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 April 30, 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
- ---------------------------------- ----------------------
(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 June 6, 2002
----- ---------------------------
Common stock, $0.001 par value 39,236,264
Series A Preferred, $.001 1,124
PART I
Item 1. Financial Information
Consolidated Financial Statements of
GLOBUS WIRELESS LTD.
Six months ended April 30, 2002
(Unaudited)
GLOBUS WIRELESS LTD.
Consolidated Balance Sheets
$ United States
April 30, 2002 and October 31, 2001
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April 30, 2002 October 31, 2001
(Unaudited)
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Assets
Current Assets:
Cash $ 24,465 $ 66,777
Accounts and other receivables (net of allowance of $45,747, 2001 - $nil) 90,320 135,565
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Inventories - 12,118
114,785 214,460
Fixed assets 212,035 241,562
Website development 13,469 15,355
Patents and trademarks 12,623 15,123
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$ 352,912 $ 486,500
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Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable and accrued liabilities $ 1,381,956 $ 1,127,792
Dividends payable 180,963 120,901
Notes payable (note 2) 475,000 475,000
Convertible promissory note to shareholder (note 3) 75,000 68,000
Convertible promissory note (note 4) 224,000 361,000
Current portion of convertible notes payable (note 5) 1,541,558 -
- ---------------------------------------------------------------------------------------------------------------------------
3,878,477 2,152,693
Convertible notes payable, net of discounts (note 5) - 1,078,403
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3,878,477 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
$0.001 per share authorized, 39,236,264 issued
(October 31, 2001 - 16,890,174 issued) 39,236 16,890
Additional paid-in capital 12,205,172 11,872,131
Discount on convertible preferred shares (53,760) (90,037)
Exchangeable shares of subsidiary 2,108,538 2,108,538
Deficit (17,812,151) (16,639,518)
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Accumulated other comprehensive income (12,601) (12,601)
(3,525,565) (2,744,596)
Contingencies (note 7)
Subsequent events (notes 1 (b), 4 and 5)
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$ 352,912 $ 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
Six months ended April 30, 2002 and 2001
(Unaudited)
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2002 2001
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Engineering and compliance testing revenue $ 324,579 $ 275,350
Sale of cellular phones and related accessories 169,545 16,546,579
Cost of sales of cellular phones and related accessories 125,588 14,869,239
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43,957 1,677,340
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368,536 1,952,690
Expenses:
Amortization 33,913 242,669
General and administrative 789,050 2,192,595
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Research and development 62,647 64,627
Interest 718,982 427,571
Recovery of previously written off notes receivable (note 6) (166,314) -
1,438,278 2,927,462
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Loss, before the undernoted (1,069,742) (974,772)
Other income - 10,124
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Loss $ (1,069,742) $ (964,648)
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Weighted average number of common shares, basic and diluted (note 1(d)) 336,809,386
12,950,283
Loss per common share, basic and diluted (0.00) (0.07)
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See accompanying notes to consolidated financial statements.
GLOBUS WIRELESS LTD.
Consolidated Statements of Loss and Comprehensive Loss
$ United States
Three months ended April 30, 2002 and 2001
(Unaudited)
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2002 2001
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Engineering and compliance testing revenue $ 167,241 $ 168,960
Sale of cellular phones and related accessories 3,221 5,424,927
Cost of sales of cellular phones and related accessories - 4,817,104
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3,221 607,823
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170,462 776,783
Expenses:
Amortization 18,674 152,556
General and administrative 359,665 862,114
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Research and development 32,139 52,160
Interest 434,093 92,721
Recovery of previously written off notes receivable (166,314) -
678,257 1,159,551
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Loss, before the undernoted (507,795) (382,768)
Other income - 4,890
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- ---------------------------------------------------------------------------------------------------------------------------
Loss $ (507,795) $ (377,878)
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Weighted average number of common shares, basic and diluted (note 1(d)) 351,551,716 12,991,304
Loss per common share, basic and diluted (0.00) (0.03)
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See accompanying notes to consolidated financial statements.
GLOBUS WIRELESS LTD.
