As filed with the Securities and Exchange Commission on June 14, 2001
REGISTRATION NO. 333-57108
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
PRE-EFFECTIVE AMENDMENT NO. 6 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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WORLDWIDE WIRELESS NETWORKS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 7389 88-0286466
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
770 THE CITY DRIVE SOUTH, SUITE 3700
ORANGE, CALIFORNIA 92868
(714) 937-5500
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
------------------------------------
Approximate date of commencement of proposed sale to the public: from time to
time after the effective date of this registration statement. From time to time
after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. / /
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
TO BE REGISTERED REGISTERED MAXIMUM MAXIMUM REGISTRATION
OFFERING AGGREGATE FEE
PRICE PER OFFERING
SHARE(1) PRICE
- ---------------------------------- ------------- ---------- ----------- ------------
Common stock, par value $0.001 per 3,316,082 $0.05 $165,804 $95.11 (3)
share
- ---------------------------------- ------------- ---------- ----------- ------------
Common stock, par value $0.001 per 16,488,192(2) $0.05 $824,409 $400.00 (3)
share
- ---------------------------------- ------------- ---------- ----------- ------------
<FN>
(1) Closing price on June 13, 2001, pursuant to Rule 457(c) under the Securities
Act.
(2) Most of the shares registered pursuant to this prospectus will become issuable
upon the conversion of convertible debentures issued by the registrant.
(3) We paid a registration fee of $504.93 on March 16, 2001, and an additional fee
of $78.47 on April 24, 2001 because we added 2,241,864 additional shares
for registration. No additional shares are being registered with this
amendment.
The registrant amends this registration statement on the date or dates as may
be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on the date as the commission, acting pursuant to said
Section 8(a), may determine.
WORLDWIDE WIRELESS NETWORKS, INC.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JUNE 14, 2001
PROSPECTUS
19,804,274 shares of common stock
The information in this prospectus may be changed. The selling stockholders may
not sell their common stock until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell common stock, and it is not soliciting an offer to buy common stock, in
any state where the offer or sale of common stock is not permitted. THE SALE OF
COMMON STOCK BY THE SELLING STOCKHOLDERS HAS NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The selling stockholders listed on page 15 of this prospectus are offering for
sale up to 19,804,274 shares of our common stock. All proceeds from the sale of
common stock under this prospectus will go to the selling stockholders. We will
not receive any proceeds from the sale of common stock. Of the 19,804,274 shares
offered in this prospectus, 16,488,192 will be issuable upon the conversion of
convertible debentures.
Our common stock is traded under the symbol "WWWN" on the OTC Bulletin Board.
The last reported sale price on the OTC Bulletin Board for our common stock on
June 13, 2001 was $0.05 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
The date of this prospectus is June 14, 2001.
-1-
TABLE OF CONTENTS
PAGE
----
ITEM 3: SUMMARY INFORMATION AND RISK FACTORS. . . . . . . . . . . . 4
ITEM 4: USE OF PROCEEDS.. . . . . . . . . . . . . . . . . . . . . . 16
ITEM 5: DETERMINATION OF OFFERING PRICE . . . . . . . . . . . . . . 16
ITEM 6: DILUTION - NOT APPLICABLE . . . . . . . . . . . . . . . . . 16
ITEM 7: BENEFICIAL OWNERSHIP AND SELLING STOCKHOLDERS . . . . . . . 18
ITEM 8: PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . 26
ITEM 9: LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 28
ITEM 10: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS . . . . 28
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (COMBINED WITH ITEM 7, ABOVE) . . . . . . . 30
ITEM 12: DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . 35
ITEM 13: INTERESTS OF NAMED EXPERTS AND COUNSEL - NOT APPLICABLE . . 39
ITEM 16: DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . 40
ITEM 17: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION . . . . . . . . . . 47
ITEM 18: DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . 53
ITEM 19: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . 53
ITEM 20: MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . 54
ITEM 21: EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . 56
ITEM 22: FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 1
ITEM 23: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . 33
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . 48
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION . . . . . . . . 48
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . 48
ITEM 27: EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 54
ITEM 28: UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . . 58
-2-
ITEM 3: SUMMARY INFORMATION AND RISK FACTORS
PROSPECTUS SUMMARY
AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS
"WE," "US" OR "WORLDWIDE WIRELESS" MEAN WORLDWIDE WIRELESS NETWORKS, INC., DOING
BUSINESS AS GLOBAL PACIFIC INTERNET IN THE STATE OF CALIFORNIA. THIS SUMMARY
HIGHLIGHTS INFORMATION WHICH IS CONTAINED IN MORE DETAIL ELSEWHERE IN THIS
PROSPECTUS, AND WHICH WE FEEL IS MATERIAL FOR AN INVESTOR TO CONSIDER AND
UNDERSTAND BEFORE MAKING A DECISION TO INVEST IN OUR COMPANY. YOU SHOULD READ
THE ENTIRE PROSPECTUS CAREFULLY.
WORLDWIDE WIRELESS NETWORKS, INC.
Worldwide Wireless Networks, Inc. was incorporated in the state of Nevada on
June 10, 1992 as Second Investors Group, Inc. On June 19, 1998, Second Investors
changed its corporate name to Progressive Environmental Recovery Corporation. On
March 5, 1999, Progressive Environmental changed its corporate name to Worldwide
Wireless Networks, Inc. We were originally organized as a "blank check" company
and our purpose was to seek out investment opportunities in emerging technology
companies. In early 1999, we identified a privately-held corporation, Pacific
Link, Inc. ("Pacific Link"), which was engaged in the marketing and sale of
wireless internet services in Southern California under the trade name Global
Pacific Internet. We remained inactive until our reverse merger with Pacific
Link Internet, Inc. in April 1999, through which we acquired all of the business
assets of Pacific Link. (See: "Management's Discussion and Analysis - Reverse
Merger Treatment.")
We are a networking solutions company that specializes in providing our
customers with high-speed Internet access using our own wireless network. Other
products we provide include direct service links, which are connections of a
customer's computer network to the Internet via our wireless network, and frame
relay connections, which are wired connections between a customer's computer and
a router which sends the data to the desired end connection. We also provide web
hosting and network consulting. We serve all sizes of commercial businesses,
including the home office market.
We have a short operating history, and have experienced cumulative operating
losses of $8,624,644 as of March 31, 2001, primarily due to continued
investments we have made in an effort to expand our existing network. In an
effort to gain profitability, we have postponed our earlier expansion plans for
an indefinite period of time so that we can concentrate on enhancing our
services in Orange County, California. We anticipate that we will be forced to
continue to raise funds through the sale of debt and/or equity instruments,
which may greatly dilute the percentage of ownership that our existing
shareholders own of our company. If we are unable to access this capital, then
we will be unable to achieve profitability as planned. Management has developed
a cost reduction plan which is currently being implemented. This plan will allow
us to focus on our efforts in Orange County, California, during the near-term.
-3-
Large scale commercial operations began in April 1999 and, as of March 31, 2001,
we provided high-speed wireless services to approximately 280 commercial
customers. Our high-speed wireless network currently serves approximately 85% of
the Orange County, California area. Although we had began to expand into Los
Angeles County, California, and other areas outside of California, we are in the
process of terminating activities in those areas temporarily so that we can
focus on enhancing our Orange County, California business, gain profitability
and then resume our expansion plans. We deliver wireless services to our
customers, ranging from 256Kbps to 100 Mbps, which are high speed Internet
access options. We opened a co-location facility providing central office
services to 12 customers as of March 31, 2001. To facilitate our market
expansion we hired a direct sales force with support and management teams. We
do not anticipate a reduction of our employees due to the move away from
expansion, as our sales force will redirect all efforts to Orange County,
California.
Our name, Worldwide Wireless Networks, was designed to indicate to customers and
others our vision of providing our high-speed Internet access services through
the development of an international network. We are a very young company, and to
date our operations have been primarily focused on growing our Southern
California customer base. With the exception of our investment in Bridge
Technology, described later in this prospectus, we have no current international
operations or offices. As we mature, our business objective is to further
develop our international operations, as we believe that the wireless
technologies we provide are well-suited for the international marketplace. Due
to a conflict with corporate names in California, Worldwide Wireless is doing
business as "Global Pacific Internet" in California. We are reviewing what, if
anything, can be done to resolve that conflict, while at the same time
determining what actions we may be able to take to further protect the name
Worldwide Wireless Networks in general. As of the date of this prospectus, we
are not aware of any other conflict involving our name in any other
jurisdiction, although there can be no guarantee that none exists or will not
develop in the future. (See: Risk Factors - "Risks Relating to Our Business.")
We are incorporated under the laws of the State of Nevada. Our principal
executive offices are located at 770 The City Drive South, Suite 3700, Orange,
California 92868 and our telephone number is (714) 937-5500.
THE OFFERING
Common stock offered by the selling stockholders, 19,804,274
Shares of which only 3,135,276 shares are outstanding
as of the date of this prospectus
Total common stock outstanding as of the date of this
Prospectus 20,025,043 shares
USE OF PROCEEDS. We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders. We may, however, receive proceeds from
the exercise of the warrants should the holders of the warrants choose to
exercise them (which is solely in the holders' discretion).
-4-
RISK FACTORS. An investment in the common stock offered in this prospectus
involves a great deal of risk. See the section called "Risk Factors."
OUR OTC BULLETIN BOARD SYMBOL "WWWN"
The information above about our outstanding common stock is based on information
as of June 14, 2001. This information does not include:
(a) 895,911 shares of common stock reserved for issuance upon exercise of
options granted under our 1999 Stock Option Plan;
(b) 392,500 shares of common stock reserved for issuance upon exercise of
options granted to Cliff Bream as part of his Separation Agreement
with Worldwide Wireless;
(c) 1,225,000 shares of common stock issuable upon the exercise of
outstanding warrants we issued to Whitsend Investments Ltd., Columbia
Financial Group, Inc., Trinity Capital Advisors, Inc. and AMRO
International, S.A., which were registered under our prior
registration statement on Form SB-2 (Number 333-42774), declared
effective by the SEC on February 12, 2001;
(d) 5,868,828 shares of common stock issuable under the terms of a private
equity line of credit with Whitsend Investments Ltd., which were
registered under our prior registration statement on Form SB-2 (Number
333-42774), declared effective by the SEC on February 12, 2001;
(e) 1,000,000 shares of common stock issuable upon the exercise of
warrants that we issued (or will issue) to Pacific Industrial Partners
pursuant to our Settlement Agreement with them dated April 17, 2001.
EXCEPT AS OTHERWISE INDICATED, ALL REFERENCES IN THIS PROSPECTUS TO THE NUMBER
OF SHARES OF COMMON STOCK OUTSTANDING DO NOT INCLUDE ANY OF THESE SHARES.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS HIGHLY SPECULATIVE, INVOLVES A HIGH DEGREE
OF RISK AND SHOULD BE CONSIDERED ONLY BY THOSE PERSONS WHO ARE ABLE TO AFFORD A
LOSS OF THEIR ENTIRE INVESTMENT. IN EVALUATING OUR BUSINESS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO
THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS.
-5-
RISKS RELATING TO OUR FINANCIAL CONDITION
- ----------------------------------------------
WE HAVE A HISTORY OF NET LOSSES, A SIGNIFICANT WORKING DEFICIT AND EXPECT THAT
LOSSES WILL CONTINUE IN THE FUTURE EVEN IF THE GROWTH CAPITAL WE NEED IS
OBTAINED.
For the three months ended March 31, 2001 we incurred a net loss of $1,434,344.
For the fiscal years ended December 31, 2000, and 1999, we incurred net losses
of $4,655,372 and $2,051,252, respectively. We have incurred a net loss in each
year of our existence, and have financed our operations primarily through the
sale of equity and debt securities. We expect to continue to incur net losses
for the foreseeable future, as we make further capital investment into building
our infrastructure and developing our wireless networks within Orange County,
California. Even if we are successful in attracting the capital we need, we may
not be able to achieve or sustain significant revenues or profitability on a
quarterly or annual basis in the near future.
IN LIGHT OF OUR HISTORICAL EXPERIENCES AND THE LACK OF RESOURCES AVAILABLE TO
SMALLER COMPANIES IN OUR INDUSTRY GENERALLY, WE MAY BE UNABLE TO OBTAIN THE
FINANCING WE NEED TO FUND OUR CURRENT BUSINESS PLAN OR CONTINUE OUR OPERATIONS.
We have experienced significant cash flow difficulties during the last several
years, particularly in our efforts to expand. In an effort to gain
profitability, we have moved away from our earlier expansion plans, and are
focusing on enhancing our business in Orange County, California. The purpose
behind this change of strategy is first to achieve profitability within Orange
County, California and then move forward with our expansion plans in other
areas. Our ability to exercise our modified business objectives could be
significantly impacted if we are unable to raise additional financing and
resolve our outstanding liabilities. We will need additional financing to
continue our operations, manage our outstanding indebtedness and execute our
business plan. If we are unable to obtain the financing we need, through
transactions like the ones with the selling stockholders described in this
prospectus, our ability to expand our networks would be stalled, and we would
most likely remain a small, regional wireless operator with a very limited
opportunity to increase our profitability from operations. We are presently
negotiating with potential financing sources in an attempt to raise additional
debt or equity capital, but we may not be able to do so in sufficient amounts,
or under terms that are favorable to us. Other than the arrangements we have
with the selling stockholders described in this prospectus, we have no firm
commitments, agreements or understandings regarding additional financing.
RISKS RELATING TO OUR BUSINESS
- ----------------------------------
WE RELY ON A CONTINUOUS POWER SUPPLY TO CONDUCT OUR BUSINESS. BOTH THE EXPENSE
OF HIGH ELECTRICITY COSTS AND POSSIBLE BLACKOUTS COULD HAVE AN ADVERSE IMPACT ON
OUR FINANCIAL AND BUSINESS OPERATIONS.
California is in the midst of an energy crisis that could disrupt our operations
and increase our expenses. In the event of an acute power shortage, California
has on some occasions implemented, and may in the future continue to implement,
rolling blackouts throughout the State. We currently do not have backup
generators or alternate sources of power in the event of a blackout, and our
current insurance does not provide coverage for any damages we or our customers
may suffer as a result of any interruption in our power supply. If blackouts
interrupt our power supply, we would be temporarily unable to continue
operations. Any such interruption in our ability to continue operations could
-6-
damage our reputation, harm our ability to retain existing customers and to
obtain new customers, and could result in lost revenue, any of which could
substantially harm our business and results of operations. While we are
currently evaluating sources for backup power, it is unknown whether we will be
able to find and implement a backup power source that is economically feasible
and acceptable to our landlord. Furthermore, the deregulation of the energy
industry instituted in 1996 by the California government has caused power prices
to increase. The shortage of supply has caused wholesale prices to skyrocket
over the past year, and should they continue to increase, the operating expenses
associated with our business will likely increase and possibly harm the results
of our operations.
OUR UNPROVEN BUSINESS MODEL MAY RESULT IN OUR INABILITY TO GROW OUR BUSINESS,
REALIZE POTENTIAL PROFITS, WITHSTAND COMPETITIVE FORCES OR SUSTAIN OUR
OPERATIONS.
Our business model depends upon our ability to develop and market wireless
technologies, services and products that allow our customers to integrate both
Internet and traditional sales channels. The potential profitability of this
business model is unproven. Alternatively, we may be forced by competitive
pressures, industry consolidation or otherwise, to change our business model.
Our business model may not be successful and we may not sustain revenue growth
or achieve or sustain profitability.
OUR DEBT AND EQUITY FUNDING SOURCES MAY BE INADEQUATE TO FINANCE FUTURE
ACQUISITIONS AND, EVEN IF THEY ARE, OUR FINANCIAL CONDITION MAY BE ADVERSELY
AFFECTED BY THE HIGH BORROWING COSTS OF DEBT, OR THE HIGHLY-DILUTIVE IMPACT OF
EQUITY, IF WE ARE UNABLE TO OBTAIN FUNDING ON REASONABLE TERMS.
We believe that making acquisitions of businesses and products which complement
our core business services will ultimately be an important element of our
business strategy. Our ability to engage in these acquisitions depends on our
ability to establish a profitable business in Orange County, California and,
subsequently, to be able to obtain debt or equity financing. These types of
financing may not be available for us in the future or, if they are, they may
not be available on terms acceptable to us. Our inability to obtain this
financing could make us unable to pursue our acquisition strategy in the future.
Debt financing may require us to pay significant amounts of interest and
principal payments, reducing the resources available to us to expand our
existing businesses. Some types of equity financing may be highly dilutive to
our stockholders' interest in our assets and earnings.
WE ARE A TECHNOLOGY-BASED COMPANY THAT DEPENDS UPON INTELLECTUAL PROPERTY RIGHTS
TO DEVELOP, MARKET AND SELL OUR PRODUCTS AND SERVICES, BUT WE MAY NOT BE ABLE
ADEQUATELY TO PROTECT THESE INTELLECTUAL PROPERTY RIGHTS, EITHER BECAUSE SOMEONE
HAS A SUPERIOR CLAIM ON THESE RIGHTS OR BECAUSE WE DO NOT HAVE ADEQUATE
FINANCIAL RESOURCES TO PROTECT OUR OWN CLAIMS.
As a high-technology company, we may need to rely on a combination of
trademarks, copyrights, patent rights, contractual rights, trade secrets and
other intellectual property rights to protect our business plan and our
proprietary products and services from infringement or unauthorized use by third
parties. We intend to monitor closely, and take steps to protect, our
intellectual property rights, including by obtaining signed non-disclosure
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agreements prior to disclosing confidential information. We have not, however,
filed for statutory protection of any of our intellectual property, either
through the registration of federal or state trademarks, service marks,
copyrights or patents, and it may be that third parties have or could develop
superior rights to our intellectual property before we are able to file for this
protection. To the extent that any third party already has a superior claim to
any of these rights, which could exist if they began using the right earlier in
time than we did, we may not ever be able to protect our rights. Even if no
competing rights are claimed by any third party at this time, our financial
condition does not make it feasible to file for intellectual property right
protection for all of our intellectual property rights in all jurisdictions
where we may conduct business. By the time we may be able to do so financially,
a third party could have developed a prior claim to these rights which would
render us unable to file for protection at that time.
As an example, we have been unable to file to do business in the State of
California under the name Worldwide Wireless Networks, Inc., and have had to
continue to use the name Global Pacific Internet, due to a conflict with a
company that had a prior existing claim to Worldwide Wireless Networks name in
that state. While our management does not believe that the inability to use this
name in California has had an adverse effect on its business operations there,
it may in the future or other similar conflicts may be discovered which could
have an adverse impact on our ability to conduct business as we want to.
Similarly, if any party were to assert that our proprietary technology infringed
upon the rights of others, the costs of defending against these claims can be so
large that it could have a negative impact on our business, financial condition
and/or future prospects, even if we were ultimately found to have done nothing
wrong.
WE MAY FACE POTENTIAL CLAIMS IF OUR CLIENTS CONDUCT HARMFUL OR ILLEGAL
ACTIVITIES USING OUR PRODUCTS AND SERVICES AND, EVEN IF THESE CLAIMS ARE WITHOUT
MERIT, THEY COULD HARM OUR BUSINESS AND REPUTATION BY CAUSING US TO EXPEND
SIGNIFICANT RESOURCES TO DEFEND OURSELVES.
Some of our products and services involve the transmission of information over
the Internet. Our products or services could be used to transmit harmful
applications, negative messages, unauthorized reproduction of copyrighted
material, inaccurate data or computer viruses to end users. Any transmission of
this kind could damage our reputation or give rise to legal claims against us.
We could spend a significant amount of time and money defending these legal
claims.
In addition, our clients may not comply with federal, state and local laws when
promoting their products and services. We cannot predict whether our role in
facilitating these marketing activities would expose us to liability under
current or future laws. Any claims made against us could be costly and time
consuming to defend, even if we ultimately prevail in, or are dismissed from,
these cases. If we are exposed to this kind of liability, we could be required
to pay substantial fines or penalties, redesign our business methods,
discontinue some of our services or otherwise expend resources to avoid
liability.
IF WE ARE UNABLE TO ADAPT TO THE RAPID TECHNOLOGICAL CHANGES WHICH ARE PREVALENT
IN THE WIRELESS COMMUNICATIONS INDUSTRY TODAY, IT MAY ADVERSELY IMPACT OUR
ABILITY TO MARKET OUR PRODUCTS EFFECTIVELY, WITHSTAND COMPETITION OR MEET OUR
CUSTOMERS' TECHNOLOGICAL REQUIREMENTS, ANY OF WHICH COULD HAVE AN ADVERSE IMPACT
ON OUR FINANCIAL CONDITION.
-8-
The wireless communications market is characterized by rapidly changing
technologies, frequent new product and service introductions, short development
cycles and evolving industry standards. The recent growth of the Internet, and
intense competition from both US and foreign companies in our industry,
exacerbate these market characteristics. Our future success will depend on our
ability to adapt to rapidly changing technologies by maintaining and improving
the performance features and reliability of our services. We may experience
technical difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services. In addition, any new
enhancements to our products and services must meet the requirements of our
current and prospective users. We could incur substantial costs to modify our
infrastructure and our range of products and services to adapt to rapid
technological change. Our inability to adapt quickly could cause us to incur
losses and require additional capital expenditures which would affect the value
of our business and of the securities being offered in this prospectus.
