused solely on Specific Absorption Rate
("SAR") compliance testing and developing SAR solutions for wireless devices
using wireless technologies. Management believes the plans described above
will be sufficient to meet the Company's liabilities and commitments as they
become payable over the next twelve months. There can be no assurance that
management's plans will be successful as such plans are contingent upon
ongoing support from various creditors. Failure to maintain the support of
creditors, obtain additional external debt or equity financing and generate
sufficient working capital from operations through the exclusive focus on SAR
compliance testing and developing other wireless technologies, will cause the
Company to curtail operations and the Company's ability to continue as a
going concern will be impaired. The outcome of these matters cannot be
predicted at this time.
(b) Basis of presentation
The accompanying financial statements are unaudited, however, in the opinion
of management, all adjustments, consisting solely of normal recurring
adjustments, necessary for the fair presentation of these unaudited financial
statements in conformity with accounting principles generally accepted in the
United States of America, have been made. Readers of these financial
statements should read the annual audited financial statements of the Company
filed on Form 10-KSB in conjunction herewith. The results of operations for
the interim periods presented are not necessarily indicative of the results
to be expected for the entire fiscal year.
(c) Loss per share
As disclosed in note 1 (n) of the Company's October 31, 2001 financial
statements, basic loss per share has been calculated by dividing income
available to common shareholders by the weighted average number of common
shares outstanding during the period, which includes the effect of shares
issuable for little or no consideration, namely the exchangeable shares of
the Company's subsidiary. As the market price of the Company's common stock
has decreased significantly during the three months ended January 31, 2002,
the number of common shares issuable, should the Company be required to
exchange the shares, has increased significantly. As a result, the weighted
average number of common shares as at January 31, 2002 exceeds the authorized
number of common shares. In order to have a sufficient number of common
shares available to exchange for the outstanding exchangeable shares of the
Company's subsidiary, the Company would have to amend its articles of
incorporation to increase its authorized common shares or renegotiate the
terms of the exchangeable shares.
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements (continued)
$ United States
Three months ended January 31, 2002
(Unaudited)
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2. Notes payable:
Notes payable were due December 26, 2001 and are secured by a pledge by the
Company, in the event of default, to issue an amount of its common stock with a
value of two times the sum of the outstanding principal and unpaid interest.
$300,000 and $175,000 of the notes payable bear interest at 30% and 24% per
annum respectively, payable monthly.
The notes payable are overdue at January 31, 2002, however, the creditors have
not taken any action to demand payment or convert the notes to common stock. If
the creditors elect to exercise their rights under the default provisions of the
notes payable, the Company will be required to issue common stock with a fair
value of $950,000 in full settlement of its obligations.
3. Convertible promissory note:
The convertible promissory note is secured by a general security agreement over
the two research and development projects and bears interest at prime plus 1%.
Principle repayments are approximately as follows:
September 1, 2001 $ 22,000
October 1, 2001 25,000
November 1, 2001 56,000
February 1, 2002 56,000
May 1, 2002 56,000
August 1, 2002 56,000
November 1, 2002 56,000
February 1, 2003 56,000
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383,000
Less amounts paid to January 31, 2002 (103,000)
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$ 280,000
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The convertible promissory note is convertible, upon default by the Company,
into common shares of the Company at 85% of the 10 day average quoted price of
the Company's common shares prior to conversion. As at January 31, 2002, the
creditor considered the Company to be insolvent and, accordingly, in default on
the terms under the general security agreement on the convertible promissory
note. The creditor engaged legal counsel who notified the Company of the
creditor's intent to exercise their security rights over the technology projects
on February 18, 2002. Prior to February 18, 2002, the Company and the creditor
reached a mutually acceptable arrangement, the creditor ceased their intent to
exercise their security rights and the Company paid the required February 1,
2002 payment.
In conjunction with the convertible promissory notes, the Company agreed to
grant 500,000 common share purchase warrants with exercise prices fixed at 85%
of the market at the time of grant, exercisable for 3 years from grant date,
issuable as follows:
a) 150,000 prior to October 31, 2001; and
b) 350,000 based on specific performance criteria.
