UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2001
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20/20 WIRELESS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-4054666
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
511-475 Howe Street
Vancouver, British Columbia V6A 1A4
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (604) 939-2560
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Check here whether the issuer (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the
past 90 days.
Yes __X____ No_______
As of June 30, 2001, the following shares of the Registrant's
common stock were issued and outstanding:
10,765,514 shares of voting common stock
PART I - FINANCIAL INFORMATION
To the Board of Directors of 20/20 Wireless Inc.
We have audited the consolidated balance sheet of 20/20 Wireless
Inc., as of June 30, 2001 and the consolidated statements of
operations and deficit, and cash flows for the three months then
ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an
opinion on these financial statements on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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 financials 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.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
company as at June 30, 2001 the results of its operations and
its cash flows for the years then ended in accordance with
generally accepted accounting principles. As required by the
Company Act of British Columbia, we report that in our opinion,
these principles have been applied on a basis consistent with
that of the preceding years.
COQUITLAM, B.C. PEACH GODDARD
JULY 31, 2001 CHARTERED ACCOUNTANTS
20/20 WIRELESS INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Audited)
U.S. Funds
As Of As Of
June 30, 2001 March 31, 2001
(Audited) (Audited)
--------------------------------
ASSETS
Current Assets
Cash $ 0 $ 8
Technology License (Note 2e) 373,019 361,192
Capital Assets (Note 4) 1,563 1,690
Incorporation Costs 629 629
_________ __________
TOTAL ASSETS $375,211 $363,510
LIABILITIES
Current Liabilities
Accounts Payable $ 2,500 $ 689
Note Payable (Note 5) - -
_________ ________
Due to Shareholders (Note 6) 191,191 166,297
---------- ----------
Total Liabilities $193,691 $166,986
SHAREHOLDERS' EQUITY
Share Capital (Note 7) 362,257 362,257
Deficit (180,737) (165,724)
---------- ----------
Total Stockholders' Equity 181,520 196,533
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $375,211 $363,519
========== ==========
The accompanying notes and accountant's report are an integral
part of these financial statements.
20/20 WIRELESS INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2001
(U.S. Funds)
For the 3 Mos Ended For the 3 Mos
Ended
June 30, 2001 March 31,
2001
--------------------
--------------------
TOTAL REVENUES: $ 0 $ 0
OPERATING EXPENSES:
Advertising & Promotion 1,253 41,780
Auto 660 4,723
Amortization 127 628
Insurance, licenses and fees - 212
Legal & Accounting 4,000 7,355
Office 1,500 7,500
Rent 7,200 19,825
Telephone & Utilities 273 5,232
Testing - 1,154
Travel - 5,218
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15,013 93,627
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LOSS FOR THE PERIOD $(15,013) $(93,627)
========== ==========
LOSS PER SHARE - BASIC $ (.01) $ (.01)
========== ==========
The accompanying notes and accountant's report are an integral
part of these financial statements.
20/20 WIRELESS INC.
STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2001
U.S. FUNDS
For the 3 Mos Ended For the 3 Mos Ended
June 30, 2001 March 31, 2001
-------------------- --------------------
CASH RESOURCE PROVIDED
BY(USED IN):
OPERATIONS
Cash flow provided by operations
before the undernoted $ (15,013) $ (93,627)
Non-cash working capital 1,811 ( 2,204)
Amortization 127 698
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(13,075) (95,133)
INVESTING
Purchase Technology License ( 11,827) (361,192)
Additions to Capital Assets - (2,318)
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( 11,827) (364,139)
FINANCING
Issue of Share Capital - 361,192
Shareholder's loans 24,894 98,088
------------ ------------
NET INCREASE(DECREASE) IN CASH (8) 8
CASH POSITION AT BEGINNING OF PERIOD 8 0
------------ ------------
CASH POSITION AT END OF PERIOD $ 0 $ 8
============ ============
The accompanying notes and accountant's report are an integral
part of these financial statements.
20/20 WIRELESS INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
(U.S. FUNDS)
1. CONTINUED OPERATIONS
These financial statements have been prepared on the basis of
accounting principles applicable to a "going concern", which
assume that the company will continue in operation for the
foreseeable future and will be able to realize its assets and
discharge its liabilities in the normal course of operations.
Several adverse conditions and events cast doubt upon the
validity of the assumption. The company has incurred operating
losses since its inception, has a working capital deficiency, and
is currently unable to self-finance its operations.
The continuation of the company asa going concern is dependent
upon its ability to obtain additional financing to meet its
obligations for future development and the attainment of
successful operations. The company is currently seeking new
investors to raise the needed working capital.