WE MAY BE UNABLE TO EXPAND OUR WIRELESS NETWORKS IF WE CANNOT RELIABLY DEPEND ON
THE DEVELOPMENT OF THE INFRASTRUCTURE OF THE INTERNET GENERALLY. DEMAND FOR OUR
INTERNET-BASED PRODUCTS AND SERVICES COULD BE ADVERSELY AFFECTED IF CONSUMERS
ARE CONCERNED ABOUT THE INTEGRITY OF THE INTERNET, INCLUDING WITH RESPECT TO
SECURITY, CAPACITY, RELIABLE PERFORMANCE AND OTHER FACTORS.
A number of factors may inhibit Internet usage, including inadequate network
infrastructure, security concerns, inconsistent quality of services, and lack of
availability of cost-effective, high-speed service. If Internet usage grows, its
infrastructure may not be able to support the demands placed on it by this
growth and its performance and reliability may decline. In addition, a number of
Web-based businesses have experienced interruptions in their services as a
result of outages and other delays occurring throughout the Internet. We depend
upon consumer confidence in, and the reliability of, the Internet to market and
sell our wireless services to our customers. If outages or delays occur
frequently on the Internet in the future, Internet usage, and the usage of our
products and services, could grow more slowly or decline, and this could result
in lower earnings for our shareholders.
WE MAY NOT BE ABLE TO LOCATE, OR AFFORD TO PURCHASE, SUFFICIENT
POINTS-OF-PRESENCE TO CONDUCT OUR OPERATIONS IN THE JURISDICTIONS WHERE WE ARE
SEEKING TO DO BUSINESS AND, EVEN IF WE ARE ABLE TO FIND SUFFICIENT SPACE, IF THE
AVAILABILITY OF POINTS-OF-PRESENCE IS OR BECOMES SCARCE, THE COMPETITION FOR
SITES AMONG WIRELESS PROVIDERS AND OTHERS MAY DRIVE UP THE PRICE OF THESE SITES
TO A LEVEL WHICH IS NOT FEASIBLE ECONOMICALLY FOR US OR WHICH WE CANNOT AFFORD.
As the market for wireless products and services matures, the roof-top spaces
and other locations available to place radios and antennae, known in the
industry as a point-of-presence, or a POP, may become scarce. The effect of this
would be to increase, perhaps significantly, the rental values associated with
leasing these roof-top and other rights, to the extent that we are able to
-9-
identify sufficient space in our required locations at all. We may not be able
to compete effectively with much larger wireless providers that have better
resources available to them with which to acquire roof-top rights and other POP
locations. If that happens, the quality and scope of our services could be
greatly restricted, which would have a negative impact upon our business and
financial condition.
IF WE ARE UNABLE TO FORM STRATEGIC ALLIANCES, WE MAY BE UNABLE TO WITHSTAND THE
COMPETITIVE PRESSURES OF LARGER COMPANIES WITH GREATER RESOURCES, WHICH WOULD
MAKE IT MORE DIFFICULT, IF NOT IMPOSSIBLE, TO GROW OUR WIRELESS NETWORK.
We intend to focus on developing, operating, and entering into strategic
relationships with third parties to quickly implement our business plan and to
provide promotional and other direct marketing services utilizing telephony, the
Internet and wireless communications. To accomplish our strategy, we will be
competing with national and international wireless service providers desiring to
invest in identical opportunities. Many of these competitors will have longer
operating histories, greater name recognition, larger client bases and
significantly greater financial, technical and marketing resources than us. To
combat these market differences, we intend to pursue a strategy of seeking
strategic relationships with larger companies that can support our efforts. If
we are unable to attract the interest of these strategic partners, or to
negotiate arrangements with them that are favorable to us, then we may be unable
to compete effectively with the larger competitors discussed above.
WE HAVE, AND MAY CONTINUE TO, ENGAGE IN STRATEGIC TRANSACTIONS WITH OTHER
COMPANIES INVOLVING THE MUTUAL EXCHANGE OF STOCK AND, IF THE VALUE OF THE STOCK
WE RECEIVE IN THESE TRANSACTIONS FALLS BELOW THE VALUE WE HAVE GIVEN UP, IT
COULD HAVE A MATERIAL ADVERSE IMPACT UPON OUR FINANCIAL CONDITION AND THE MARKET
VALUE OF OUR STOCK.
Some of our strategic alliances with other corporations have involved, and
future arrangements may continue to involve, our making investments in the stock
of our strategic partners. However, our investments may decline in value after
the date we acquire the strategic partner's stock. This has already happened in
the case of Bridge Technology, Inc. The Company has taken an
other-than-temporary loss of $500,000 on its original investment of $1,200,000,
and an unrecognized loss of $400,000, both of which are recorded on our year-end
December 31, 2000 financial statements. (Please refer to Note 3 of our Financial
Statements for more information). During the three months ended March 31, 2001,
we reclassified the $400,000 temporary write-down from a balance sheet impact to
an other-than-temporary loss of $400,000 , an income statement impact, on our
original investment of $1,200,000 in Bridge Technology. This results in a
restated carrying value of $300,000 for this investment, or $2.00 per share.
Also, in some cases, if our management decides that there is long-term strategic
value in a mutual stock investment transaction, we may agree to participate in
that transaction even where the value of the partner's stock received by us is
less than the value of the WWWN stock given up by us in the transaction. If the
value of any stock in which we have invested never increases to the expected
level, or if it declines significantly, it could have a material adverse impact
on our financial condition. Furthermore, if we are ever deemed to have paid more
in stock value than we have received from a strategic partner in a mutual stock
transaction, then we may be required under applicable accounting rules to record
a charge to our earnings which could also have a material adverse impact upon
our financial statements and the market value of our stock.
-10-
OUR OPERATING RESULTS AND FINANCIAL CONDITION COULD BE NEGATIVELY IMPACTED BY
CURRENTLY PENDING OR FUTURE LEGAL PROCEEDINGS.
From time to time, we are involved in litigation incidental to our business.
Even if we are successful in any given lawsuit, litigation can be expensive and
time consuming to prosecute or defend, and could cause our customers to delay or
cancel purchase orders until these lawsuits are resolved. Currently, we are
involved in a lawsuit against Sean Loftis and 1st Universe L.P. (See: Item 9 -
--------
Legal Proceedings.)
- ------------------
ACTIONS PREVIOUSLY TAKEN BY OUR MANAGEMENT, INCLUDING MAKING STATEMENTS IN
PUBLIC PRESS STATEMENTS ABOUT THE CONDITION OF OUR COMPANY AND THE VALUE OF OUR
STOCK WHILE WE HAD SHARES IN REGISTRATION WITH SEC, MAY HAVE CAUSED VIOLATIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
If we are found to have violated these laws, it could result in penalties
against us that could have a material adverse effect on our financial condition,
market price and future stock activity. Also, if any person purchased or was
offered any of our securities in any public or private transaction during the
time period in which we may be found to have been in violation of applicable
securities laws, they may be entitled to seek rescission or other monetary
damages against us. Our operating results and financial condition could also be
negatively impacted, and trading in our shares could be adversely affected, if
we are found to have committed any violations of applicable federal or state
securities laws, including the making of any statements about the value or
quality of our stock while we have any securities in registration.
We have participated in press interviews while our shares were in registration
with the SEC, including in a live oral interview over the Internet, in which
Jack Tortorice, the former President of WWWN, is quoted as saying that he felt
the stock of wireless network companies, including WWWN, was under-valued in the
market. He stated that he believed we would realize gross revenues in excess of
four to six million dollars for fiscal year 2000 , which did not happen. These
and other similar statements made by him in public settings and in the press may
be deemed to violate the securities laws, including potentially Section 5 of the
Securities Act. Mr. Tortorice also stated that, "[w]e've probably got the
largest wireless license-free revenue stream coming for our company than any
other company in the United States right now." At the time of this statement,
based upon his industry knowledge, Mr. Tortorice believed this statement to be
true, but it may not be. Our management has not deliberately attempted to
circumvent or take actions in violation of any securities laws, and has taken
steps to better familiarize itself with its obligations regarding the
communication of statements as a publicly-reporting company. However, if it were
found to have violated any of these regulations, and if these violations
-11-
resulted in any discernable impact on the market for our stock, our failure to
comply could have significant ramifications even if the intentions of management
making these statements was not malicious or fraudulent. If we are ever deemed
to have published any statement which is in violation of securities laws
applicable to the "quiet period" while our shares are in registration, or if we
otherwise violate any federal or state securities law applicable to our company
or its shares, we could subject the company and individual members of its
management and board of directors to liability, which could include sanctions,
financial penalties and the imposition of restrictions on the trading of our
shares, any of which could have a material adverse effect upon our financial
condition, our ability to raise financing in the future and our shareholders.
Similarly, if any person purchased or was offered our securities during any
period in which we may be found to have been in violation, they may be entitled
to rescission of their purchase, a refund of their money, and, potentially,
other monetary damages.
RISKS RELATED TO OUR STOCK
- --------------------------
WE HAVE A LIMITED TRADING MARKET, AND GIVEN THE HISTORICAL TRADING PATTERNS OF
OUR STOCK, AS WELL AS HIGHLY UNPREDICTABLE CHANGES IN THE PUBLIC STOCK MARKETS
GENERALLY, THE PRICE OF OUR COMMON STOCK MAY BE QUITE VOLATILE FOR SOME TIME.
OUR TRADING PRICE HAS, IN FACT, DECLINED VERY RAPIDLY OVER THE PAST SEVERAL
MONTHS, AMID VERY ERRATIC TRADING PATTERNS, AND WITH NO SIGN OF BECOMING LESS
VOLATILE IN THE FORESEEABLE FUTURE.
There is a limited public trading market for our common stock on the OTC
Bulletin Board. We cannot assure you that a regular trading market for our
common stock will ever develop or that, if developed, it will be sustained. As
is the case with the securities of many emerging companies, the market price of
our common stock may also be highly volatile. Factors including our operating
results and announcements by us or our competitors of new products or services,
may significantly impact the market price of our securities. Similarly, many of
the capital-raising activities we have engaged in, or may be required to enter
into in the future to obtain needed funds, have resulted in, and may in the
future result in, large blocks of stock being held by professional investors who
may from time to time release these shares into the market place in a manner
which could have a highly depressive effect on the public market and valuation
of our shares at any given time and for any given period. Ultimately, we have
no control over the schedule or timing of how these shares may be sold in the
future, nor will we likely have advance knowledge of these releases, and
therefore our stock prices may be affected significantly in the future by these
activities which, in some circumstances, could have a material and adverse
impact on the stock price of our shares for a long time. If this were to
happen, it could materially affect our ability to raise funds under favorable
terms in the future.
Our stock trading price has declined rapidly during the past several months, and
the volume of our stock's trading has been highly volatile during the same
period. We have no specific knowledge as to why our stock trading prices and
volume have been so erratic, nor is it likely that these trading patterns are
likely to become more stable in the foreseeable future.
OUR SHARES HAVE TRADED AT LOW PRICES, AND ARE CURRENTLY SUBJECT TO PENNY STOCK
REGULATIONS, WHICH MAY HAVE THE EFFECT OF EXACERBATING THE VOLATILITY OF OUR
STOCK'S PRICE AND TRADING PATTERNS. ALSO, THE ADDITIONAL REQUIREMENTS IMPOSED
ON BROKER-DEALERS WHO TRADE IN PENNY STOCKS MAY REDUCE THE SPEED AT WHICH
TRANSACTIONS INVOLVING PENNY STOCKS CAN BE EFFECTED, AND MAY ALSO REDUCE THE
NUMBER OF BROKER-DEALERS WILLING TO ENGAGE IN SUCH TRANSACTIONS, EITHER OF WHICH
CAN ADVERSELY IMPACT AN INVESTOR'S ABILITY TO TRADE SHARES OF OUR STOCK AS
RAPIDLY AS MAY BE DESIRED.
-12-
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by various penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on some national securities
exchanges or quoted on the Nasdaq system, provided that current prices and
volume information with respect to transactions in these securities are provided
by the exchange or system). The penny stock rules require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document that provides information about
penny stocks and the risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
generally require that prior to a transaction in a penny stock the broker-dealer
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for our stock when there
is penny activity and our stock becomes subject to the penny stock rules, and
potentially could have a depressive effect on the price of our shares generally.
WE EXPECT TO ENTER INTO FUTURE AGREEMENTS, WHICH RESULT IN SIGNIFICANT DILUTION
OR SUBSTANTIAL INDEBTEDNESS, WITHOUT STOCKHOLDER APPROVAL. STOCKHOLDERS MAY BE
UNABLE TO REVIEW PROPOSED AGREEMENTS BEFORE THEY ARE SIGNED.
In all likelihood, stockholders will be unable to review the terms of or vote on
any potential relationships into which we may enter. Consequently, stockholders
are dependent upon the Board of Directors' judgment with respect to transactions
of this nature. These transactions, if realized, may involve the issuance of a
significant number of additional equity securities which could cause significant
dilution or the incurrence, assumption or issuance by us of substantial
indebtedness and the undertaking by us of material obligations including, among
other things, long-term employment, consulting or management agreements.
THE EXERCISE OR CONVERSION OF OUR OUTSTANDING DERIVATIVE SECURITIES INTO COMMON
STOCK, AS WELL AS THE ISSUANCE OF COMMON STOCK UPON OUR USE OF THE EQUITY LINE
OF CREDIT DESCRIBED LATER IN THIS PROSPECTUS, WILL DILUTE THE PERCENTAGE
OWNERSHIP OF OUR OTHER STOCKHOLDERS, AND THE SALE OF THIS COMMON STOCK IN THE
OPEN MARKET COULD ADVERSELY AFFECT OUR MARKET CAPITALIZATION BY HAVING A
DEPRESSIVE EFFECT ON, AND POTENTIALLY SIGNIFICANTLY DRIVING DOWN THE PRICE OF,
OUR COMMON STOCK.
-13-
As of the date of this filing, our outstanding options and warrants equal
2,763,411, due to the issuance of 250,000 warrants to Pacific Industrial
Partners LLC pursuant to the terms of our Settlement Agreement with them. We
will issue additional warrants to purchase 750,000 shares of common stock to PIP
in the future, at the rate of 250,000 warrants per quarter. More options can be
granted in the future under our employee benefit plan. Substantially all of the
shares of common stock underlying these securities are to be registered for
unrestricted resale under the Securities Act. The exercise or conversion of
outstanding stock options, warrants or other convertible securities will dilute
the percentage ownership of our existing stockholders.
OUR ISSUANCE OF FURTHER SHARES AND THE ELIGIBILITY OF ISSUED SHARES FOR RESALE
WILL DILUTE OUR COMMON STOCK AND MAY LOWER THE PRICE OF OUR COMMON STOCK.
The common stock being offered in this prospectus, assuming that all warrants
and convertible debentures are converted and exercised, represents 19,804,274
shares, which is 98.90% of the total issued and outstanding common stock as of
the date of this filing. Assuming that all of these warrants and convertible
debentures are exercised and converted in their entirety, and assuming that no
other shares are issued, the common stock being offered in this prospectus will
represent 49.72% of the total issued and outstanding common stock as of the date
the exercise and conversions are completed. If you invest in our common stock,
your interest will be diluted to the extent of the differences between the price
per share you pay for the common stock and the pro forma as adjusted net
tangible book value per share of our common stock at the time of sale. We
calculate net tangible book value per share by subtracting from our total assets
all intangible assets and total liabilities, and dividing the result by the
number of outstanding shares of common stock. Furthermore, we may issue
additional shares, options and warrants and we may grant additional stock
options to our employees, officers, directors and consultants under our stock
option plan, all of which may further dilute our net tangible book value.
OUR SALE OF SHARES UPON CONVERSION OF DEBENTURES AND EXERCISING OUR EQUITY LINE
OF CREDIT FOR SHARES AT A PRICE BELOW THE MARKET PRICE OF OUR COMMON STOCK WILL
HAVE A DILUTIVE IMPACT ON OUR STOCKHOLDERS AND COULD ADVERSELY EFFECT OUR MARKET
CAPITALIZATION BY HAVING A DEPRESSIVE EFFECT ON, OR SIGNIFICANTLY DRIVING DOWN
THE PRICE OF, OUR COMMON STOCK.
We have issued debentures to AMRO International S.A. and Trinity Capital
Advisors, Inc., some of which have been converted into common stock at a
discount to the then-prevailing market price of our common stock. Discounted
sales resulting from the conversion of the debentures could have an immediate
adverse effect on the market price of the common stock. To the extent that
debenture and warrant holders convert their securities and sell the underlying
shares into the market, the price of our shares may decrease due to the
additional shares in the market.
In addition, any sales in the public market of shares of our common stock
issuable upon the exercise or conversion of stock options, warrants or
convertible securities, or the perception that these sales could occur, may
adversely affect the prevailing market price of our common stock, and may result
in depressing our share price generally and, potentially, driving our price down
significantly in a short period of time. Moreover, our ability to obtain
additional equity capital could be adversely affected since the holders of
outstanding warrants and options will likely exercise these securities when we
probably could obtain any needed capital on terms more favorable than those
provided by these securities. We lack control over the timing of any exercise or
the number of shares issued or sold if this exercise occurs.
-14-
We have also entered into a private equity line of credit, described later in
this prospectus, under which we can draw down financing in exchange for issuing
shares of our common stock. These shares will be issued to the lender providing
this line of credit at a significant discount from our market price for shares
and, if sold into the market in large blocks, could also have a depressive
effect on the market price for our shares. This, in turn, could make it more
difficult for us to obtain needed financing under terms favorable to us.
THE FUTURE SALE OF LARGE BLOCKS OF CURRENTLY RESTRICTED SHARES WHICH NOW EXIST
OR WHICH MAY BE ISSUED BY US IN THE FUTURE COULD DECREASE THE MARKET PRICE OF
OUR COMMON STOCK AND IMPAIR OUR ABILITY TO RAISE CAPITAL. WE MAY HAVE NO
ABILITY TO KNOW ABOUT OR TO CONTROL THE TIMING AND/OR THE AMOUNT OF RESTRICTED
STOCK WHICH PRIVATE INVESTORS MAY SELL INTO THE MARKET IN THE FUTURE.
Future sales of common stock by existing stockholders under exemptions from
registration or through the exercise of outstanding registration rights could
materially adversely affect the market price of our common stock and could
materially impair our future ability to raise capital through an offering of
equity securities. A substantial number of shares of common stock are, or in the
near future will be, available for sale under exemptions from registration, or
are being registered registration rights. We are unable to predict the effect,
if any, that market sales of these shares, or the availability of these shares
for future sale, will have on the prevailing market price of our common stock at
any given time.
ITEM 4: USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale of the
shares of common stock offered under this prospectus. We will not receive any of
the proceeds from the sale of shares of common stock by the selling
stockholders. Some of the shares of common stock included in this prospectus
will come from the exercise of warrants, or the conversion of convertible
debentures, which have been sold by us to some selling stockholders. These
selling stockholders have no obligation to exercise or convert their securities,
and Worldwide Wireless may never receive any additional proceeds from them. Any
proceeds we do receive from them will be contributed to working capital and will
be used for general corporate purposes.
ITEM 5: DETERMINATION OF OFFERING PRICE
Each selling stockholder will determine the offering price at which the shares
included in this prospectus will be sold.
ITEM 6: DILUTION - not applicable
-15-
ITEM 7: BENEFICIAL OWNERSHIP AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the shares of our
common stock beneficially owned as of June 14, 2001 by each of our directors and
executive officers and non-management beneficial owners of more than 5% of our
common stock. The table also lists the number of shares of common stock that
each selling stockholder may offer and sell under this prospectus.
Except as where indicated, the persons named in the table above have sole
voting and investment power with respect to the shares of common stock shown as
beneficially owned by them.
SHARES OF COMMON
BENEFICIAL STOCK BENEFICIAL
OWNERSHIP BEFORE BEING OWNERSHIP AFTER
OFFERING OFFERED THE OFFERING
OR SALE
NAME AND ADDRESS
OF BENEFICIAL SHARES % SHARES %
OWNER(1)
DIRECTORS/EXECUTIVE
OFFICERS
Dennis Shen (Director) 2,598,500(2) 12.98% 0 2,598,500 12.98%
And Susan Shen
770 The City Drive South,
Suite 3700
Orange, CA 92868
Ming-Chau Yeung 688,000(3) 3.43% 0 688,000 3.43%
9 Red Coat Place
Irvine, CA 92602
Jack Tortorice (Director) 2,575,500(4) 12.86% 0 2,575,500 12.86%
770 The City Drive South,
Suite 3700
Orange, CA 92868
Vincent Tsao (Director) 0 0 0 0 0
770 The City Drive South
Suite 3700
Orange, CA 92868
Jerry Collazo (CEO, CFO) 150,000(15) .23% 0 150,000 .023%
770 The City Drive South
Suite 3700
Orange, CA 92868
-16-
Steve Button (Secretary) 45,134(15) .75% 0 45,134 .75%
770 The City Drive South
Suite 3700
Orange, CA 92868
Directors and Executive 6,057,134 30.25% 0 6,057,134 30.25%
Officers as a group (5
persons)
NON-MANAGEMENT 5%
STOCKHOLDERS
Whitsend Investments 5,868,828(5) 29.31% 0 5,868,828 29.31%
Limited
C/o Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz,
Liechtenstein
SELLING
STOCKHOLDERS
AMRO International S.A. 13,452,050(6) 67.18% 12,566,615 885,435(14) *
c/o Ultra Finance
Grossmunster Platz 26
Zurich CH 8022
Switzerland
Capporicci, Tony 0 -- 250,000(7) 0(13) --
6827 S. Industrial
Las Vegas, NV 89118
Feldhake, August & 200,000 .99% 200,000(11) 0(12) --
Roquemore LLP
19900 MacArthur Blvd., Suite
850
Irvine, CA 92688
(Robert J. Feldhake has
control over the common
stock issued to this selling
stockholder)
Maxik, Fred 0 -- 250,000(7) 0(13) --
6827 S. Industrial
Las Vegas, NV 89118
Menzies, Steve 100,000 .49% 800,000(7) 100,000(13) *
6827 S. Industrial
Las Vegas, NV 89118
Pacific Industrial Partners, 900,000(8a) 4.49% 1,000,000(8b) 400,000(8(c)), (14) *
LLC
1100 Quail Street, Suite 207
Newport Beach, CA 92660
-17-
Sinclair Davis Trading Corp. 262,500 1.31% 262,500(9) 0(13) --
108 Harbor Road,
Head of the Harbor
New York 11780
(Brooke Bray has control over
the common stock issued to
this selling stockholder)
Trinity Capital Advisors, Inc. 5,355,336(10) 26.74% 3,921,577 1,433,759(14) 7.2%
211 Sutter Street, 2nd Floor
San Francisco, CA 94108
Universal Business Insurance 553,582 2.77% 553,582(11) 0(12) --
6360 S. 3000 East, Suite 205
Salt Lake City, Utah 84121
(Don Mayer has control over
the common stock issued to
this selling stockholder)
<FN>
(1) This table sets forth the beneficial ownership of our outstanding
common stock owned by (a) each of our executive officers, (b) each of
our directors, (c) all executive officers and directors as a group,
and (d) each person or group known by us to own beneficially more than
5% or more of our outstanding common stock, including non-management
persons and/or entities as well as any selling stockholder. The
percentage of beneficial ownership is based on 20,025,043 shares of
common stock outstanding as of June 14, 2001.