No warrants, based upon specific performance criteria, were granted during the
three months ended January 31, 2002.
Future share purchase warrants that become no longer contingent will be recorded
at their fair value as an increase to research and development expense.
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements (continued)
$ United States
Three months ended January 31, 2002
(Unaudited)
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4. Convertible notes payable:
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Balance Balance,
Due Date October 31, 2001 Issued Converted January 31, 2002
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May 31, 2003 (i) $ 787,409 $ - $ (34,976) $ 752,433
June 6, 2003 (ii) 450,000 - (40,000) 410,000
July 24, 2003 (iii) 247,192 - (135,219) 111,973
August 16, 2003 (iv) 250,000 - - 250,000
October 3, 2003 (v) 150,000 - - 150,000
October 16, 2003 (vi) 150,000 - - 150,000
October 31, 2003 (vii) 85,000 - - 85,000
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November 15, 2003 (viii) - 70,000 - 70,000
November 21, 2003 (ix) - 90,000 - 90,000
$ 2,119,601 $ 160,000 $ (210,195) 2,069,406
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Unamortized discount related to the beneficial conversion option on and warrants
granted in conjunction with the convertible notes payable (645,466)
Unamortized cash financing costs (256,064)
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$ 1,167,876
===============
The convertible notes payable bear interest at 8% per annum and are convertible
into common stock of the Company at the lesser of: a) $0.48; (ii) $0.448; (iii)
$0.421; (iv) $0.368; (v) $0.232; (vi) $0.165; (vii) $0.104; (viii) $0.056;
(ix) $0.046.
b) 80% of the average of the three lowest closing bid prices of the Company's
common stock for the thirty days immediately prior to the conversion date.
In conjunction with the notes, the Company granted the following warrants:
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Expiry date Exercise Price Number
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May 31, 2004 $ 1.78 320,000
June 6, 2004 1.78 180,000
July 24, 2004 1.15 100,000
August 16, 2004 1.15 100,000
October 3, 2004 1.15 60,000
October 16, 2004 1.15 60,000
October 31, 2004 0.144 34,000
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November 15, 2004 0.084 28,000
November 21, 2004 0.068 36,000
918,000
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GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements (continued)
$ United States
Three months ended January 31, 2002
(Unaudited)
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4. Convertible notes payable (continued):
The convertible notes payable issued during the three months ended January 31,
2002 contain a beneficial conversion feature as the note holders were granted
common share purchase warrants, and the notes are convertible into common shares
at prices that are less than the market price at the date of issuance, both of
which result in the convertible notes payable initially being recorded at a
carrying amount which is less than their face value. The note proceeds
attributable to the warrants was estimated to be $3,491 and has been recorded as
a discount on the convertible notes payable. The fair value of the note proceeds
attributable to the warrants was determined using the Black Scholes pricing
model using the following assumptions: the three year life of the warrants,
volatility factor of 325%, risk-free rate of 4.5% and no expected dividend
yield. The intrinsic value of the beneficial conversion option has been
calculated as $43,491 which is being accreted over the term of the debt in
accordance with EITF 00-27.
5. Subsequent events:
(a) Subsequent to January 31, 2002, the Company issued:
(i) 2,025,000 common shares on settlement of $9,113 of convertible notes
payable and accrued interest; and (ii) 169,632 common shares for services of
$3,250.
No gain or loss resulted from the settlement of the convertible notes payable
and accrued interest.
(b) Subsequent to January 31, 2002, the Company received $265,000 for
convertible notes payable. $215,000 and $50,000 of the notes are due April
30, 2002 and June 2, 2002 respectively, bear interest at 8% per annum and are
convertible into common stock of the Company at the lesser of:
(i) $0.00453 for $215,000 and $0.005067 for the remaining $50,000; or
(ii) 80% of the average of the three lowest closing bid prices for the
Company's common stock for the thirty days immediately prior to the
conversion date.