These financial statements do not reflect adjustments that would
be necessary if the "going concern" assumption were not
appropriate because management believes that the actions already
taken or planned, as described above, will mitigate the adverse
conditions and events which raise doubts about the validity of
the "going concern" assumption used in preparing the financial
statements.
If the "going concern" assumption were not appropriate for these
financial statements, then adjustments would be necessary in the
carrying values of assets and liabilities, the reported revenues
and expenses, and the balance sheet classifications used.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared on the historical cost
basis in accordance with accounting principles generally accepted
in Canada.
a) Principles of Consolidation
These consolidated financial statements include the accounts of
the company and the wholly owned subsidiary, Global Wireless
Services Inc. The effective date of purchase was December 20,
2000. Included in these consolidated financial statements are
the results of operations of Global Wireless Services Inc. from
May 29, 2000 (date of incorporation) to March 31, 2001.
The subsidiary is accounted for using the pooling of interests
method.
All companies are located in British Columbia, Canada.
b) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. These
estimates are based on management's best knowledge of current
events and actions that the company may undertake in the future.
c) Foreign currency transactions
The financial statements of the company are reflected in United
States dollars. The company uses the temporal method of
accounting for foreign currency translations, whereby monetary
items are translated at the rate of exchange in effect at the
balance sheet date, non-monetary items are translated at
historical rates and revenue and expense items are translated at
the rate of exchange on the dates they occur.
d) Capital Assets
Capital Assets are recorded at cost. Amortization is provided
using the declining balance method at the following rates:
Computer Hardware 30%
e) Technology License
In a related party transaction the company purchased from its
President $361,192 for a license to certain technology relating
to wireless communications systems. The company may use the
licensed technology for a period of six years at which time it
can purchase for $100 (US) any residual values in the technology
from the President. Amortization of the license will begin once
revenues are generated.
f) Revenue recognition
All revenue is recorded and related cost transferred to cost of
sales at the time the product shipped or the service provided.
g) Loss per Share
Basic loss per share computations is based on the weighted
average number of shares outstanding during the year. Fully
diluted earnings per shares have not been disclosed, as it is
anti-dilutive.
3. FAIR VALUE OF FINANCIAL STATEMENTS
The company's financial instruments consist of accounts payable.
Unless otherwise noted, it is management's opinion that the
company is not exposed to significant interest, currency or
credit risks arising from the financial instruments. The fair
value of these financial instruments approximates their carrying
value due to their short-term maturity or capacity of prompt
liquidation.
4. CAPITAL ASSETS
2001
Accumulated Net Book
Cost Amortization Value
------------------------------------
Computer Hardware $2,318 $ 755 $ 1,563
5. NOTE PAYABLE
The company has arranged a loan of $133,000 at 12% per annum.
The loan may be drawn upon by the company at its discretion and
may be repaid by the company without notice, bonus or penalty.
The loan is unsecured and is governed by the laws of British
Columbia, Canada, to the exclusion of the law of any other
jurisdiction. The loan was arranged on June 26, 2001 and as at
year end no advances had been taken.
6. DUE TO SHAREHOLDERS
Amounts due to shareholders are non-interest bearing and have no
specific terms of repayment. The shareholders have indicated
that these amounts need not be repaid within the next fiscal
period and consequently these have been classified as long term.
7. SHARE CAPITAL
Authorized
The authorized capital of the company consists of 25,000,000
common shares with a par value of $.001.
Issued and Outstanding
Number Amount
----------- ----------
Balance March 31, 1999 1,000,000 $ 1,000
Issued for cash 65,000 65
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Balance March 31, 2000 1,065,000 1,065
Issued for cash 50,000 50
Stock Split 4,460,000 0
Issued for purchase of
technology 5,190,514 361,142
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Balance March 31 & June 30, 2001 10,765,514 362,257
=========== ==========
8. BUSINESS COMBINATION
Effective December 20, 2000, Eurokiosk Inc., entered into a
business combination with Global Wireless Services Inc. The
details of the combination are as follows:
(i) The companies in this combination have been incorporated to
develop and market a wireless technology that provides wireless
monitoring and diagnostic systems to electrical, cable
television, telephone vending and petroleum industries.
Eurokiosk Inc., a company formed principally to obtain
secondary financing for producing and marketing the wireless
technology.
Global Wireless Services Inc., a company formed to
principally develop wireless technology.