(2) Dennis Shen is the record owner of 500,000 shares and options to
purchase 4,500 shares; he and Susan Shen, his wife, jointly own
1,606,000 shares, and they share voting and investment power over
688,000 shares held by Susan's mother, Ming-Chau Yeung. This number
includes the transfer by Mr. Shen of 200,000 shares that Mr. Shen will
deliver to PIP under the terms of our Settlement Agreement with them.
(3) Includes options to purchase 3,600 shares exercisable within 60 days
from the date of this prospectus.
(4) Includes options to purchase 4,500 shares exercisable within 60 days
from the date of this prospectus. This number includes the transfer by
Mr. Tortorice of 200,000 shares that are to be delivered to PIP under
the terms of our Settlement Agreement with them.
(5) Includes 125,000 warrants to purchase common stock which can be
exercised at the election of Whitsend Investments Limited during the
term of their Agreement, as well as 5,743,828 shares which we could,
if we elected in our sole discretion to draw down on our private
equity line of credit, obligate Whitsend Investments Limited to
purchase up to 5,743,828 shares within 60 days from the date of this
prospectus. This assumes we do not draw down for purposes of financing
an acquisition, in which case the maximum amount that could be drawn
down would depend upon the acquisition price of our target and, since
there is no acquisition currently being contemplated, that amount
cannot be determined today. Our agreement with Whitsend provides that
-18-
it cannot own more than 9.9% of our total issued and outstanding
common stock at any given time, however investors should not assume
that the amount of overall dilution attributable to Whitsend will be
limited to that amount, because each of the following events could
increase the amount of overall dilution attributable to Whitsend under
its agreement with us: (a) our issuance of new shares of common stock;
(b) the sale of stock by Whitsend into the market (which we may or may
not be aware of at that time); and/or (c) the express or implied
waiver of that limitation by Whitsend at any time during the term of
our agreement.
(6) Includes (a) 70,000 warrants that can be exercised at the election of
AMRO within 60 days from the date of this prospectus, (b) 815,435
shares of common stock it owns as a result of converting a portion of
its convertible debentures and, assuming no change in the current
number of authorized shares and no change in our current share price
of $.05 as of June 13, 2001, (c)12,566,615 shares of common stock it
could own as a result of converting its convertible debentures within
60 days from the date of this prospectus (including $39,541 of accrued
interest as of the date of this prospectus). In order for AMRO to be
able to convert its convertible debentures into the total number of
shares to which it is currently entitled at the current market price
of $.05 per share, we will have to amend our Articles of Incorporation
to increase our authorized number of shares of common stock. Assuming
no change in the current share price of $.05 as of June 13, 2001,
after increasing our authorized shares as discussed above, we could
issue to AMRO an additional 2,195,681 shares. Our agreement with AMRO
provides that it cannot own more than 9.9% of our total issued and
outstanding common stock at any given time. However, investors should
not assume that the amount of overall dilution attributable to AMRO
will be limited to that amount, because each of the following events
could increase the amount of overall dilution attributable to AMRO
under its agreement with us: (a) our issuance of new shares of common
stock; (b) the sale of stock by AMRO into the market (which we may or
may not be aware of); and/or (c) the express or implied waiver of that
limitation by AMRO at any time during the term of our agreement.
(7) We are registering up to the stated amount of shares in anticipation
that they may be issued in connection with the final settlement of
disputes with these parties.
(8a) These shares include (a) 400,000 shares delivered to PIP from Dennis
Shen and Jack Tortorice, as per the terms of our Settlement Agreement
with PIP, and (b) 500,000 warrants, 250,000 of which were issued to
PIP on April 17, 2001 and 250,000 of which we will issue to PIP on
July 17, 2001. The 500,000 warrants are part of the 1,000,000 warrants
that we are registering for PIP in this prospectus.
(8b) These shares will be issuable to Pacific Industrial Partners upon
their exercise of warrants issued by us under a Settlement Agreement
which we and the other named defendants in the lawsuit Pacific
-------
Industrial Partners v. Worldwide Wireless entered into with PIP.
------------------------------------------
Pursuant to the terms of the Settlement Agreement, the warrants will
be issued in quarterly increments of 250,000. Of the total issuable
1,000,000 warrants, PIP will receive a total of 500,000 warrants, each
of Uri Halfon, Uri Zahavi and Mike Davidov will receive 83,500
warrants, Misuma Investment will receive 209,500 warrants and Gil
Priel will receive 40,000 warrants.
-19-
8(c) This does not include 500,000 warrants for 500,000 shares that will be
issued more than sixty days after this offering.
(9) This includes 262,500 shares issued to Sinclair Davis Trading
Corporation in connection with the final settlement of our dispute.
(10) Includes (a) 30,000 warrants that can be exercised at the election of
Trinity within 60 days from the date of this prospectus, (b) 1,403,759
shares of common stock that Trinity owns as a result of converting a
portion of its convertible debentures and, assuming no increase in our
authorized shares of common stock and no change in our current share
price of $.05 as of June 13, 2001, (c) 3,921,577 shares of common
stock it could own as a result of converting its convertible
debentures within 60 days from the date of this prospectus (not
including any accrued interest). In order for Trinity to be able to
convert its convertible debentures into the total number of shares to
which it is currently entitled at the current market price of $.05 per
share, we will have to amend our Articles of Incorporation to increase
our authorized number of shares of common stock. Assuming no change in
the current share price of $.05 as of June 13, 2001, after increasing
our authorized shares as discussed above, we will be able to issue to
Trinity an additional 204,605 shares. Our agreement with Trinity
provides that it cannot own more than 9.9% of our total issued and
outstanding common stock at any given time. However, investors should
not assume that the amount of overall dilution attributable to Trinity
will be limited to 9.9%, because each of the following events could
increase the amount of overall dilution attributable to Trinity under
its agreement with us: (a) our issuance of new shares of common stock;
(b) the sale of stock by Trinity into the market (which we may or may
not be aware of); and/or (c) the express or implied waiver of that
limitation by Trinity at any time during the term of our agreement.
(11) These shares are being registered in connection with the performance
of services by these parties on our behalf and will be issued and
delivered after this registration statement is declared effective by
the SEC.
(12) This assumes that the selling stockholders subsequently will sell the
shares that we are registering in this prospectus.
(13) This assumes that the selling stockholders will receive up to the
stated amount of shares we are registering in this prospectus and that
the selling stockholders subsequently will sell the shares. The
beneficial owner is under no obligation to inform us or otherwise
report any changes in beneficial ownership. The data provided in the
column entitled "Beneficial Ownership After Offering" is based solely
on our assumptions and the information, if any, provided to us.
(14) This assumes that the selling stockholders will convert their
convertible debentures and/or exercise their warrants that we are
registering in this prospectus, and subsequently sell the shares. The
beneficial owner is under no obligation to inform us or otherwise
report any changes in beneficial ownership. The data provided in the
column entitled "Beneficial Ownership After Offering" is based solely
on our assumptions and the information, if any, provided to us.
(15) This consists of vested but unexercised options.
-20-
DISPUTED BENEFICIAL OWNERSHIP
On April 19, 2000, we filed a lawsuit in Orange County, California Superior
Court - Central Justice Center, against one of our former consultants, DFL
Capital Partners, LLC, and our former legal counsel, alleging, among other
things, fraud and malpractice. The dispute arose out of an Option Agreement we
entered into in 1998 whereby DFL provided certain consulting services in
exchange for options to purchase common stock of Worldwide Wireless. We
retained legal counsel recommended to us by DFL, but we were never advised that
the partner of the law firm who represented us specifically was, at the same
time, also the managing member of DFL Capital Partners, LLC. As a result of
this undisclosed conflict of interest, we believe that the agreement which the
law firm counseled us to sign did not adequately protect us in terms of the
services which we understood we were supposed to receive and the number of stock
options which DFL was to receive as compensation for these services. We began
settlement negotiations and subsequently dismissed the lawsuit. Depending upon
the outcome of the negotiations, DFL may receive anywhere from 50,000 to 700,000
options to purchase common stock of Worldwide Wireless.
DIVIDEND POLICY
We have not paid cash dividends on our common stock since our inception. We do
not intend to pay cash dividends on our common stock in the foreseeable future.
We currently intend to reinvest earnings, if any, in the development and
expansion of our business. The declaration of dividends in the future will be at
the election of our Board of Directors, to the extent they may lawfully do so,
and will depend upon our earnings, capital requirements and financial position,
general economic conditions and other relevant factors.
ITEM 8: PLAN OF DISTRIBUTION
The selling stockholders may offer their shares at various times in one or more
of the following transactions:
- ordinary brokers transactions, which may include long sales;
- cross or block trades or otherwise on the OTC Electronic Bulletin
Board;
-21-
- purchases by brokers, dealers or underwriters as principals, and
resale by these purchasers for their own accounts using this
prospectus;
- "at the market" sales to or through market makers, or into an existing
market for the common stock;
- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales made through
agents;
- through the use of options, swaps or other derivative securities;
- in connection with short sales of shares of common stock;
- option or other transactions; and
- any combination of the above transactions, or any other legally
available means.
Brokers, dealers, underwriters or agents participating in the distribution of
our shares of common stock may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders. Sometimes commissions
will also be paid wholly or partially by the purchasers of these shares of
common stock, for whom the broker-dealers may act as agent or to whom they may
sell as principal, or both. The compensation paid or given to a particular
broker-dealer may sometimes be in excess of customary commissions. All of the
selling stockholders and any broker-dealers acting in connection with the sale
of the shares of common stock included in this prospectus may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act because
of the manner in which these shares are being purchased and resold. In those
situations where a selling stockholder is acting as an underwriter, any
commissions received by that selling stockholder, and any profit realized on the
resale of shares of common stock as principals, will be considered underwriting
compensation under the Securities Act. Neither we nor any selling stockholder
can presently estimate the amount of this compensation. We do not know of any
existing arrangements between a selling stockholder and any other shareholder,
dealer, underwriter or agent relating to the sale or distribution of the shares.
The selling stockholders have advised us that they do not intend to engage in
short selling activities in connection with their plan of distribution, but we
have no control over whether or not any selling stockholder will actually engage
in this activity.
The selling stockholders have represented to us that any purchase or sale of
shares of common stock by them will comply with all applicable securities
regulations then in effect, which would include Regulation M adopted under the
Securities Exchange Act of 1934. In general, Rule 102 of Regulation M prohibits
any person connected with a distribution of our common stock from directly or
indirectly bidding for, or purchasing for any account in which he or she has a
beneficial interest, any of our common stock or any right to purchase our common
stock, for a period of one business day before and after completion of his or
her participation in the distribution.
-22-
During the time a selling stockholder participates in a distribution, Rule 104
of Regulation M prohibits that selling stockholder, and any other persons
engaged in the distribution, from engaging in any stabilizing bid or purchasing
our common stock except for the purpose of preventing or retarding a decline in
the open market price of our common stock. No person may effect any stabilizing
transaction to facilitate any offering at the market. If any selling
stockholder offers and sells our common stock at the market, Rule 104 prohibits
that selling stockholder from making any stabilizing transaction that involves
our common stock.
There can be no assurance that the selling stockholders will sell any or all of
the shares offered by them in this prospectus. Also, there can be no assurance
that each selling stockholder will, in fact, comply with applicable securities
regulations, including Regulation M, in connection with the sale or distribution
of the shares. Beyond seeking the representations of the selling stockholders
that they will do so, Worldwide Wireless has no power to compel them to comply
with these regulations, nor will we necessarily have any way of knowing whether
or not they do. We have not obtained this type of representation from every
selling stockholder named in this prospectus.
ITEM 9: LEGAL PROCEEDINGS
Except as disclosed below, we are not involved in any material pending legal
proceedings, other than routine litigation incidental to our business, to which
we are a party or of which any of our property is subject:
Sean Loftis and 1st Universe L.P.
- --------------------------------
We entered into an agreement with Mr. Loftis whereby we would provide wireless
internet services to customers located by Mr. Loftis, and with whom Mr. Loftis
would enter into contracts to provide wireless internet services. Mr. Loftis
received a profit to the extent that the fees charged by him to the customer
exceeded the fees charged by us to him. On January 30, 2001, we terminated the
agreement, and we were subsequently sued by 1st Universe and Mr. Loftis for
breach of contract, breach of the implied covenant of good faith and
interference with contract, among other things. 1st Universe and Mr. Loftis
filed the suit on February 6, 2001, in the Superior Court of Orange County,
California, seeking compensatory and punitive damages. Mr. Loftis alleges that
we breached the agreement by terminating internet access services on short
notice and entering into new contracts with his customers. We dispute all of
Mr. Loftis' allegations and are actively litigating against his claims.
ITEM 10: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS
The names, ages and positions of the current directors, executive officers and
key employees of Worldwide Wireless are set forth below. Biographical
information for each of these persons is also presented below. Our executive
officers are appointed by our Board of Directors and serve at its discretion.
-23-
DIRECTORS AND EXECUTIVE OFFICERS
Name Age Position Held
- --------------------------------------- --- ------------------------
Jack Tortorice 52 Chairman of the Board
Jerry Collazo 41 Chief Executive Officer,
Chief Financial Officer
Steve Button 37 Secretary
Vincent (Li-Hsiu) Tsao 37 Director
Dennis Shen 34 Director
JACK TORTORICE. Chairman of the Board of Directors since April of 1999, and
until January 4, 2001, Chief Executive Officer and President of WWWN. He served
as CEO, Chairman of the Board and a Director of Pacific Link from October 1997
to May 1999. Prior to joining Pacific Link, he was General Manager for the
sales and marketing division of Frontier Communications from January 1995 to
June 1997. Prior positions include: General Manager for Sales and Operations of
ITT Courier related to computer equipment sales; Vice President of Sales for
Automatic Data Processing selling payroll outsourcing; and sales positions for
Wang Labs and Xerox. Mr. Tortorice graduated with a Masters in Business
Administration from Pepperdine University in 1989 and received a bachelor's
degree in economics from Edinboro University in Pennsylvania in 1973.
JERRY COLLAZO. Mr. Collazo joined us as our Chief Financial Officer in July
2000, and as of January 4, 2001, he is our President and acting Chief Executive
Officer. Most recently, prior to joining Worldwide Wireless, Mr. Collazo served
from August 1996 to April 1998 as COO of Xtend Micro Products. From August 1995
to July 1996, he served as CFO of Powerwave Technologies (NASDAQ:PWAV), a leader
in wireless telecommunications, helping the company grow to $60 million in
revenues. Prior to that, he served as CFO of Young Minds, Inc. Mr. Collazo has
also served as Director of Finance and Tax for Seagate Technology (NYSE:SEG)
(formerly Archive Corporation), a $400 million revenue company. In addition, he
has served as a manager at Ernst & Young. Mr. Collazo is a CPA, and holds a
Masters in Business Administration from UCLA, a Masters in Business Taxation
from Golden Gate University and a BS in Accounting from Fort Lewis College.
VINCENT (LI-HSIU) TSAO. Mr. Tsao was appointed as a Director of Worldwide
Wireless, Inc. on January 4, 2001. He has served as a Director for Multacom, a
private international telecommunications company, since October 1998 and as Vice
President of Asian Operations since May 2000. Prior to that, Mr. Tsao was the
Chief Operating Officer of Multacom for the period October 1998 through November
1999, and was the Vice President for Investor Relations from November 1999 to
May 2000. Mr. Tsao worked in the Marketing Department of Tien Fu Securities
Investment Consulting Co. in Taipei, Taiwan, where he was appointed manager in
1990. From 1992 to 1995 he was an officer in the Trust Department of Asia Trust
and Investment Corporation in Taipei, Taiwan. From 1995 until joining Multacom
in 1999, Mr. Tsao worked for General Bank as an Assistant Vice President of
Business Development.
-24-
STEVE BUTTON. Mr. Button joined us as accounting manager in March 1999, and as
of March 14, 2001, he is our Vice President of Finance. The Board of Directors
appointed Mr. Button as our corporate Secretary on April 23, 2001. Prior to his
employment at Worldwide, Mr. Button founded JS Tex Inc., a textile distribution
services company that began operations in February 1996. He served as General
Manager of JS Tex Inc. through February 1999. From November 1992 to July 1995,
he served as Senior Systems Analyst of Arden Mayfair, Inc, a diversified
conglomerate with operations in the supermarket retail, telecommunications, and
manufacturing industries. Prior to that, he served as a Senior Associate at
Coopers & Lybrand, now known as PriceWaterhouseCoopers. In 1987, Mr. Button
received a Bachelor of Science in Accounting from Oral Roberts University where
he attended on a full athletic scholarship.
DENNIS SHEN. Mr. Shen was appointed as a Director of Worldwide Wireless, Inc.
on February 13, 2001. In February 2000, we learned that Mr. Shen had been
convicted in California in 1996 of two counts involving the receipt or
concealment of stolen property, both of which were dropped to misdemeanor counts
and which, it appears, were eventually expunged at the bench and entered as not
guilty pleas. In May, 1992, Mr. Shen was the founder, President, and Chief
Information Officer for Global Pacific, which later became Pacific Link (which
merged with WWWN in April 1999). He was responsible for network design and
implementation and spearheaded the transition of that company from computer
reseller to an Internet service provider in 1995. Mr. Shen has extensive
experience in large-scale wireless network implementations. He was a featured
speaker at World Expo '94, and the Unlicensed Spectrum-Wireless Internet Access
Show. Our management has determined that Mr. Shen's prior legal issues have not
lessened the importance or value of his contribution to our company in the past,
nor is it expected to be an impediment to his service as a Director in the
future. Susan Shen, the wife of Dennis Shen, serves as a full-time employee of
Worldwide Wireless, and Shen family members have historically been, and continue
to be, significant shareholders of our company.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT --
(COMBINED WITH ITEM 7, ABOVE).
ITEM 12: DESCRIPTION OF SECURITIES
The following is a summary of the material terms of our capital stock, qualified
in its entirety by, the provisions of our Certificate of Incorporation, as
amended, and the Amended and Restated Bylaws that are referenced as exhibits to
this registration statement and by provisions of applicable law.
COMMON STOCK
We are presently authorized to issue up to 50,000,000 shares of common stock,
$.001 par value per share. As of June 14, 2001, there were 20,025,043 shares of
common stock outstanding. The holders of common stock are entitled to one vote
for each share held of record on each matter submitted to a vote of
stockholders. There is no cumulative voting for election of directors.
Additionally, there are no dividend rights for common stockholders. Dividends
may be granted at the discretion of the Board of Directors, and no dividends are
expected in the foreseeable future.
-25-
OPTIONS AND WARRANTS
There are currently outstanding options to purchase 1,288,411 shares of common
stock at exercise prices ranging from $.25 to $3.00, and outstanding warrants to
purchase 1,475,000 shares of common stock at exercise prices ranging from
approximately $1.10 to $5.00 per share. The exercise price of the warrants for
250,000 shares of common stock to PIP is the average trading price of the ninety
(90) day period preceding the date of its issue. We are under a contractual
obligation to issue 750,000 additional warrants to PIP under the same exercise
price.
CONVERTIBLE DEBENTURES
On June 30, 2000, we entered into a Convertible Debenture and Warrant Purchase
Agreement having an aggregate principal amount of $1,000,000. The convertible
debentures mature on June 30, 2003 and bear interest at 7% per annum until the
earlier of conversion into our common stock or maturity. Interest is payable
quarterly in arrears on September 1, October 1, January 1 and June 1 of each
year commencing on September 1, 2000. The convertible debentures are
convertible by the holder at any time prior to the close of business on June 30,
2003. The conversion price is equal to the lesser of $3.1563 per share or 80%
of the market price as of the date on which the holder of the debenture gives
notice of their intention to convert the debentures. Under the terms of our
agreement (which was drafted before the applicable conversion price was
calculated and fixed), we may redeem the debentures for cash at 150% of the
amount of unpaid principal and accrued interest on these debentures if the
conversion price is not less than $7.00 per share. Since the price of our
common stock was less than $7.00 per share when our agreement was subsequently
signed by the selling stockholders, the applicable conversion price fixed by
this agreement will always be less than $7.00 per share and we have no ability
------ --
to redeem these debentures for cash.
