As filed with the Securities and Exchange Commission on March 15, 2001
REGISTRATION NO.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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)
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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 AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED MAXIMUM MAXIMUM REGISTRATION
OFFERING AGGREGATE FEE
PRICE PER OFFERING
SHARE PRICE
- - - --------------------------- ------------ --------- ---------- -------
Common stock, $0.01 per share 1,562,500 $0.115 $179,687 $44.93
par value
Common stock, $0.01 per share 16,000,000(2) $0.115 $1,840,000 $460.00
par value
(1) Closing price on March 12, 2001, pursuant to Rule 457(c) under the
Securities Act.
(2) Shares registered pursuant to this prospectus will become issuable upon
the conversion of convertible debentures issued by the registrant.
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.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED March 15, 2001
PROSPECTUS
17,562,500 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 14 of this prospectus are offering for
sale up to 17,562,500 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 17,562,500 shares
offered in this prospectus, 16,000,000 are 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
March 14, 2001 was $0.115 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
The date of this prospectus is March 13, 2001.
TABLE OF CONTENTS
Page
ITEM 3: SUMMARY INFORMATION AND RISK FACTORS 3
ITEM 4: USE OF PROCEEDS 14
ITEM 5: DETERMINATION OF OFFERING PRICE 14
ITEM 6: DILUTION - not applicable 14
ITEM 7: SELLING SECURITY HOLDERS 15
ITEM 8: PLAN OF DISTRIBUTION 17
ITEM 9: LEGAL PROCEEDINGS 19
ITEM 10: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS 20
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 22
ITEM 12: DESCRIPTION OF SECURITIES 24
ITEM 13: INTERESTS OF NAMED EXPERTS AND COUNSEL 28
ITEM 16: DESCRIPTION OF THE BUSINESS 29
ITEM 17: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 36
ITEM 18: DESCRIPTION OF PROPERTY 42
ITEM 19: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 42
ITEM 20: MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 43
ITEM 21: EXECUTIVE COMPENSATION 44
ITEM 22: FINANCIAL STATEMENTS F-1
ITEM 23: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS F-30
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS II-1
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION II-1
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES II-1
ITEM 27: EXHIBITS II-7
ITEM 28: UNDERTAKINGS II-11
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 which 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 $6,959,782 as of December 31, 2000, primarily due to continued
investments we have made in an effort to expand our existing network. We have
entered into several private placements of debt and equity securities in order
to obtain expansion capital, including the transactions described elsewhere in
this prospectus, and we will continue to require additional funds to implement
our national and international expansion plans until the time our revenues
generated from internal operations are sufficient to cover all of our capital
requirements. Until then, we anticipate 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 which our existing shareholders own of our
company. If we are unable to access this capital, then we will be unable to
continue our expansion as planned, and could remain essentially an Orange
County, California network. Management has developed a cost reduction plan
which could be implemented and this plan would allow us to operate profitably,
but with no meaningful expansion or growth.
Large scale commercial operations began in April 1999 and, as of
December 31, 2000, we provided high-speed wireless services to
approximately 388 commercial customers. Our high-speed wireless network
currently serves approximately 85% of the Orange County, California
area and, in March 2000, we initiated operations in Los Angeles County,
California, as well. We deliver DSL (Digital Subscriber Line) and
100 Mbps wireless services to our customers, which are high speed
Internet access options. We opened a co-location facility providing
central office services to 12 customers as of December 31, 2000.
To facilitate our market expansion we hired a direct sales force with
support and management teams.
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 Technologies, 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 market-
place. 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, 17,562,500 shares
of which only 262,500 shares are outstanding as of
the date of this prospectus
Total common stock outstanding as of the date of
this prospectus 14,525,277 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).
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 March 15, 2001. This information does not include:
(a) 1,049,067 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 Columbia, Trinity and AMRO, which
were registered under a previous registration statement filed on
Form SB-2.
(d) shares of common stock issuable upon the exercise of
convertible debentures; and
(e) shares of common stock issuable under a private equity line
of credit which were registered under a previous registration statement
filed on Form SB-2.
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.
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 twelve months ended December 31, 2000 we incurred a net loss
of $4,424,854. For the fiscal years ended December 31, 1999 and 1998,
we incurred net losses of $2,051,252 and $330,183, 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 foresee-
able future, as we make further capital investment into building our
infrastructure and developing our wireless networks. 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. Our ability to
exercise our business plan and to grow our operations as we hope to do
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 which are favorable to us. Other than the arrangements
we have with the selling stockholders described in this prospectus, we
have no commitments, agreements or understandings regarding additional
financing.
Risks Relating to our Business
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 which 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 be an important element of our
business strategy. Our ability to engage in these acquisitions depends
on our ability to obtain debt or equity financing. These types of
financing may not be available 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. 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 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.
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 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 recog-
nition, 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 is
taking an other-than-temporary loss of $600,000 on its original investment
of $1,200,000, which is recorded on the Company's year-end December 31,
2000 Income Statement. (Please refer to the Note entitled "Investment
Available for Sale", on page F-27of this registration statement for more
information). 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.
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 with Pacific Industrial Partners,
LLC ("PIP"). If we are unable to have Worldwide Wireless dismissed from
the lawsuit filed against us by PIP, and they were to prevail on all or a
significant portion of their claims against us, then enforcement of the
judgment would have a materially adverse impact upon us and our financial
condition. (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 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 to come. 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 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. Additionally,
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.
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.