(ii) At the date of the business combination, the book values of
the assets and liabilities of Eurokiosk, Inc., and Global
Wireless Inc., are as follows:
Eurokiosk Global Wireless
-------------------------------
ASSETS
Current assets $ 0 $ 1,856
Capital assets 0 1,691
Other assets 0 361,821
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0 365,368
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LIABILITIES
Current liabilities 2,803 1,325
Other 78,571 28,699
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81,374 30,024
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SHAREHOLDERS EQUITY(DEFICIENCY) 0 335,344
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$ 0 $365,368
========== =========
The operating results of Eurokiosk Inc., and Global Services
Inc., for the nine-month period ended December 31, 2000 were as
follows:
Eurokiosk Global Wireless
-------------------------------
Revenues $ 0 $ 0
---------- ---------
Net Loss $(10,342) $(25,847)
iii) The business combination was effected by the shareholders of
each of the companies exchanging 100% of their shares in the
combined entity.
iv) The number of shares received by the shareholders of Global
Wireless Services Inc., immediately after the combination in the
combined entry is 5,490,514 common shares.
v) The method of accounting for this combination was the pooling
method. Under the pooling method, the assets and liabilities are
combined and accounted for in the combined companies financial
statements at their carrying values. The reported loss of the
combining companies includes the results of operations of the
combining companies for the entire fiscal period in which the
combination took place.
The pooling of interest method was used for the following
reasons:
- The combination is an arrangement between shareholder groups
uniting business interests to carry on their previous operation
together in combination.
- The controlling group of shareholders controlled 100% of the
company's shares, in aggregate, prior to the combination and 51%
of the shares after the combination.
- The directorship in each of the combining companies was
similar.
- The officers and day-to-day management in each of the
combining companies was similar.
- The combination was effected solely to consolidate assets
and shareholdings to allow ease of acquisition by a public
company.
- No assets are brought into the combination other than those
of the parties to the combination.
9. INCOME TAX LOSSES
The company has non-capital income tax losses of $39,020, which
may be carried forward to reduce future year's taxable income,
these losses expire as follows:
2006 $78,097
2007 $93,627
=======
The potential future tax benefit of these expenditures and tax
losses have not been recognized in the accounts of the company.
10. COMMITMENTS
(i.) By agreement dated 29 May 2000, the company entered into a 5
year lease for premises. The minimum lease payments, not
including common area costs, are as follows:
2001 $ 23,841
2002 23,841
2003 23,841
2004 23,841
------------
$ 95,364
============
11. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 issue arises because many computerized systems use
two digits rather than four to identify a year. Date sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates are
processed. In addition, similar problems may arise in some
systems, which use certain dates in 1999 to represent something
other than a date. Although the change in date has occurred, it
is not possible to conclude that all aspects of the year 2000
issue that may affect the entity, including those related to
customers, suppliers, or other third parties, have been fully
resolved.
12. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of accounts
receivable, accounts payable and amounts due from shareholders.
Unless otherwise noted, it is management's opinion that the
company is not exposed to significant interest, currency or
credit risks arising from these financial instruments. The fair
value of these financial instruments approximates their carrying
values, unless otherwise noted.
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with
generally accepted accounting principles in Canada. These
financial statements also comply, in all material respects, with
accounting principles accepted in the United States and the rules
and regulations of the Securities and Exchange Commission.
FORWARD LOOKING STATEMENTS
Except for the Historical Information Contained Herein, Certain
Matters Discussed in this Report May Be Considered
"Forward-looking Statements" Within The Meaning of The Securities
Act of 1933 And The Securities Exchange Act of 1934, as Amended
by The Private Securities Litigation Reform Act of 1995. Those
Statements Include Statements Regarding The Intent, Belief or
Current Expectations of The Company and Members of its Management
as Well as the Assumptions on Which Such Statements Are Based.
Prospective Investors Are Cautioned That Any Such Forward-looking
Statements Are Not Guarantees of Future Performance and Involve
Risks and Uncertainties, and That Actual Results May Differ
Materially from Those Contemplated by Such Forward-looking
Statements. Important Factors Currently Known to Management That
Could Cause Actual Results to Differ Materially from Those in
Forward-looking Statements Include "The Company's Operating
Results Could Fluctuate, Causing Its Stock Price to Fall", "If
the Company Cannot Integrate Acquired Companies in its Business,
its Profitability May Be Adversely Effected", and "The Company
May Not Be Able to Compete Successfully Against Other Companies."
