SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------------------------------------------------------------
FORM 10-QSB
Quarterly report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
-----------------------------------------------------------------------------
For Quarter Ended: September 30, 2003
Commission File No. 000-08281
Wireless Frontier Internet, Inc.
(Exact name of small business issuer as specified in its charter)
-----------------------------------------------------------------------------
Delaware 75-2890405
(State of Incorporation) (IRS Employer Identification No.)
104 West Callaghan
Fort Stockton, Texas 79735
(Address of principal executive office)
(Zip code)
(432) 336-0336
Issuer's telephone number, including area code
-----------------------------------------------------------------------------
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--------- ----------
As of January 23, 2004, there were issued and outstanding 24,841,730 shares
of Common Stock, $.001 par value per share.
Transitional Small Business Disclosure Format
Yes No X
--------- ----------
Wireless Frontier Internet, Inc.
INDEX
-----
PAGE
NUMBER
----------
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
(unaudited)
Balance sheet as of September 30, 2003 3
Statements of operations for the nine and three months
ending September 30 , 2003 4
Statements of Stockholders' Equity 5
Statements of cash flows 6
Notes to financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Controls and Procedures 15
PART II. OTHER INFORMATION 16
----------------
SIGNATURES 17
2
Pollard-Kelley Auditing Services
Auditors 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. and Subsidiaries
Ft Stockton, Texas
We have reviewed the accompanying consolidated balance sheets of Wireless
Frontier Internet, Inc. and Subsidiaries as of September 30, 2003 and the
related consolidated statements of income, stockholders' equity, and cash flows
for the three months and nine months then ended 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. and Subsidiaries.
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, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the September 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
January 19, 2004
Fairlawn, Ohio
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
BALANCE SHEET
Septemeber 30, 2003
ASSETS
2003
CURRENT ASSETS -------------
Cash ........................................................... $ 215,194
Accounts receivable ............................................ 399,118
Inventories .................................................... 338,679
Prepaid expenses ............................................... 94,471
------------
Total Current Assets ...................................... 1,047,462
FIXED ASSETS
Buildings ...................................................... 375,910
Equipment ...................................................... 1,252,423
Vehicles ....................................................... 466,631
------------
2,094,964
Less: Accumulated depreciation ................................. (396,469)
------------
1,698,495
OTHER ASSETS
Goodwill ....................................................... 3,892,448
Covenants not to compete ....................................... 10,000
------------
3,902,448
Less: Accumulated amortization ................................. (126,354)
------------
3,776,094
Shareholder receivables ........................................ 20,286
------------
3,796,380
------------
Total Assets .............................................. $ 6,542,337
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES ...................................................
Line of credits ................................................ $ 230,654
Current portion of long - term debt ........................... 299,723
Accounts payable ............................................... 354,518
Accrued payroll ................................................ 78,043
Accrued interest ............................................... 6,573
Accrued taxes .................................................. 4,822
------------
Total Current Liabilities ................................. 974,333
LONG - TERM DEBT
Long - term debt ............................................... 697,697
STOCKHOLDERS' EQUITY
Common stock 100,000,000 shares authorized ..................... 23,478
23,477,583 shares outstanding, par value
$0.001 per share
Additional contributed capital ................................. 5,811,319
Retained deficit ............................................... (959,730)
Treasury stock ................................................. (4,760)
------------
4,870,307
------------
Total Liabilities and Stockholders' Equity ................ $ 6,542,337
============
See accompanying notes and accountant's report.
3
WIRELESS FRONTIER INTERNET, INC.