TRANSACTIONS WITH SELLING STOCKHOLDERS
The shares to be registered pursuant to the registration statement and this
prospectus have been issued in, or underlay derivative securities exercisable
for or convertible into shares which were issued in, private transactions
exempted pursuant to Sections 4(2) or 4(6), or other applicable exemptions, of
the Securities Act from the registration provisions contained in Section 5 of
the Securities Act. Each offering included less than 35 purchasers, other than
"accredited investors" as defined in Rule 501, and as a result each offering
qualified as exempt from registration in accordance with Rules 505 and/or 506 of
Regulation D. The following pages briefly describe the agreements and
transactions we entered into with each of the selling stockholders with respect
to each class of security registered under this prospectus. The following
discussion provides an understanding of the material terms of each transaction
referenced below. It is not intended to be a complete description of each
agreement described below, and the discussion in this registration statement is
qualified in its entirety by reference to the documents included or referenced
in the exhibits to this registration statement.
-26-
CONVERTIBLE DEBENTURE AND WARRANT PURCHASE AGREEMENT
On June 30, 2000, we entered into a Convertible Debenture and Warrant Purchase
Agreement with AMRO International S.A. and Trinity Capital Advisors, Inc. for
the purchase of debentures having an aggregate principal amount of $1,000,000.
The convertible debentures are set to mature on June 30, 2003 with interest
accruing at 7% per annum from the date the convertible debentures were issued
until the earlier to occur of conversion of the debentures into shares of our
common stock or June 30, 2003. Until conversion, the interest accruing on the
debentures shall be payable quarterly in arrears, on September 1, October 1,
January 1 and June 1 of each year, commencing September 1, 2000.
The convertible debentures are convertible by the holder into shares of our
common stock at any time prior to the close of business on June 30, 2003. The
conversion price will be the amount which is equal to the lesser of $3.1563 per
share or 80% of the market price of our shares as of the date on which a
conversion notice is received by us. Under the terms of our agreement (which was
drafted before the applicable conversion price was calculated and fixed), we may
redeem the debentures for cash at 150% of the amount of unpaid principal and
accrued interest on these debentures if the conversion price is not less than
$7.00 per share. Since the price of our common stock was less than $7.00 per
share when our agreement was subsequently signed by the selling stockholders,
the applicable conversion price fixed by this agreement will always be less than
------
$7.00 per share and we have no ability to redeem these debentures for cash. We
--
have the right to redeem the convertible debentures for an amount equal to 150%
of their unpaid principal balance, plus all accrued but unpaid interest
outstanding on that amount at the time of redemption. We are obligated to
reserve for issuance upon conversion a sufficient number of shares of common
stock, and to register and maintain an effective registration statement for the
shares of common stock reserved for issuance. The beneficial conversion feature
associated with the issuance of the convertible debenture will result in a
charge of approximately $25,000 to interest expense during the third quarter of
our current fiscal year.
We received proceeds from the sale of the debentures in the amount of
$1,000,000, less the amount of $7,000 for escrow, administrative and legal fees
payable to Epstein, Becker & Green, P.C. A finder's fee of 5,000 shares of our
common stock was paid to Triton West Group, Inc. under the terms of our
debenture purchase agreement.
In the event that we do not register the shares as required by our agreement
with the purchasers of these debentures, we will incur penalties in the amount
of two percent of the aggregate market value of our shares of common stock
covered by that agreement.
OUR TRANSACTIONS WITH THE OTHER SELLING STOCKHOLDERS
Pacific Industrial Partners, LLC
- --------------------------------
-27-
On July 12, 2000, a lawsuit was filed in Orange County Superior Court against us
and some of our officers, directors and shareholders by Pacific Industrial
Partners, LLC and its affiliates (collectively, "PIP") for breach of contract,
breach of the implied covenant of good faith and fair dealing, promissory
estoppel and intentional interference with existing contract. The dispute arose
out of a convertible debt note we signed dated January 6, 2000, as amended, in
which PIP proposed to finance up to $2.5 million dollars through the purchase of
convertible notes at eight percent interest (with an option to purchase up to $3
million dollars in additional notes).
On April 17, 2001, we resolved the dispute through settlement negotiations. In
exchange for dismissal of the pending litigation and releases of all claims
against all parties, we have agreed to the following: (a) cash payment of
$115,000, of which $70,000 was paid by check from persons other than us to PIP
and its affiliates, and the remaining balance of $45,000 is payable from us by
installments under a promissory note, which is secured by a Stipulated Entry of
Judgment for that amount; (b) 400,000 shares of common stock of WWWN to be
transferred to PIP and its affiliates; and (c) 1,000,000 warrants for the
purchase of 1,000,000 shares of free-trading stock. With respect to the
warrants, we are registering for resale only the shares underlying the warrants.
As of the date of this filing, we have issued warrants for the purchase of
250,000 shares.
Steve Menzies
- --------------
During the last quarter of fiscal year 2000, Steve Menzies lent us $125,000, to
be repaid with 8% interest, pursuant to an oral loan agreement. In order to pay
off the debt, we are currently negotiating a formal payment schedule, whereby we
will repay the debt, with a combination of cash and stock over a 6 to 8 month
period, depending on the selling price of the stock during that time. We are
currently negotiating our agreement with Mr. Menzies, and in anticipation of
that, we are registering up to 800,000 shares.
Mr. Maxik and Mr. Capporicci
- ----------------------------
We entered into separate oral consulting agreements with Mr. Maxik and Mr.
Capporicci early last year, whereby each of Mr. Maxik and Mr. Capporicci would
provide consulting services in exchange for 30,000 shares of stock and a monthly
payment of $1,500 plus reimbursement of expenses. Instead of the originally
agreed upon compensation, the parties have agreed that we will register up to
250,000 shares for issuance to each of Mr. Maxik and Mr. Capporicci, as full
compensation for services rendered to date.
Sinclair Davis Corporation
- ----------------------------
We entered into a marketing agreement with Sinclair Davis Corporation in
November 2000, which, by mutual agreement between the parties, was cancelled.
In full satisfaction of all amounts owed to Sinclair Davis for services already
rendered, the Company and Sinclair Davis agreed to compensation in the
amount of 262,500 shares of free-trading stock, which is being registered under
this registration statement.
-28-
Universal Business Insurance, Inc.
- ----------------------------------
We executed a Share Purchase Agreement with Universal Business Insurance, Inc.
on March 30, 2001. Under this Agreement, we agreed to issue, register for free
trading and deliver 553,582 shares of common stock to Universal, in exchange for
payment of our premium owed for Director's and Officer's insurance coverage for
the period between March 13, 2001 and March 13, 2002. The amount of the
applicable premium was $66,429.83. Additionally, we granted Universal an option
to purchase an additional amount of 55,358 shares of common stock in the event
that our highest bid price on July 30, 2001 is less than $0.10 per share.
Feldhake, August & Roquemore LLP
- --------------------------------
We have entered into a Share Purchase Agreement with our outside law firm,
Feldhake, August & Roquemore LLP. Under that agreement, plan to issued 200,000
shares of common stock for a credit of $20,000 to be applied against our
outstanding balance with them.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference room at the following
locations:
- Main Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549
- Regional Public Reference Room, 75 Park Place, 14th Floor, New York, New York
10007
- Regional Public Reference Room, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511
You may obtain information on the operation of the SEC's public reference rooms
by calling the SEC at (800) SEC-0330.
We are required to file these documents with the SEC electronically. You can
access the electronic versions of these filings on the Internet at the SEC's web
site, located at http://www.sec.gov.
We have included this prospectus in our registration statement that we filed
with the SEC. The registration statement provides additional information that we
are not required to include in the prospectus. You can receive a copy of the
entire registration statement as described above. Although this prospectus
describes the material terms of contracts, agreements and other documents filed
as exhibits to the registration statement, you should read the exhibits for a
more complete description of the document or matter involved.
ITEM 13: INTERESTS OF NAMED EXPERTS AND COUNSEL-- NOT APPLICABLE.
-29-
ITEM 16: DESCRIPTION OF THE BUSINESS
WIRELESS NETWORK
We have the technical expertise to build and operate large scale wireless
networks without relying on an existing wire-based network, such as a telephone
network's copper lines. Our wireless network allows the user to connect to an
Internet service provider bandwidth via a radio modem. Typically a customer
relies on an incumbent local exchange carrier such as a telephone company's
copper wires or a cable company's television coaxial plant to provide the
physical means for the customer to connect to the Internet.
Our primary means of providing our wireless services is a wireless network
consisting of an operations center, centralized base stations known as
"points-of-presence", and distribution radios which connect to the end customer.
We currently operate a wireless network which has been operational for
approximately three years and covers an estimated 85% of Orange County,
California. On December 31, 1999, we began to provide wireless services in Los
Angeles County, California, but we are in the process of phasing out these
operations so that we can focus our efforts on enhancing our services and
business in Orange County, California. We currently rely on fifteen,
fully-operational POPs, which are generally located on the tops of tall
buildings. We negotiate long- term site licenses for each POP location.
The typical POP site consists of one indoor/outdoor equipment cabinet (62" H x
23" W x 34" D) and an array of four to eight small sectional antennas (42" H x
4" W). The sectional antennas can be painted any color to match existing
surroundings. There is no roof penetration, and once the system is installed
there are minimum inspections. We pay for all costs associated with the
installation and our unit requires a single phase 110 volt outlet for power.
As part of our network expansion and in the course of normal operations, we are
negotiating to expand our rights associated with the current POP locations as
well as acquire additional point-of-presence locations. Management believes
that the current market for these facilities is sufficient to meet our needs,
and that they are reasonably priced; however, the ability to acquire and
maintain these rights is, and will continue to be, a material factor in our
success.
In general, our end customers must be within five miles of a POP and have
line-of-sight visibility between the POP and an antenna located at their
building. The five mile standard is based upon the equipment we use, existing
interference and equipment reliability. Other companies may use greater
distances from a POP, and we do as well, but we have adopted five miles as a
general guideline for our connections. Each end customer must install a rooftop
or window radio with an antenna. When the customer accesses the Internet, the
signal travels over its building's wiring or wireless network to the rooftop or
window antenna. The antenna sends the data signal to a nearby POP, where the
signal is communicated to our broadband switching center and then onto its final
destination.
-30-
Our wireless network has been designed to provide our customers with flexible,
rapidly-installed and reliable high-speed internet connectivity. For example,
during the Panasonic Shock Wave Beach Games in August of 1999 we established a
temporary wireless system which provided Internet access to the participants on
the beach. We are able to install the necessary equipment at a customer's
business within two to five days. Actual installation of a wireless system may
take as little as four hours. Installation and incorporation into our wireless
network can be accomplished as fast as within 48 hours following a signed
service order. This can be accomplished when we rely on installation scheduling
and preparation prior to contract signing. However, we generally plan for a
three week time period for completion of installation. We manage our network
traffic by using routing equipment that measures and controls packet flows (data
bundled for transmission) and we install equipment with performance levels that
meet or exceed those required by the customer.
Our wireless network is engineered to provide high reliability and wide area
coverage. We generally operate at a greater than 98% uptime. Our wireless
networks are capable of high speeds of 128 kbps through 100 Mbps speeds. Kbps
stands for Kilobits per second, and Mbps stands for megabits per second; the
number of bits per second is the industry standard of measurement of how fast
data can be transmitted over the Internet. Our wireless system and Digital
Subscriber Lines (which are enhanced copper lines that connect to a local
telephone company system and then directly to the Internet), provide connection
to the Internet at high speeds. Our wireless connections can provide
transmissions at greater speeds than a dial up connection. For example, a dial
up modem transmits at 28,000 to 56,000 bps; a T1 line (which is a dedicated
telephone cable with a bundle of twenty-four voice or data lines) transmits at
1.544 Mbps, and our wireless network transmits at a rate of 100 Mbps. These
high speed connections allow files, documents and voice transmissions to be
dispatched over the Internet in much shorter time periods.
We operate on a combination of licensed frequencies of 23 Ghz and unlicensed
frequencies in the 2.4 Ghz ISM bandwidth, 5.8 Ghz ISM bandwidth, and 5.2 Ghz
UNII bandwidth ranges. Ghz, (giga hertz) is a measurement of electromagnetic
energy which is equivalent to one "wave" or cycle per second. The bandwidth
range determines whether federal licensing is required. Some frequencies must
be licensed by the U.S. Federal Communications Commission, whereas unlicensed
frequencies are part of the radio spectrum that the general public may use for
personal radios. The licensing required is determined on a site-by-site basis,
depending on the distance and type of network link. Reliability is achieved
through redundant radio links and wired line back-up. Security is provided
through spread spectrum radio links and encryption, among other standard
security measures. Our radio modem transmits data by a microwave frequency
which changes 32 times a second. During our initial twelve months of operations
we experienced no significant weather interference, nor did we expect to, since
the low frequencies which we use are rarely affected by weather conditions
(other than hail). We are not sure how a wireless network in geographical areas
with more severe weather than Southern California would be affected, but
management does not believe that weather conditions will pose a significant
factor to our ability to provide high-quality wireless services.
-31-
PRINCIPAL SERVICES
High-speed Internet: We offer connections to the Internet at speeds from 128
- -------------------
kbps to 100 Mbps. This service provides always-connected, secure access for all
sizes of commercial businesses. These connections are primarily supported by
our wireless network with the balance of customers being served by DSL and
leased T-1 circuits. We enhance our service by balancing and distributing our
traffic across our upstream connections, which include Digital Broadcast
Networks, Savis, and Exodus networks. As of March 31, 2001, we had
approximately 280 high-speed wireless customers.
Dial-up Internet Access: As of March 31, 2001, we did not provide Internet
- -----------------------
access to Internet users using dial-up connections. This service was previously
marketed to the general public throughout Orange County and to our commercial
customers to support work-at-home, remote server access, and other business
applications. As of August 31, 2000, we divested our dial-up division because
we felt the cost of operating this service exceeded the revenue value it did, or
would in the future, provide to us.
Data Center Services: We offer web hosting, web site development and co-location
- --------------------
services to our customers. Our co-location service allows a customer located
outside our wireless network to physically place a computer connected to the
customer's network in a secure facility with a high-speed physical connection to
the Internet. As of March 31, 2001, we provided these services to approximately
292 customers.
Network Consulting: We offer design and implementation services for private
- ------------------
wireless networks and consulting services to develop network hardware
components. For the three months ended March 31, 2001, we provided these
services to an average of 10 customers.
BUSINESS AND OPERATING STRATEGIES
Our historical sales have resulted from domestic operations primarily located in
Orange County, California. This area has a high concentration of
technology-oriented businesses that represent our prime targeted customers due
to their need for high-speed Internet access. By focusing our efforts on our
Orange County, California customer base, our management believes that we can
utilize our existing network assets, brand equity, central facilities,
administration, and technical resources to efficiently grow our business and
become profitable.
We generally work with our end customer when providing network access. We
believe that a direct customer relationship provides the opportunity for us to
cross-sell network products, improve customer satisfaction, and reduces the
chance of customer attrition. In May 1999, we created a direct sales force to
market and sell our products and services. This sales force markets our
services to businesses of all sizes within our network service area, and is
supported by our customer service, technical experts, and outbound telemarketing
activities. This direct sales activity is supplemented by telemarketing sales
agents and through customer referrals.
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At the local level, we advertise in general print media and through publications
targeted at the information professional. During late 1999 we established an
e-commerce site, www.airwaveproducts.com, to sell wireless network equipment to
enterprise customers and Internet service providers. Although no revenues were
generated from this site during fiscal years 1999 and 2000, management believes
that in the future an increasing percentage of our revenues will be attributable
to the sale of products and services over the Internet.
Our backlog results from the difference in timing between a firm customer order
and the installation of all services ordered by the customer. In general, our
target interval for installation is three weeks. As of March 31, 2001, we
estimate that our revenue from contracts for services ordered but not yet filled
to be approximately $60,000, of which approximately $8,000 represents recurring
monthly revenue, and the rest represents one-time revenue from the sale of
equipment.
COMPETITION
Our market is crowded with companies which provide both wired and wireless
Internet networks and Internet access to businesses and individuals. We face
competition from existing network and Internet service providers, most of whom
have financial resources, brand recognition, work coverage, technical resources,
and sales forces much larger than ours. These providers may have substantial
financial and technical resources directed at the same markets served by us. As
a result, from time to time, we may need to adjust the pricing of our products,
expend more funds to acquire customers and may experience higher customer
attrition. In addition, we need to be able successfully to compete with the
larger and more established companies that already provide Internet service.
In the wireless market we compete with, among others, Teligent, Inc. and XO
Communications, Inc., each of which offers wireless directional, high-speed
network services; Pacific Bell, AT&T, World Com, Qwest, Cox Communications,
Sprint and similarly situated telecommunications companies, which offer Internet
products as stand-alone products or in a bundle with telecommunications, network
services, or wide-area networking; and companies like Covad and Rhythms Net
Connections, which are representative of service providers who provide
high-speed network facilities primarily by using state-of-the-art modems in
conjunction with the facilities of incumbent local exchange carriers.
Similarly, we compete with Time Warner, @Work, and other cable television
companies which have converted cable television coaxial lines to support
bi-directional, high-speed network services, and we also compete with
Internet-dedicated access companies, like Verio, Concentric, and Level 3, which
specialize in Internet protocol products that include data center services, web
hosting, virtual private networking, network consulting, and related products
and services.
We compete with these companies in the areas of rapid installation, technical
performance, quality of customer service and price. We have the capacity to
deliver Internet service in 48 hours because at a minimum our service may only
require installation of a radio and antennae at a customer's site. Competing
technologies that rely on physical wiring may require 30 to 45 days for the
necessary wiring to be installed. We develop our networks primarily with our
own internal engineering expertise, and we believe the use of our own personnel
increases the uniqueness of our service and prevents direct copy by our
competition. Use of our own technical network configuration, radio technology,
and POP site implementations reduce costs and improve performance.
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Although pricing is an important factor in our customers' purchase decisions, we
believe that customer relationships, customer service and consistent quality
will be the key to generating customer loyalty. During the past several years
management has observed market prices for network services declining, which is a
trend management believes will likely continue. As prices decline for any given
speed of service, we expect that our total number of customers will increase due
to more individuals and companies having access to, and deciding to use, these
services. As the total number of customers increase, the proportion of
customers purchasing our high-speed services, which are more expensive in
comparison to our other services, will increase because the cost to upgrade a
customer's speed is generally minimal.
Many of our competitors rely on existing networks of copper lines owned by third
parties. We believe these networks are facing increased demand from individuals
and businesses for new services at a reasonable cost. Our management believes
that elimination of reliance on third parties reduces our costs by eliminating
the expense of payments to these third parties for labor costs associated with
installation and costs of troubleshooting network problems. Further, we believe
that capital expenditures associated with constructing our wireless network are
substantially lower because we do not physically have to construct a wire
network.
PRINCIPAL SUPPLIERS
Our principal suppliers provide hardware and software that is incorporated into
our networks. While no single vendor represents a majority of capital spending,
network performance depends on the operation and support of these products. We
rely on third-party vendors for equipment, upstream bandwidth, operational
software, and product support. We currently rely on six vendors for our
equipment and four vendors for upstream bandwidth access. Our product
availability and network performance may be diminished when and if these
providers limit the availability of service, delay product, or deviate from our
expectations for performance. However, management believes these vendors could
be replaced within approximately 60 days should that become necessary in the
future. Our agreements with our customers typically require specific
performance on our part for financial, service, or operational actions, and any
failure in our performance due to a vendor's non-performance could result in
penalties and/or increased costs of operation for us. As is customary in the
industry, damages owed by a company for failure to provide bandwidth are
generally limited to service credits for the circuits affected.
In November 1999, we entered into a contract to purchase wireless
telecommunications equipment from Adaptive Broadband Corporation. Pursuant to
the agreement we committed to purchase 2,624 units, 5,120 units and 7,760 units
during the first, second and third years of the agreement, respectively. Due to
the expense of retro-fitting our network to be able to use the equipment, we
terminated this agreement on February 15, 2001 and have returned equipment that
we acquired pursuant to the contract. This resulted in a reduction both in
inventory and accounts payable of approximately $1,485,240 in the first quarter
of 2001. The termination of this agreement will not have any material impact on
our continuing operations, and we will incur a restocking fee of $20,000.
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TRADEMARK, LICENSE AND INTELLECTUAL PROPERTY
Our primary service mark in our service area of Orange County is Global Pacific
Internet, because the name Worldwide Wireless was not available to us as a
corporate name from the Secretary of State of California. We are currently
seeking trademark protection for both "Global Pacific Internet" and "Worldwide
Wireless Networks." To the extent we succeed in obtaining a federal trademark
for "Worldwide Wireless Networks," we may be able to enforce our right to use
that trademark as our corporate name in California, but there can be no
assurance that we will ever be able to do so. The success of our business
depends in part on brand recognition, trade secrets, network hardware, and
software which may be proprietary or purchased from third-parties. We rely upon
a combination of licenses, confidentiality agreements and other contractual
covenants, as well as the statutory protections of the California Trade Secrets
Act to establish and protect our technology and other intellectual property
rights. Although we do not believe that our intellectual property infringes on
the rights of any other party, third-parties may in the future assert claims for
infringement which may be successful and/or require substantial resources to
defend. Other than in California, we have no knowledge of any condition or
circumstance which would cause a conflict with our trademark or name in any
jurisdiction, although there can be no assurance that a condition or
circumstance of this type does not exist, or will not develop in the future.