These and Additional Important Factors to Be Considered Are Set
Forth in the Safe Harbor Compliance Statement for Forward-looking
Statements the Company Undertakes No Obligation to Update or
Revise Forward-looking Statements to Reflect Changed Assumptions,
the Occurrence of Unanticipated Events or Changes to Future
Operating Results.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General Statement - Factors that may affect future results
With the exception of historical information, the matters
discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain forward looking
statements under the 1995 Private Securities Litigation Reform
Act (the "Reform" Act) that involve various risks and
uncertainties. Typically, these statements are indicated by
words such as "anticipates", "expects", "believes", "plans",
"could", and similar words and phrases. Factors that could cause
the Company's actual results to differ materially from
management's projections, forecasts, estimates and expectations
include but are not limited to the following:
- In this period the company raised additional working
capital in the amount of 133,000.00.This working
capital shall be sufficient for the next two-three
quarters.
- Ability of the Company to raise additional capital
- Ability of the Company to secure sales of its products
and services through its distributors
- Unexpected economic changes in Canada and/or the United
States
To the extent possible, the following discussion will highlight
the relative needs of the Company with respect to its business
activities.
20/20 is a development stage company which has minimal operating
history. As a result, investors are alerted that any investment
in the company entails a high degree of risk. The company has
not yet generated any revenue from its products or services. The
Company will seeks to derive revenue from (i) wireless telemetry
devices (ii) associated wireless network air time (iii) third
party products and services, consisting of the provision of
non-20/20 products and services as part of the total contract.
20/20 seeks to design, develop, manufacture and market, wireless
telemetry technologies for use by a wide variety of companies
that have remote equipment, such as electronic vending, cable
television, and utilities (electric, gas and water). 20/20's
technology will utilize both public and private wireless data
networks to transmit mission critical information. The Company
seeks to provide products that feature a cost-effective method
for companies with remote equipment to utilize wireless data to
immediately connect equipment to the operations center and with
mobile workers.
The Company believes that recent economic developments and trends
may adversely affect levels of capital spending by companies in a
variety of industries, including companies in the vertical
markets that the Company serves. The Company anticipates that
such economic conditions and regulatory trends may affect demand
in 2001 for the products and services offered by 20/20. A
decline in demand for 20/20's products in these markets as a
result of economic conditions, or otherwise, may have a material
adverse effect on 20/20's business, financial condition,
operating results and cash flows.
20/20's customers will enter into ongoing maintenance agreements
that provide for maintenance and technical support services for a
period commencing after expiration of the initial warranty
period. Maintenance agreements will have a term of twelve months
and are invoiced either annually or monthly. Revenue for these
services is recognized ratably over the term of the contract.
The Company expects to be periodically required to provide, in
addition to 20/20 products and services, certain third party
products, such as host computer hardware and operating system
software, and mobile computing. The Company recognizes revenue
of the supply on third party hardware upon transfer of title to
the customer. The Company expects to recognize revenue on the
supply on third party services using a percentage of completion
method based on the costs incurred over the total estimated cost
to complete the third party services contract.
The Company expects to supply some portion of third party
products and services to customers where it is successful in
selling its own products and services. There can be no
assurance, however, that any contracts entered into by the
Company to supply third party software and products in the future
will represent a substantial portion of revenue in any future
period. Since the revenue generated from the supply of third
party products and services may represent a significant portion
of certain contracts and the installation and rollout of third
party products is generally at the discretion of the customer,
the Company may, depending on the level of third party products
and services provided during a period, experience large quarterly
fluctuations in revenue.
The Company's revenue is dependent, in large part, on significant
contracts from a limited number of customers. As a result, any
substantial delay in the Company's completion of a contract, the
inability of the Company to obtain new contracts or the
cancellation of an existing contract by a customer could have a
material adverse effect on the Company's results of operations.
Some of the Company's contracts are cancelable upon notice by the
customer. The loss of certain contracts could have a material
adverse effect on the Company's business, financial condition,
operating results and cash flows. As a result of these and other
factors, the Company's results of operations have fluctuated in
the past and may continue to fluctuate from period-to-period.
The future success of the Company's business development strategy
will depend on the Company's ability to develop and implement the
technology related to its wireless telemetry solutions; the
Company's ability to enter into contracts with end-users and
distributors; raising additional capital to finance growth in the
company and development of new products. Growth in the Company's
business revenue is anticipated to be derived primarily from the
sale of wireless telemetry devices and monthly wireless network
air time.
RISK FACTORS
------------
20/20's believes that its operations and the overall success of
its business may be subject to the following risks.