In conjunction with the notes, the Company also granted the following commons
share purchase warrants:
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Number Exercise price Expiry date
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60,000 $ 0.0075 February 8, 2005
50,000 0.0096 March 13, 2005
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110,000
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The convertible notes payable contain a beneficial conversion feature as the
note holders were granted the above warrants and the notes are convertible
into common shares at prices that are less than the market price at the date
of issuance. As a result, a discount on convertible note payable and a
corresponding increase in additional paid-in capital of $165,687 will be
recorded at the date of issuance.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe-harbor" for forward-looking statements. This report includes both
historical and forward-looking statements. Any forward-looking statements
contained herein are based on the current expectations and projections of Globus
Wireless Ltd. (the "Company") about future events. All forward-looking
statements are subject to risks, uncertainties, and assumptions about the
Company, including anticipated growth strategies, anticipated trends in the
business, including trends in technology and growth of the wireless
communication industry, and future business directions for the Company and
associated financial commitments. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect, the
Company's actual results may differ materially from those described in this
report as anticipated, believed, estimated or expected.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the accompanying
condensed financial statements and notes thereto attached and the Company's
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB as of and for the year ended October 31, 2001.
Overview
Globus Wireless, Ltd. is engaged in the research, design and testing of
wireless communication products. We have two primary objectives:
- to become a leading provider of SAR technology solutions for
OEM wireless products. SAR, or Specific Absorption Rate, is a
measurement to determine the amount of microwave radiation
absorbed by human tissue. We strive to lower SAR in products
without affecting, or alternatively enhancing, their desired
performance.
- to secure new marketing, manufacturing and technology
opportunities in the wireless communication industry that
further our commitment to market products that enhance
performance, reduce operating costs, improve efficiency, and
provide us with significant earnings.
In fiscal 2001, our product distribution business units, including the
acquisitions of Edge Continental and PCI Marketing (Shopwireless.com), were to
provide us with distribution channels to market products from wireless equipment
manufacturers, aftermarket or proprietary design, to generate significant
revenues and earnings. While we did realize significant growth in product sales
revenues over the prior year, selling an array of wireless equipment,
manufacturers handsets, and accessory products, rapidly declining margins and
markets for these products lead us to change our strategy to greater emphasis on
distribution of proprietary product, specifically targeting higher margin,
value-added, and differentiated sales opportunities.
Primary distribution of proprietary products was to occur through
established, large-scale distributors, carriers and wireless equipment
manufacturers. During fiscal 2001, we negotiated distribution and manufacturing
rights to a hands-free, in-vehicle speakerphone that was to be a future
cornerstone product for our distribution businesses. In December 2001, due to
unsuccessful marketing and sales campaigns we terminated the technology license
agreement, reducing the risk of future losses, future overhead and eliminating
future royalty obligations for this unsuccessful venture.
In December 2001, due to financial losses incurred, we ceased
operations related to commodity product distribution, and closed our warehouse
distribution operations in Los Angeles, California and Markham Ontario,
liquidated inventories and implemented labor force reductions in all
distribution business units.
The resulting cost savings of the distribution business closures and
staff reductions are projected to be approximately $2.0 million annually. While
we will continue to explore new market, product and technology opportunities in
the industry, we are re-focusing resources on leveraging our core competencies
and expertise in specific absorption rate (SAR) research and related product and
technology opportunities. SAR is the measurement of heat generated in human
tissue by radio frequency radiation from wireless transmitting devices, such as
cellular phones, wireless modems, cordless telephones, etc.
As a result of curtailing these operations, as at October 31, 2001, we
wrote down goodwill associated with PCI and Edge Continental as well as related
fixed assets, website development, patents and trademarks and other assets.
We also own Globus On-Line Inc., d/b/a ShopWireless.com, a business to
consumer e-commerce Company with US, Canadian and United Kingdom URLs. Although
e-tail businesses in general have had major declines in business, during fiscal
year 2001 we had remained committed, in the long term, to the business
distribution channel opportunity provided by ShopWireless. During 2001, plans
were initiated to re-engineer and re-focus the business, maximizing cost
efficiencies through direct cost reductions and cost avoidance programs, and
improving current product margins. At fiscal year end, the business unit had
continued to decline in sales performance. An on-going review of operations led
us to abandon the online sales operations in January 2002. Efforts are underway
to seek a buyer for the Globus On-line Inc.