Consolidated Statement of Stockholders' Deficiency
$ United States
Six months ended April 30, 2002
(Unaudited )
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Discount on Accumulated
Convertible Exchangeable Additional Other Total
Common Shares Preferred Shares Preferred Shares of Paid-in Comprehensive Stockholders
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 - - - - 51,898 - - 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 16,082,944 16,083 - - - - 207,410 - - 223,493
Common shares
issued in
lieu of cash
payment of
interest on
convertible
notes payable 746,884 747 - - - - 7,506 - - 8,253
Fair value of
warrants
granted to
non-employees
in consideration
for convertible
notes payable
note 5) - - - - - - 4,404 - - 4,404
Amortization
of discount
on preferred
shares - - - - 36,277 - - (36,277) - -
Beneficial
conversion
feature of
convertible
notes payable
(note 5) - - - - - - 210,311 - - 210,311
Dividends
accrued on
preferred
shares - - - - - - - (66,614) - (66,614)
Common
shares issued
for director's
fees 629,087 629 - - - - 4,121 - - 4,750
Common shares
issued for
services 300,000 300 - - - - 2,040 - - 2,340
Common shares
returned in
payment of
notes
receivable
originally
issued for
common shares (100,500) (101) - - - - (166,213) - - (166,314)
Loss for the
six months
ended April
30, 2002 - - - - - - - (1,069,742) - (1,069,742)
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39,236,264 $39,236 1,124 $ 1 $(53,760) $2,108,538 $12,205,172 $(17,812,151) $(12,601) $(3,525,565)
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GLOBUS WIRELESS LTD.
Consolidated Statements of Cash Flows
$ United States
Six months ended April 30, 2002 and 2001
(Unaudited)
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2002 2001
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Cash flows from operating activities:
Loss $ (1,069,742) $ (964,648)
Non cash items:
Amortization 33,913 242,669
Amortization of deferred financing costs 150,177 -
Amortization of discount on convertible notes payable 394,186 -
Common shares issued for services 2,340 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 8,253 -
Compensation cost of options issued to employees - 95,318
Conversion feature of bridge financing payable - 215,900
Common shares cancelled to retire notes payable (166,314) -
Common shares issued for directors fees 4,750 -
Changes in non cash working capital:
Decrease in accounts receivable 45,245 4,233,320
Decrease (increase) in inventory 12,118 (1,294,571)
Increase in prepaid expenses - (89,762)
Increase (decrease) in accounts payable 262,152 (3,139,473)
Increase in convertible promissory note to shareholder 7,000 -
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(262,312) (536,723)
Cash flows from financing activities:
Proceeds from convertible notes payable 425,000 800,000
Repayment of loans payable to related parties - (780,375)
Reduction of due to stockholders - (246,373)
Proceeds from bridge financing - 1,000,000
Financing costs paid (68,000) -
Repayment of convertible promissory note (137,000) -
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220,000 773,252
Cash flows used in investing activities:
Purchase of fixed assets - (114,760)
Purchase of patents and trademarks - (3,554)
Decrease in loans and other advances - 82,508
Advances to former shareholders of PCI Marketing & Communications Inc. - (259,498)
Business combination - (58,978)
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- (354,282)
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Decrease in cash (42,312) (117,753)
Cash, beginning of period 66,777 319,511
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Cash, end of period $ 24,465 $ 201,758
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GLOBUS WIRELESS LTD.
Consolidated Statements of Cash Flows
$ United States
Six months ended April 30, 2002 and 2001
(Unaudited)
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2002 2001
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Supplementary information
Interest paid $ 21,874 $ 153,531
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 2,340 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 4,404 124,500
Amortization of discount on convertible preferred shares 36,277 244,566
Amounts receivable extinguished by cancellation of exchangeable
shares of subsidiary - 106,816
Extinguishment of amount due to shareholder - 162,233
Common shares cancelled - 193,350
Compensation cost of options granted to employees - 95,318
Common shares issued to settle accounts payable 7,988 -
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Common shares issued to settle dividends payable on preferred shares 6,552 -
Common shares issued on conversion of convertible notes payable 223,493 -
Common shares issued in lieu of cash payment of interest on convertible
notes payable 8,253 -
Beneficial conversion feature of convertible notes payable 210,311 -
Common shares cancelled to retire notes payable 166,314 -
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Dividends accrued on preferred shares 66,614 -
Common shares issued on conversion of preferred shares 2,584 -
Common shares issued for directors fees 4,750 -
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements
$ United States
Six months ended April 30, 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 April 30, 2002, the
Company was in default of certain debt obligations, had lost the services of
a key employee (note 1 (b)), had been named as a defendant in several
statement of claims, 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, creditors, 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. Further, during the six months ended
April 30, 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) Economic dependence
As disclosed in note 1(b) of the Company's October 31, 2001 financial
statements, the Company's sole focus on SAR compliance testing and developing
SAR solutions for wireless devices caused the Company to become economically
dependent upon one employee. Subsequent to April 30, 2002, the Company
terminated this employee. In the interim period, management believes that
remaining staff members possess the necessary technical expertise and
qualifications to continue to service the Company's existing client base
while potential replacements are evaluated. The effect of this matter on the
Company's ability to continue as a going concern cannot be predicted at this
time.