Liquidity
The Company requires additional capital principally to meet its
costs for the implementation of its business plan, for general
and administrative expenses and to fund costs associated with the
development of its products. It is not anticipated that the
Company will be able to meet its financial obligations through
internal net revenue in the foreseeable future. The Company does
not have a working capital line of credit with any financial
institution. Therefore, future sources of liquidity will be
limited to the Company's ability to obtain additional debt or
equity funding.
Potential Fluctuations in Quarterly Operating Results
Once 20/20 begins to generate revenues and secures firm contract
orders, its results of operations may fluctuate from period to
period depending on a number of factors, including the timing and
receipt of significant orders, the timing of completion of
contracts, increased competition, changes in the demand for
20/20's products and services, the cancellation of contracts, the
timing of new product announcements and introductions, changes in
pricing policies by 20/20 and its competitors, delays in the
introduction of products or enhancements by 20/20, expenses
associated with the acquisition of products or technology from
third parties, the mix of sales of 20/20's products and services
and third party products, seasonality of customer purchases,
personnel changes, and general economic conditions.
20/20 will rely upon its ability to implement and integrate
wireless telemetry solutions on schedule and to the satisfaction
of its customers. 20/20 from time to time may experience certain
implementation and other problems that may delay the completion
of certain projects, including the failure of third parties to
deliver products or services on a timely basis and delays caused
by customers. There can be no assurance that 20/20 will be able
to complete projects on a timely and cost effective basis or that
delays will not result in cancellations of contracts or result in
the imposition of substantial penalties. Any such material
delay, cancellation or penalty could have a material adverse
effect upon 20/20's business, financial condition, operating
results and cash flows.
Because 20/20 is unable to forecast with certainty the receipt of
orders for its products and services and 20/20's expense levels
are relatively fixed and are based, in part, upon its expectation
of future revenue, if revenue levels do not meet expectations as
a result of a delay in completing a contract, the inability to
obtain new contracts, the cancellation of an existing contract or
otherwise, operating results are likely to be adversely effected.
As a result, net income may be disproportionately affected
because a relatively small amount of 20/20's expenses vary with
its revenue. In particular, 20/20 plans to increase its
operating expenses to expand its sales and marketing operations,
expand its distribution channels, fund greater levels of research
and development, enhance distributor training and increase its
administrative resources. There can be no assurance that 20/20
will effectively compete in this market or receive sufficient
revenues to offset such costs. Additionally, as 20/20 is a
development stage company, there is no guarantee that it will be
able to secure firm orders for its products or services or to
generate significant revenue to become self sufficient in its
need for capital.
Based upon all of the foregoing factors, 20/20 believes that its
quarterly revenue, direct expenses and operating results are
likely to vary significantly in the future, that period-to-period
comparisons of the results of operations are not necessarily
meaningful and that such comparisons should not be relied upon as
an indication of future performance. 20/20 may also choose to
reduce prices or increase spending in response to competition, or
to pursue new market opportunities. If new competitors,
technological advances by existing competitors or other
competitive factors require 20/20 to reduce its prices or invest
significantly greater resources in research and development
efforts, 20/20's operating results in the future may be adversely
affected. There can be no assurance that 20/20 will be able to
grow in future periods or that it will be able to sustain its
level of total revenue or its rate of revenue growth on a
quarterly or annual basis. It is likely that in some future
quarter 20/20's operating results will be below the expectations
of public market analysts and investors. In such event, the price
of 20/20's Common Shares would likely be materially adversely
affected.
Because the revenue generated from the supply of third party
products and services may represent a significant portion of
certain contracts and the installation and rollout of third party
products is generally at the discretion of the customer, 20/20
may, depending on the level of third party products and services
provided during a period, experience large quarterly fluctuations
in revenue.
Lengthy Sales Cycles for 20/20's Products
The purchase of a wireless telemetry solution is often an
enterprise-wide decision for prospective customers and will
require 20/20 and its distribution partners to engage in sales
efforts over an extended period of time and to provide a
significant level of education to prospective customers regarding
the use and benefits of such systems. Due in part to the
significant impact that the application of wireless telemetry
solutions has on the operations of a business and the commitment
of capital required by such a system, potential customers tend to
be cautious in making acquisition decisions. As a result, 20/20
believes that its products will generally have a lengthy sales
cycle of several months. Consequently, if sales forecasted from
a specific customer for a particular quarter are not realized in
that quarter, 20/20 may not be able to generate revenue from
alternative sources in time to compensate for the shortfall. The
loss or delay of a large contract could have a material adverse
effect on 20/20's quarterly financial condition, operating
results and cash flows, which may cause such results to be less
than analysts' expectations. Moreover, to the extent that
significant contracts are entered into and required to be
performed earlier than expected, operating results for subsequent
quarters may be adversely affected.