(See: Risk Factors - Risks Relating to Our Business.)
As of December 31, 2000, we held twelve (12) FCC private operational fixed
microwave radio station licenses. (See "Government Regulations" below). These
licenses have a term of ten years, the first of which will expire in July 2009.
The importance of having FCC licenses to companies like ours is that it
establishes superior rights as against third parties to provide our services
using the frequencies and in the locations for which these licenses are granted.
We intend to continue to apply for these licenses as our business and operations
expand.
PRODUCT DEVELOPMENT
We conduct research and development as an incidental activity to our ordinary
operations. Therefore, we have not spent any material amount for research and
development during the past two fiscal years.
In May of 1999 we entered into a joint venture with Bridge Technology, Inc.
Pursuant to the agreement, we agreed to provide our know-how and contributed
$50,000 toward the capitalization of Pacific Bridge Net, a subsidiary of Bridge
Technology. The mission of Pacific Bridge Net is to design, develop (patent and
copyright), market and sell various devices required to provide high speed
broadband wireless access to the Internet backbone infrastructure. We own a 20%
interest in the venture, and will have the right to sell any radio equipment
that is developed through the venture in the United States. As of December 31,
1999, the amount of this investment was reduced to $36,885, resulting from our
-35-
20% allocation of the losses reported by Pacific Bridge Net for fiscal year
1999. Pacific Bridge Net has finished an engineering prototype of a wireless
radio with a built-in firewall and integrated router (which may eliminate the
need for a proxy server or complicated network configuration), and has been
testing it for a period of approximately 12 weeks for reliability and stability
in real wireless network deployment. The formal agreement was terminated by
mutual consent as of July 1, 2000, however we continue to make sales of
equipment through Global Bridge E Net for use both in the U.S. and Asia.
GOVERNMENT REGULATION
At the federal level, the FCC has jurisdiction over the use of the
electromagnetic spectrum (i.e., wireless services) and has exclusive
jurisdiction over all interstate telecommunications services, that is, those
that originate in one state and terminate in another state. State regulatory
commissions generally have jurisdiction over intrastate communications, that is,
those that originate and terminate within the same state. Municipalities and
other local jurisdictions may regulate limited aspects of our business by, for
example, imposing zoning and franchise requirements and requiring installation
permits. We are also subject to taxation at the federal and state levels and
may be subject to varying taxes and fees from local jurisdictions.
A large portion of our wireless networks operate in a radio spectrum not
requiring licensing from the Federal Communications Commission under current
regulations. As an Internet service provider we are not currently directly
regulated by the FCC or the Public Utilities Commission of any state. However,
as required by law, we license frequency spectrum directly from the FCC for some
of the high-speed portions of our wireless network. Changes in current state or
federal law, or in the interpretation of existing law, may cause increased
regulation of our business or restrictions on the unlicensed radio spectrum
currently used in the wireless networks.
EMPLOYEES
We currently have a total of 23 full-time employees, 2 part-time employees and
no temporary workers. These individuals bring us expertise in various aspects
of sales, engineering, customer service, finance and network operations. The
majority of our employees are based in Orange County, California. We believe we
have good relations with our employees, and none are covered by any collective
bargaining agreement.
ITEM 17: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements, including all notes attached to these statements, which appear at
the end of this prospectus. In addition to historical information, the
discussion here and elsewhere in this prospectus contains some forward-looking
statements. These statements by their nature involve risks and uncertainties,
and should not be construed to imply any promise, certainty or likelihood that
these results or trends will necessarily continue in the future. Our actual
results in the future may differ significantly from those anticipated by these
forward-looking statements, due to many factors including those set out in the
"Risk Factors," "Business" and other sections of this prospectus.
-36-
Overview. Worldwide Wireless is a networking solutions company which provides
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high speed Internet access using our own wireless network, dial-up Internet
access, data center services and network consulting. Since April 1999 we have
undertaken large-scale commercial operations and have developed a commercial
customer base, a direct sales force and have expanded our wireless network. Our
primary market is currently Orange County, California, where we operate our
wireless network. We are currently in process of terminating operations in Los
Angeles County, California. Since inception we have operated at a net loss, due
primarily to our investment in expanding our network coverage. Management
believes that efforts to continue expansion will result in additional losses
from which recovery will be difficult. Therefore, we temporarily have
discontinued expansion efforts beyond our existing Orange County operations. We
plan to resume expansion efforts after we have established profitability in
Orange County, California. There can be no assurance that we will be able to
access either debt or equity capitalization in sufficient amounts or on
acceptable terms to continue to fund operations and continue growth of our
customer base. We have received a term sheet from one of our existing
investors, Esyon Corporation, indicating a willingness to provide additional
debt and/or equity capitalization in such amounts as may be mutually determined
between us. We are continuing to negotiate a definitive strategic alliance
agreement with Esyon, however in the interim Esyon has made loans to us in the
principal face amount of $475,000 under secured promissory notes bearing
interest at 10% per annum and coming due in June 2002. We are hopeful that the
definitive agreement will be completed by the end of the second fiscal quarter
of 2001, although there can be no assurance that it will be completed by that or
at all. A copy of the term sheet and the form of promissory note we have been
using with Esyon are attached as exhibits to this registration statement.
Additionally, we have a $20,000,000 equity line with Whitsend Investments
Limited that may be utilized on an as-needed basis with certain limitations. If
we were unable to access this capital, or any other capital for current
operations, then we would be unable to continue our operations.
Revenues. We generate revenues primarily through the sale of annuity-like
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service contracts with customers, the sale of equipment and installation of
wireless networks, and network consulting. We recognize revenues when services
are completed. Our revenues for the twelve months ended December 31, 1999 and
December 31, 2000 were $1,980,203, and $3,351,878, respectively, which
represents a 69% increase for the twelve months ended December 31, 2000. The
increase in revenue for the twelve months ended December 31, 1999 and 2000 are
primarily attributable to an increase in the number of wireless customers. We
had approximately one hundred and ninety wireless customers at December 31,
1999, and two hundred and eighty customers at December 31, 2000. In addition to
the growth in our wireless customer base, equipment sales increased from
$251,037 for the twelve months ended December 31, 1999 to $944,052 for the
twelve months ended December 31, 2000, an increase of 276%.
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Our revenues for the three month periods ended March 31, 2001 and 2000 were
$514,025 and $817,227, respectively, which represents a 37% decrease. The
decrease in revenue from the three months ended March 31, 2000 is primarily
attributable to discontinuing unprofitable segments of our business, such as
dial-up, DSL, and certain frame circuit services. Additionally, sales of
equipment declined from $295,598 to $89,765 for the three months ended March 31,
2000, and 2001, respectively. We believe that growth in revenue will come from
additional penetration in markets currently served by existing networks,
expansion of complimentary product lines to existing and new customers, and
geographic expansion using currently deployed technologies. We have spent, and
intend to continue to spend, significant resources on these activities.
Cost of Sales. Our cost of sales consists of third-party network usage and
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other outsourced service costs; the cost of roof rights; and the cost of
equipment sold. Third-party network costs are expensed in the period when
services are rendered and are generally proportional to the number of customers.
Our total cost of sales for goods and services sold for the years ended December
31,1999, and 2000 equaled $972,802, and $2,292,996, respectively, an increase of
134%. The increase in our cost of sales for the twelve months ended December 31,
2000 is relative to the increase in revenue generated from our growth in
wireless customers and equipment sales.
Our total costs of sale for goods and services sold for the three months ended
March 31, 2001, and 2000, equaled $363,457, and $560,292, respectively,
reflecting a decrease of 35%. The decrease in our cost of sales for the three
months ended March 31, 2001 is relative to the decrease in revenue due to our
decision to discontinue dial-up, DSL, and certain frame relay services, as well
as reduced costs associated with equipment sales. Currently, we do not
anticipate that inflation will have a material impact on our results of
operations in the near future.
Sales and Marketing. Sales and marketing expenses include salaries, sales
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commissions, employee benefits, travel and related expenses for our direct sales
force, fees paid to third-party sales agents, marketing and sales support
functions. For the years ended December 31, 1999, and December 31, 2000 our
sales and marketing expenses equaled $616,022, and $836,088, respectively. The
increase in sales and marketing expenses for the twelve months ended December
31, 2000 was attributable to expanding and employing a larger sales and
telemarketing department. However, in the fourth quarter of fiscal year 2000,
our management restructured the sales department by reducing the number of sales
representatives to six and eliminating the telemarketing group as part of our
business plan to focus our services in the Orange County, California market and
slowly phase out activities in Los Angeles, California.
For the three months ended March 31, 2001, and 2000, our sales and marketing
expenses equaled $89,342 and $162,435, respectively, for a decrease of 45% from
the prior year. The decrease in sales and marketing expenses for the three
months ended March 31, 2001 is attributable to staff restructuring from 10 sales
representatives in March 2000 compared to 5 sales representatives in March 2001.
In an effort to increase our revenues, user base and brand awareness, we expect
a slight increase in expenditures related to our sales and marketing effort over
the next year. Marketing costs associated with increasing our user base, which
to date have been minimal, are expensed in the period incurred.
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General and Administrative. General and administrative expenses include
- --------------------------
salaries, employee benefits and expenses for our executive, finance,
depreciation of network equipment, technical staff costs, legal, and human
resources personnel. Investment in network equipment is related primarily to
geographic network expansion and incremental customer installations, which
result in increased depreciation expense in future periods. In addition,
general and administrative expenses include fees for professional services and
occupancy costs. Our general and administrative expenses were $2,377,133 for
the year ended December 31, 1999 and $3,990,987 for the year ended December 31,
2000. This represents an increase of $1,613,854 or 68% for the twelve months
ended December 31, 2000. The increase in general and administrative expenses
for the twelve months ended December 31, 2000 is attributable to hiring
additional personnel, requiring additional legal, professional and outside
services related to our status as a public company, and increased depreciation
expense due to continued expansion of our network
Our general and administrative expenses were $1,044,901 for the three months
ended March 31, 2001, compared with $1,126,513 for the three months ended March
31, 2000. This represents a decrease of $81,612, or 7%, for the three months
ended March 31, 2001. The decrease in general and administrative expense for
the three months ended March 31, 2001 is attributable to implementing
management's restructuring plan, which includes staff reductions so that we can
focus on the Orange County, California market. We expect general and
administrative expenses to continue to decline as further cost restructuring
efforts are implemented.
Interest Expense. Interest expense consists primarily of interest accrued for
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notes payable. Interest expense increased 298% to $186,495 for the fiscal year
2000, which represented an increase of $139,600 from interest expense of $46,895
for fiscal year 1999. The increase was attributable primarily to the interest
expense on the $2,097,725 long-term debt incurred during the twelve months ended
December 31, 2000, which was used on expansion activities and increasing the
customer base in our existing market.
Interest expense for the three months ended March 31, 2001 increased to $95,161
from $21,327 for the three months ended March 31, 2000, which represents an
increase of $73,834, or 346%, due to the increase in our overall level of
indebtedness.
Loss on Investment Worldwide Wireless has taken an other-than-temporary loss of
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$500,000 on its original investment in Bridge Technology of $1,200,000, and an
unrecognized loss of $400,000, both of which are recorded on our year-end
December 31, 2000 financial statements. Our investment in Bridge Technology
suffered losses because of weak market conditions. The original price per share
of $8.00 in July 2000 suffered from a continuous decline down to $2.06 by the
end of December 2000. Based upon market forecasts and the slim probability of a
reverse trend, our management recognized a permanent write down from $8.00 to
$4.67 per share, and recorded an additional write down of $400,000 on a
temporary basis to arrive at an investment carrying value of $300,000 or $2.00
per share. (Please refer to Note 3 of our Financial Statements for more
information).
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During the three months ended March 31, 2001, we reclassified the $400,000
temporary write down from a balance sheet impact to an other-than-temporary loss
of $400,000 , an income statement impact, on our original investment of
$1,200,000 in Bridge Technology. This results in a restated carrying value of
$300,000 for this investment, or $2.00 per share. Our investment in Bridge
Technology has suffered from losses due to weak market conditions and based upon
market forecasts and the slim probability of a reverse trend, our management
decided to recognize a permanent write down.
Bad debt expense increased significantly for the year ended December 31, 2000 to
$207,343 from $40,317 for the year ended December 31, 1999, an increase of
$167,026 or 414%. As a percentage of sales, bad debt expense was 2.04% of sales
in fiscal 1999 and 6.02% of sales in fiscal 2000. Our customer base tends to be
concentrated in the high tech and entrepreneurial sectors, due to our value
added pricing structure and the ease and timeliness of installation. This sector
of the economy was especially hard hit by the economic slowdown and the failures
of e-commerce companies. Management attributes most of the increase in bad debt
expense to these economic problems.
To address these problems and minimize bad debt exposure, our management has
implemented stricter credit standards and we have increased our marketing
efforts towards more established companies.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through the
private placement of equity securities, loans, leasing arrangements and
cash-flow from operations. As of March 31, 2001, cash reserves totaled $13,827
and current assets totaled $639,992. The decrease in current assets from
$2,563,519 at March 31, 2000 is due primarily to significant reductions in
inventory accomplished by returning unnecessary equipment valued at
approximately $1,500,000 to several suppliers.
Our current liabilities as of March 31, 2001 were $3,980,366, of which
$2,083,484 consists of the current portion of our long-term liabilities
discussed above, and $1,211,691 is attributable to current accounts payable. Of
the current portion of long-term liabilities, one note with outstanding
principal of $91,947 requires monthly payments of $16,667, including interest.
The remaining notes do not require payment until maturity. Currently, our
management is negotiating maturity extensions on these notes. However, no
assurance can be given that we will be successful in obtaining these extensions.
We have paid interest rates ranging from 15.5% to 32.5%, or an average of 21.7%,
on these obligations as a new company without a credit history. As of March 31,
2001, we had $780,500 in long-term liabilities (other than the current portion
of long-term liabilities discussed above and reflected on our financial
statement as a current liability).
As of March 31, 2001, our principal commitments consisted of rent, roof-rights
payments, and equipment leases. Future minimum principal payments on notes
payable are approximately $95,483. Operating lease payments due through the end
of fiscal years 2001 and 2002 are $463,953 and $404,014, respectively.
-40-
Net cash used to fund our operating activities for the year ended December 31,
2000 was $2,277,252 compared to $865,302 in funds utilized by operating
activities for the year ended December 31, 1999, which is an increase of 163%.
Net cash used for operating activities consisted primarily of net operating
losses and network asset purchases. Net cash used to fund our operating
activities for the three months ended March 31, 2001 was $391,492, compared to
$744,056 in funds utilized by operating activities for the three months ended
March 31, 2000, representing a decrease of 47%. Net cash used for operating
activities consisted primarily of net operating losses and network asset
purchases.
Net cash provided by our financing activities was $3,189,560 for the year ended
December 31, 2000, an increase of $1,159,889 from the $2,029,671 for the year
ended December 31, 1999. Net cash provided by our financing activities was
$319,899 for the three months ended March 31, 2001, a decrease of $648,862
compared to the $968,761 for the three months ended March 31, 2000. Net cash
provided by financing activities was attributable to the sale of debt and equity
securities as described in the Recent Transactions section below.
Our net loss for the fiscal year ended December 31, 2000 totaled $4,655,372, or
$.37 per share, compared to $2,051,252, or $.21 per share, for the fiscal year
ended December 31, 1999. As discussed above, our fiscal year 2000 was impacted
by costs associated with increases in the number of sales personnel,
administrative personnel, professional and consulting services, depreciation
expenses and losses associated to certain investments.
Our net loss for the three months ended March 31, 2001 totaled $1,434,344, or
$0.11 per share, compared to $1,050,295, or $.09 per share, for the three months
ended March 31, 2000. The net loss for March 31, 2001 included a recognized
loss of $400,000 on securities held for investment.
We expect to continue to incur significant capital expenditures in the future in
our current market of Orange County, including additions and enhancements to our
server and network infrastructure, software licenses and furniture, fixtures and
equipment. The actual amount of capital expenditures will depend on the rate of
growth in our user base and available resources, which is difficult to predict
and which could change dramatically over time. Technological advances may also
require us to make capital expenditures to develop or acquire new equipment or
technology. We anticipate that our funding sources will be our equity line of
credit, as well as development of strategic alliances, such as the one that we
are contemplating with Esyon.
Our primary business goals are to streamline operations, become self-sufficient
and establish profitability by focusing our services and efforts in Orange
County, California. After we are able to accomplish this, we will resume our
expansion plans.
Any future securities offerings will be effected through registered offerings,
or in compliance with applicable exemptions under federal and state laws. The
purchasers and manner of issuance will be determined according to our financial
needs and the terms available. After determination of the availability of debt
financing we may elect to offer securities and, accordingly, will determine the
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type of offering or the type or number of securities which we will offer at that
time. However, we cannot assure that a future securities offering will be
successful. We have no plans to make a public offering of our common stock at
this time. We also note that each time if we issue more shares of our common
stock our shareholders will experience dilution in the percentage of ownership
of their common stock.
During fiscal years ended December 31, 2000 and 1999, the company did not
generate positive cash flows. Based on our current capital position, we are
limited to expanding our network of services to customers located exclusively to
Orange County. We are currently reliant upon cash flows generated from
operations, which our management has determined are not adequate to maintain
current personnel and expansion levels for the next 12 months. As a result of
this inadequacy, our management has implemented a cost reduction plan that
mandates our elimination of some outside services and costs associated with
expansion. Management believes that the implementation of this cost reduction
plan will allow us to meet all of our debt and operational expense requirements.
ITEM 18: DESCRIPTION OF PROPERTY
Our principal executive offices are located in the City of Orange, California,
where we lease 8,728 square feet of office space with roof rights for antennas.
We renewed the lease on March 30, 1999 and it will expire in 2004. The monthly
rent ranges from approximately $16,583 in the first year to $18,329 in the fifth
year. This office space is in good condition and satisfies our current space
needs.
We also lease one additional office space in Irvine, California, located at 8001
Irvine Center Drive. This is subleased to a computer consulting company for the
cost of the lease (which is approximately $4,021 per month). We opened a sales
office in Los Angeles County, California, comprising 1,993 square feet, located
at 5933 Century Boulevard, Los Angeles, CA. The lease for that office has a
five-year term, expiring in March 2005. Monthly rent there is $2,889.85 for the
first thirty months of the lease, escalating to $3,089.15 for the remainder of
our lease term.
ITEM 19: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thomas Rotert, Esq., a former director of Worldwide Wireless, also used to serve
as our corporate secretary and treasurer. Mr. Rotert did not receive any
compensation for serving in these capacities, however his law firm, Schumann &
Associates, has been engaged to represent us as general legal counsel, for which
they have received compensation in cash as well as shares of our common stock.
All stock earned by Schumann & Associates was accrued monthly and accounted for
at its trading price at the end of each month, and were granted at the rate of
$10,000 worth of shares per month of service, until May 31, 2000, by which time
20,157 shares had been earned.
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During 1999, we paid $15,000 to a shareholder for a note payable that was
outstanding from December 31, 1997. This amount was received as a loan to us on
a verbal basis from Ming Chan Yeung, Susan Shen's mother and also one of our
shareholders. The $15,000 was received by us in November 1997 and subsequently
paid off in April 1999. These funds were raised for purposes of meeting the
company's operating expenses.
During 1999, we paid $16,300 to a shareholder for a note payable that was
outstanding from December 31, 1998. This amount was received as a loan to us
from Zhi Gang Zhang a shareholder and outside consultant. The $16,300 was
received by us in July 1998 and subsequently paid off in April 1999. These funds
were raised for purposes of meeting our operating expenses.
During 1999, we received $75,000 from a shareholder for a note payable. As of
March 31, 2001, the balance due is $75,000. We received this amount in exchange
for two Promissory Notes from Andrew Taubman, a shareholder and outside
consultant. The first note dated August 6, 1999 was for $50,000, and the second
note dated September 22, 1999 was for $25,000. These funds were raised in
connection with our expansion efforts. They accrue interest at the rate of 10%
per year and are payable on demand.
ITEM 20: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded over-the-counter and quoted on the Over the Counter
Electronic Bulletin Board under the symbol "WWWN." The following table
represents the range of the high and low bid prices of our stock as reported by
the NASDAQ Trading and Market Services for each fiscal quarter beginning with
the third quarter of 1997 and ending with the first quarter of 2001. These
quotations represent prices between dealers, may not include retail markups,
markdowns, or commissions, and may not necessarily represent actual
transactions.
Year Quarter High Low
- ------ ----------------- ------ ------
1997 Third Quarter 0.25 0.125
Fourth Quarter 0.13 0.13
1998 First Quarter 0.125 0.10
1999 First Quarter 4.0 4.0
Second Quarter 6.0 0.41
Third Quarter 4.75 2.875
Fourth Quarter 4.00 2.50
2000 First Quarter 9.56 4.50
2000 Second Quarter 7.85 3.19
2000 Third Quarter 3.56 0.85
2000 Fourth Quarter 1.69 0.25
2001 First Quarter 0.406 0.094
-43-
During 1997 and 1998 our market was sporadically and thinly traded. There was
no trading activity during the second, third and fourth quarters of 1998.