(c) 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.
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements
$ United States
Six months ended April 30, 2002
(Unaudited)
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1. Significant accounting policies (continued):
(d) 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 six months ended April 30, 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 April 30, 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 it's articles of
incorporation to increase its authorized common shares or renegotiate the
terms of the exchangeable shares.
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 April 30, 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 to shareholder:
As disclosed in note 11 of the Company's October 31, 2001 financial statements,
the convertible promissory note to shareholder was due February 2002. During the
six months ended April 30, 2002, the shareholder extended the due date of the
note to July 31, 2002 and the Company agreed to increase the amount owing to the
shareholder by $7,000 to $75,000. The income in the note payable has been
recorded as additional interest expense. The convertible promissory note to
shareholder does not bear interest, is unsecured and is convertible, upon
default, into common shares of the Company at 75% of the average market price of
the Company's common stock for the ten days immediately prior to conversion.
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements
$ United States
Six months ended April 30, 2002
(Unaudited)
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4. 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
---------
383,000
Less amounts paid to April 30, 2002 ....................... (159,000)
---------
$ 224,000
---------
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.
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, where issuance was subject to specific performance criteria, were
granted during the six months ended April 30, 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.
Subsequent to April 30, 2002, the Company chose not to pay the $56,000 due on
May 1, 2002. The creditor notified the Company of the creditor's intent to
exercise their security rights over the technology projects on February 18, 2002
under the general security agreement. The Company is discussing the matter with
its legal counsel to determine a course of action.
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements
$ United States
Six months ended April 30, 2002
(Unaudited)
- --------------------------------------------------------------------------------
5. Convertible notes payable:
- ---------------------------------------------------------------------------------------------------------
Balance Balance,
Due Date October 31, 2001 Issued Converted April 30, 2002
- ---------------------------------------------------------------------------------------------------------
May 31, 2003 (i) $ 787,409 $ $ (48,274) $ 739,135
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
April 30, 2002 (x) - 215,000 - 215,000
June 2, 2002 (xi) - 50,000 - 50,000
$ 2,119,601 $ 425,000 $ (223,493) 2,321,108
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Unamortized discount related to the beneficial conversion option on and warrants
granted in conjunction with the convertible notes payable (557,822)
Unamortized cash financing costs (221,728)
$ 1,541,558
The convertible notes payable of $215,000 is overdue at April 30, 2002. In
addition, the $50,000 convertible note payable due June 2, 2002 was not repaid
subsequent to April 30, 2002. Accordingly, these amounts have been reclassified
to current liabilities. However, the creditors have not taken any action to
demand payment or convert the notes to common stock. If the creditors 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 $265,000 in full
settlement of its overdue obligations.
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; (x) $0.0045; (xi) $0.0051; and
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.
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements
$ United States
Six months ended April 30, 2002
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
5. Convertible notes payable (continued):
In conjunction with the notes, the Company granted the following warrants:
- ---------------------------------------------------------------------------------------------------------------------------
Expiry date Exercise Price Number
- ---------------------------------------------------------------------------------------------------------------------------
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
February 8, 2005 0.0075 60,000
March 13, 2005 0.0096 50,000
1,028,000
- ---------------------------------------------------------------------------------------------------------------------------
The convertible notes payable issued during the six months ended April 30, 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 $4,404 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 $210,311 which is being accreted over the term of the debt in
accordance with EITF 00-27.
6. Recovery of previously written off note receivable:
Consistent with the decision to discontinue its operations related to the PCI
and Edge acquisitions as well as the pre-existing operations related to the
wholesale and retail distribution of cellular phones and related accessories in
North America, the Company previously recorded a $293,186 expense related to the
write-down of notes receivable originally issued to employees of PCI and Edge in
exchange for common shares as part of a total writedown of $4,117,268. In the
quarter ended April 30, 2002, the Company was able to have certain common shares
returned as payment of notes receivable originally issued for common shares in
the amount of $166,314.
