UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest reported): September 16, 2003
Wireless Frontier Internet, Inc.
(F/K/A Freemont Corp)
(Exact name of registrant as specified in charter)
Delaware 000-08281 75-28904059
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
104 West Callaghan, Fort Stockton, Texas 79735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (432) 336-0336
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
See Item 5. below.
ITEM 4. Change in Registrant's Certifying Accountant
Wireless Frontier Internet, Inc. (f/k/a Fremont Corporation) (the
"Company"), through its wholly owned subsidiary Winfill Holdings International
Limited ("Winfill"), a British Virgin Island corporation, incurred a net loss in
1998 as a result of various factors, including declining sales, a shortage of
working capital, and a bad debt provision necessitated in substantial part by
the bankruptcy of a major customer. These aforementioned factors and the
cessation of operations of Winfill, prevented the Company's auditors, Arthur
Anderson & Co. ("Arthur Anderson"), from finalizing the Company's audit for the
year ended December 31, 1998 and, as a result, the Company failed to file its
Form 10-KSB Annual Report for the year ended December 31, 1998 and all other
required reports under the Securities Exchange Act of 1934 (the "Exchange Act")
since. In addition, as described in Item 5 below, the Company consummated a
transaction in July 2003 that resulted in a change in management. As a result,
current management of the Company have not been in contact with a representative
of Arthur Anderson as a result of the winding-down of Arthur Andersen's
business, effectively terminating the Company's relationship with Arthur
Andersen. As a result of the cessation of the Company's business operations and
Arthur Anderson's winding-down, current management has been unable to determine
if Arthur Anderson has terminated its auditor relationship with the Company
although Arthur Andersen will no longer serve as the Company's independent
auditor.
The audit reports of Arthur Andersen on the consolidated financial
statements of the Company for each of the years ended December 31, 1997, and
December 31, 1996, did not contain any adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years ended December 31, 1997 and December 31, 1996, as
well as during the period from January 1, 1998 through the date of the
winding-down of Arthur Anderson's affairs, there were no disagreements with
Arthur Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Arthur Andersen would have caused them to
make reference to the matter in their report.
During the two most recent fiscal years and through the date of the
winding-down of Arthur Anderson's affairs, there have been no reportable events
(as defined in Regulation S-K Item 304(a)(1)(v)).
The Company has been unable to contact Arthur Andersen in connection with a
request that Arthur Andersen furnish a letter addressed to the Securities and
Exchange Commission stating whether it agrees with the above statements and
disclosure due to the fact that the personnel primarily responsible for the
Company's account (including the engagement partner and manager) have left
Arthur Andersen.
On September 17, 2003, the Company, upon recommendation of the Audit
Committee of its Board of Directors, engaged Pollard-Kelley Auditing Services
Inc. ("Pollard-Kelley") to serve as the Company's independent public
accountants.
During the two most recent fiscal years and through the date hereof, the
Company did not consult Pollard-Kelley with respect to the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or reportable events set
forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
During the two most recent fiscal years and through September 17, 2003, the
Company has not consulted with Pollard-Kelley regarding either:
o the application of accounting principles to any specified transaction,
either completed or proposed, or the type of audit opinion that might
be rendered on the Company's financial statements, and neither a
written report was provided to the Company nor oral advice was
provided that Pollard-Kelley concluded was an important factor
considered by the Registrant in reaching a decision as to the
accounting, auditing or financial reporting issue; or
o any matter that was either subject of disagreement or event, as
defined in Item 304(a)(1)(iv)(A) of Regulation S-B and the related
instruction to Item 304 of Regulation S-B, or a reportable event, as
that term is explained in Item 304(a)(1)(iv)(A) of Regulation S-B.
Item 5. Other Event
On September 16, 2003, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") among the Company, Networker Systems, Inc.
("Networker") and Wireless Frontier Internet, Inc. ("Wireless-TX"), a Texas
corporation. Pursuant to the Merger Agreement, Networker, a wholly owned
subsidiary of the Company, was merged into Wireless-TX with Wireless-TX being
the surviving corporation. The shareholders of Wireless-TX exchanged all of the
outstanding shares of Wireless-TX for 16,000,000 shares of common stock of the
Company. As a result of this transaction, Wireless-TX became a wholly-owned
subsidiary of the Company. In addition, the Company also entered into an Asset
Purchase Agreement (the "Asset Agreement") dated September 16, 2003 with Million
Treasure Enterprises Limited ("MTE"), a British Virgin Islands corporation.
Pursuant to the Asset Agreement, Million acquired all of the Company's equity
interest in Winfill in exchange for MTE's return to the Company of the 661,654
shares of common stock of the Company held by MTE, the cancellation of MTE's
warrant to purchase 2,000,000 shares of common stock of the Company and the
release of all sums owed by the Company to MTE.
The Company has not filed any report since it filed its late notification
filing for its Form 10-KSB for the year ended December 31, 1998. The reasons for
this delay included the cessation of the business operations of Winfill, the
Company's wholly-owned operating subsidiary. As a result of Winfill's ceasing of
operations and the resulting lack of cash to pay the Company's professional
fees, the Company was not able to make these filings.
The Company, after its acquisition of Wireless-TX and the commencement of
its new business, retained Pollard-Kelley, as its independent public accountants
on September 17, 2003. Further, commencing in December 2003, the Company
retained the services of new counsel to represent it in connection with certain
securities matters and to assist it in becoming current with its reports
required under the Securities Exchange Act of 1934.
In sum, the Company's delay in filing was the result of various
circumstances which impeded its ability to timely file. Specifically, as set
forth above, the cessation of Winfill's business operations, the lack of cash
and the winding down of Arthur Anderson combined to result in a delay in the
Company's filings. However, with the acquisition of Wireless-TX, the disposition
of Winfill and the retention of Pollard-Kelley and new securities counsel, the
Company is seeking to become current in its reports however, no assurance can be
given that it will be successful in doing so.
Description of Wireless Frontier Internet, Inc.
History
On July 7, 1998, Partners Alliance Group, Inc. ("PAG"), which was owned by
Alex Gonzalez, a majority shareholder, executive officer and director of the
Company, was incorporated under the laws of the State of Texas for the purpose
of selling computer components in Texas and Colorado. On January 1, 2001,
West-Tex Internet, Inc. contributed its assets to PAG, which established PAG as
a Internet service provider. On November 30, 2001, PAG acquired Overland
Network, Inc. a company engaged in providing dial up and broadband wireless
Internet services in the Trans Pecos region of Texas. This purchase expanded
PAG's Internet service provider area to include Terlingua, Presidio, Sanderson,
Sheffield, Comstock, Big Bend National Park and Heath Canyon, Texas areas. On
April 1, 2003, PAG changed its name to Wireless Frontier Internet, Inc., a Texas
corporation. Today, Wireless-TX has developed into an Internet service provider
in the southwest Texas and Kansas areas, providing both dial-up and wireless
services in addition to the equipment sales.
Overview
Wireless-TX is a Wireless Broadband Internet Service Provider located in
Fort Stockton, Texas. In addition, Wireless-TX is also a traditional Internet
service provider. Wireless-TX currently provides services to customers in over
100 cities throughout Southwest Texas and Kansas. Wireless-TX designs, develops,
markets and supports fixed wireless broadband Internet access products.
Wireless-TX was designed to deliver efficient, reliable and cost effective
solutions to bringing high-speed Internet access to rural markets within the
United States. Wireless-TX believes it has positioned itself to meet the
Internet Access needs of organizations and consumers which require broadband
access to the Internet, but do not have access to cable or DSL from the
traditional service providers.
Strategy
Wireless-TX's business strategy revolves around the need to provide quality
wireless and dial up Internet access to clients, in the process fully satisfying
their internet data needs, at a fraction of the time and cost of traditional
wire-line providers. In addition, Wireless-TX intends to continue its networking
and telecommunications equipment sales. Wireless-TX's intent is to grow its
customer base in a short period of time, while maintaining a higher than average
level of service and support for the customers and their needs. It intends to
implement its growth strategy through the marketing of its services and the
acquisition of both dial-up and wireless Internet service providers.