Our wireless compliance-testing laboratory, serves over 35 wireless
equipment manufactures that bring their new products to us for emissions testing
and license submission. We help wireless equipment manufacturers satisfy their
applicable government regulations, as well as their carrier client and consumer
client performance requirements. The facility also serves as a testing agency
and filing center for wireless equipment manufactures and their requirement to
satisfy Federal Communication Commission and Industry Canada regulations for
wireless communication devices.
Through proprietary and trade secret processes, we provide solutions to
wireless equipment manufactures, to assist in their products achieving lower
specific absorption rate measures and enhanced performance, in compliance with
regulatory guidelines, for such wireless communications products such as
wireless phones, laptops, personal digital assistants, family radio service,
marine and two-way radios. Performance objectives include increased range,
clarity, battery life, and fewer failed attempts and dropped calls.
Our common stock is currently listed on the OTC Bulletin Board, under
the trading symbol GBWL. Mr. Bernard Penner is President, CEO and Chairman of
the Board of Directors.
Results of Operations
Three months ended January 31, 2002 and 2001
In the quarter ending January 31, 2002, we incurred a loss of $561,947
or $0.00 per share compared to a loss of $725,370 or $0.06 per share for the
quarter ending January 31, 2001. The improvement over the same quarter ended
January 31, 2001 is attributable to a decline of gross margins of $977,833,
offset by cost reductions in amortization, general and administrative and
interest charges of $1,164,531.
Consolidated revenues for the quarter ending January 31, 2002 were
$323,662. We recorded revenues of $11,228,042 for the same period ending January
31, 2001. The decrease in revenues reflects the impact of abandonment of the low
margin wireless products and related accessories distribution businesses in
Canada and the US.
Wireless handset and accessory gross margins were $40,736 or 24.5% of
product sales revenue for the three month period ending January 31, 2002
compared to wireless handset and accessory gross margins of $1,069,517 or 9.6%
of product sales revenue for same period ending January 31, 2001. The
improvement in gross margin is attributable to the curtailment of the low margin
cellular phone and related accessories distribution operations during 2002.
Depreciation and Amortization decreased $74,874 to $15,239 for the
three months ended January 31, 2002 compared to $90,113 for the same period in
fiscal 2001. The decline is attributable to write-downs of fixed assets and
goodwill related to the abandoned cellular phones and accessories businesses
during the fiscal year ended October 31, 2001.
General and administrative costs for the quarter ending January 31,
2002 were $429,385. This compares with selling, general, and administrative
costs of $1,330,481 for the same period in 2001. The decrease in selling,
general, and administrative costs is directly attributable to abandonment of
non-performing operations, and cost reductions in overhead costs including
salaries and wages, legal, investor relations, and professional services.
Interest expense was $284,889 for the three month ended January 31,
2002 compared with interest expense of $473,450 over the same period in fiscal
2001. The significant decline is attributable to a beneficial conversion feature
of $354,500 recorded in the first quarter of fiscal 2001, resulting from
financing activities undertaken during that period, partially offset by
amortization of the discount on the convertible notes payable, and amortization
of deferred financing charges of $209,000 recorded during quarter one of fiscal
2002. The difference is also offset by accrued interest on notes payable during
2002 that were not outstanding during 2001.
Liquidity & Capital Resources
For the fiscal three month period ended January 31, 2002, we incurred a
loss of $561,947 offset by non cash costs of $285,438 and a net increase in
working capital of $175,224 resulting in cash flows used in operations of
$101,285. Non cash items include amortization of $15,239, amortization of
deferred financing costs and discount on convertible debt of $209,150, and
issuance of common shares for wages of $53,610 and interest on convertible debt
of $7,439.
For the three month period ended January 31, 2002, we received proceeds
from financing activities of $160,000 comprised of proceeds from issuance of
convertible notes payable. Such proceeds were offset by financing costs paid of
$22,500, and repayment of convertible promissory notes of $81,000
We did not conduct any investing activities over the course of the
three month period ending January 31, 2002.