Trading activity increased in August of 1999. The price per share of companies
situated similarly to Worldwide Wireless have also exhibited extreme volatility
in response to company-specific information as well as general market
conditions. Shareholders should consider the possibility of the loss of the
entire value of their shares.
As of March 31, 2001, we had approximately 111 stockholders of record.
Management controls, directly and beneficially, 6,057,134 shares of our
outstanding stock, representing approximately 30.25% of all shares outstanding.
We have 1,475,000 common shares subject to the exercise of warrants.
Approximately 8,400,000 shares of our outstanding common stock are subject to
the resale limitations of Rule 144. We may have 442,500 to 1,092,500 common
shares subject to options pending the resolution of our dispute with DFL. (See
"Disputed Beneficial Ownership," page 24).
-44-
ITEM 21: EXECUTIVE COMPENSATION
The following table shows compensation of our executive officers for our last
completed fiscal year.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------------------
NAME AND ANNUAL SALARY ANNUAL SALARY PROJECTED ANNUAL
PRINCIPAL POSITION FOR FY 1999 FOR FY 2000(1,2) SALARY FOR FY 2001(3)
- ----------------------- -------------- --------------- ----------------------
Jack Tortorice $ 98,000(4) $ 140,000 $ 0
Director
Jerry Collazo N/A $ 60,000 $ 130,000
Chief Financial Officer
Steve Burton $ 25,000 $ 52,000 $ 72,000
Secretary
Charles C. Bream III $ 0(2) $ 140,000(5) $ 0
Thomas J. Rotert $ 0 $ 58,125(6) $ 0
<FN>
(1) This column represents actual compensation earned through the date of
this prospectus, and projected amounts to be earned during the
remaining portion of this fiscal year on an annualized basis.
(2) No member of our executive management has received any bonus or other
special compensation other than the options described in this
prospectus. None is expected to be given in the foreseeable future.
(3) This column represents management's best estimate of what executive
compensation may be during fiscal year 2001, at current levels and
assuming no material changes in our executive management team during
that period.
(4) Mr. Tortorice's employment contract called for an annual salary of
$150,000 for fiscal year 2000. He resigned from his position as Chief
Executive Officer on January 4, 2001, and the Company paid $18,750 to
Mr. Tortorice from January to March 2001 as salary for services
rendered in the year 2000.
(5) Mr. Bream resigned as President of Worldwide Wireless on October 5,
2000, at which time he received options to purchase 392,500 shares of
common stock as part of his Separation Agreement with Worldwide
Wireless.
(6) Mr. Rotert resigned as our Director, Treasurer and Secretary effective
December 20, 2000. Prior to that date he received 25,000 shares of
common stock for services valued at $58,125.
COMPENSATION OF DIRECTORS
We do not have any standard arrangement for compensation of our directors for
any services provided as director, including services for committee
participation or for special assignments.
EMPLOYMENT CONTRACTS
-45-
On January 1, 2000, we entered into an employment agreement with Mr. Bream to
serve as President and Chief Operating Officer for an initial term of five
years, terminating on December 31, 2004. Mr. Bream resigned from this position
effective October 5, 2000. Under the terms of a Separation Agreement we entered
into with Mr. Bream at that time, he is entitled to a severance package of six
months compensation, payment for his accrued but unused vacation benefit, an
allowance for medical and dental benefits and 2 options to purchase 392,500
shares of our common stock for $3.00 per share. These options expire on January
1, 2010.
On July 17, 2000, we entered into an employment agreement with Mr. Collazo to
serve as the Chief Financial Officer for an initial term of three years,
terminating on July 17, 2003. However, the agreement automatically renews for
one year successive terms after the initial term. Mr. Collazo receives a salary
of $130,000 per year and may receive a bonus up to 35% and he received an option
to purchase 300,000 shares of stock at $3.00 per share vesting ratably over a
period of two years. He will also be reimbursed for expenses incurred on our
behalf. Mr. Collazo or Worldwide Wireless may terminate the agreement by giving
30 days notice.
1999 STOCK OPTION PLAN
On August 13, 1999, Worldwide Wireless established an Employee Stock Ownership
Plan. The Plan covers both current and prospective employees, consultants and
directors. Executive officers and employees are covered under the provisions
governing the incentive stock options, and consultants will be covered under the
provisions governing the nonstatutory stock options.
The exercise price for each option is established by our Board of Directors.
The exercise price per share for a qualified incentive stock option cannot be
less than the fair market value of a share of stock on the date the option is
granted. The exercise price per share for a non-qualified stock option cannot
be less than 85% of the fair market value of a share of stock on the date the
option is granted.
As of March 31, 2001, we have issued 1,288,411 options, of which 337,154 options
have vested. In accordance with FASB No. 123, we are not required to recognize
compensation when the options vest since the exercise price for all the options
granted were at fair market value on the date of the grant. No options are
exercisable after the expiration of 10 years after the date they are granted.
We may also issue options other than under our stock option plan
-46-
ITEM 22: FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Worldwide Wireless Networks, Inc. Audited Consolidated Financial Statements
dated December 31, 2000 and December 31, 1999.
PAGE
----
Independent Auditor's Report F-2
Consolidated Financial Statements F-3
Consolidated Balance Sheets F-4 - F-5
Consolidated Statement of Operations F-6
Consolidated Statement of Stockholders' Equity F-7 - F-8
Consolidated Statement of Cash Flows F-9 - F-10
Notes to Consolidated Financial Statements F-11 - F-25
F-1
Independent Accountants Report
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Office (801) 363-1175
Fax (801) 363-0615
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Worldwide Wireless Networks, Inc. (formerly Pacific Link Internet, Inc.):
We have audited the accompanying consolidated balance sheets of Worldwide
Wireless Networks, Inc. (formerly Pacific Link Internet, Inc.) as of December
31, 2000 and 1999 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Worldwide Wireless Networks,
Inc. (formerly Pacific Link Internet, Inc.) as of December 31, 2000 and 1999 and
the results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company has suffered recurring operating losses and
is dependent upon financing to continue operations. These factors raise
substantial doubt about the ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 11.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Chisholm & Associates
Salt Lake City, Utah
January 19,2001
F-2
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Financial Statements
December 31, 2000 and 1999
F-3
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Balance Sheets
ASSETS
------
DECEMBER 31
2000 1999
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents (Note 1) 121,329 136,311
Accounts receivable (net of allowance for
doubtful accounts of $15,000 and
$20,000, respectively) 263,797 165,091
Employee advance 7,500 3,000
Inventory 2,131,892 129,861
Prepaid Expenses 39,001 18,912
----------- -----------
Total Current Assets 2,563,519 453,175
----------- -----------
PROPERTY & EQUIPMENT (Note 1)
Office equipment 197,592 103,231
Leased equipment 61,315 177,653
Machinery equipment 1,839,675 1,109,524
----------- -----------
2,098,582 1,390,408
Less:
Accumulated depreciation - leased equipment (61,315) (165,255)
Accumulated depreciation (801,475) (282,495)
----------- -----------
Total Property & Equipment 1,235,792 942,658
----------- -----------
OTHER ASSETS
Investments (Note 3) 300,000 36,885
Deferred Charges (Note 1) 2,858 21,984
Deposits 52,421 36,197
----------- -----------
Total Other Assets 355,279 95,066
----------- -----------
TOTAL ASSETS $4,154,590 $1,490,899
=========== ===========
F-4
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31
2000 1999
------------ ------------
CURRENT LIABILITIES
Accounts payable 3,099,153 655,485
Accrued expenses 328,816 83,933
Lines of credit (Note 5) 69,839 89,323
Unearned revenue (Note 1) 90,525 102,356
Current portion of long-term liabilities (Note 4) 1,663,080 665,355
------------ ------------
Total Current Liabilities 5,251,413 1,596,452
------------ ------------
LONG TERM LIABILITIES
Notes payable (Note 4) 677,282 562,245
Notes payable-related party (Note 4) 75,000 75,000
Convertible debentures (Note 4 & 10) 2,000,000 -
Capital lease obligations (Note 4) 10,798 30,340
Less current portion (1,663,080) (665,355)
------------ ------------
Total long term Liabilities 1,100,000 2,230
------------ ------------
TOTAL LIABILITIES 6,351,413 1,598,682
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, 50,000,000 shares
of $.001 par value authorized,
12,844,060 and 11,799,988 shares issued
and outstanding 12,844 11,800
Additional paid in capital 5,380,633 2,415,345
Accumulated comprehensive income (loss) (400,000) -
Retained earnings (7,190,300) (2,534,928)
------------ ------------
Total Stockholders' Equity (2,196,823) (107,783)
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,154,590 $ 1,490,899
============ ============
F-5
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Statements of Operations
For the years
ended
December 31
2000 1999
------------ ------------
REVENUES 3,351,878 1,980,203
COST OF SALES 2,292,996 972,802
------------ ------------
GROSS PROFIT 1,058,882 1,007,401
------------ ------------
SELLING EXPENSES 836,088 616,022
BAD DEBT EXPENSE 207,343 40,317
GENERAL &
ADMINISTRATIVE EXPENSES 3,990,987 2,377,133
------------ ------------
TOTAL OPERATING EXPENSES 5,034,418 3,033,472
------------ ------------
OPERATING INCOME (LOSS) (3,975,536) (2,026,071)
------------ ------------
OTHER INCOME
AND (EXPENSES)
Loss on disposal of assets (6,135) -
Loss on investment (536,885) (13,115)
Miscellaneous income 49,679 34,829
Interest expense (186,495) (46,895)
------------ ------------
Total Other Income
and (Expenses) (679,836) (25,181)
------------ ------------
INCOME (LOSS)
BEFORE INCOME TAXES (4,655,372) (2,051,252)
PROVISION FOR
INCOME TAXES (Note 1)
NET INCOME (LOSS) $(4,655,372) $(2,051,252)
============ ============
NET INCOME (LOSS) PER SHARE (.37) (.21)
============ ============
WEIGHTED AVERAGE OUTSTANDING SHARES 12,594,366 9,883,325
============ ============
F-6
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Statements of Stockholders' Equity
December 31, 2000 and 1999
Additional Retained Accumulated
Common Stock Paid in Earnings Comprehensive
Shares Amount Capital (Deficit) Income (Loss)
---------- ------ ---------- ----------- -------------
Balance at inception on
August 1, 1997 - - - - -
Shares issued to organizers for cash 5,880,000 5,880 (3,380) - -
Net income (loss) for the period
ended December 31, 1997 - - - (153,493) -
---------- ------ ---------- ----------- -------------
Balance on December 31, 1997 5,880,000 5,880 (3,380) (153,493) -
Shares issued for cash 1,120,000 1,120 101,525 - -
Net income (loss) for the year
ended December 31, 1998 - - - (330,183) -
---------- ------ ---------- ----------- -------------
Balance on December 31, 1998 7,000,000 7,000 98,145 (483,676) -
April 1, 1999 - Reverse acquisition
and reorganization adjustment 4,199,988 4,200 995,800 - -
April 2, 1999 - Stock issued for cash
and services valued at $2.00 per share 400,000 400 799,600 - -
June 1999 Warrants issued for services 0 - 122,000 - -
December 1999 - Stock issued for
cash at $2 per share 200,000 200 399,800 - -
Net income (loss) for the year
ended December 31, 1999 0 - - (2,051,252) -
---------- ------ ---------- ----------- -------------
Balance on December 31, 1999 11,799,988 11,800 2,415,345 (2,534,928) -
January 2000 - Stock issued for cash
at $2 per share 250,000 250 499,750 - -
February 2000 - Stock issued for services
at $2 per share 200,000 200 399,800 - -
February 2000 - Stock issued for
acquisition of Tarrab Capital Group
at $4 per share 5,000 5 19,995 - -
March 2000 - Stock issued for insurance
policy at $4.13 per share 8,000 8 32,992 - -
April 2000 - Stock issued for services
at $5.92 per share 915 1 5,416 - -
F-7
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORK, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Statement of Stockholders' Equity
December 31, 2000 and 1999
Additional Retained Accumulated
Common Stock Paid in Earnings Comprehensive
Shares Amount Capital (Deficit) Income (Loss)
----------- ------- ---------- ----------- -------------
May 2000 - Stock issued for cash
at $3.50 per share 100,000 100 349,900 - -
May 2000 - Stock issued for cash
at $3.45 per share 144,887 145 499,855 - -
June 2000 - warrants issued for private
equity line 0 0 48,000 - -
June 2000 - warrants issued for services 0 0 63,000 - -
June 2000 - November 2000 - stock options
vested for services 0 0 13,800 - -
June 2000 - Stock issued for services
at $2.32 per share 45,157 45 104,945 - -
June 2000 - Cash paid for offering costs 0 - (30,000) - -
June 2000 - Stock issued for offering
costs at $3.45 per share 5,000 5 (5) - -
June 2000 - Stock issued for investment
at $4 per share 300,000 300 1,199,700 - -
July 2000 - Stock issued for services
at $3 per share 5,000 5 14,995 - -
July 2000 - Stock cancelled for
convertible debentures (144,887) (145) (499,855) - -
July 2000 - Stock issued for cash
at $2 per share 125,000 125 249,875 - -
July 2000 - Cash paid for offering costs 0 - (6,875) - -
Net unrealized income (loss) for year
ended December 31, 2000 0 - - - (400,000)
Net income (loss) for the year
ended December 31, 2000 0 - - (4,655,372) -
----------- ------- ---------- ----------- -------------
Balance on December 31, 2000 12,844,060 12,844 5,380,633 (7,190,300) (400,000)
=========== ======= ========== =========== =============
F-8
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Statements of Cash Flows
For the years
ended
December 31
2000 1999
----------- -----------
Cash Flows From Operating Activities
Net income (loss) (4,655,372) (2,051,252)
Non-cash items:
Depreciation & amortization 575,717 321,246
Bad debt (5,000)
Loss on investment 536,885 13,115
Stock and warrants issued for services 124,800 822,000
Loss on disposal of asset 6,135
Shares issued for services 525,407
Shares issued for insurance policy 33,000
(Increase)/decrease in current assets:
Accounts receivable (93,706) (135,751)
Accounts receivable-related party - 54,814
Employee advance (4,500) (3,000)
Prepaid expenses (14,433) (18,912)
Deferred charges 19,126 (11,556)
Inventory (2,002,031) (129,861)
Increase/(decrease) in current liabilities:
Bank overdraft - (4,092)
Accounts payable 2,443,668 133,148
Accrued expenses 244,883 83,933
Unearned revenue (11,831) 60,866
----------- -----------
Net Cash Provided (Used)
by Operating Activities (2,277,252) (865,302)
----------- -----------
Cash Flows from Investing Activities
Purchase of property and equipment (911,066) (957,045)
Cash paid for deposits (16,224) (21,013)
Cash paid for Investments - (50,000)
----------- -----------
Net Cash Provided (Used)
by Investing Activities (927,290) (1,028,058)
----------- -----------
Cash Flows from Financing Activities
Advances on line of credit - 98
F-9
The accompanying notes are an integral part of these financial statements
Cash paid on line of credit (19,484) (9,246)
Cash from sale of stock 1,063,000 500,000
Cash received from debt financing 2,262,150 633,468
Principal payments on long-term debt (109,227) (94,649)
Cash received in merger with Worldwide - 1,000,000
Cash paid for registration fees (6,879) -
----------- -----------
Net Cash Provided (Used) by Financing Activities 3,189,560 2,029,671
----------- -----------
Increase/(decrease) in cash (14,982) 136,311
Cash and Cash Equivalents
at Beginning of Period 136,311 -
----------- -----------
Cash and Cash Equivalents
at End of Period 121,329 136,311
=========== ===========
Supplemental Cash Flow Information:
Cash paid for interest 29,205 28,119
Cash paid for income taxes - -
Non-cash financing transaction: - -
Stock and warrants issued for services 124,800 822,000
Stock issued for services 545,407 -
Stock issued for investment 1,200,000 -
Stock issued for insurance policy 33,000 -
Stock issued for notes payable 100,000 -
Stock cancelled for convertible debentures 500,000 -
F-10
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The audited financial statements presented for December 31, 2000 and
1999, are those of Worldwide Wireless Networks, Inc. (formerly Pacific Link
Internet, Inc.) (The Company). The Company was incorporated under the laws
of the State of California on September 22, 1997, however operations began
on August 1, 1997. The Company provides wireless internet access to
business and individuals. The Company's headquarters are located in Orange,
California.
On April 1, 1999 the Company merged with Worldwide Wireless Networks,
Inc. (Worldwide) a public company with no operations, and assumed the name
of Worldwide Wireless Networks, Inc. Pursuant to the merger, Pacific Link
ceased to exist and Worldwide became the surviving corporation. Worldwide
was organized in the State of Nevada on June 10, 1992. Worldwide recently
raised $1,000,000 in anticipation of the merger, and provided this as the
only asset to the newly combined organization. The merger was treated as a
reverse merger for accounting purposes.
On February 10, 2000, the Company issued 5,000 shares of restricted
common stock valued at $20,000 for all of the outstanding shares of Tarrab
Capital Group (TCG), a Nevada Corporation. At the date of the merger, TCG
had no assets and no revenues or operations and ceased to exist.
b. Recognition of Revenue, Deferred Charges, Unearned Revenue
The Company recognizes income and expense on the accrual basis of
accounting. During 1999 and 1998, the Company entered into various sales
agreements whereby, a third party financial institution pays a factored
sales amount to the Company for sales contracts received from customers
with terms of 1 to 3 years. The Company has deferred the revenue on these
contracts to be recognized over the time of the contract. Unearned revenue
has been established on the books in order to defer the revenues received
from the third party on these contracts. The corresponding factoring fee
has been deferred as an asset called "deferred charges" and is also
recognized over the life of the contract. All other sales are recorded when
the services are completed.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements. Fully diluted earnings per share has not been presented,
because the earnings per share is the same. Warrants to purchase 625,000
common shares and employee stock options have been eliminated in the fully
diluted earnings per share due to their anti-dilutive effect.
F-11
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 1 - Summary of Significant Accounting Policies (continued)
c. Earnings (Loss) Per Share (continued)
Income (loss) Shares Per Share
(Numerator) (Denominator) Amount
-------------- ------------- -----------
For the year ended December 31, 2000:
Income (loss) from operations $ (4,655,372)
--------------
Basic EPS
INCOME (LOSS) TO COMMON SHAREHOLDERS $ (4,655,372) 12,594,366 $ (.37)
============== ============= ===========
For the year ended December 31, 1999:
Income (loss) from operations $ (2,051,252)
--------------
Basic EPS
Income (loss) to common shareholders $ (2,051,252) 9,883,325 $ (.21)
============== ============= ===========
d. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating
loss carryforwards totaling approximately $7,190,300 that will be offset
against future taxable income. These NOL carryforwards begin to expire in
the year 2013. No tax benefit has been reported in the financial statements
because the Company has yet to generate taxable income.
Deferred tax assets and the valuation account is as follows at
December 31, 2000 and 1999:
Deferred tax asset: 2000 1999
------------ ----------
NOL carryforward $ 2,453,013 $ 861,900
Valuation allowance (2,453,013) (861,900)
------------ ----------
Total $ - $ -
============ ==========
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
f. Property and Equipment
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life of assets
or convert the assets to a new use, are capitalized at cost. Expenditures
for maintenance, repairs and other renewals of items are charged to
expense. When items are disposed of, the cost and accumulated depreciation
are eliminated from the accounts, and any gain or loss is included in the
results of operations.
F-12
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 1 - Summary of Significant Accounting Policies (continued)
f. Property and Equipment (continued)
Assets are reviewed by management annually for impairment and are
written down to fair market value if impairment exists.
The provision for depreciation is calculated using the straight-line
method over the estimated useful lives of the assets. Useful lives of
assets are as follows: Computer and wireless network equipment - 3 years;
DSL equipment - 1 year; Furniture and fixtures - 7 years; Office equipment
- 5 years. Depreciation expense for the period ended December 31, 2000 and
1999 is $575,717, and $321,246, respectively.
g. Investments Available for Sale
Management determines the appropriate classification of marketable
equity Security investments at the time of purchase and reevaluates such
designation as of each balance sheet date. Unrestricted and restricted
marketable equity securities have been classified as available for sale.
Available for sale securities are carried at fair value, with the
unrealized gains and losses, net of tax, reported as a net amount in
accumulated comprehensive income. Realized gains and losses and declines in
value judged to be other-than-temporary on available for sale securities
are included in investment income. The cost of securities sold is based on
the specific identification method. Interest and dividends on securities
classified as available for sale are included in investment income.
NOTE 2 - Related Party Transactions
During 1999, the Company paid $16,300 to a shareholder for a note
payable which was outstanding from December 31,1998.
During 1999, the Company paid $15,000 to a shareholder for a note
payable which was outstanding from December 31, 1997.
During 1999, the Company received $75,000 from a shareholder for a
note payable. As of December 31, 2000 and 1999, the balance due is $75,000.
NOTE 3 - Investments
In April 1999, the Company entered into an agreement with Bridge
Technology, Inc., wherein the Company contributed $50,000 for a 20%
interest in Pacific Bridge Net (PBN). In addition to the capital
contribution, the Company was to provide consulting services to PBN for
$50,000.
F-13
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 3 - Investments (Continued)
As of December 31, 1999, the investment has been reduced from $50,000
to $36,885 due to the Company's 20% share of the $65,575 loss reported by
PBN. The Company uses the equity method of accounting for this investment.
During 2000, the Company contributed their 20% investment interest
back to PBN. A loss on the investment has been recognized of $36,885.