Wireless-TX will also focus on increasing its Wi-fi penetration.
Wireless-TX products are designed to deliver efficient, reliable, and
cost-effective solutions; bringing high-speed Internet access to rural markets
within the United States. Wireless-TX believes that it is in a position to meet
the Internet access needs of these organizations and consumers. Users in these
areas require broadband access to the Internet, but do not have access to cable
or digital subscriber line connections from traditional service providers. These
customers are typically found in smaller cities in North America, and in most
suburban and semi-rural areas where there are few Internet access options other
than traditional telephone dial-up connections.
These areas desire affordable high-speed Internet access. Their demand for
faster, broadband transmission speeds has largely remained unsatisfied because a
growing portion of the market has found itself "priced out" of the "broadband
revolution". Especially critical in this regard has been the ability to deliver
broadband content over the "last mile" (the connection between the Internet
backbone and the end-user), which is the central data bottleneck in
telecommunications networks today.
Wireless-TX is focused on providing the solution to the "last mile" problem
faced by traditional wired telecommunications services which is how to
profitably build out a network that provides the level of services demanded by
end users. In medium to small markets, and in areas of the United States with
limited or no existing telecommunications infrastructure, the cost to install or
upgrade wired services to provide the level of access customers expect can be
prohibitive. Wireless-TX believes that its fixed wireless Internet access
products are faster and less expensive to deploy than traditional wired
services, with a lower cost-per-user to install, deploy and manage.
Wireless-TX's wireless network products is designed to operate in the
license-free ISM radio spectrum, which facilitates a more rapid and low-cost
market introduction for service providers than for licensed or hardwire
solutions. Our products utilize direct sequence spectrum or DSS communications,
which ensures reliable, secure, low-interference communications.
The Market
The market for our fixed wireless access products is driven by the
worldwide demand for Internet access as well as the increasing demand for high
speed Internet access. Our target market in North America is comprised of cities
with a population of fewer than 150,000, suburban areas of larger cities and
industrial parks. In these markets, our products address the demands of
organizations and consumers who require broadband access to the Internet, but do
not have access to cable or digital subscriber line connections from traditional
service providers. We believe that the growth of our business will be driven by
the following:
o growth in the number of Internet users world wide;
o growing demand for high speed Internet access;
o scarcity of access technologies that are capable of efficiently and
economically delivering more than 1 Mbps; o lack of wireline
infrastructures; and
o lack of suitable broadband access technologies in rural and suburban
areas in North America.
In meeting these market requirements, we believe our fixed wireless access
product line offers the following benefits as a communications technology:
o instant blanket coverage without digging up streets or leasing
capacity from competitors;
o a pay-as-you-grow deployment model, which allows for low-cost market
entry with incremental costs matched to incremental revenues;
o bandwidth increments that address the requirements of small and
mid-size businesses;
o point-to-multipoint technology allowing for burstable, bandwidth on
demand services, which are specially suited towards a data-centric
environment;
o wireless technology which enables those who do not have access to
copper, coaxial or fiber optic wire to participate in the high-speed
Internet access market;
o significant cost advantages through the use of license-free radio
frequencies; and
o easy to set up, non-line-of-sight modems resulting in further
significant cost savings by avoiding expensive truck rolls to install
customer premise equipment.
Currently, our products operate in the unlicensed spectrum, specifically
900 MHz and 2.4 GHz. We believe that our 900 MHz products in particular could
enjoy wide acceptance because of their non-line-of-sight and easy to set up
features. Deployments that combine business and consumer subscribers can be
shown to offer a viable and profitable business case for service operators
Regulation of Wireless Communications
Currently, our technology is deployed in the highly regulated license free
frequency bands. As such, our products are not subject to any wireless or
transmission licensing in the United States, Canada and many other jurisdictions
worldwide. The products do, however, have to be approved by the Federal
Communications Commission, for use in the United States, Industry Canada, for
use in Canada, and other regulatory bodies for use in other jurisdictions, to
ensure they meet the rigorous requirements for use of these bands.
Continued license-free operation will be dependent upon the continuation of
existing government policy and, while we are not aware of any policy changes
planned or expected, this cannot be assured. License-free operation of our
products in the 902 to 928 MHz and the 2.4 GHz bands are subordinate to certain
licensed and unlicensed uses of the bands and our products must not cause
harmful interference to other equipment operating in the bands and must accept
interference from any of them. If we should be unable to eliminate any such
harmful interference, or should our products be unable to accept interference
caused by others, we or our customers could be required to cease operations in
the bands in the locations affected by the harmful interference. Additionally,
in the event the 902 to 928 MHz or the 2.4 GHz bands becomes unacceptably
crowded, and no additional frequencies are allocated, our business could be
adversely affected.
Risk Factors
We Have A Limited Operating History With Which To Judge Our Performance and
Which Is Not Indicative of Our Future Performance.
We were only recently incorporated and we have a limited operating history.
We may encounter risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets. We cannot assure stockholders
that our business strategy will be successful or that we will successfully
address these risks. Our failure to do so could materially adversely affect our
business, financial condition and operating results.
We Depend Upon Key Personnel And Need Additional Personnel
Our success depends on the continuing services of Alex Gonzalez , our chief
executive officer and director. The loss of this individual could have a
material and adverse effect on our business operations.
Additionally, the success of the Company's operations will largely depend
upon its ability to successfully attract and maintain competent and qualified
key management personnel. As with any startup company, there can be no guaranty
that the Company will be able to attract such individuals or that the presence
of such individuals will necessarily translate into profitability for the
Company. Our inability to attract and retain key personnel may materially and
adversely affect our business operations.
We Need To Expand Our Sales And Support Organizations To Increase Market
Acceptance Of Our Products and If We Are Unable to Achieve market Acceptance of
Our Products Our Revenue May be Adversely Impacted.
Competition for qualified sales personnel is intense. In addition, we
currently have a small customer service and support organization and will need
to increase our staff to support new customers and the expanding needs of
existing customers. The employment market for sales personnel, and customer
service and support personnel in this industry is very competitive, and we may
not be able to hire the kind and number of sales personnel, customer service and
support personnel we are targeting. Our inability to hire qualified sales,
customer service and support personnel may materially adversely affect our
business, operating results and financial condition.
Competition may adversely affect the Company's operations and results
The ability of the Company to compete successfully depends upon a number of
factors including its responsiveness to demand for diversity in products and
services, technological capability, product quality and pricing. The ability to
remain competitive will depend in significant part upon its ability to
continually upgrade systems and service to keep up with technological advances
and changes in a timely and cost-effective manner in response to both evolving
demands of the marketplace, requirements of applicable laws and regulations and
product/service offerings by competitors. Should a competitor have a
technological breakthrough, the Company could lose a significant share of the
market unless it is able to keep pace with developing technology.
The two principal providers of high-speed Internet access are the local
telephone and the cable company. The local telephone company can provide service
only to the extent it can reach a house or business through an upgraded copper
phone line. The broadband product they offer is Digital Subscriber Lines
("DSL"). DSL service is offered by the regional Bell Operating companies such as
SBC, Verizon and BellSouth. Consequently, local telephone and cable companies
provide the most competition to the business of the Company. Earthlink, Sprint,
Covad and competitive local exchange carriers such as Adelphia and NuVox also
sell DSL service.
Local cable companies provide shared bandwidth over their cable systems. To
do so, they must first upgrade their physical plants from one-way television
service to two-way data service. The capital involved in such upgrades has
restrained cable modem rollouts. Moreover, the service they offer, a shared,
"best efforts" service, degrades as more users burden their systems.
Contract termination may affect our operations and results.
While the Company may obtain firm, long-term purchase commitments from
corporate and/or residential customers, cancellations and non-renewals in excess
of anticipated sales-reductions would adversely affect profitability. The
short-term nature of the Company's customer commitments and the possibility of
rapid changes in demand reduce the Company's ability to estimate accurately
future customer requirements. The Company may increase staffing, purchase
additional equipment and incur other expenses to meet the anticipated demand of
its customers but that increased demand may not materialize, thus adversely
affecting the Company's ability to make a profit. Additionally, any of the
Company's long-term relationships may be terminated at any time, for valid or
invalid reasons, with or without recourse and termination of a significant
number of these relationships could have a material and adverse effect on the
Company and its business.