7. Contingencies:
(a) During the six months ended April 30, 2002, the Company was named as
defendant in several statements of claim related to approximately 250,000
outstanding amounts included in accounts payable. The Company has consulted
with legal counsel to assess the validity of the claims.
GLOBUS WIRELESS LTD.
Notes to Consolidated Financial Statements
$ United States
Six months ended April 30, 2002
(Unaudited)
- --------------------------------------------------------------------------------
7. Contingencies (continued):
(b) Subsequent to April 30, 2002, a former employee of the Company named the
Company as defendant in a wrongful dismissal lawsuit. The complaint claims an
amount of approximately $190,000 plus costs and such further costs or other
relief as deemed equitable by the court. The Company has consulted with legal
counsel to assess the validity of the claim.
The Company has determined that it is not possible at this time to predict the
final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to these lawsuits has been made in the
April 30, 2002 financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 Globus Wireless, Ltd.'s (the "Company) current
expectations and projections about future events. All forward-looking statements
are subject to risks, uncertainties, and assumptions about the Company,
including anticipated growth strategies, anticipated trends and corrections 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 attached in the Company's
Annual Report on Form 10-KSB as of and for the year ended October 31, 2001.
Overview
The Company was incorporated under the laws of the State of Nevada in June 1987,
under the name Daytona Pacific Corporation. In October 1994, the Company
acquired all the assets of Globus Cellular & User Protection Ltd. (Canada) and
changed its name to Globus Cellular and User Protection Ltd. In September 1995,
the Company became a publicly traded corporation, trading on the NASD
Over-the-Counter (OTC) Bulletin Board. In August 1997, the changed it's name to
Globus Cellular, Ltd. In December 1999, the Company changed its name to Globus
Wireless, Ltd., the name being more indicative of the Company's expertise,
technologies, and new product lines. Globus Wireless has the following wholly
owned subsidiaries, Globus Wireless Canada Ltd., Globus Wireless Korea Ltd.,
Globus Online Inc, and Celltech Research Inc.
The corporate offices are located at 1955 Moss Court, Kelowna, British Columbia,
Canada V1Y 9L3. The Company's registered offices in the United States of
America, are Ste 220 - 1495 Ridgeview, Reno NV.
Globus Wireless, Ltd., is engaged in the research , design and testing of
wireless communication products. Our primary objectives of business are :
o To provide SAR compliance testing services for wireless devices, and
o to develop 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
In fiscal 2001, our product distribution business units, including the
acquisitions of Edge Continental and PCI Marketing (Shopwireless.com), were to
provide the Company with distribution channels to market products from wireless
equipment manufacturers, aftermarket or proprietary design, to generate
significant revenues and earnings. While the Company did realize significant
growth in product sales revenues over the prior year, selling an array of
wireless equipment, rapidly declining margins and markets for these products
lead the Company to change its strategy to a 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, the Company negotiated distribution and manufacturing rights to
hands-free, in-vehicle speakerphone that was to be a future cornerstone product
for the distribution business. In December 2001, due to unsuccessful marketing
and sales campaigns we terminated the technology agreement, reducing the risk of
future losses, future overhead and eliminating future royalty obligations for
this unsuccessful venture. Efforts are underway to seek out a buyer for the
Shopwireless.com portion of the business. There can be no assurance that such
efforts will have success.
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 closed our warehouse liquidated
inventories and implemented labor force reductions in all distribution business
units.
Our wireless compliance testing laboratory, Celltech Research Inc., serves over
35 wireless equipment manufacturers, providing emission testing and license
submission services. This business unit, assists wireless equipment
manufacturers to satisfy their applicable government licensing regulations, with
the Federal Communication Commission and/or Industry Canada.
The Company, during and subsequent to the current reporting quarter, April 30,
2002, has defaulted on certain debt and operating obligations. At this time the
remedies provided in the debt obligations have been acted upon by certain
debtors, in addition, legal proceedings have been initiated by certain
suppliers. The Company is currently in discussions with legal counsel and the
parties to the default in an attempt to formulate a solution, including amending
repayment terms, which will provide for maintaining ongoing operations. The
outcome of these proceedings is not yet determinable at this time.
The Company remains committed to re-focusing its resources to its core
competences, and the profitable operations by providing SAR compliance testing
services and developing SAR technology solutions for wireless products.