On June 28, 2000, the Company issued 300,000 shares of its common
stock valued at $1,200,000 to Bridge Technology, Inc. (Bridge) in exchange
for 150,000 shares of Bridge stock valued at $1,200,000. The fair value of
this security was determined by the quoted stock price on the market at the
time of purchase.
As of December 31, 2000, the Company recorded $400,000 of unrecognized
losses on Bridge, an investment available for sale, in accumulated
comprehensive income in equity. The aggregate fair value of Bridge at
December 31, 2000 is $300,000. A loss of $500,000 has been recognized due
to management's determination that the value of Bridge is a permanent
decline.
NOTE 4 - Long-Term Liabilities
Long Term Liabilities are detailed in the following schedules as of
December 31, 2000 and 1999:
Notes payable is detailed as follows: 2000 1999
---------- ----------
Note payable to an individual, payments due
monthly of $500 through July 2000, bears
interest at 7%, secured by equipment and
other assets. - 3,777
Note payable to an individual, no monthly
payment, payable on demand, bears interest
at 10%, unsecured note 38,000 -
Note payable to a corporation, payments due
monthly of $5,457 until paid in full, bears
interest at 12%, unsecured note 8,879 58,468
Note payable to a corporation, no monthly
payment, due in January 2001, bears interest
at 12%, secured by business assets 200,000 -
---------- ----------
F-14
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 4- Long-Term Liabilities (continued)
2000 1999
---------- ----------
Note payable to a corporation, no monthly
payment, matures March 2001, bears interest
at 11%, guaranteed by an officer of the
Company and secured by business assets - 500,000
Note payable to a corporation, no monthly
payment, bears interest at 10%, due January
2002, unsecured note 100,000 -
Note payable to a corporation, no monthly
payment, bears interest at 10%, due upon
demand, unsecured note 125,000 -
Note payable to a corporation, no monthly
payment, payable on demand, bears interest
at 56.75%, secured by equipment 130,403 -
Note payable to an individual, no monthly
payment, payable on demand, bears interest
at 10%, unsecured note 75,000 -
---------- ----------
Total Notes Payable 677,282 562,245
---------- ----------
Convertible debentures is detailed as follows:
2000 1999
---------- ----------
Note payable to a corporation, no monthly
payment, matures March 2001, bears interest
at 11%, guaranteed by an officer of the
Company and secured by business assets 1,000,000 -
Note payable to a corporation, no monthly
payment, bears interest at 7%, due June 2003,
unsecured note 300,000 -
Note payable to a corporation, no monthly
payment, bears interest at 7%, due June 2003,
unsecured note 700,000 -
---------- ----------
Total Convertible Debentures 2,000,000 -
---------- ----------
F-15
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 4- Long-Term Liabilities (continued)
Notes payable related party is detailed as follows:
2000 1999
---------- ----------
Note payable to a shareholder, no monthly
payment, payable on demand, bears interest
at 10%, unsecured note 75,000 75,000
---------- ----------
Total notes payable - related party 75,000 75,000
---------- ----------
Capital lease obligations are detailed in the following schedule as of
December 31, 2000 and 1999:
2000 1999
---------- ----------
Capital lease obligation to a corporation
for antenna equipment, lease payments due
monthly of $710 through January 2001,
bears interest at 19.7%, secured by antenna
equipment. $ 2,638 $ 8,815
Capital lease obligation to a corporation
for wireless equipment, lease payments due
monthly of $175 through May 2001,
bears interest at 18%, secured by
wireless equipment. 855 2,743
Capital lease obligation to a corporation
for wireless equipment, lease payments due
monthly of $1,244 through October 2000,
bears interest at 15.5%, secured by wireless
equipment. 7,305 17,567
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $1,248 through December 1999, bears
interest at 32.5%, secured by equipment. - 1,215
---------- ----------
Total Lease Obligations 10,798 30,340
---------- ----------
Total long term liabilities 2,763,080 667,585
F-16
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 4- Long-Term Liabilities (continued)
2000 1999
---------- ----------
Less current portion of:
Notes payable 577,282 562,245
Convertible debentures 1,000,000 -
Notes payable - related party 75,000 75,000
Capital lease obligations 10,798 28,110
---------- ----------
Total current portion 1,663,080 665,355
---------- ----------
Net Long Term Liabilities $1,100,000 $ 2,230
========== ==========
Future minimum principal payments on notes payable are as follows at
December 31, 2000:
2001 1,652,282
2002 -
2003 1,100,000
----------
Total notes payable $2,752,282
==========
Future minimum lease payments are as follows at December 31, 2000:
2001 12,153
----------
Less portion representing interest 1,355
----------
Total $ 10,798
==========
NOTE 5 - Lines of Credit
The Company has three lines of credit with three banks with total
credit of $106,000. The average interest rate is 11.75%. The balances due
at December 31, 2000 and 1999 were $69,839 and $89,323, respectively.
NOTE 6 - Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
In these financial statements, assets, liabilities, revenues and expenses
involve reliance on management's estimates. Actual results could differ
from those estimates.
NOTE 7 - Commitments and Contingencies
The Company has an operating lease for office space. Monthly lease
payments are due of $2,549 for sixty months starting May 1, 1998 and ending
April 30, 2003.
F-17
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 7 - Commitments and Contingencies (continued)
The Company has an operating lease for antenna space on a roof. The
agreement calls for monthly payments of $350 the first six months, $450 the
next six months, and $500 for the remaining 48 months of the sixty-month
contract. The lease began on September 15, 1998 and ends on August 31,
2003.
The Company has an operating lease for office space. Monthly lease
payments are due of $4,021 for sixty months starting October 15, 1998 and
ending September 30, 2003. The Company has an operating lease for office
space. Monthly lease payments are due of $10,083 and the lease expires in
March 2004.
The Company has an operating lease for roof space. Monthly lease
payments are due of $250 for sixty months starting September 15, 1998 and
ending August 31, 2003.
The Company has an operating lease for roof space. Monthly lease
payments are due of $300 for sixty months starting November 16, 1998 and
ending October 31, 2003.
The Company has an operating lease for roof space that could
potentially secure up to three antennas. The agreement calls for minimum
monthly payments for the initial antenna of $1,000 the first twelve months,
$1,050 the next twelve months, $1,103 the following twelve months, $1,158
the next twelve months, and $1,216 for the remaining twelve months of the
sixty-month contract. Each additional antenna (limit of three total) will
require monthly payments of $750 the first twelve months, $788 the next
twelve months, $827 the following twelve months, $868 the next twelve
months, and $912 the remaining twelve months. The lease began on October 1,
1998 and ends on September 30, 2003.
The Company has an operating lease for roof space. Monthly lease
payments are due of $1,300 for use of a one directional antenna or $1,300
for use of a four directional antenna for sixty months starting October 1,
1998 and ending September 30, 2003.
The Company has an operating lease for roof space. Monthly lease
payments are due of $250 for thirty-six months starting December 2, 1998
and ending November 30, 2001.
The Company has an operating lease for roof space. Monthly lease
payments are due of $200 for thirty-six months starting August 1, 1999 and
ending July 31, 2002.
F-18
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 7 - Commitments and Contingencies (continued)
The Company has an operating lease for roof space. Monthly lease
payments are due of $300 for thirty-six months starting April 1, 1999 and
ending March 31, 2004.
The Company has an operating lease for office space. Monthly lease
payments are due of $2,890 starting March 1, 2000 and ending February 28,
2005.
The Company has an operating lease for roof space. Monthly lease
payments are due of $2,100 starting July 1, 2000 and ending June 30, 2003.
The Company has an operating lease for roof space. Monthly lease
payments are due of $500 starting August 1, 2000 and ending July 31, 2003.
The Company has an operating lease for roof space. Monthly lease
payments are due of $750 starting September 1, 2000 and ending August 31,
2005.
The Company has an operating lease for roof space. Monthly lease
payments are due of $650 starting September 1, 2000 and ending August 31,
2010.
The Company has an operating lease for roof space. Monthly lease
payments are due of $1,275 starting September 1, 2000 and ending August 31,
2010.
The Company has an operating lease for roof space. Monthly lease
payments are due of $1,175 starting September 1, 2000 and ending August 31,
2010.
Future minimum operating lease payments are as follows at December 31,
2000:
2001 $ 463,953
2002 404,014
2003 313,558
2004 114,033
2005 48,980
-----------
Total $ 1,344,538
===========
The Company is obligated under employment contracts to officers of the
Company through December 31, 2003, for $110,000 total compensation per
year.
F-19
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 7 - Commitments and Contingencies (continued)
The Company has an investor group committed to providing capital for
the Company's continued expansion and operations. If this funding source
did not provide the necessary capital needed, the Company would need to
find additional sources of funding, or cut back on the expansion process to
maintain operations.
During 2000, the Company granted 24,966 stock options to a consultant
who was not covered under the employee stock option plan. The stock options
are exercisable at a price of $3 per share. The fair value of the stock
options were determined using the Black-Scholes option pricing model with
the following assumptions: risk free interest rate of 7%, life of 5 years;
volatility of 25% with no dividend yield. In 2000, the Company recorded
expenses of $13,800. No stock options were exercised during 2000.
In November 1999, the Company entered into a purchase agreement with
Adaptive Broadband Corporation(Adaptive). The Company has agreed to
purchase wireless telecommunications equipment from Adaptive.
Details of the agreement are as follows:
Unit Prices
----------------------
Subscriber Access
Time Frame Quantity Commitment Units Points
------------------ ---------------------- ---------- ----------
0-12 months after 2,624 units $1,675,000 $2,075,000
effective date
13-24 months after additional 5,120 units $1,250,000 $1,650,000
effective date
25-36 months after additional 7,760 units $1,000,000 $1,400,000
effective date
As of December 31, 2000, management is in the process of canceling the
agreement with Adaptive and returning approximately $1,485,241 in
inventory.
As of December 31, 2000, management is in the process of canceling the
agreement with Adaptive and returning approximately $1,485,241 in
inventory.
NOTE 8 - Employee Stock Option Plan
On August 13, 1999, the Company established an Employee Stock
Ownership Plan (the Plan). The Plan covers both current and prospective
employees, consultants and directors. Employees will be covered under the
Incentive Stock Option and consultants will be covered under the
Nonstatutory Stock Option.
F-20
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 8 - Employee Stock Option Plan(continued)
The exercise price for each option shall be established by the Company
Board of Directors. The exercise price per share for an Incentive Stock
Option cannot be less than the fair market value of a share of stock on the
effective grant date. The exercise price per share for a Nonstatutory Stock
Option cannot be less than 85% of the fair market value of a share of stock
on the effective date of the option.
As of December 31, 2000, there are 895,911 options granted, of which
337,154 are vested. Per FASB 123, the Company is not required to recognize
compensation when the options vest since exercise price for all the options
granted were at fair market value on the date of grant. No options are
exercisable after the expiration of 10 years after the effective grant
date. The maximum number of shares to be issued under the plan is
1,000,000.
A summary of the option activity follows:
Weighted
Options Available Average Exercise
for Grant Options Outstanding Price
----------------- ------------------- ----------------
Granted 1,000,000 895,911 3.00
Exercised 0 0 0
Cancelled / 0 0 0
Forfeited
Balances, 1,000,000 895,911 3.00
12/31/00
Pro forma information regarding net income and earnings per share is
required by SFAS N. 123. This information is required to be determined as
if the company had accounted for its employee stock options granted during
the year under the fair value method of that statement. The fair value of
options granted in 2000 reported below has been estimated at the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
Expected life (in years) 10
Risk-free interest rate 6.0%
Volatility 50%
Dividend yield 0%
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The company's
pro forma information follows:
F-21
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 8 - Employee Stock Option Plan (continued)
2000 1999
----------- -----------
Pro forma net income (4,655,372) (2,120,000)
Pro forma basic earnings per share (.37) (.22)
NOTE 9 - Reverse Acquisition and Reorganization
Effective April 1, 1999, Pacific Link Internet, Inc. (Pacific) (a
private company) was acquired by Worldwide Wireless Networks, Inc.
(Worldwide) (a public company).
Worldwide issued 7,000,000 shares to the shareholders of Pacific in
exchange for all shares of Pacific, thus making it a wholly owned
subsidiary of Worldwide. The agreement provides for the acquisition to be
treated as a reverse acquisition, thus making Pacific the accounting
survivor. Because the historical financial information in these financial
statements prior to the reverse acquisition (April 1, 1999) is that of the
accounting acquirer (Pacific), a forward stock split of 14 for 1 has been
retroactively applied to show the effects of the 7,000,000 share issuance
as though it happened ratably since inception of Pacific. The management of
Worldwide resigned and the management and board of Pacific filled the
vacancy.
In January 1999, $1,000,000 was advanced to the Company from investors
as an investment. Of the 4,199,988 shares issued, 200,000 post merger
shares were issued to the investors in relation to the $1,000,000
investment.
NOTE 10 - Warrants
In June 1999, the Company issued warrants to purchase common stock at
various prices for services. The fair value of the warrants were determined
using the Black-Scholes option pricing model with the following
assumptions: risk free interest rate of 7%; warrant life of 5 years;
volatility of 25% with no dividend yield. In 1999, the Company recorded
expenses of $122,000 in connection with the warrant issuance. No warrants
were exercised at December 31, 2000 and the following are outstanding:
Warrants Exercise Price
-------- -------------------
100,000 $ 3.00 per share
100,000 4.00 per share
200,000 5.00 per share
---------
400,000
=========
F-22
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Notes to the Financial Statements
December 31, 2000 and 1999
NOTE 10 - Warrants (continued)
On June 19, 2000, the Company entered into a Private Equity Line of
Credit Agreement with Whitsend Investments Ltd. (Whitsend). Pursuant to
this agreement, Whitsend has committed up to $20,000,000 for the purchase
of the Company's common stock over a 36 month period. Once every 15 days,
the Company may borrow up to $500,000 from Whitsend if the Company meets
certain criteria. The Company is not obligated to draw on any of the
available funds. In lieu of providing Whitsend with a minimum aggregate
draw down commitment, the Company has issued 125,000 warrants for the
purchase of its shares of common stock at $4.69 per share. These warrants
expire on June 19, 2003. The fair value of the warrants were determined
using the Black-Scholes option pricing model with the following
assumptions: risk free interest rate of 7%; warrant life of 5years;
volatility of 25% with no dividend yield. In 2000, the Company recorded
expenses of $48,000 in connection with the warrant issuance. No warrants
were exercised during 2000.
On June 30, 2000, the Company entered into a Convertible Debenture and
Warrants Purchase Agreement with several investors. Pursuant to the
agreement, the Company converted $1,000,000 of its notes payable to
$1,000,000 in convertible debentures and issued 100,000 warrants. The
exercise price per share under these warrants will be $4.20 per share.
These warrants expire on June 30, 2003. The fair value of the warrants were
determined using the Black-Scholes option pricing model with the following
assumptions: risk free interest rate of 7%; warrant life of 5 years;
volatility of 25% with no dividend yield. In 2000, the Company recorded
expenses of $63,000 in connection with the warrant issuance.
On June 30, 2000, the Company entered into a Convertible Debenture and
Warrant Purchase Agreement having an aggregate principal amount of
$1,000,000. The convertible debentures mature on June 30, 2003, and bear
interest at 7% per annum until the earlier of conversion into the Company's
common stock or maturity. Interest is payable quarterly in arrears on
September 1, October 1, January 1 and June 1 of each year commencing on
September 1, 2000.
The convertible debentures are convertible by the holder at any time
prior to the close of business on June 30, 2003. The conversion price is
equal to the lesser of $3.66 per share or 80% of the market price as of the
date on which the holder of the debenture gives notice of their intention
to convert the debentures. If the conversion price is not less than $7.00
per share, the Company may redeem the debentures for cash at 150% of the
unpaid principal and accrued interest.
Note 11 - Going Concern
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has had recurring
operating losses for the past several years and is dependent upon financing
to continue operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. It is
management's plan to restructure the Company's financial position and to
adjust operations toward profitability. Management has divested their
interest from unprofitable services and has eliminated approximately
$2,000,000 of short-term debt through the return of inventory. In addition,
funding of the Company's operations may be supplemented by the use of the
$20,000,000 equity line as discussed in Note 10.
F-23
The accompanying notes are an integral part of these financial statements
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Financial Statements
March 31, 2001
F-24
Worldwide Wireless Networks, Inc.
Consolidated Balance Sheets
ASSETS
------
December 31,
March 31, 2001 2000
-------------- -----------
CURRENT ASSETS
Cash and Cash Equivalents $ 13,827 $ 121,329
Accounts Receivable 126,448 278,797
Allowance for Doubtful Accounts (27,194) (15,000)
Other Current Assets 6,120 7,500
Inventory 320,478 2,131,892
Prepaid Expenses 200,313 39,001
-------------- -----------
Total Current Assets 639,992 2,563,519
-------------- -----------
PROPERTY & EQUIPMENT
Office Equipment 193,980 197,592
Leased Equipment 61,315 61,315
Machinery Equipment 1,720,471 1,839,675
-------------- -----------
1,975,766 2,098,582
Less:
Accumulated Depreciation - Leased
Equipment (61,315) (61,315)
Accumulated Depreciation (887,528) (801,475)
-------------- -----------
Total Property & Equipment 1,026,923 1,235,792
-------------- -----------
OTHER ASSETS
Investments 300,000 300,000
Other Assets 715 2,858
Deposits 52,522 52,421
-------------- -----------
Total Other Assets 353,237 355,279
-------------- -----------
TOTAL ASSETS $ 2,020,152 $4,154,590
============== ===========
F-25
Worldwide Wireless Networks, Inc.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
March 31, 2001 2000
-------------- ------------
CURRENT LIABILITIES
Accounts Payable $ 1,211,691 $ 3,099,153
Accrued Expenses 546,764 328,816
Lines of Credit 60,279 69,839
Unearned Revenue 78,148 90,525
Current Portion of Long Term Liabilities 2,083,484 1,663,080
-------------- ------------
Total Current Liabilities 3,980,366 5,251,413
-------------- ------------
LONG TERM LIABILITIES
Notes Payable 1,008,484 677,282
Notes Payable - Related Party 75,000 75,000
Convertible Debentures 1,780,500 2,000,000
Capital Lease Payable 0 10,798
Less Current Portion (2,083,484) (1,663,080)
-------------- ------------
Total Long Term Liabilities 780,500 1,100,000
-------------- ------------
TOTAL LIABILITIES 4,760,866 6,351,413
-------------- ------------
STOCKHOLDERS' EQUITY
Common Stock, 50,000,000 Shares of $.001
Par Value
Authorized, 16,079,336 and 12,844,060
Shares
Issued and Outstanding 16,079 12,844
Additional Paid In Capital 5,867,851 5,380,633
Accumulated Other Comprehensive
Income (Loss) 0 (400,000)
Retained Earnings (8,624,644) (7,190,300)
-------------- ------------
Total Stockholders' Equity (2,740,714) (2,196,823)
-------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,020,152 $ 4,154,590
============== ============
F-26
Worldwide Wireless Networks, Inc.
Consolidated Statements of Operations
Three Months Ended
March 31,
2001 2000
------------ -------------
SALES $ 514,025 $ 817,227
COST OF GOODS SOLD 363,457 560,292
------------ -------------
GROSS PROFIT 150,568 256,935
------------ -------------
OPERATING EXPENSES
General And Administrative Expenses 1,044,901 1,126,513
Sales 89,342 162,435
------------ -------------
TOTAL OPERATING EXPENSES 1,134,243 1,288,948
------------ -------------
OPERATING INCOME (983,675) (1,032,013)
------------ -------------
OTHER INCOME AND (EXPENSE)
Interest Expense (95,161) (21,327)
Interest Income 101 0
Miscellaneous Income 44,391 3,045
Loss on Investment (400,000) 0
------------ -------------
(450,669) (18,282)
------------ -------------
NET INCOME (LOSS) ($1,434,34) ($1,050,295)
------------ -------------
NET INCOME (LOSS) PER SHARE ($0.11) ($0.09)
------------ -------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 13,654,025 12,189,321
============ =============
F-27
Worldwide Wireless Networks, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
2001 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($1,434,344) ($1,050,292)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation and Amortization 161,301 116,549
Bad Debt 12,194 15,000
Shares Issued for Services 185,625 425,417
Shares Issued for Insurance Policy 77,501 33,000
Shares Issued for Interest 8,332 0
Loss on Investment 400,000 0
Loss on Sale of Assets 5,385 0
Changes in Asset and Liabilities
(Increase) Decrease in Current Assets:
Accounts Receivable 152,349 (356,975)
Other Current Assets 1,380 (17,258)
Inventory 1,891,548 (504,164)
Prepaid Expenses (161,312) (33,355)
Increase (Decrease) in Current Liabilities:
Accounts Payable (1,887,462) 550,557
Accrued Expenses 217,948 42,141
Lines of Credit (9,560) (2,778)
Unearned Revenue (12,377) 38,102
------------- -------------
Net Cash Provided (Used) by Operating Activities (391,492) (744,056)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (39,701) (225,095)
Proceeds from Sale of Assets 1,750 0
Cash Paid for Deposits (101) (25,349)
Cash from Deferred Charges 2,143 4,782
------------- -------------
Net Cash Provided (Used) by Investing Activities (35,909) (245,662)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Debt Financing 375,000 474,650
Principal Payments on Debt Financing (54,596) (5,889)
Shares Issued for Cash 0 500,000
Registration Fees Paid (505) 0
------------- -------------
Net Cash Provided (Used) by Financing Activities 319,899 968,761
------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents (107,502) (20,957)
------------- -------------
Cash and Cash Equivalents
Beginning 121,329 136,311
------------- -------------
Ending $ 13,827 $ 115,354
============= =============
============= =============
Supplemental Cash Flow Information
Cash paid for Interest $ 20,221 $ 0
Cash paid for Income Taxes $ 0 $ 0
Non-cash Financing Transactions:
Stock Issued for Services $ 185,625 $ 458,417
Stock Issued for Accrued Interest $ 8,332 $ 0
Stock Issued to Retire Long Term Liabilities $ 219,500 $ 0
F-28
WORLDWIDE WIRELESS NETWORKS, INC.