The Company may not be able to manage potential growth, if any.
The Company has grown in recent years and expects to continue the expansion
of its operations. This growth has placed, and will continue to place,
significant strain on management, operations, technical, financial, systems,
sales, marketing and other resources. The ability to manage the expansion to
date, as well as any future expansion, will require progressive enhancements or
upgrades of processes, equipment, accounting and other systems and the
implementation of a variety of procedures and controls. The Company cannot
assure that significant problems in these areas will not occur. Any failure to
enhance or expand these systems and implement procedures and controls in an
efficient manner and at a pace consistent with its business activities could
harm the financial condition and results of operations. The success of the
internal growth strategy of the Company will depend on various factors,
including the demand for its products and services and its ability to generate
new and higher margin business. These factors are, at least in part, beyond the
Company's control and there can be no assurance the Company's internal growth
strategy will be successful.
Executive Officers
Alex Gonzalez, the Chairman and Chief Executive Officert, is 42
years old and has twenty years of experience in data networking and
telecommunications. Prior to starting Wireless-TX, Mr. Gonzalez held R&D and
management positions with Partners Alliance Group from 1998 to 2002. In
addition, Mr. Gonzalez served as the Vice President of Sales for Flair Data
Systems from 1989 to 1998. From 1984 to 1988, Mr. Gonzalez served as a sales
manger for and MCI Communications and regional sales manager for ClayDesta
Communications. Mr. Gonzalez received a bachelors degree from Texas A&M
University.
Jasper Knabb, a director and President of the Company, has a track record
with eighteen of years experience in business development, retail marketing and
wireless industry solutions. Mr. Knabb has worked in the wireless internet
services arena since the late 1990's. Most recently, Mr. Knabb served as an
officer of Internet OTC Wireless, Inc., a privately held wireless manufacturer.
Executive Compensation
The following table summarizes the compensation earned by or paid to our
Chief Executive Officer and the other most highly compensated executive officers
whose total salary and bonuses exceeded $100,000 for services rendered in all
capacities during the fiscal years ended December 31, 2002 and 2001.
- ------------------ ---------------- ---------------- --------------------------------- ---------------------------------
Annual Compensation Long Term Compensation
- ------------------ ---------------- ---------------- --------------------------------- ---------------------------------
Name and Year Salary Bonus Other Annual Securities All Other
Principal Compensation Underlying Compensation
Position Options
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Alex Gonzalez, 2002 $91,750 $10,000 $-- -- $--
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Chairman and 2001 $50,176 $-- $-- -- $--
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Chief Executive 2000 -- $-- $-- -- $--
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Officer
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Jasper Knabb, 2002 $-- $-- $-- -- $--
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
President and 2001 $-- $-- $-- -- $--
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Director 2000 $-- $-- $-- -- $--
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Related Party Transactions
As of June 30, 2003, Wireless-TX had outstanding loans to shareholders and
its officer in the aggregate amount of $20,269. The loans are non-interest
bearing and are due on demand.
Litigation
In May 2003, Wireless-TX, pursuant to that certain Asset Purchase
Agreement, purchased the assets of Momentum Online Computer Services, Inc., a
Texas corporation ("Momentum") in exchange for the issuance of shares of
Wireless-TX. On November 10, 2003, Momentum filed a complaint against
Wireless-TX in district state court for the State of Texas. Momentum's complaint
alleges that Wireless-TX breached its contract as a result of the failure to
deliver shares of common stock of Wireless-TX as required pursuant to the Asset
Purchase Agreement. The court issued an injunction requiring that any revenue
generated from the subject assets be placed in escrow and utilized to pay any
outstanding invoices in connection with the use of the assets. In addition, the
court also ordered mediation, which did not produce a resolution. The management
of Wireless-TX believes that Momentum's lawsuit is without merit and intends to
vigorously defend this matter.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of businesses acquired.
1. Audited Financial Statements of Wireless Frontier Internet, Inc.,
a Texas corporation, for the years ended December 31, 2002 and
December 31, 2001
2. Unaudited Financial Statements of Wireless Frontier Internet,
Inc., a Texas corporation, for the six month period ended June
30, 2003
(b) Proforma Financial Information
Proforma Financial Information.
(c) Exhibits.
2.1 Agreement and Plan of Merger among Fremont Corporation, Networker
Systems, Inc. and Wireless Frontier, Inc. dated September 16,
2003
10.1 Asset Purchase Agreement entered between Fremont Corporation and
Million Treasure Enterprise Limited dated September 16, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WIRELESS FRONTIER INTERNET, INC.
Date: January 13, 2004 /s/Alex Gonzalez
---------------
Alex Gonzalez
Chairman and CEO
EXHIBIT A-1
TERANCE L. KELLEY
Certified Public Accountant 3250 West Market Street Suite 307,
Fairlawn, OH 44333 (330) 864-2265
Partners Alliance Group, Inc.
Fort Stockton, Texas
I have audited the Balance Sheet of Partners Alliance Group, Inc., as of
December 31, 2002 and December 31, 2001 and the related Statement of Income,
Changes in Stockholders' Equity, and Statement of Cash Flows for the years then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on those financial
statements based on my audits.
I conducted my audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that I plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. Audits include examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Audits also include assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis for
my opinion.
In my opinion, based on my audits, the financial statements referenced above
present fairly, in all material respects, the financial position of Partners
Alliance Group, Inc. as of December 31, 2002 and December 31, 2001, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles accepted in the United
States of America.
Terance L. Kelley
April 25, 2003
PARTNERS ALLIANCE GROUP INC.
BALANCE SHEET
December 31, 2002 and 2001
ASSETS
2002 2001
------------ ------------
CURRENT ASSETS
Cash $ 188,990 $ 94,331
Accounts receivable 136,824 35,418
Inventories 59,615 -
------------ ------------
Total Current Assets 385,429 129,749
FIXED ASSETS
Equipment 621,079 539,832
Vehicles 47,520 47,520
------------ ------------
668,599 587,352
Less: Accumulated depreciation (233,610) (107,646)
------------ ------------
434,989 479,706
OTHER ASSETS
Goodwill 505,966 283,091
Covenants not to compete 10,000 5,000
------------ ------------
515,966 288,091
Less: Accumulated amortization (37,307) (7,517)
------------ ------------
478,659 280,574
Shareholder receivables 15,779 11,679
------------ ------------
494,438 292,253
------------ ------------
Total Assets $ 1,314,856 $ 901,708
============ ============
See accompanying notes and accountant's report.
2
LIABILITIES AND STOCKHOLDERS' EQUITY
2002 2001
------------ ------------
CURRENT LIABILITIES
Line of credits 246,110 67,696
Current portion of long - term debt 75,041 60,270
Accounts payable 27,084 337
Accrued payroll 17,675 7,923
Accrued interest 5,451 1,987
Accrued taxes 12,774 6,234
------------ ------------
Total Current Liabilities 384,135 144,447
LONG - TERM DEBT
Long - term debt 485,877 290,678
STOCKHOLDERS' EQUITY
Common stock, 100,000,000 authorized 1,000 1,000
10,000,000 outstanding
Additional contributed capital 664,316 664,316
Retained deficit (220,472) (198,733)
------------ ------------
444,844 466,583
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,314,856 $ 901,708
============ ============
PARTNERS ALLIANCE GROUP, INC.