The common stock of the corporation 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 April 30, 2002 and 2001
In the quarter ending April 30, 2002, we incurred a loss of $ 507,795 or $0.00
per share compared to a loss of $377,878 or $0.03 per share for the quarter
ended April 30, 2001. The increase in the loss over the same quarter in April
30, 2001 is attributable to increased interest charges on greater debt balances,
reduced margins on abandoned distribution and retail business units that offset
reductions in General and Administrative charges, and amortization charges.
Consolidated revenues for the three month period ending April 30, 2001 were
$170,462, compared $5,593,887 for the same period ending April 30, 2001. The
decrease in revenues reflects the impact of the abandonment of the low margin
wireless products and accessories distribution and retail businesses in Canada
and the USA. Not including the sales related to the sale of cellular phones and
related accessories in the prior year, engineering and compliance testing
revenue is $167,241 compared to $168,960 in the preceding three month period
ended April 30, 2001.
Amortization decreased $133,882 to $18,674 for the three months ended April 30,
2002 compared to $152,556 for the same period in fiscal 2001. The decrease is
attributable to write-downs of fixed assets and goodwill related to the
abandonment of wireless and accessories business units during the fiscal year
ended October 31, 2001.
General and administrative costs for period ending April 30, 2002 were $359,665
compared to $862,114 for the same period in fiscal 2001. The decrease is the
direct result of rationalizations, in the labor force and distribution and
retail business units of the Company.
Interest expense was $434,093, for the three months ended April 30, 2002
compared with interest expense of $92,721 for the same period in fiscal 2001.
The increase is attributable to greater debt balances, and the beneficial
conversion features associated with these debt instruments, over the debt
balances in the same period in fiscal 2001.
During the quarter the Company experienced a gain of $166,314 on previously
written off notes receivable when common share certificates held as security for
certain employee notes receivable were returned to the Company as payment of
notes receivable originally issued for common shares.
Six months ended April 30, 2001 and 2000
Consolidated sales revenues for the first six months of fiscal year 2002 were
$494,124, compared to sales of $16,821,929 for the same period in 2001. The
decrease in revenues reflects the impact of the abandonment of the low margin
wireless products and accessories distribution and retail businesses in Canada
and the USA. Engineering revenues for the first six months of fiscal year 2002
were $324,579, compared to engineering revenues of $275,350 for the same period
in 2001. The increase is attributable to a growth in the client base and
services provided in the operations of Celltech Research Inc.
Amortization decreased $208,756 to $33,913 for the three months ended April 30,
2002 compared to $242,600 for the same period in fiscal 2001. The decrease is
attributable to write-downs of fixed assets and goodwill related to the
abandonment of wireless and accessories business units during the fiscal year
ended October 31, 2001.
General, and administrative costs for the first six-months of 2002 were $789,050
compared with general, and administrative for the same period in 2001 of
$2,192,595. The decrease is the direct result of rationalizations, in the labor
force and distribution and retail business units of the Company.
Interest expense was $718,982, for the six months ended April 30, 2002 compared
with interest expense of $427,571 for the same period in fiscal 2001. The
increase is attributable to greater debt balances, and the beneficial conversion
features associated with these debt instruments, over the debt balances in the
same period in fiscal 2001.
The Company recorded a loss of $1,069,742 for the six months ended April 30,
2002. This compares to a $964,648 loss recorded over the same period of fiscal
2001.
Capital Resources & Liquidity
For the six months ended April 30, 2002 , the Company incurred a loss of
$1,069,742 and cashflows used in operations of $262,312.
For the six months ended April 30, 2002, the Company received proceeds from
convertible notes payable of $425,000 net of $68,000 in financing costs. The
Company increased convertible note to shareholder by $7,000 and repaid $137,000
on the convertible promissory note, for a total cash inflow from financing
activities of $227,000. The Company had no investing activities during the six
months ended April 30, 2002.
The above activities resulted in a net decrease in a cash of $42,312 during the
period to a cash balance at April 30, 2002 of $24,465.
The company has a working capital deficiency of $3,763,692 as at April 30, 2002,
compared to a working capital deficiency at October 31, 2001, of $1,938,233.
No dividends have been declared since our inception nor does the Company
anticipate that dividends will be declared in the ensuing fiscal year.
The consolidated financial statements assume the company will continue as a
going concern. As discussed in note 1(a) to the consolidated financial
statements have been prepared on the going concern basis, which assumes the
realization if assets and liquidation of liabilities and commitments in the
normal course of business. As at April 30, 2002, the Company was in default of
certain debt obligations, had lost the services of a key employee (note 1(b)),
had been named as a defendant in several statement of claims, 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, creditors, 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. Further, during the six months
ended April 30, 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.