STATEMENT OF INCOME
For the Quarter and Nine Months Ended September 30, 2003
Nine Months
Quarter Ended Ended
September 30, September 30,
2003 2003
-------------- -------------
REVENUES
Equipment Sales
Revenues ........................ $ 722,428 $ 1,599,618
Cost of sales ................... 235,352 728,029
-------------- -------------
Gross profit equipment sales 487,076 871,589
Internet service
Revenues ........................ 272,547 1,205,155
Cost of sales ................... 179,726 414,363
-------------- -------------
Gross profit internet sales 92,821 790,792
TOTAL GROSS PROFIT ........................... 579,897 1,662,381
-------------- -------------
GENERAL AND ADMINISTRATIVE
Advertising and promotion ............ 15,639 50,325
Amortization and depreciation ........ 141,383 265,072
Legal and professional ............... 85,585 144,975
Auto and travel ...................... 85,877 174,060
Commissions and contract labor ....... 3,824 36,255
Office expenses and supplies ......... 48,369 145,170
Insurance ............................ 26,842 62,968
Interest ............................. 13,165 45,562
Rent ................................. 12,400 48,547
Repairs and maintenance .............. 1,850 7,893
Salary and wages ..................... 543,519 1,136,194
Taxes ................................ 41,464 137,644
Utilities ............................ 49,148 87,619
-------------- -------------
1,069,065 2,342,284
-------------- -------------
LOSS FROM OPERATIONS ......................... (489,168) (679,903)
Other income ......................... 432,694 483,656
-------------- -------------
NET INCOME/(LOSS) ............................ $ (56,474) $ (196,247)
============== =============
Average shares outstanding ........... 22,547,118 21,029,687
Earnings/(Loss) per share ............ $ -- $ (0.01)
See accompanying notes and accountant's report.
4
WIRELESS FRONTIER INTERNET, INC.
CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2003
ADDITIONAL
NUMBER OF COMMON CONTRIBUTED RETAINED TREASURY
SHARES STOCK CAPITAL DEFICIT SHARES TOTAL
----------- ---------- ----------- ----------- --------- -------------
BALANCE December 31, 2002 14,850,834 $ 1,000 $ 664,316 $ (220,472) $ - $ 444,844
Recapitalize for stock split - 485 (485) - - -
Shares sold 567,430 57 1,251,479 - - 1,251,536
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
US Mex -West Texas acquisition 55,166 6 381,990 - - 381,996
Merger with Fremont Corporation 5,861,900 5,862 - (543,011) (4,760) (541,909)
Recapitalization for increase in par
value - 14,438 (14,438) - - -
Debt exchanged for stock in merger 448,204 448 110,220 - - 110,668
Services in connection with merger 1,125,000 1,125 - - - 1,125
Net Loss for nine months - - - (196,247) - (196,247)
----------- ---------- ----------- ----------- --------- -------------
BALANCE September 30, 2003 23,477,583 $ 23,478 $5,811,319 $(959,730) $ (4,760) $ 4,870,307
=========== ========== =========== =========== ========= =============
See accompanying notes and accountant's report.
5
WIRELESS FRONTIER INTERNET, INC.
STATEMENT OF CASH FLOWS
For the Quarter and Nine Months Ended September 30, 2003
Quarter Nine Months
Ended Ended
September 30, September 30,
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the three months ................. $ (56,474) $ (196,247)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation .............................. 84,380 176,025
Amortization .............................. 57,003 89,047
(Loss) on sale of assets .................. -- (5,793)
Changes in Current assets and liabilities:
Decrease (Increase) in Accounts receivable 44,511 (568,616)
Decrease (Increase) in Inventories ........ (133,922) (252,347)
Decrease (Increase) in Prepaid expenses ... 3,805 (94,471)
Increase (Decrease) in Accounts payable ... 27,610 249,636
Increase in Accrued payroll ............... 13,922 36,191
Increase (Decrease) in Accrued interest ... -- --
Increase (Decrease) in Accrued taxes ...... (33,741) (25,843)
-------------- --------------
NET CASH (USED) BY
OPERATING ACTIVITIES ................ 7,094 (592,418)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Shareholder receivables ........... -- (4,507)
Purchase of Fixed assets ...................... (52,207) (908,940)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES ................ (52,207) (913,447)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common stock .......................... 95,398 1,251,536
(Payments) Increase in Line of credit - net ... -- (74,878)
Increase in Long - term debt .................. 51,000 455,199
Payments on Long - term debt .................. (78,324) (111,841)
-------------- --------------
NET CASH USED BY
FINANCING ACTIVITIES ................ 68,074 1,520,016
-------------- --------------
NET INCREASE (DECREASE) IN CASH ....................... 22,961 14,151
CASH AT BEGINNING OF PERIOD ........................... 192,233 188,990
CASH ACQUIRED FROM MOMENTUM ........................... -- 12,053
-------------- --------------
CASH AT END OF PERIOD ................................. $ 215,194 $ 215,194
============== ==============
See accompanying notes and accountant's report.
6
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 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.
7
WIRELESS FRONTIER INTERNET, INC.
NOTES TO FINANCIAL STATEMENTS
September 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.