STATEMENT OF INCOME
For the Years ended December 31, 2002 and 2001
2002 2001
------------ ------------
REVENUES
Equipment Sales
Revenues $ 1,442,901 $ 1,107,164
Cost of sales 865,201 838,553
------------ ------------
Gross profit equipment sales 577,700 268,611
Internet service
Revenues 653,817 230,239
Cost of sales 281,533 59,234
------------ ------------
Gross profit internet sales 372,284 171,005
------------ ------------
TOTAL GROSS PROFIT 949,984 439,616
GENERAL AND ADMINISTRATIVE
Advertising and promotion 19,199 7,406
Amortization and depreciation 155,754 114,656
Legal and professional 7,500 8,415
Auto and travel 58,057 41,850
Commissions and contract labor 14,702 69,692
Office expenses and supplies 52,967 25,213
Insurance 23,732 16,570
Interest 55,188 22,938
Rent 44,453 34,932
Repairs and maintenance 5,229 16,824
Salary and wages 434,618 187,001
Taxes 68,509 43,710
Utilities 39,885 20,893
------------ ------------
979,793 610,100
------------ ------------
LOSS FROM OPERATIONS (29,809) (170,484)
Other income 8,070 9,244
------------ ------------
NET LOSS $ (21,739) $ (161,240)
============ ============
See accompanying notes and accountant's report.
3
PARTNERS ALLIANCE GROUP, INC.
CHANGES IN STOCKHOLDERS' EQUITY
For the Years ended December 31, 2002 and 2001
ADDITIONAL
COMMON CONTRIBUTED RETAINED
STOCK CAPITAL DEFICIT TOTAL
---------- ------------ ------------ -------------
BALANCE December 31, 2000 $ 1,000 $ 71,490 $ (37,493) $ 34,997
Contribution of West-Tex Internet - 592,826 - 592,826
Net Loss for 2001 - - (161,240) (161,240)
---------- ------------ ------------ -------------
BALANCE December 31, 2001 1,000 664,316 (198,733) 466,583
Net Loss for 2002 - - (21,739) (21,739)
---------- ------------ ------------ -------------
BALANCE December 31, 2002 $ 1,000 $ 664,316 $ (220,472) $ 444,844
========== ============ ============ =============
See accompanying notes and accountant's report.
4
PARTNERS ALLIANCE GROUP, INC.
STATEMENT OF CASH FLOWS
For the Years ended December 31, 2002 and 2001
2002 2001
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $ (21,739) $ (161,240)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation 125,964 107,139
Amortization 29,790 7,517
Gain on sale of assets - (6,995)
Changes in Current assets and liabilities:
(Increase) in Accounts receivable (101,406) (35,418)
(Increase) in Inventories (59,615) -
Increase (Decrease) in Accounts payable 26,747 337
(Decrease) Increase in Accrued payroll 9,752 7,923
Increase in Accrued interest 3,464 1,987
Increase in Accrued taxes 6,540 6,234
------------ -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 19,497 (72,516)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed assets (81,247) (558,587)
Proceeds from sale of Fixed assets - 23,182
Purchase of Goodwill (222,875) (283,091)
Purchase of Covenant not to compete (5,000) (5,000)
Increase in Shareholder receivables (4,100) (11,679)
------------ -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (313,222) (835,175)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Line of credit - net 178,414 67,696
Increase in Long - term debt 457,975 316,133
Payments on Long - term debt (248,005) (14,554)
Increase in Additional contributed capital - 592,826
------------ -----------
NET CASH USED BY
FINANCING ACTIVITIES 388,384 962,101
------------ -----------
NET INCREASE (DECREASE) IN CASH 94,659 54,410
CASH AT BEGINNING OF YEAR 94,331 39,921
------------ -----------
CASH AT END OF YEAR $ 188,990 $ 94,331
============ ===========
See accompanying notes and accountant's report.
5
PARTNERS ALLIANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History
The Company was incorporated under the laws of the state of Texas on July 7,
1998 for the purpose of making equipment sales within the state of Texas and
Colorado. On February 8, 2000 the controlling interest in the Company was
purchased by the current majority shareholder.
The current majority shareholder, on January 1, 2001 contributed the assets and
operations of West-Tex Internet to the Company. At that time the Company also
became an Internet Service Provider with about 475 customers in the Fort
Stockton, Texas area.
The Company purchased on November 30, 2001 the assets and operations of Overland
Network for $200,000. This purchase expanded the Company's Internet Service
Provider area to include Alpine, Fort Davis, Marathon and Marfa, Texas areas.
The Company also obtained, for $5,000, a three-year covenant not to compete,
within a 50-mile radius of the Company's operations including the areas
purchased from the seller.
The Company purchased on May 31, 2002 the assets and operations of Brooks Data
Consultants, Inc. for $245,000. This purchase expanded the Company's Internet
Service Provider area to include Terlingua, Presidio, Sanderson, Sheffield,
Comstock, Big Bend National Park and Heath Canyon, Texas areas. The Company also
obtained, for $5,000, a five-year covenant not to compete, within a 50-mile
radius of the Company's operations including the areas purchased, from the
seller.
Today the Company is an Internet Service Provider in southwest Texas, providing
both dial-up and wireless services in addition to the equipment sales.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all
short-term debt securities to be cash equivalents.
Cash paid during the years for:
2002 2001
---- ----
Interest $51,724 $20,951
Income taxes -0- -0-
PARTNERS ALLIANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income taxes
The Company accounts for income taxes under a method, which requires a company
to, recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in a company's financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statements carrying amounts and tax basis of assets and liabilities using
enacted tax rates. The Company presently prepares its tax return on the cash
basis and its financial statements on the accrual basis. No deferred tax assets
or liabilities have been recognized at this time, since the Company has shown
losses for both tax and financial reporting. The Company's net operating loss
carryforward at December 31, 2002 is approximately $186,000.
Depreciation and Amortization
The Company provides for depreciation of fixed assets utilizing the
straight-line method to apportion costs over the following estimated lives:
Years
Equipment 5
Vehicles 5
The Company provides for amortization of purchased Goodwill utilizing the
straight-line method to apportion costs over a 15 year estimated life.
The Company provides for amortization of the Covenants not to compete utilizing
the straight-line method to apportion costs over the life of the covenant.
Presently the Company has two covenants not to compete. One has a three-year
life and the other has a five-year life.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
PARTNERS ALLIANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE -2 FIXED ASSETS
Fixed assets are summarized by major classifications as follows:
December 31, December 31,
2002 2001
----------- ------------
Equipment $ 621,079 $ 539,832
Vehicles 47,520 47,520
----------- ------------
668,599 587,352
Less: Accumulated depreciation (233,610) (107,646)
----------- ------------
$ 434,989 $ 479,706
=========== ============
Depreciation expense for the years ended December 31, 2002 and 2001 was $125,964
and $107,139 respectively.
NOTE 3 - GOODWILL AND COVENANTS NOT TO COMPETE
Goodwill and covenants not to compete are summarized by major classifications as
follows:
December 31, December 31,
2002 2001
----------- ------------
Goodwill $ 505,966 $ 283,091
Covenants not to compete 10,000 5,000
----------- ------------
515,966 288,091
Less: Accumulated amortization (37,307) (7,517)
----------- ------------
$ 478,659 $ 280,574
=========== ============
Amortization expense for the years ended December 31, 2002 and 2001 was $29,790
and $7,517 respectively.
Future amortization expense for the next five years is as follows:
2003 $36,398
2004 36,258
2005 34,731
2006 34,731
2007 34,148
PARTNERS ALLIANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 4 - NOTES PAYABLE
On February 1, 2001, the Company entered into a Merchant Services Agreement with
a local Bank. The agreement called for the Bank to bill and collect certain of
the Company's Internet Services billings. Funds billed were advanced to the
Company upon billing. The Company was responsible to buy back the receivables
when and if they reached a certain age. The total commitment by the Bank was
$85,000. The interest rate on the loan was 18%. The balance outstanding at
December 31, 2001 was $2,004. The loan was paid in full when the agreement
expired on February 1, 2002.
On May 15, 2001, the Company entered into a Line of Credit Loan Agreement with a
local Bank for $150,000. The loan was renewed for an additional year when it
expired on May 15, 2002. The initial interest rate on the loan was 9.5% that
varied with the Wall Street journal Prime Rate. The rate at December 31, 2002
was 6.25%. The loan is secured by all inventories, accounts and general
intangibles owned by the Company. The loan is also guaranteed by two
shareholders and officers of the Company. The balance due at December 31, 2002
and 2001 was $146,110 and $65,692 respectively.