(a Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
March 31, 2001
GENERAL
- -------
Worldwide Wireless Networks, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the three months
ended March 31, 2001 since there have been no material changes (other than
indicated in other footnotes) to the information previously reported by the
Company in their Annual Report filed on the Form 10-KSB for the year ended
December 31, 2000.
UNAUDITED INFORMATION
- ----------------------
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all normal and
recurring adjustments which are, in the opinion of management, necessary to
properly reflect the results of the interim period presented. The information
presented is not necessarily indicative of the results from operations expected
for the full fiscal year.
INVENTORY
In November 1999, the Company entered into a purchase agreement with Adaptive
Broadband Corporation (Adaptive). During 2001, the purchase agreement has been
canceled and $1,485,241 in inventory has been returned to Adaptive.
INVESTMENTS
During 2001, the Company has recognized a loss of $400,000 for the investment in
the common stock of Bridge Technology, Inc. (Bridge). The loss has been
recognized due to management's determination that the value of Bridge is a
permanent decline.
CONVERTIBLE DEBENTURES
During 2001, the Company issued 2,219,194 shares of its common stock for notes
payable and accrued interest of $227,832.
ITEM 23: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have had no change in, or disagreements with, our principal independent
accountant during our last three fiscal years.
F-29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation and bylaws provide for the indemnification of
present and former directors and officers and each person who serves at our
request as our officer or director. To the full extent of Nevada Revised
Statutes Sections 78.7502 and 78.751 indemnification for a director is mandatory
and indemnification for an officer, agent or employee is permissive. We will
indemnify these individuals against all costs, expenses and liabilities
reasonably incurred in a threatened, pending or completed action, suit or
proceeding brought because the individual is our director or officer. The
individual must have conducted himself in good faith and reasonably believed
that his conduct was in, or not opposed to, our best interest. In a criminal
action he must not have had a reasonable cause to believe his conduct was
unlawful. This right of indemnification shall not be exclusive of other rights
the individual is entitled to as a matter of law or otherwise.
We will not indemnify an individual adjudged liable due to his negligence or
willful misconduct toward us, adjudged liable to us, or if he improperly
received personal benefit. Indemnification in a derivative action is limited to
reasonable expenses incurred in connection with the proceeding. Also, we are
authorized to purchase insurance on behalf of an individual for liabilities
incurred whether or not we would have the power or obligation to indemnify him
pursuant to our bylaws.
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The selling stockholders will pay all brokerage commissions and discounts
attributable to the sale of the shares plus fees and expenses relating to the
registration of their shares. We are responsible for all other costs, expenses
and fees incurred in registering the shares offered by this prospectus, which
are estimated to be $25,000.
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities we have sold within the past
three years without registration:
At the inception of Pacific Link, the founders received an aggregate of 420,000
shares of common stock. The issuance of these shares was exempt from
registration under the Securities Act of 1933 by reason of Section 4(2) as a
private transaction not involving a public distribution.
48
During 1998, subsequent to the issuance of the founders' stock, we issued 80,000
shares of common stock at $0.10 per share in reliance upon the exemption
provided by Section 4(2) of the Securities Act of 1933 as a private transaction
not involving any public distribution. On April 1, 1999, in conjunction with
our reverse merger, we effected a forward stock split in which each shareholder
received 14 shares for every single share of common stock owned by that
shareholder. As a result, the shares issued to founders became 5,880,000
shares, and the shares issued for cash became 1,120,000 shares, for a total of
7,000,000 shares which were then used to effect the reverse merger. (See
Consolidated Statements of Shareholders' Equity in our Audit Report for 1999,
and Footnote 9 and 12 attached to that audit report).
On April 2, 1999, we sold 400,000 common shares to Andrew Taubman for $100,000
and recognized services valued at $700,000, or $2.00 per share. The issuance
of these shares was exempt from registration under the Securities Act of 1933 by
reason of Section 4(2) as a private transaction not involving a public
distribution.
On June 1, 1999, we agreed to issue warrants to Columbia Financial Group, Inc.
in consideration for services rendered on our behalf. The warrants are
exercisable for an aggregate of 400,000 common shares. The services which
Columbia Financial Group, Inc. performed for us involved the preparation and
dissemination to our shareholders, the media and others, information concerning
Worldwide Wireless and our activities. Based upon our negotiation of, and entry
into some agreements with, other companies providing or offering to provide
these services to us for only cash, as well as our understanding of which
Columbia Financial Group, Inc. charges to other clients in cash for the same
type of services, we value the service provided to us by Columbia Financial
Group, Inc. at approximately $10,000 per year of service. The fair value of the
warrants were determined using the Black-Scholes option pricing model with the
following assumptions: risk free interest rate of 7%; warrant life of 5 years;
volatility of 25% with no dividend yield. We recorded expenses of $122,000 in
connection with the warrant issuance. The issuance of these shares was exempt
from registration under the Securities Act of 1933 by reason of Section 4(2) as
a private transaction not involving a public distribution.
On December 6 and 8, 1999 we sold an aggregate of 200,000 common shares, 100,000
on each date, to SGS Holdings for $400,000, or $2.00 per share. The issuance of
these shares was exempt from registration under the Securities Act of 1933 by
reason of Section 4(2) as a private transaction not involving a public
distribution.
On January 5, 2000 we issued 250,000 restricted common shares to Pacific First
National Corp., Inc. in consideration of $500,000.00. The issuance of these
shares was exempt from registration under the Securities Act of 1933 by reason
of Section 4(2) as a private transaction not involving a public distribution.
Pursuant to an Acquisition Agreement and Plan of Merger (the "Merger
Agreement") dated as of February 10, 2000 between Worldwide Wireless and Tarrab
Capital Group ("TCG"), a Nevada corporation, all the outstanding shares of
common stock of TCG were exchanged for 5,000 shares of our 144 restricted common
stock in a transaction in which we were the successor corporation and TCG will
cease to exist. A copy of the Merger Agreement and Certificate of Merger were
filed as exhibits to the Form 8-K filed in February, 2000.
49
On February 10, 2000, we issued 200,000 restricted common shares to Mutual
Ventures Corporation in consideration of $400,000 in legal fees paid to Sperry,
Young & Stoecklein for services rendered in connection with the Tarrab Capital
Group Merger. Mutual Ventures Corporation paid for these legal services on our
behalf. The issuance of these shares was exempt from registration under the
Securities Act of 1933 by reason of Section 4(2) as a private transaction not
involving a public distribution.
On March 13, 2000 we issued 8,000 restricted common shares to Universal Business
Insurance, Inc. in consideration of an officer and director liability insurance
policy valued at $33,000.00. The transaction was exempt from registration
pursuant to 4(2) of the Securities Act of 1933 as a private offering not
involving any public distribution.
Subsequent to the close of the first quarter, Worldwide Wireless awarded 915
shares to Robert P. Kelly, Jr. and Mimi Grant, joint owners of Southern
California Technology Executive Network in compensation for its membership in
that organization. The transaction was exempt from registration pursuant to 4(2)
of the Securities Act of 1933 as a private offering not involving any public
distribution.
On May 15, 2000 we issued 100,000 restricted common shares to The Oxford Group,
Inc. in consideration of $350,000 in cash. The transaction was exempt from
registration pursuant to 4(2) of the Securities Act of 1933 as a private
offering not involving any public distribution.
On May 25, 2000, we issued 144,887 shares of common stock for cash of $500,000
at $3.45 per share, from a private investor on June 30, 2000. We subsequently
recalled the shares and the $500,000 was rolled into an agreement to sell
$1,000,000 of convertible debentures and warrants to AMRO International, S.A.
and Trinity Capital Advisors, Inc. A condition of the purchase is that we must
register the shares of common stock underlying these debentures and warrants
with the SEC. These investors are selling stockholders in this registration
statement. As the shares originally issued in May have not yet been physically
returned to us, we are continuing to reflect them as issued and outstanding;
however, we anticipate that they will be returned and cancelled out in the
fourth quarter of 2000. The transaction was exempt from registration pursuant to
4(2) of the Securities Act of 1933 as a private offering not involving any
public distribution.
On June 1, 2000, we issued 20,157 shares of common stock to Schumann &
Associates in consideration of legal and management services rendered between
October 1999 and May 31, 2000, which were valued at $46,865. The transaction was
exempt from registration pursuant to 4(2) of the Securities Act of 1933 as a
private offering not involving any public distribution.
On June 1, 2000, Worldwide Wireless Networks, Inc. issued 25,000 shares of
common stock for services valued at $58,125. The transaction was exempt from
registration pursuant to 4(2) of the Securities Act of 1933 as a private
offering not involving any public distribution.
On June 14, 2000, Worldwide Wireless Networks, Inc. issued 5,000 shares of
common stock for services valued at $17,250. The transaction was exempt from
registration pursuant to 4(2) of the Securities Act of 1933 as a private
offering not involving any public distribution.
50
On June 19, 2000, we entered into a Private Equity Line of Credit Agreement with
Whitsend Investments Limited, one of the selling shareholders. The terms of the
agreement allow for periodic draw downs of the funding at the discretion of
Worldwide Wireless Networks, Inc., the Investor is committed to purchasing up to
$20,000,000 of our common stock and 125,000 warrants. Worldwide Wireless
Networks, Inc. registered the investor securities in its prior SB-2 filing.
On June 28, 2000, we issued 300,000 restricted common shares to Bridge
Technology, Inc. ("BTI") valued at $4.00 per share in consideration of the
issuance of 150,000 BTI unrestricted common shares valued at $8.00 per share.
The transaction was exempt from registration pursuant to 4(2) of the Securities
Act of 1933 as a private offering not involving any public distribution.
On July 10, 2000, we issued 5,000 shares of common stock to Triton West Group,
Inc. in consideration for services rendered to us in advising us as to the
structure of, and helping us identify institutional purchasers of, our
convertible debentures and warrants. A copy of the Convertible Debenture and
Warrant Purchase Agreements, which references the involvement of Triton West
Group, Inc. in that transaction, were filed as exhibits to the Form SB2
Registration Statement filed on August 1, 2000. Based upon our assessment of
the value of the services provided to us, and the market value of our stocks at
the time of the transaction, we have valued the shares given to Triton West
Group, Inc. at $15,000 in the aggregate. The transaction was exempt from
registration pursuant to 4(2) of the Securities Act of 1933 as a private
offering not involving any public distribution.
On July 12, 2000, we agreed to issue warrants to Columbia Financial Group, Inc.
in consideration for services rendered on our behalf. The warrants are
exercisable for an aggregate of 600,000 common shares. The services which
Columbia Financial Group, Inc. performed for us involved the preparation and
dissemination to our shareholders, the media and others, information concerning
Worldwide Wireless and our activities. Based upon our negotiation of, and entry
into some agreements with, other companies providing or offering to provide
these services to us for only cash, as well as our understanding of which
Columbia Financial Group, Inc. charges to other clients in cash for the same
type of services, we value the service provided to us by Columbia Financial
Group, Inc. at approximately $10,000 per year of service. The issuance of these
shares was exempt from registration under the Securities Act of 1933 by reason
of Section 4(2) as a private transaction not involving a public distribution.
On July 19, 2000 we issued 125,000 restricted common shares to Technology Equity
Fund Corp. in consideration of $250,000 in cash. The transaction was exempt
from registration pursuant to 4(2) of the Securities Act of 1933 as a private
offering not involving any public distribution.
On January 31, 2001, we entered into a Settlement Agreement with Sinclair Davis
Trading Corporation whereby, in exchange for services rendered to the Company,
Sinclair Davis will receive 262,500 shares of common stock. Sinclair Davis is a
selling stockholder in this registration statement. The issuance of these shares
was exempt from registration under the Securities Act of 1933 by reason of
Section 4(2) as a private transaction not involving a public distribution.
51
We executed a Share Purchase Agreement with Universal Business Insurance, Inc.
on March 30, 2001. Under this Agreement, we agreed to issue, register for free
trading and deliver 553,582 shares of common stock to Universal, in exchange for
payment of our premium owed for Director's and Officer's insurance coverage for
the period between March 13, 2001 and March 13, 2002. The amount of the
applicable premium was $66,429.83. Additionally, we granted Universal an option
to purchase an additional amount of 55,358 shares of common stock in the event
that our highest bid price on July 30, 2001 is less than $0.10 per share. The
issuance of these shares was exempt from registration under the Securities Act
of 1933 by reason of Section 4(2) as a private transaction not involving a
public distribution.
On April 10, 2001, Whitsend Investments Limited purchased a total of 1,420,454
shares of our common stock pursuant to the terms of our Private Equity Line of
Credit Agreement.
On April 17, 2001, we entered into a settlement agreement with PIP and its
affiliates. In exchange for dismissal of the pending litigation and releases of
all claims against all parties, we have agreed to the following: (a) cash
payment of $115,000, of which $70,000 was paid by check from persons other than
us to PIP and its affiliates, and the remaining balance of $45,000 is payable
from us by installments under a promissory note, which is secured by a
Stipulated Entry of Judgment for that amount; (b) 400,000 shares of common stock
of WWWN to be transferred to PIP and its affiliates; and (c) 1,000,000 warrants
for the purchase of 1,000,000 shares of free-trading stock. (See: Our
Transactions with the Other Selling Stockholders). The issuance of these shares
was exempt from registration under the Securities Act of 1933 by reason of
Section 4(2) as a private transaction not involving a public distribution.
On May 8, 2001, Whitsend Investments Limited purchased a total of 631,313 shares
of our common stock pursuant to the terms of our Private Equity Line of Credit
Agreement.
On May 31, 2001, Whitsend Investments Limited purchased a total of 1,893,940
shares of our common stock pursuant to the terms of our Private Equity Line of
Credit Agreement.
In each of the private transactions above referenced above, we believe (and have
received investor representations to the effect that) each purchaser:
(a) was aware that the securities had not been registered under federal
securities laws;
(b) acquired the securities for his/her/its own account for investment
purposes of the federal securities laws;
(c) understood that the securities would need to be indefinitely held
unless registered or an exemption from registration applied to a
proposed disposition; and
(d) was aware that the certificate representing the securities would bear
a legend restricting its transfer. We believe that, in light of the
above, the sale of our securities to the respective acquirers did not
constitute the sale of an unregistered security in violation of the
federal securities laws and regulations by reason of the exemptions
provided under Sections 3(b) and 4(2) of the Securities Act, and the
rules and regulations promulgated thereunder.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Exchange Act requires Worldwide Wireless's directors and
officers and persons who beneficially own more than ten percent of Worldwide
Wireless's common stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common stock
52
in Worldwide Wireless. Officers, directors and greater-than-ten percent
shareholders are required by Commission regulation to furnish Worldwide Wireless
with copies of all Section 16(a) reports they filed. To Worldwide Wireless's
knowledge, based solely on review of the copies of reports furnished to
Worldwide Wireless and written representation that no other reports were
required, during the fiscal year ended December 31, 1999, these persons complied
with all Section 16(a) filing requirements.
53
ITEM 27: EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1.1 N/A
2.1* Agreement and Plan of Merger, dated March 31, 1999, between
Worldwide Wireless and Pacific Link Internet, Inc.
2.2* Articles of Merger, dated April 9, 1999, between Worldwide
Wireless and Pacific Link Internet, Inc.
2.3* Acquisition Agreement and Plan of Merger, dated February 10,
2000, between Worldwide Wireless and Tarrab Capital Group, Inc.
2.4* Certificate of Merger, dated February 10, 2000, between Worldwide
Wireless and Tarrab Capital Group, Inc.
2.5* Letter of Intent dated May 8, 2000 between Worldwide Wireless and
1st Universe Internet
3.1* Articles of Incorporation of Second Investors Group, Inc. dated
June 10, 1992
3.2* Certificate of Amendment to Articles of Incorporation of Second
Investors Group, Inc. filed June 19, 1998
3.3* Certificate of Amendment to Articles of Incorporation of
Progressive Environmental Recovery Corporation dated January 29,
1999
3.4* Amended and Restated Bylaws of Worldwide Wireless Networks, Inc.,
dated September 14, 1999
4.1* Form of Stock Purchase Warrant Agreement
4.2* Form of 7% Convertible Debenture
4.3**** Form of Promissory Note with Esyon Corporation
(5.1)**** Opinion of Feldhake, August & Roquemore LLP, dated June 14, 2001,
as to Legality of Shares Offered
6.1 N/A
7.1 N/A
54
8.1 N/A
9.1 N/A
10.1* Lease Agreement, dated March 30, 1999, between Worldwide
Wireless and NL-Orange, LP
10.2* Agreement, dated May 20, 1999, between Bridge Technology, Inc.
and Worldwide Wireless
10.3* Consultant Agreement, dated June 1, 1999, between Worldwide
Wireless and Columbia Financial Group
10.4* Employment Agreement, dated 1997, between Worldwide Wireless and
Dennis Shen
10.5* Microwave radio status license, call sign WP0T648, dated July 7,
1999, between Worldwide Wireless and the FCC
10.6* Microwave radio status license call sign WP0T649, dated July 7,
1999, between Worldwide Wireless and the FCC
10.7* Purchase Agreement, dated October 27, 1999, between Adaptive
Broadband Corporation and Worldwide Wireless
10.8* Private Equity Line of Credit Agreement date June 19, 2000,
between Worldwide Wireless and Whitsend Investments Limited
10.9* Registration Rights Agreement, dated June 19, 2000, between
Worldwide Wireless and Whitsend Investments Limited
10.10* Convertible Debenture and Warrants Purchase Agreement, dated
June 30, 2000, between Worldwide Wireless and AMRO International,
S.A. and Trinity Capital Advisors, Inc.
10.11* Registration Rights Agreement dated June 30, 2000, between
Worldwide Wireless and AMRO International, S.A. and Trinity
Capital Advisors, Inc.
10.12* Employment Agreement with Charles Bream dated January 1, 2000
10.13* Consultant Agreement, dated July 12, 2000, between Worldwide
Wireless and Columbia Financial Group
55
10.14* Consultant Agreement, dated November 2000, between Worldwide
Wireless and Columbia Financial Group
10.15** Settlement Agreement, dated January 25, 2001, between
Worldwide Wireless and Sinclair Davis Trading Corporation
10.16*** Share Purchase Agreement, dated March 30, 2001, between
Worldwide Wireless and Universal Business Insurance, Inc.
10.17*** Settlement Agreement, dated April 17, 2001, between Worldwide
Wireless and Pacific Industrial Partners
10.18*** Share Purchase Agreement, dated April 23, 2001, between
Worldwide Wireless and Feldhake, August & Roquemore LLP
10.19**** Letter of Intent, dated December 28, 2000, between Esyon
Corporation and Worldwide Wireless
11.1 N/A
12.1 N/A
13.1 N/A
14.1 N/A
15.1 N/A
16.1 N/A
17.1 N/A
18.1 N/A
19.1 N/A
20.1 N/A
21.1* Subsidiaries of the Registrant
22.1 N/A
(23.1)**** Consent of Independent Public Accountant dated June 14, 2001,
for year-end financial statements
(23.2)**** Consent of Feldhake, August & Roquemore LLP
56
99.1* Press release dated May 8, 2000 by Worldwide Wireless and
announcing the purchase of the assets of 1st Universe Internet
99.2* Resolution of the Board of Directors of Worldwide Wireless dated
July 19, 2000 authorizing the issuance of shares to Technology
Equity Fund Corporation
99.3* Resolution of the Board of Directors of Worldwide Wireless dated
May 15, 2000 authorizing the issuance of shares to The Oxford
Group
99.4* Resolution of the Board of Directors of Worldwide Wireless dated
June 1, 2000 authorizing the issuance of shares to Schumann &
Associates
99.5* Resolution of the Board of Directors of Worldwide Wireless dated
October 18, 2000 authorizing the amendment of the Warrant
Agreements with Columbia Financial Group, Inc. to amend the
exercise price of the warrants
* As previously filed with the Form SB-2/A on November 21, 2000
** As previously filed with the Form SB-2 on March 15, 2001
*** As previously filed with the Form SB-2/A on April 24, 2001
**** As previously filed with the Form 10-KSB/A on May 7, 2001
( ) Filed herewith
57
ITEM 28: UNDERTAKINGS
The undersigned registrant will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section (10)(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of Worldwide Wireless pursuant to the above mentioned
provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission this indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable.
58
(5) In the event that a claim for indemnification against these
liabilities (other than the payment by us of expenses incurred or paid
by a director, officer or controlling person of Worldwide Wireless in
the successful defense of any action, suit or proceeding) is asserted
by a director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether this
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of this issue.
59
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Orange, State of California, on June 14, 2001.
Worldwide Wireless Networks, Inc.
- ------------------------------------
(Registrant)
By: ________/s/_________________________
Jerry Collazo, Chief Executive Officer
By: ________/s/_________________________
Jerry Collazo, Principal Financial Officer
Principal Accounting Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------
_______/s/______________ Director June 14, 2001
Dennis Shen
_______/s/______________ Director June 14, 2001
Jack Tortorice
60