The above activities resulted in a net decrease in cash of $44,785
during the period to a cash balance at January 31, 2002 of $21,992.
We have working capital deficiency of $2,095,970 as at January 31,
2002, compared to a working capital deficiency at October 31, 2001, of
$1,938,233.
Our consolidated financial statements assume the company will continue
as a going concern. As discussed in note 1(a) to the consolidated financial
statements, the financial statements have been prepared on the going concern
basis, which assumes the realization of assets and liquidation of liabilities
and commitments in the normal course of business. As at January 31, 2002, we
were in default of certain debt obligations, had a significant working capital
deficiency and deficit and has suffered recurring losses from operations. The
application of the going concern concept is dependent upon our ability to
generate future profitable operations and receive continued financial support
from our suppliers, shareholders and other investors. The consolidated financial
statements do not give effect to any adjustment should we be unable to continue
as a going concern and therefore, be required to realize our assets and
discharge our liabilities in other than the normal course of business and at
amounts differing from those reflected in the consolidated financial statements.
Management plans to continue to negotiate with creditors and to pursue debt and
equity financing to support operations until operations become profitable.
Management anticipates equity financing to occur during the second quarter of
fiscal 2002. Further, during the three months ended January 31, 2002 management
decided to discontinue certain areas of the business including the wholesale and
retail distribution of cellular phones and related accessories, which comprised
all of our product sales in the periods presented.
As a result, we are now focused solely on SAR compliance testing and
developing SAR solutions for wireless devices using wireless technologies.
Management believes the plans described above will be sufficient to meet our
liabilities and commitments as they become payable over the next twelve months.
There can be no assurance that management's plans will be successful as such
plans are contingent upon ongoing support from various creditors. Failure to
maintain the support of creditors, obtain additional external debt or equity
financing and generate sufficient working capital from operations through the
exclusive focus on SAR compliance testing and developing other wireless
technologies, will cause us to curtail operations and our ability to continue as
a going concern will be impaired. The outcome of these matters cannot be
predicted at this time.
Since the commencement of fiscal 2002, the Company has initiated the
following actions and strategies with regards to the on-going advancement of its
business opportunities:
- In December 2001, owing to incurrence of large financial
losses, we ceased operations in commodity product
distribution, with closures of warehouse distribution
operations in Los Angeles, California and Markham Ontario,
liquidation of inventories and labor force reductions in all
distribution business units.
- Effective December 15, 2001, Mr. Gene Haley, formally Director
of U.S. Sales left the company.
- On December 19, 2001, Mr. Tom. W. Pick resigned from all
offices for personal reasons.
- On December 20, 2001 the Board of Directors re-instated
Bernard Penner as acting President and CEO.
- On December 6, 2001 Mr. Nicholas Wizinsky resigned his
positions of Chief Operations Officer, Chief Financial
Officer, and Secretary Treasurer for personal reasons.
- In December 2001, due to financial constraints, the company
abandoned and ceased operations of Globus Wireless Korea Ltd.
- January 2002 Globus Online Inc. d.b.a. ShopWireless.com
operations were abandoned.
- We currently have eight employees.
We will have to secure additional capital to meet our ongoing
requirements and to meet our stated objectives for the next 12 months. In
January 2002, we announced a re-structuring plan aimed at stabilizing the
remaining operations and a re-focus on its core competencies related to SAR
testing and engineered solutions.
Based on current market conditions and given our present financial
position, we cannot guarantee that we will be able to complete financings as
required for growth and operations. We are continuing to review all
opportunities for both long-term equity programs as well as debt financing. Any
significant capital expenses or increases in operating costs will be dependent
upon our ability to raise additional capital, debt financing, generate revenue
from sales of our products or services and maintain support from existing
creditors.
Historically, we have not generated sufficient revenue from sales of
our products or solutions and testing services to sustain operations. The sales
cycle to OEMs of our proprietary SAR solution process has been lengthy however
we have been able to generate increasing awareness and interest in its SAR
compliance testing and filing services. We continue to expand services and
testing capabilities through fiscal 2002.