On November 14, 2002, the Company entered into a Line of Credit Agreement with a
local Bank for $175,000 due March 7, 2003. The loan was renewed on March 7, 2003
and is due June 5, 2003. The interest rate is 6.75%. The loan is secured by all
accounts and other rights to payments, inventories, equipment, instruments and
chattel paper, general intangibles, documents, and deposit accounts owned by the
Company. The majority shareholder and officer of the Company also guarantee the
loan. The balance due at December 31, 2002 was $100,000.
On July 17, 2000, the Company entered into a loan agreement with a local Bank
for $26,659. The loan calls for 30 monthly payments of $1,014 including interest
at 10.5%. The note is secured by the equipment purchased and a Bank Account of
the Company. The majority shareholder and officer of the Company also guarantee
the note. The balance due at December 31, 2002 and 2001 was $1,004 and $12,410
respectively.
On June 15, 2001, the Company entered into a loan agreement with Fort Stockton
Development Corporation for $50,000. The interest rate is 3% and is due in full
on June 15, 2004. The loan will be forgiven in proportion to the number of full
time jobs created at a ratio of $2,000 per full time job. Furniture, fixtures
and equipment secure the note. To date the Company has added over 20 full time
jobs under this agreement. The balance due at December 31, 2002 and 2001 was
$50,817 and $52,361 respectively.
PARTNERS ALLIANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 4 - NOTES PAYABLE-CONTINUED
On June 29, 2001, the Company entered into a loan agreement with a local Bank
for $27,000. The initial interest rate on the loan was 9% that varied with the
Wall Street Journal Prime Rate. The rate at December 31, 2002 was 6.25%. The
loan calls for 60 monthly payments of $563 including interest. The loan is
unsecured, however the Bank has the right of offset in all the Company's
accounts with the lender. The balance outstanding at December 31, 2002 and 2001
was $19,575 and $24,374 respectively.
On September 4, 2001, the Company entered into a loan agreement with a local
Bank for $40,000. The interest rate is 8%. The loan calls for 60 monthly
payments of $813 including interest. The vehicle purchased secures the loan. The
balance due at December 31, 2002 and 2001 was $31,515 and $38,347 respectively.
On November 30, 2001, the Company entered into a loan agreement with a local
Bank for $225,000. The loan calls for monthly payments of $4,671 including
interest at 9%. The assets purchased secure the note. The majority shareholder
and officer of the Company also guaranteed the note. The note was refinanced on
May 30, 2002. The balance due at December 31, 2001 was $225,000.
On April 15, 2002, the Company entered into a loan agreement with a local Bank
for $16,350. The loan calls for monthly payments of $621 including interest. The
initial interest was 6.75%, which varies with the Wall Street Journal Prime
Rate. The rate at December 31, 2002 was 6.25%. The loan is unsecured, however
the Bank has the right of offset in all the Company's accounts with the lender.
The balance due at December 31, 2002 was $13,026.
On May 30, 2002, the Company entered into a loan agreement with a local Bank for
$469,073. The loan calls for 24 monthly payments of $7,000, followed by 47
monthly payments of $8,500 and 1 payment of $11,603. All payments include
interest at 6.75%, which varies with the Wall Street Journal Prime Rate. The
interest rate at December 31, 2002 was 6.25%. The loan is secured by all
equipment, accounts receivable, and inventories whether now owned or hereafter
acquired, wherever located. Certain Shareholders and officers of the Company
also guarantee the loan.
Total Long-Term debt at December 31 is as follows:
2002 2001
---- ----
Long-term debt $560,918 $350,948
Less Current portion (75,041) (60,270)
-------- --------
Long-term debt $485,877 $290,678
======== ========
PARTNERS ALLIANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 4 - NOTES PAYABLE-CONTINUED
Maturities on long-term debt are as follows:
Year ending December 31,
2003 $75,041
2004 147,457
2005 100,542
2006 99,222
2007 95,583
Thereafter 48,073
--------
Total $565,918
=========
NOTE 5 - COMMITMENTS
The Company leases real estate in Fort Stockton under a one-year agreement due
to expire on December 31, 2003. The lease calls for monthly payments of $750 per
month.
The Company leases real estate in Sanderson under a five-year agreement due to
expire in 2008. The lease calls for monthly payments of $675 per month.
The Company leases real estate in Fort Davis under a month-to-month agreement.
The lease calls for monthly payments of $300 per month.
The Company leases real estate in Alpine under a month-to-month agreement. The
lease calls for monthly payments of $625 per month.
The Company leases equipment on a month-to-month basis from an individual. The
lease calls for monthly payments of $1,221 per month.
The Company leases equipment under a 7-month agreement from a leasing company,
which expires January 24, 2003. The lease calls for monthly payments of $892 per
month,
Future minimum lease payments are as follows:
2003 $17,992
2004 8,100
2005 8,100
2006 8,100
2007 8,100
PARTNERS ALLIANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has advanced funds to Shareholders and Officers of the Company
totaling $15,779 and $11,679 at December 31, 2002 and 2001 respectively. The
advances are non-interest bearing and are due on demand. The Company has not
indicated any desire to call the advances at this time.
NOTE7 - SUBSQUENT EVENTS
In April of 2003 the Company embarked on a private placement offering to raise
$1,000,000 through the sale of additional shares of common stock. The offering
is at $6 per share.
EXHIBIT A-2
TERANCE L. KELLEY
Certified Public Accountant 3250 West Market Street Suite 307,
Fairlawn, OH 44333 (330) 864-2265
Report of Independent Certified Public Accountants
Board of Directors
Wireless Frontier Internet, Inc.
Ft Stockton, Texas
I have reviewed the accompanying consolidated balance sheets of Wireless
Frontier Internet, Inc. as of June 30, 2003 and the related consolidated
statements of income, stockholders' equity, and cash flows for the three months
then ended and since inception, in accordance with standards established by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of Wireless
Frontier Internet, Inc.
A review consists principally of inquires of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the object of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the June 30, 2003 financial statements in order for them to be in
conformity with generally accepted accounting principles accepted in the United
States of America.
Terance L Kelley
Certified Public Accountant
July 25, 2003
Fairlawn, Ohio
WIRELESS FRONTIER INTERNET, INC.
BALANCE SHEET
June 30, 2003
ASSETS
2003
------------
CURRENT ASSETS
Cash $ 192,233
Accounts receivable 873,441
Inventories 204,757
Prepaid expenses 98,276
------------
Total Current Assets 1,368,707
FIXED ASSETS
Buildings 375,000
Equipment 1,201,423
Vehicles 466,334
------------
2,042,757
Less: Accumulated depreciation (311,791)
------------
1,730,966
OTHER ASSETS
Goodwill 3,510,452
Covenants not to compete 10,000
------------
3,520,452
Less: Accumulated amortization (69,351)
------------
3,451,101
Shareholder receivables 20,286
------------
3,471,387
Total Assets $ 6,571,060
============
See accompanying notes and accountant's report.
2
LIABILITIES AND STOCKHOLDERS' EQUITY
2003
------------
CURRENT LIABILITIES
Line of credits $ 230,654
Current portion of long - term debt 263,223
Accounts payable 326,902
Accrued payroll 64,121
Accrued interest 6,573
Accrued taxes 38,563
------------
Total Current Liabilities 930,036
LONG - TERM DEBT
Long - term debt 761,521
STOCKHOLDERS' EQUITY
Common stock 100,000,000 shares authorized 1,603
16,026,579 shares outstanding, par value
$0.0001 per share
Additional contributed capital 5,238,145
Retained deficit (360,245)
------------
4,879,503
Total Liabilities and Stockholders' Equity $ 6,571,060
============
WIRELESS FRONTIER INTERNET, INC.