Dependence on Large Contracts and Concentration of Customers
20/20's ability to generate revenue is dependent, in large part,
on significant contracts from a limited number of customers. The
inability of 20/20 to secure and maintain a sufficient number of
large contracts will have a material adverse effect on 20/20's
business, financial condition, operating results and cash flows.
Moreover, 20/20's success will depend in part upon its ability to
obtain orders from new customers, as well as the financial
condition and success of its customers and general economic
conditions.
The size of a contract for a particular customer can vary
substantially depending on whether 20/20 provides its own
products and services or is also responsible for supplying third
party products and services. Any significant increase in the
costs required to complete a project, or any significant delay in
a project schedule, could have a material adverse effect on that
contract's profitability and because of the size of each
contract, on 20/20's overall results of operations. Any
significant failure by 20/20 to accurately estimate the scope of
work involved, plan and formulate a contract proposal,
effectively negotiate a favorable contract price, properly manage
a project or efficiently allocate resources among several
projects could have a material adverse effect on 20/20's
business, financial condition, operating results and cash flows.
Potential Fluctuations in Backlog
Due to the long, complex sales process and the mix of sales of
20/20's products and services and third party products and
services, 20/20's backlog may fluctuate significantly from
period-to-period. Contracts for software maintenance and support
are generally renewable every year and are subject to
renegotiation upon renewal. There can be no assurance that any
customer of 20/20 will renew its maintenance contracts or that
renewal terms will be favorable to 20/20.
Limited Operating History; History of Losses; Increased Expenses
20/20 has only a limited operating history upon which an
evaluation of its business and prospects can be based. As of
March 31, 2001, 20/20 had an accumulated deficit of $138,567.
There can be no assurance of sustained profitability or that,
20/20 will realize revenue growth or be profitable on a quarterly
or annual basis. In addition, 20/20 plans to increase its
operating expenses to expand its sales and marketing operations,
fund greater levels of research and development, enhance
distributor training, and increase its administration resources.
A relatively high percentage of 20/20's expenses will be
typically fixed in the short term as 20/20's expense levels are
based, in part, on its expectations of future revenue. To the
extent that such expenses precede or are not subsequently
followed by increased revenue, 20/20's business, financial
condition, operating results and cash flows would be materially
adversely affected. 20/20 believes that period-to-period
comparisons of financial results are not necessarily meaningful
and should not be relied upon as an indication of future
performance.
Integration of Acquisitions
20/20 may, when and if the opportunity arises, acquire other
products, technologies or businesses involved in activities, or
having product lines, that are complementary to 20/20's business.
Acquisitions involve numerous risks, including difficulties in
the assimilation of the operations, technologies and products of
the acquired companies, the diversion of management's attention
from other business concerns, risks associated with entering
markets or conducting operations with which 20/20 has no or
limited direct prior experience and the potential loss of key
employees of the acquired company. Moreover, there can be no
assurance that any anticipated benefits of an acquisition will be
realized. Future acquisitions by 20/20 could result in
potentially dilutive issuance's of equity securities, the
incurrence of debt and contingent liabilities, amortization of
expenses related to goodwill and other intangible assets and
write-off of restructuring costs and acquired research and
development costs, all of which could materially and adversely
affect 20/20's financial condition, results of operations and
cash flows.
New Product Development
20/20 expects that a significant portion of its future revenue
will be derived from the sale of newly introduced products and
from enhancement of any existing products. 20/20's success will
depend in part upon its ability to enhance its current products
on a timely and cost-effective basis and to develop new products
that meet changing market conditions, including changing customer
needs, new competitive product offerings and enhanced technology.
There can be no assurance that 20/20 will be successful in
developing and marketing on a timely and cost-effective basis new
products and enhancements that respond to such changing market
conditions. If 20/20 is unable to anticipate or adequately
respond on a timely or cost-effective basis to changing market
conditions, to develop new software products and enhancements to
existing products, to correct errors on a timely basis or to
complete products currently under development, or if such new
products or enhancements do not achieve market acceptance,
20/20's business, financial condition, operating results and cash
flows could be materially adversely affected.