PART II - Other Information
Item 1. Legal Proceedings
From time to time we are subject to litigation incidental to our
business. We are not currently a party to any legal proceedings that we consider
to be material.
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities
The securities described below represent equity securities of Globus
sold by Globus during the three month period ended January 31, 2002 that were
not registered under the Securities Act of 1933, as amended (the "Securities
Act"), all of which were issued by the Company pursuant to exemptions under the
Securities Act. Underwriters were involved in none of these transactions.
Private Placements of Common Stock and Warrants for Cash
None.
Sales of Debt and Warrants for Cash
Convertible debentures were issued to two accredited purchasers during
our first quarter of 2002. The debentures were in the aggregate principal amount
of $160,000. The debentures were convertible into common stock at a conversion
price of the lower of 80% of the average of the three lowest closing bid prices
for the common stock thirty days prior to the closing date or 80% of the average
of the three lowest closing bid prices for the common stock thirty days prior to
conversion. In addition, these same purchasers received an aggregate amount of
64,000 warrants to purchase common stock. The offering of convertible debentures
and warrants was exempt from registration under Rule 504 of Regulation D and
under Section 4(2) of the Securities Act. No advertising or general solicitation
was employed in offering the securities. All persons were accredited investors,
represented that they were capable of analyzing the merits and risks of their
investment.
Option Grants
None.
Issuances of Stock for Services or in Satisfaction of Obligations
On November 2, 2001 we issued an aggregate of 100,000 of our common
stock to Directors for Director's Compensation of $10,000.
On November 7, 2001, we issued 30,864 shares of our common stock to
Shawn McMillen for an extension of a payment due for certain technologies
acquired for $2,303.
On November 7, 2001 we issued an aggregate of 1,239,283 of our common
stock to management for compensation of $92,500, subsequently 837,354 issued for
$62,500 were returned to treasury on January 18, 2002.
On December 17, 2001, we issued 85,125 shares of our common stock to
employees for compensation of $3,827.
On January 9, 2002, we issued 380,908 shares of our common stock to
management for compensation of $8,710.
On January 9, 2002, we issued 428,571 shares of our common stock to
532273 BC Ltd. for payment of services of $5,238.
On January 18, 2002, we issued 169,942 shares of our common stock to
Robert Duncan for services rendered of $2,379.
On January 24, 2002, we issued 214,467 shares of our common stock to
Robert Duncan for services rendered of $2,316.
On January 28, 2002, we issued 33,976 shares of our common stock to
Zebop Wireless Info for marketing services of $5,528.
On January 28, 2002, we issued 42,000 shares of our common stock to
2001 Technology Incorporated for products provided of $20,000.
The above offerings and sales were deemed to be exempt under Regulation
D and Section 4(2) of the Securities Act. No advertising or general solicitation
was employed in offering the securities. The offerings and sales were made to a
limited number of persons, all of whom were business associates of Globus or
executive officers and/or directors of Globus, and transfer was restricted by
Globus in accordance with the requirements of the Securities Act.
Item 3. Defaults Upon Senior Securities
We are in default of our promissory Notes payable due December 26,
2001. The notes payable are secured by a pledge by us, in the event of default,
to issue an amount of our common stock with a value of two times the sum of the
outstanding principal and unpaid interest. $300,000 and $175,000 of the notes
payable bear interest at 30% and 24% per annum respectively, payable monthly.
We are presently working on a restructuring that, among other benefits,
would facilitate settlement. If the creditor elects to exercise its rights under
the default provisions of the notes payable, we will be required to issue common
stock with a fair value of $950,000 in full settlement of our obligations.
Item 4. Submission of Matters to a Vote of Security
Holders
Not applicable.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None.
B. Reports on Form 8-K
None.
Pursuant to the requirements of Section 12 of the Securities
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated this 22st day of March 2002
GLOBUS WIRLESS LTD.
By:/s/ Bernie Penner
Bernie Penner, President
By:/s/ Ben Hewson
Ben Hewson, Comptroller