STATEMENT OF INCOME
For the Quarter and Six Months Ended June 30, 2003
Six Months
Quarter Ended Ended
June 30, June 30,
2003 2003
------------ ------------
REVENUES
Equipment Sales
Revenues $ 677,130 $ 877,190
Cost of sales 310,725 492,677
------------ ------------
Gross profit equipment sales 366,405 384,513
Internet service
Revenues 653,512 932,608
Cost of sales 32,199 234,637
------------ ------------
Gross profit internet sales 621,313 697,971
------------ ------------
TOTAL GROSS PROFIT 987,718 1,082,484
GENERAL AND ADMINISTRATIVE
Advertising and promotion 26,649 34,686
Amortization and depreciation 80,759 123,689
Legal and professional 57,425 59,390
Auto and travel 67,295 88,183
Commissions and contract labor 16,561 32,431
Office expenses and supplies 78,552 96,801
Insurance 22,156 36,126
Interest 28,123 32,397
Rent 8,426 36,147
Repairs and maintenance 4,040 6,043
Salary and wages 436,372 592,675
Taxes 81,391 96,180
Utilities 25,545 38,471
------------ ------------
933,294 1,273,219
------------ ------------
LOSS FROM OPERATIONS 54,424 (190,735)
Other income 40,846 50,962
------------ ------------
NET INCOME/(LOSS) $ 95,270 $ (139,773)
============ ============
Average shares outstanding 15,235,455 15,070,561
Earnings/(Loss) per share $ 0.01 $ (0.01)
See accompanying notes and accountant's report.
3
WIRELESS FRONTIER INTERNET, INC.
CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2003
ADDITIONAL
NUMBER OF COMMON CONTRIBUTED RETAINED
SHARES STOCK CAPITAL DEFICIT TOTAL
------------ ------------ ------------ ------------ ------------
BALANCE December 31, 2002 14,906,000 $ 1,000 $ 664,316 $ (220,472) $ 444,844
Recapitalize for stock split - 491 (491) - -
Shares sold 551,530 55 1,156,083 - 1,156,138
Kolinek acquisition 28,048 3 168,285 - 168,288
Strategic Abstract acquisition 104,166 10 628,986 - 628,996
Momuntum acquisition 436,835 44 2,620,966 - 2,621,010
Net Loss for six months - - - (139,773) (139,773)
------------ ------------ ------------ ------------ ------------
BALANCE June 30, 2003 16,026,579 $ 1,603 $ 5,238,145 $ (360,245) $ 4,879,503
============ ============ ============ ============ ============
See accompanying notes and accountant's report.
4
WIRELESS FRONTIER INTERNET, INC.
STATEMENT OF CASH FLOWS
For the Quarter and Six Months Ended June 30, 2003
Quarter Ended Six Months Ended
June 30, June 30,
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the three months $ 95,270 $ (139,773)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation 57,815 91,645
Amortization 22,944 32,044
(Loss) on sale of assets (5,793) (5,793)
Changes in Current assets and liabilities:
Decrease (Increase) in Accounts receivable (651,825) (613,127)
Decrease (Increase) in Inventories (153,805) (118,425)
(Increase) in Prepaid expenses (98,276) (98,276)
Increase (Decrease) in Accounts payable 240,880 222,026
Increase in Accrued payroll 12,702 22,269
Increase (Decrease) in Accrued interest 1 -
Increase (Decrease) in Accrued taxes 12,168 7,898
------------ ------------
NET CASH (USED) BY
OPERATING ACTIVITIES (467,919) (599,512)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Shareholder receivables (4,507) (4,507)
Purchase of Fixed assets (750,706) (856,733)
------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (755,213) (861,240)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common stock 1,156,138 1,156,138
(Payments) Increase in Line of credit - net (146,110) (74,878)
Increase in Long - term debt 309,699 404,199
Payments on Long - term debt (4,525) (33,517)
------------ ------------
NET CASH USED BY
FINANCING ACTIVITIES 1,315,202 1,451,942
------------ ------------
NET INCREASE (DECREASE) IN CASH 92,070 (8,810)
CASH AT BEGINNING OF PERIOD 88,110 188,990
CASH ACQUIRED FROM MOMENTUM 12,053 12,053
------------ ------------
CASH AT END OF PERIOD $ 192,233 $ 192,233
============ ============
See accompanying notes and accountant's report.
5
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History
The Company was incorporated under the laws of the state of Texas on July 7,
1998 for the purpose of making equipment sales within the state of Texas and
Colorado. On February 8, 2000 the controlling interest in the Company was
purchased by the current majority shareholder.
The current majority shareholder, on January 1, 2001 contributed the assets and
operations of West-Tex Internet to the Company. At that time the Company also
became an Internet Service Provider with about 475 customers in the Fort
Stockton, Texas area.
The Company purchased on November 30, 2001 the assets and operations of Overland
Network for $200,000. This purchase expanded the Company's Internet Service
Provider area to include Alpine, Fort Davis, Marathon and Marfa, Texas areas.
The Company also obtained, for $5,000, a three-year covenant not to compete,
within a 50-mile radius of the Company's operations including the areas
purchased from the seller.
The Company purchased on May 31, 2002 the assets and operations of Brooks Data
Consultants, Inc. for $245,000. This purchase expanded the Company's Internet
Service Provider area to include Terlingua, Presidio, Sanderson, Sheffield,
Comstock, Big Bend National Park and Heath Canyon, Texas areas. The Company also
obtained, for $5,000, a five-year covenant not to compete, within a 50-mile
radius of the Company's operations including the areas purchased, from the
seller.
On January 20, 2003 the Company's Board of Directors declared a 100 to 1 stock
split increasing the authorized common shares from 1,000,000 to 100,000,000.
On May 28, 2003 the stockholders of the Company exchanged all the outstanding
shares of the Company for 7,453,000 shares of common stock. On the same date the
Company's Board of Directors declared a 2 to 1 stock split. These financial
statements reflect this split as if it happened at the beginning of the periods
reported.
On June 1, 2003, the Company entered into an agreement to purchase all the
assets and assume certain liabilities of Momentum Online Computer Services, Inc.
for 436,835 shares of common stock valued at $6 per share. This purchase
expanded the Company's Internet Service Provider area to the Highway 281
corridor, that extends roughly from south of the Dallas, Fort Worth area to the
north of San Antonio.
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
On June 30, 2003, the Company entered into an agreement to purchase all the
assets of Kolinek Internet service for 28,048 shares of common stock valued at
$6 per share. This purchase expanded the Company's Internet Service Provider
area in the Highway 281 corridor.
On June 30, 2003, the Company entered into an agreement to purchase all the
assets of Strategic Abstract & Title Corporation for $4,000 and 104,166 shares
of common stock valued at $6 per share. This purchase added three commercial
buildings valued at $285,000 and the assets and business of Strategic Abstract &
Title Corporation.
Today the Company is a Wireless Internet Service Provider in southwest Texas,
providing both wireless and dial-up services in addition to the equipment sales.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all
short-term debt securities to be cash equivalents.
Cash paid during the six months for:
2003
Interest $31,273
Income taxes -0-
Income taxes
The Company accounts for income taxes under a method, which requires a company
to, recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in a company's financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statements carrying amounts and tax basis of assets and liabilities using
enacted tax rates. The Company presently prepares its tax return on the cash
basis and its financial statements on the accrual basis. No deferred tax assets
or liabilities have been recognized at this time, since the Company has shown
losses for both tax and financial reporting. The Company's net operating loss
carryforward at December 31, 2002 is approximately $186,000.
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Depreciation and Amortization
The Company provides for depreciation of fixed assets utilizing the
straight-line method to apportion costs over the following estimated lives:
Years
Buildings 40
Equipment 5
Vehicles 5
The Company provides for amortization of purchased Goodwill, utilizing the
straight-line method to apportion costs over a 15 year estimated life.
The Company provides for amortization of the covenants not to compete utilizing
the straight-line method to apportion costs over the life of the covenant.
Presently the Company has two covenants not to compete. One has a three-year
life and the other has a five-year life.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
NOTE -2 FIXED ASSETS
Fixed assets are summarized by major classifications as follows:
June 30,
2003
Buildings $375,000
Equipment 1,201,423
Vehicles 466,334
-----------
2,042,757
Less: Accumulated depreciation (311,791)
$1,730,966
==========
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE -2 FIXED ASSETS-CONTINUED
Depreciation expense for the six months ended June 30, 2003 was $91,645.