In light of the difficulties inherent in software development,
20/20 may experience delays in the completion and introduction of
new wireless telemetry products. The increased time required for
the initial implementation and field testing of a new product may
result in delays in commencement of additional installations.
e-Business Development
Management of Growth
20/20 believes that continued growth in the number and complexity
of products and in the number of personnel will be required to
establish and maintain 20/20's competitive position. 20/20's
growth, coupled with the rapid evolution of 20/20's markets, is
likely to place significant strains on its management,
administrative, operational and financial resources, as well as
increased demands on its internal systems, procedures and
controls. 20/20's ability to manage future growth will require
20/20 to continue to improve its financial and management
controls, reporting systems and procedures on a timely basis, to
implement new systems as necessary and to expand, train, motivate
and manage its sales and technical personnel. There can be no
assurance that 20/20 will be able to manage its growth
successfully. Failure to do so could have a material adverse
effect on 20/20's business, financial condition, operating
results and cash flows.
Dependence on Key Personnel
20/20's success and operating results are substantially dependent
on the continued service and performance of its senior management
and key technical and sales personnel. 20/20 intends to hire a
significant number of additional technical and sales personnel in
the next year. Competition for such personnel is intense, and
there can be no assurance that 20/20 can retain its key
technical, sales and managerial employees or that it will be able
to attract or retain highly-qualified technical and managerial
personnel in the future. The loss of the services of any of
20/20's senior management or other key employees or the inability
to attract and retain the necessary technical, sales and
managerial personnel could have a material adverse effect upon
20/20's business, financial condition, operating results and cash
flows.
Dependence on Selected Vertical Markets
20/20's revenue will be derived from the sale of products and
services to customers in the CATV and electronic vending
industries. 20/20 believes that 75% of its revenue will come
from the vending application, with the remaining 25% from CATV.
Adverse economic developments and trends may affect levels of
capital spending by companies in our target markets. A decline
in demand for 20/20's products in the CATV and electronic vending
industries as a result of economic conditions, regulatory trends,
competition, technological change or otherwise, would have a
material adverse effect on 20/20's business, financial condition,
operating results and cash flows. There can be no assurance that
20/20 will be able to continue to diversify its product offerings
or revenue base by entering into new vertical markets.
Dependence on Marketing Relationships
20/20's products are marketed by 20/20's distribution partner.
There can be no assurance that 20/20's distributors will continue
to provide the level of services and technical support necessary
to provide a complete solution to 20/20's customers. The loss of
these distributors, the failure of such parties to perform under
agreements with 20/20 or the inability of 20/20 to attract and
retain new distributors with the technical, industry and
application experience required to market 20/20's products
successfully could have a material adverse effect on 20/20's
business, financial condition, operating results and cash flows.
20/20 expects that it may enter into certain joint ventures in
order to facilitate its expansion into other vertical markets. To
the extent that such joint ventures are not successful, there
could be a material adverse effect on 20/20's business, financial
condition, operating results and cash flows.
Competition
The market for wireless telemetry solutions is highly
competitive. Numerous factors affect 20/20's competitive
position, including price, product features, product performance
and reliability, ease of use, product scalability, product
availability on multiple platforms (server, wireless carrier, and
mobile workstation), meeting customer schedules, integration of
products with other enterprise solutions, availability of project
consulting services and timely ongoing customer service and
support. Within these markets, there are a small number of new
ventures, either small companies attempting to establish a
business in this market or large companies attempting to
diversify their product offerings. 20/20 expects such
competition to intensify as acceptance and awareness of wireless
telemetry continues.
Current or potential competitors may establish cooperative
arrangements among themselves or with third parties to increase
the ability of their products to address customer requirements.
Certain of 20/20's competitors have substantially greater
financial, technical, marketing and distribution resources than
20/20. As a result, they may be able to respond more quickly to
new or emerging technologies and changing customer requirements,
or to devote greater resources to the development and
distribution of existing products.
There can be no assurance that 20/20 will be able to compete
successfully against current or future competitors or alliances
of such competitors, or that competitive pressures faced by 20/20
will not materially adversely affect its business, financial
condition, operating results and cash flows.
20/20 primarily competes in the vending market with Isochron of
Austin, TX, and Marconi of London, England. 20/20's competitors
in the CATV industry is limited to companies such as Cheetah
Technologies which offer a similar power supply monitoring
product, that uses part of the CATV bandwidth to connect power
supplies to the operations center.
Risk of Product Defects
Wireless telemetry products, including those offered by 20/20,
from time-to-time contain undetected errors or failures. There
can be no assurance that, despite testing by 20/20 and by current
and potential customers, errors will not be found in 20/20's
products. Such errors could result in loss of or delay in market
acceptance of 20/20's products, which could have a material
adverse effect on 20/20's business, financial condition,
operating results and cash flows.