On or about July 1, 2003, the Company acquired all the outstanding shares of US
Mex Communications and West Texas Horizons for 55,166 share of the Company's
common stock and the assumption of $51,000 in notes payable. The acquired
company sells phone cards and provides pay phone services in Southwestern Texas.
On September 30, 2003, the Company entered into an Agreement and Plan of Merger
with Fremont Corporation a publicly traded company. Pursuant to the merger
agreement Networker Systems, Inc., a wholly owned subsidiary of the Fremont, was
merged into the Company with the Company being the surviving corporation. The
shareholders of the Company exchanged all the outstanding shares of the Company
for 16,026,579 shares of the common stock of Fremont in a one for one exchange.
As a result of this transaction the Company became a wholly owned subsidiary of
Fremont. In addition, Fremont also entered into an Asset Purchase Agreement with
Million Treasure Enterprises Limited, a British Virgin Islands corporation.
Pursuant to this agreement, Million acquired all of Fremont's equity interest in
Winfill (a subsidiary of Fremont) for Millions return to Fremont of the 661,654
shares of common stock held by Million, the cancellation of Million's warrant to
purchase 2,000,000 shares of common stock and the forgiveness of all sums owed
by Fremont to Million. This combination was treated as a reverse merger whereby
the acquired company is treated as the acquiring company for accounting
purposes. Also, in connection with this transaction the Company recognized
$426,751 as other income in the third quarter of 2003 as forgiveness of debt.
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.
8
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
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
9
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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
============
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
===========
10
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 3 - GOODWILL AND COVENANTS NOT TO COMPETE-CONTINUED
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 September 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. 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 September 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
11
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
of the Company. At September 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 September 30, 2003 was $15,915.
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.
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 $9,474.
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
12
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
shareholders and officers of the Company also guarantee the loan. The balance
due at September 30, 2003 was $392,955.
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 September 30, 2003 was
$9,961.
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 September 30, 2003 was $83,964.
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 September
30, 2003 was $24,668.
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 September 30, 2003 was $32,089.
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 September 30, 2003 was $35,248.
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 September 30, 2003 was $32,022.
13
WIRELESS FRONTIER INTERNET, INC.AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
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 September 30, 2003 was $27,671.
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 September 30, 2003 was $36,386.
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 September 30, 2003 was $37,959.
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 September 30, 2003 was $38,598.
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 $900 including interest at 8.759%. The note is
secured by the building. The balance at September 30, 2003 was $81,462.
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 September 30, 2003 was
$9,032.
14
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 4 - NOTES PAYABLE-CONTINUED
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 September 30, 2003 was $8,295.
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 September 30, 2003 was $410.
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 September 30, 2003 was $2,966.
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 September 30, 2003 was $1,566.
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 $15,540.
15
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 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 September 30, 2003 was $626.
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 September 30, 2003 was $8,168.
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 September 30,
2003 was $55,976.
In connection with the US Mex-West Texas Horizon agreement the Company assumed
the debt payments for one year on certain loans for phone card terminals and pay
phones. The amount assumed was $51,000 and the balance outstanding on these
loans at September 30, 2003 was $36,500.
Total Long-Term debt at September 30 is as follows:
2003
----
Long-term debt $997,420
Less Current portion (299,723)
---------
Long-term debt $697,697
=========
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
16
WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 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
Prior to entering into the Agreement and Plan of Merger between the Company and
Wireless Frontier Internet Inc., a Texas corporation, the Company advanced funds
to Shareholders and Officers of the Company which total $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.
NOTE 7 - SUBSEQUENT EVENT
On November 10, 2003 Momentum filed a complaint against the Company in district
state court for the State of Texas in relation to the asset purchase agreement
the Company entered into with Momentum on June 1, 2003. The complaint alleges
the Company breached its contract as a result of the failure to deliver shares
of common stock of the Company 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. WIRELESS FRONTIER
INTERNET, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 7 - SUBSEQUENT EVENT - CONTINUED
On January 6, 2004 Momentum filed for voluntary bankruptcy in Federal bankruptcy
court. This action stopped the proceeding in state court until a hearing on the
Company's holdings can be heard. The Company believes that Momentum's lawsuit is
without merit and intends to vigorously defend the matter.