NOTE 3 - GOODWILL AND COVENANTS NOT TO COMPETE
Goodwill and covenants not to compete are summarized by major classifications as
follows:
June 30,
2003
Goodwill $3,510,452
Covenants not to compete 10,000
-----------
3,520,452
Less: Accumulated amortization (69,351)
-----------
$3,451,101
===========
Amortization expense for the six months ended June 30, 2003 was $32,044.
Future amortization expense for the next five years is as follows:
2003 $150,394
2004 236,558
2005 235,030
2006 235,030
2007 234,447
NOTE 4 - NOTES PAYABLE
On May 15, 2001, the Company entered into a Line of Credit Loan Agreement with a
local Bank for $150,000. The loan was renewed for an additional year when it
expired on May 15, 2002. The initial interest rate on the loan was 9.5% that
varied with the Wall Street Journal Prime Rate. The rate at December 31, 2002
was 6.25%. The loan is secured by all inventories, accounts and general
intangibles owned by the Company. Two shareholders and officers of the Company
also guarantee the loan. The balance due at June 30, 2003 was $0.
On November 14, 2002, the Company entered into a Line of Credit Agreement with a
local bank for $175,000 due March 7, 2003. The loan was renewed on March 7, 2003
and is due June 5, 2003. The interest rate is 6.75%. The loan is secured by all
accounts and other rights to payments, inventories, equipment, instruments and
chattel paper,
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
general intangibles, documents, and deposit accounts owned by the Company. The
majority shareholder and officer of the Company also guarantee the loan. The
balance due at June 30, 2003 was $171,232.
On July 17, 2000, the Company entered into a loan agreement with a local bank
for $26,659. The loan calls for 30 monthly payments of $1,014 including interest
at 10.5%. The note is secured by the equipment purchased and a bank account of
the Company. The majority shareholder and officer of the Company also guarantee
the note. The note was paid in full in January 2003, according to the terms.
On June 1, 2003 in connection with the acquisition of Momentum the Company
assumed a Line of Credit Agreement dated November 11, 2002 with a local bank for
$75,000 payable on demand and if no demand is made, then on November 22, 2003.
The interest rate is 9%. The loan is secured by all monies the Company has on
deposit with the bank. The note is guaranteed by the former shareholder of
Momentum, who is also an Officer of the Company. At June 30, 2003 the balance
outstanding under this agreement was $59,422.
On June 15, 2001, the Company entered into a loan agreement with Fort Stockton
Development Corporation for $50,000. The interest rate is 3% and is due in full
on June 15, 2004. The loan will be forgiven in proportion to the number of full
time jobs created at a ratio of $2,000 per full time job. Furniture, fixtures
and equipment secure the note. To date the Company has added over 20 full time
jobs under this agreement. In the second quarter of 2003 the Company met the
requirements for complete forgiveness of this loan. Accordingly the balance
outstanding was written off to other income during the quarter.
On June 29, 2001, the Company entered into a loan agreement with a local bank
for $27,000. The initial interest rate on the loan was 9% that varied with the
Wall Street Journal Prime Rate. The rate at December 31, 2002 was 6.25%. The
loan calls for 60 monthly payments of $563 including interest. The loan is
unsecured, however the bank has the right of offset in all the Company's
accounts with the lender. The balance due at June 30, 2003 was $16,915.
On September 4, 2001, the Company entered into a loan agreement with a local
bank for $40,000. The interest rate is 8%. The loan calls for 60 monthly
payments of $813 including interest. The vehicle purchased secures the loan.
This loan was paid off during
the second quarter, in connection with its assumption in a vehicle purchase, by
one of the Company's employees.
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
On April 15, 2002, the Company entered into a loan agreement with a local bank
for $16,350. The loan calls for monthly payments of $621 including interest. The
initial interest was 6.75%, which varies with the Wall Street Journal Prime
Rate. The rate at December 31, 2002 was 6.25%. The loan is unsecured, however
the bank has the right of offset in all the Company's accounts with the lender.
The balance due at June 30, 2003 was $10,256.
On May 30, 2002, the Company entered into a loan agreement with a local bank for
$469,073. The loan calls for 24 monthly payments of $7,000, followed by 47
monthly payments of $8,500 and 1 payment of $11,603. All payments include
interest at 6.75%, which varies with the Wall Street Journal Prime Rate. The
interest rate at December 31, 2002 was 6.25%. The loan is secured by all
equipment, accounts receivable, and inventories whether now owned or hereafter
acquired, wherever located. Certain shareholders and officers of the Company
also guarantee the loan. The balance due at June 30, 2003 was $409,042.
On January 8, 2003, the Company entered into a loan agreement with a local bank
for $14,500. The loan calls for 30 monthly payments of $532 including interest.
The initial interest was 7.5%, which varies with Wall Street Journal Prime Rate.
The loan is secured by the vehicle purchased. Certain shareholders and officers
of the Company also guarantee the loan. The balance at June 30, 2003 was
$12,770.
On April 15, 2003, the Company entered into a loan agreement with a local bank
for $88,340. The loan calls for 60 monthly payments of $1,566 plus interest. The
initial interest was 6.75%, which varies with the Wall Street Journal Prime
Rate. The loan is secured by the installation vehicles purchased. The majority
shareholder and an officer of the Company also guarantee the loan. The balance
at June 30, 2003 was $86,774.
On April 15, 2003, the Company entered into a loan agreement with a Finance
Company for $28,394. The loan calls for 60 monthly payments of $473 including 0%
interest. The loan is secured by the vehicle purchased. The majority shareholder
and an officer of the Company also guarantee the loan. The balance at June 30,
2003 was $27,477.
On April 21, 2003, the Company entered into a loan agreement with a local Credit
Union for $35,402. The loan calls for 70 monthly payments of $504 plus interest
at 6.75%. The loan is secured by the installation vehicle purchased. The
majority shareholder and an
officer of the Company also guarantee the loan. The balance at June 30, 2003 was
$34,898.
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
On April 21, 2003, the Company entered into a loan agreement with a bank for
$38,710. The loan calls for 60 monthly payments of $645 plus interest AT 6.25%.
The loan is secured by the installation vehicle purchased. The majority
shareholder and an officer of the Company also guarantee the loan. The balance
at June 30, 2003 was $38,057.
On April 21, 2003, the Company entered into a loan agreement with a bank for
$35,402. The loan calls for 62 monthly payments of $571 plus interest at 6.25%.
The loan is secured by the installation vehicle purchased. The majority
shareholder and an officer of the Company also guarantee the loan. The balance
at June 30, 2003 was $34,831.
On May 1, 2003, the Company assumed a loan of an employee in exchange for the
vehicle secured by the loan. The loan amount assumed was financed by a Finance
Company and was for $32,005, the balance due at May 1, 2003. The loan calls for
40 additional monthly payments of $762 plus interest at 0%. The loan is secured
by the installation vehicle purchased. The employee of the Company is still
liable for the loan. The balance at June 30, 2003 was $30,480.
On May 1, 2003, the Company entered into a loan agreement with a Finance Company
for $40,546. The loan calls for 60 monthly payments of $676 plus interest at 0%.
The loan is secured by the installation vehicle purchased. The majority
shareholder and an officer of the Company also guarantee the loan. The balance
at June 30, 2003 was $39,195.
On May 27, 2003, the Company entered into a loan agreement with a local bank for
$40,768. The loan calls for 60 monthly payments of $807 including interest at
7.0%. The loan is secured by the installation vehicle purchased. The majority
shareholder and an officer of the Company also guarantee the loan. The balance
at June 30, 2003 was $40,768.
On May 27, 2003, the Company entered into a loan agreement with a local Bank for
$41,407. The loan calls for 60 monthly payments of $820 plus interest at 7.0%.
The loan is secured by the installation vehicle purchased. The majority
shareholder and an officer of the Company also guarantee the loan. The balance
at June 30, 2003 was $41,407.
In May 2003, the Company entered into a loan agreement with an individual for
$90,000 backdated to May 1, 2001 to purchase the Company's headquarters building
in Fort Stockton, Texas. Rent paid since May 1, 2001 has been applied to the
note and recorded as other income in the first quarter of 2003. The loan calls
for 180 monthly payments of
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
$900 including interest at 8.759%. The note is secured by the building. The
balance at June 30, 2003 was $83,321.