Proprietary Technology
20/20's success is dependent on its ability to protect its
protect its proprietary technology and property rights. 20/20
intends on making appropriate applications to governmental bodies
to secure its trademark and to patent any future inventions or
developed technologies. 20/20 also utilizes non-disclosure
agreements and other contractual provisions to establish and
maintain its rights and to maintain confidentiality. As part of
its confidentiality procedures, 20/20 enters into non-disclosure
and confidentiality agreements with each of its key employees,
consultants, distributors, customers and corporate partners, to
limit access to and distribution of its software, documentation
and other proprietary information. There can be no assurance
that 20/20's efforts to protect its intellectual property rights
will be successful. Despite 20/20's efforts to protect its
proprietary technology, unauthorized third parties, including
competitors, may be able to copy or reverse engineer certain
portions of 20/20's software products, and use such copies to
create competitive products. Policing the unauthorized use of
20/20's products is difficult.
In addition, because third parties may attempt to develop similar
technologies independently, 20/20 expects that wireless telemetry
developers will be increasingly subject to infringement claims as
the number of products and competitors in 20/20's industry
segments grow and the functionality of products in different
industry segments overlaps. Although 20/20 believes that its
products do not infringe on the intellectual property rights of
third parties, there can be no assurance that third parties will
not bring infringement claims (or claims for indemnification
resulting from infringement claims) against 20/20 with respect to
copyrights, trademarks, patents and other proprietary rights.
Any such claims, whether with or without merit, could be time
consuming, result in costly litigation and diversion of
resources, cause product shipment delays or require 20/20 to
enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms
acceptable to 20/20 or at all. A claim of product infringement
against 20/20 and failure or inability of 20/20 to license the
infringed or similar technology could have a material adverse
effect on 20/20's business, financial condition, operating
results and cash flows.
Dependence on Third Parties
Certain contracts may require 20/20 to supply, coordinate and
install third party products and services. 20/20 believes that
there are a number of acceptable vendors and subcontractors for
most of its required products, but in many cases, despite the
availability of multiple sources, 20/20 may select a single
source in order to maintain quality control and to develop a
strategic relationship with the supplier or may be directed by a
customer to use a particular product. The failure of a third
party supplier to provide a sufficient supply of parts and
components or products and services in a timely manner could have
a material adverse effect on 20/20's results of operations. In
addition, any increase in the price of one or more of these
products, components or services could have a material adverse
effect on 20/20's business, financial condition, operating
results and cash flows. Additionally, under certain
circumstances, 20/20 supplies products and services to a customer
through a larger company with a more established reputation
acting as a project manager or systems integrator. In such
circumstances, 20/20 has a sub-contract to supply its products
and services to the customer through the prime contractor. In
these circumstances, 20/20 is at risk that situations may arise
outside of its control that could lead to a delay, cost over-run
or cancellation of the prime contract which could also result in
a delay, cost over-run or cancellation of 20/20's sub-contract.
The failure of a prime contractor to supply its products and
services or perform its contractual obligations to the customer
in a timely manner could have a material adverse effect on
20/20's financial condition, results of operations and cash
flows.
Foreign Currency Exchange Rate Fluctuations
Because 20/20's reporting currency is the United States dollar,
its operations outside the United States face additional risks,
including fluctuating currency values and exchange rates, hard
currency shortages and controls on currency exchange. 20/20 has
operations outside the United States and is hedged, to some
extent, from foreign exchange risks because of its ability to
purchase, develop and sell in the local currency of those
jurisdictions. In addition, 20/20 does enter into foreign
currency contracts under certain circumstances to reduce 20/20's
exposure to foreign exchange risks. There can be no assurance,
however, that the attempted matching of foreign currency receipts
with disbursements or hedging activities will adequately moderate
the risk of currency or exchange rate fluctuations which could
have a material adverse effect on 20/20's business, financial
condition, operating results and cash flows. In addition, to the
extent 20/20 has operations outside the United States, 20/20 is
subject to the impact of foreign currency fluctuations and
exchange rate charges on 20/20's reporting in its financial
statements of the results from such operations outside the United
States.
Product Liability
The license and support of products by 20/20 may entail the risk
of exposure to product liability claims. A product liability
claim brought against 20/20 or a third party that 20/20 is
required to indemnify, whether with or without merit, could have
a material adverse effect on 20/20's business, financial
condition, operating results and cash flows. 20/20 carries
insurance coverage for product liability claims which it believes
to be adequate for its operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are currently no pending legal proceedings against the
company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
20/20 WIRELESS INC.
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(Registrant)
Date: September 21, 2001
By: /s/ Eric MacKenzie
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President