During fiscal 2002, the Company has initiated or experienced the following
actions and strategies, in regards to the on-going operations of its business
activities;
o In December 2001, the Company 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 marketing and distribution business units.
o On December 6, 2001 Mr. Nicholas Wizinsky resigned his positions of Chief
Operations Officer, Chief Financial Officer, and Secretary Treasurer for
personal reasons.
o Effective December 15, 2001, Mr. Gene Haley, formally Director of U.S.
Sales, left the company.
o On December 19, 2001, Mr. Tom Pick resigned from all offices for personal
reasons.
o On December 20, 2001 the Board of Directors re-instated Mr. Bernard Penner
as acting president and CEO.
o In December 2001, the Company ceased operations of Globus Wireless Korea
Ltd.
o In January 2002, the Company ceased operations of Globus Online Inc.
d.b.a. ShopWireless.com.
o Subsequent to the quarter, on June 13, 2002, the Company terminated
the employment of Mr. Shawn McMillen, formally General Manager of Celltech
Research Inc.
o The Company currently has 5 employees.
The Company has drastically reduced overhead costs, and does require additional
capital to meet ongoing requirements and to meet objectives for the next twelve
months. The Company remains committed to the re-structuring plan originally
announced in January 2002, aimed at stabilizing the remaining operations and a
re-focus on its core competencies related to SAR testing.
PART II - Other Information
Item 1. Legal Proceedings
As stated in Note 7 (a) of the financial statements, the Company was named as
defendant in several statements of claim related to approximately $250,000
outstanding amounts included in accounts payable. Details are as follows;
Date of Proceedings: April 4, 2002
Jurisdiction of Court: Supreme Court of British Columbia
Principal partners: 310047 B.C. Ltd. vs. Globus Wireless Ltd.
Allegation: Amounts owing for services rendered.
Damages/award sought: $122,000 ($191,224.28 CAD)
Date of Proceedings: April 12, 2002
Jurisdiction of Court: Court of Queen's Bench of Alberta
Principal partners: Bennett Jones LLP vs. Globus Wireless Ltd.
Allegation: Amounts owing for services rendered.
Damages/award sought: $30,000 ($46,934.08 CAD)
Date of Proceedings: May 10, 2002
Jurisdiction of Court: Circuit Court of Cook County, Illinois
Principal partners: Mr. Gene Haley
Allegation: Breach of wirtten, oral employment contract and
unjust enrichment.
Damages/award sought: $190,000
The Company has consulted with legal counsel to assess the validity of the
claims, and intends to defend against these claims.
Item 2. Change in Securities
Recent Sales of Unregistered Securities
The securities described below represent equity securities of Globus sold by
Globus during the three month period ended April 30, 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 notes payable were issued to two accredited purchasers during the
quarter ended April 30, 2002. The debentures were in aggregate principal amount
of $265,000. 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
110,000 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, and
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 February 12, 2002, the Company issued 169,632 shares of common stock to a
Director for Director's compensation of $3,250.
On April 5, 2002, the Company issued 300,000 shares of common stock to 532273 BC
Ltd. for services of $2,340.
On April 19, 2002, the Company issued 459,455 shares of common stock to a
Director for Director's compensation of $ 1,500.
The above offerings and sales were deemed to be exempt under Regulation D
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
As stated in note 2 of the financial statements the Company is in default on
Notes payable that 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 April 30, 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.
As stated in note 4 of the financial statements the Company is in default on a
Convertible promissory note with an outstanding balance of approximately
$224,000. The creditor has notified the Company of the creditor's intent to
exercise their security rights over the technology projects on February 18, 2002
under the general security agreement. The Company is discussing the matter with
its legal counsel to determine a course of action.
As stated in note 5 of the financial statements the Company is in default on
Convertible notes payable. The convertible notes payable of $215,000 is overdue
at April 30, 2002. In addition, the $50,000 convertible note payable due June 2,
2002 was not repaid subsequent to April 30, 2002. Accordingly, these amounts
along with the remaining convertible notes payable have been reclassified to
current liabilities. However, the creditors have not taken any action to demand
payment or convert the notes to common stock. If the creditors 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 $265,000 in full settlement
of its overdue 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 17th day of June 2002
GLOBUS WIRELESS LTD.
By:/s/ Bernie Penner
Bernie Penner, President
By: /s/ Ben Hewson
Ben Hewson, Comptroller