On June 1, 2003, the Company entered into a loan agreement with a finance
company for $9,600. The loan calls for 16 monthly payments of $658 plus interest
at 10.2%. The loan is secured by the installation vehicle purchased. An officer
of the Company also guarantee the loan. The balance at June 30, 2003 was $9,032.
On June 1, 2003 in connection with the acquisition of Momentum the Company
assumed the following loans:
On October 18, 2000 the Company entered into a loan agreement with a finance
company for $25,860 to purchase a vehicle. The loan calls for 48 monthly
payments of $658 including interest at 10.2%. The installation vehicle secures
the note. A shareholder and officer of the Company also guarantee the note. The
balance due at June 30, 2003 was $9,411.
On February 5, 2001 the Company entered into a loan agreement with a finance
company for $4,100 to purchase equipment. The loan calls for 36 monthly payments
of $141 including interest at 16.5%. The equipment secures the note. A
shareholder and officer of the Company also guarantee the note. The balance due
at June 30, 2003 was $835.
On February 6, 2001 the Company entered into a loan agreement with a finance
company for $18,929 to purchase equipment. The loan calls for 36 monthly
payments of $637 including interest at 14.6%. The equipment secures the note. A
shareholder and officer of the Company also guarantee the note. The balance due
at June 30, 2003 was $3,550.
On April 16, 2003 the Company entered into a loan agreement with a finance
company for $17,125 to purchase equipment. The loan calls for 36 monthly
payments of $586 including interest at 15.9%. The equipment secures the note. A
shareholder and officer of the Company also guarantee the note. The balance due
at June 30, 2003 was $4,056.
On July 10, 2001 the Company entered into a loan agreement with a local bank for
$54,785 to purchase equipment. The loan is due on demand and if no demand is
made, then 35 monthly payments of $1,771 including interest at 10.0%. The
equipment secures
the note along with funds that the Company has on deposit with the bank. A
shareholder and officer of the Company also guarantee the note. The balance due
at June 30, 2003 was $20,511.
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
On February 6, 2003 the Company entered into a loan agreement with a finance
company for $10,584 to purchase equipment. The loan calls for 24 monthly
payments of $545 including interest at 25.5%. The equipment secures the note. A
shareholder and officer of the Company also guarantee the note. The balance due
at June 30, 2003 was $2,190.
On December 30, 2002 the Company entered into a loan agreement with a finance
company for $13,600 to purchase equipment. The loan calls for 36 monthly
payments of $465 including interest at 15.9%. The equipment secures the note.
The balance due at June 30, 2003 was $9,748.
On April 1, 2003 the Company entered into a loan agreement with an individual
and shareholder for $59,250 for working capital funds advance to the Company
since inception. The loan is due on demand with an 8% interest rate. Accruing
interest is due monthly. The note is unsecured. The balance due at June 30, 2003
was $59,250.
Total Long-Term debt at March 31 is as follows:
2003
Long-term debt $1,024,744
Less Current portion (263,223)
-----------
Long-term debt $761,521
===========
Maturities on long-term debt are as follows:
Year ending December 31,
2003 $ 172,057
2004 239,307
2005 173,488
2006 167,157
2007 171,907
Thereafter 100,828
-----------
Total $1,024,744
===========
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 5 - COMMITMENTS
The Company leases real estate in Sanderson under a five-year agreement due to
expire in 2008. The lease calls for monthly payments of $675 per month.
The Company leases real estate in Fort Davis under a month-to-month agreement.
The lease calls for monthly payments of $300 per month.
The Company leases real estate in Alpine under a month-to-month agreement. The
lease calls for monthly payments of $625 per month.
The Company leases equipment on a month-to-month basis from an individual. The
lease calls for monthly payments of $1,221 per month.
The Company leases equipment under a 7-month agreement from a leasing company,
which expires January 24, 2003. The lease calls for monthly payments of $892 per
month,
Future minimum lease payments are as follows:
2003 $9,000
2004 8,100
2005 8,100
2006 8,100
2007 8,100
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has advanced funds to Shareholders and Officers of the Company
totaling $20,268 at June 30, 2003. The advances are non-interest bearing and are
due on demand. The Company has not indicated any desire to call the advances at
this time.
EXHIBIT B
The accompanying Pro Forma Consolidated Financial Statements should be read in
conjuction with the historical financial statements and related notes thereto
for the Company, and Fremont.
PRO FORMA CONSOLIDATED BALANCE SHEETS
June 30, 2003
(Unaudited)
HISTORICAL
Wireless Fremont Note Adjustments Combined
------------ ------------ ------------ ------------- ------------
ASSETS
CURRENT ASSETS
Cash $ 192,233 $ 532 1 $ (532) $ 192,233
Accounts receivable 873,441 - - 873,441
Inventories 204,757 - - 204,757
Prepaid expenses 98,276 - - 98,276
------------ ------------ ------------- ------------
Total Current Assets 1,368,707 532 (532) 1,368,707
FIXED ASSETS
Buildings 375,000 - - 375,000
Equipment 1,201,423 - - 1,201,423
Vehicles 466,334 - - 466,334
------------ ------------ ------------- ------------
2,042,757 - - 2,042,757
Less: Accumulated depreciation (311,791) - - (311,791)
------------ ------------ ------------- ------------
1,730,966 - - 1,730,966
OTHER ASSETS
Goodwill 3,510,452 - - 3,510,452
Covenants not to compete 10,000 - - 10,000
------------ ------------ ------------- ------------
3,520,452 - - 3,520,452
Less: Accumulated amortization (69,351) - - (69,351)
------------ ------------ ------------- ------------
3,451,101 - - 3,451,101
Investments - 4,760 2,3,7 (4,760) -
Shareholder receivables 20,286 - - 20,286
------------ ------------ ------------- ------------
3,471,387 4,760 (4,760) 3,471,387
------------ ------------ ------------- ------------
Total Assets $ 6,571,060 $ 5,292 $ (5,292) $ 6,571,060
============ ============ ============= ============
HISTORICAL
Wireless Fremont Adjustments Combined
------------ ------------ ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credits $ 230,654 $ - $ - $ 230,654
Current portion of long - term debt 263,223 - - 263,223
Accounts payable 326,902 355,891 1,5,6 (353,729) 329,064
Accrued payroll 64,121 - - 64,121
Accrued interest 6,573 - - 6,573
Accrued taxes 38,563 - - 38,563
------------ ------------ ------------ -------------
Total Current Liabilities 930,036 355,891 (353,729) 932,198
LONG - TERM DEBT
Long - term debt 761,521 - - 761,521
STOCKHOLDERS' EQUITY
Common stock 100,000,000 shares authorized 1,603 5,947 3,4,5,7 15,970 23,520
23,520,104 shares outstanding, after merger
par value $0.001 per share
Additional contributed capital 5,238,145 1,500,029 3,5,7,8 (1,500,029) 5,238,145
Retained deficit (360,245) (1,856,575) 1,837,256 (379,564)
Treasury stock - - 2 (4,760) (4,760)
------------ ------------ ------------ -------------
4,879,503 (350,599) 348,437 4,877,341
------------ ------------ ------------ -------------
Total Liabilities and Stockholders' Equity $ 6,571,060 $ 5,292 $ (5,292) $ 6,571,060
============ ============ ============ =============
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
1 Closing of Fremont bank account.
2 Sale of Fremont subsidiary, Winfill Limited Holdings International
Limited, for the return of 661,654 shares of common stock.
3 Purchase of Wireless Frontier Internet, Inc. for 16,000,000 shares of
common stock.
4 Fees paid in connection with merger. 1,125,000 shares of common stock.
5 Conversion of $110,668 of accounts payable to 448,204 shares of common
stock.
6 Restructuring of vendor debt in September, 2003.
7 Elimination of investment on Fremont's book in Wireless Frontier
Internet, Inc.
8 Quasi reorganization, reducing the retained deficit of Fremont to the
balance in additional paid in capital.