17
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations or Plan of Operation
Introduction
The following discussion of our financial condition and results of our
operations should be read in conjunction with the Financial Statements and Notes
thereto. This document contains certain forward-looking statements including,
among others, anticipated trends in our financial condition and results of
operations and our business strategy. These forward-looking statements are based
largely on our current expectations and are subject to a number of risks and
uncertainties. Actual results could differ materially from these forward-looking
statements. Important factors to consider in evaluating such forward-looking
statements include (i) changes in external factors or in the our internal
budgeting process which might impact trends in our results of operations; (ii)
unanticipated working capital or other cash requirements; (iii) changes in our
business strategy or an inability to execute its strategy due to unanticipated
changes in the industries in which it operates; and (iv) various competitive
market factors that may prevent us from competing successfully in the
marketplace.
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.
Plan of Operation
The Company is a wireless broadband Internet service provider located in
Fort Stockton, Texas. In addition, the Company is also a traditional Internet
service provider. The Company currently provides services to customers in over
100 cities throughout Southwest Texas and Kansas. The Company designs, develops,
markets and supports fixed wireless broadband Internet access products. The
Company was designed to deliver efficient, reliable and cost effective solutions
to bringing high-speed Internet access to rural markets within the United
States. The Company 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.
The Company will focus its primary marketing efforts on providing wireless
broadband access services to customers located in rural areas of Texas and
Kansas and then throughout the United States. The Company will superficially
focus on cities of less than 150,000 inhabitants. As the Company positions
itself as a high quality service provider, it targets to offer network
reliability complemented by quality customer support.
The Company will need to raise substantial capital over the next year to
fund its operations and to implement its strategies. The continuation of the
Company as a going concern is dependent upon the successful implementation of
its business plan, raising capital, and ultimately achieving profitable
operations. However, there can be no assurance that the business plan will be
successfully implemented. The inability of the Company to implement the business
plan or to successfully raise capital could adversely impact the Company's
business and prospects. The Company presently does not have plans to commence
18
any product research and development, purchase or sell plant or significant
equipment except that the Company intends to expand its business through the
acquisition of Internet service provides located throughout the United States of
which no assurance can be guaranteed.
The Company will focus its effort on customer satisfaction by attracting
and retaining a core team of professionals. We plan to increase our staffing
levels only as required by our operation. We currently have no plans to
significantly increase the number of our employees.
Liquidity and Capital Resources
At September 30, 2003, we had working capital of $73,129. We have
historically sustained our operations and funded our capital requirements with
the funds received from working capital loans received from various financial
institutions.
As of September 30, 2003, we did not have any financing arrangements in
place. We believe that the funds generated from operations will be sufficient to
fund our operations for the next 12 months. In the event that the funds from
operation are not sufficient, we will enter into financing arrangements as
needed. As of September 30, 2003, we had $215,194 in cash and $399,118 in
accounts receivable that could be used in connection with funding our
operations.
If we need to obtain capital, no assurance can be given that we will be
able to obtain this capital on acceptable terms, if at all. In such an event,
this may have a materially adverse effect on our business, operating results and
financial condition. If the need arises, we may attempt to obtain funding
through the use of various types of short term funding, loans or working capital
financing arrangements from banks or financial institutions. As we generally
obtain all of our funding from operations, a decrease in revenue could
negatively impact our short and long term liquidity.
We believe that the impact of inflation on our operations since our
inception has not been material.
Item 3. Controls and Procedures
As of September 30, 2003, an evaluation was performed under the supervision
and with the participation of the Company's management, including the Principal
Executive Officer and the Principal Financial Officer, of the effectiveness of
the design and operation of the Company's disclosure controls and procedures.
Based on that evaluation, the Company's management, including the Principal
Executive Officer and the Principal Financial Officer, concluded that the
Company's disclosure controls and procedures were effective as of September 30,
2003. There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to September 30, 2003.
19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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 2. Changes in Securities And Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
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
31.1 Certification by Alex Gonzalez, Principal Executive Officer and
Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification by Alex Gonzalez, Principal Executive Officer and
Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(b) Reports
The Company filed a Form 8-K Current Report on January 14, 2004 reporting a
change in its certifying accountant, the entering into of the Agreement and Plan
of Merger with Wireless Frontier Internet, Inc., a Texas corporation and the
entering into an Asset Purchase Agreement for the sale of the Company's
wholly-owned subsidiary, Winfill Holdings International Limited
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Wireless Frontier Internet, Inc.
By: _/s/ Alex Gonzalez______________________
Alex Gonzalez, CEO
20