As of December 31, 2000, outstanding options and warrants equaled
2,666,567, in addition to the convertible debentures we issued to AMRO
International S.A. and Trinity Capital Advisors, Inc. for the purchase
of debentures having an aggregate principal amount of $1,000,000. 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 represents 17,562,500
shares, and if all warrants and convertible debentures are exercised and
converted, the common stock to be registered in this statement will
represent 54.5% of our total issued and outstanding shares of common stock.
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 whch 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.
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
ITEM 7: SELLING SECURITY HOLDERS
Below is a table identifying the selling stockholders offering shares
through this prospectus, which includes:
- - the number of shares of common stock currently owned by each
selling stockholder;
- - the number of shares being offered by each selling stockholder; and
- - the number and percentage of shares of common stock to be held by
each selling stockholder after the completion of this offering, assuming
that all shares being offered by this prospectus are sold.
In certain cases, the selling stockholders do not now own beneficially
the shares of our stock referenced in the table below. These shares have
been included because the selling stockholders could receive up to the
amount of shares indicated for each selling stockholder within sixty days
of the date of this prospectus. In some cases, the selling stockholders
may receive their shares through the exercise of warrants or convertible
debentures, the terms of which are described later in this prospectus.
Except as otherwise indicated in the footnotes to the table below, no
selling stockholder has been an officer, director or employee of Worldwide
Wireless during the past three years. The selling shareholders have
represented that none of them are broker-dealers or affiliates of broker-
dealers. The inclusion of any shares in this prospectus does not
necessarily mean that the selling stockholders will sell all or any of
the common stock and, if they do, we have no way of knowing at what prices
these sales might occur.
The selling stockholders provided us with all of the information contained
in this prospectus regarding themselves and their share ownership.
Because the selling stockholders may sell all or part of their shares,
we are unable to estimate the number of shares that will be held by any
selling stockholder in the future. Beneficial ownership is determined in
accordance with SEC rules, and generally includes the voting or investment
power which any person has over securities. In calculating the percentage
ownership of each selling stockholder that owns options, warrants or
convertible debentures, we have counted the shares of common stock underlying
these securities as outstanding shares if those securities could be exercised
for, or converted into, common stock within 60 days from the date of this
prospectus. (See "Plan of Distribution.")
NUMBER OF
SHARES
BENEFICIALLY NUMBER OF SHARES
NAME AND ADDRESS OF THE OWNED PRIOR TO OFFERED BY
SELLING STOCKHOLDERS THE OFFERING THIS PROSPECTUS
Sinclair Davis Trading Corporation 262,500 262,500
108 Harbor Rd
Head of the Harbor, New York 11780
(Brooke Bray has control over the stock)
AMRO International, S.A. 815,435(1) 12,000,000
c/o Utra FinanceGrossmunster Platz 26
Zurich CH 8022 Switzerland
(H.U. Bachofen and Michael Klee have
control over the common stock issued to
this selling stockholder)
Trinity Capital Advisors, Inc. 603,2821 4,000,000
211 Sutter Street
2nd FloorSan Francisco, CA 94108
(E. Edward Jung has control over the common
stock issued to this selling stockholder)
Maxik Family Trust6827 S. Industrial 250,000
Las Vegas, NV 89118
(Fred Maxik has control over the stock)
Tony Capporicci6827 S. Industrial 250,000
Las Vegas, NV 89118
(Tony Capporicci has control over the stock)
Steve Menzies6827 S. Industrial 100,000 800,000
Las Vegas, NV 89118
(Steve Menzies has control over the stock)
(1) Some of the shares included in this amount will only
be issued and offered for sale if the selling stockholders elect
to convert convertible debentures which they purchased from us
in a private offering.
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;
- - 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
commissionswill also be paid wholly or partially by the purchasers of these
shares ofcommon 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.
Some of the selling stockholders and any broker-dealers acting in connection
with the sale of the shares of common stock included in this prospectus are
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 don't
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.
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.
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 in which any of our property is subject.
On March 28, 2000, we filed a lawsuit in Orange County 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 arises out of an Option Agreement we entered into
in 1998 for our consultant to provide technical and financial advisory services
in exchange for non-qualified options. We retained legal counsel recommended
to us by the consultant, but 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 the consultant was to receive as compensation for these services. This
lawsuit has been dismissed but the terms of the settlement have not yet been
reached. Depending upon the resolution of this lawsuit, the number of
options to purchase our common stock which the consultant may retain could
range from 50,000 to 700,000.
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 corporate affiliates ("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
arises out of a convertible debt proposal 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). Under this proposal,
the conversion price was to be $2 per share for the initial notes, and 50% of
the average closing bid price for the 5 trading days prior to conversion for
the additional notes if PIP exercised its option.
In addition, PIP agreed to grant rooftop rights to us under purportedly
favorable leasing agreements. The proposal was subject to completion of due
diligence by PIP, the deposit of $100,000 of earnest money into escrow by PIP,
the negotiation and execution of final legal documents and agreements between
PIP and us, the receipt of an opinion of counsel, and our obtaining all
legally-required consents to the transaction, including the approvals of our
shareholders and Board of Directors.
Upon receipt of the proposed legal documentation from PIP, much of which
contained terms and conditions not in the original proposal letter, and which
management and our Board of Directors viewed as onerous to our company and its
existing shareholders, our legal counsel notified PIP's counsel, at the
direction of our board, that the board could not vote in good faith to accept
the new transaction terms as proposed without breaking the fiduciary duties
owed to its shareholders, and we ceased negotiations with PIP.
Our management, including our in-house counsel, have reviewed the complaint
filed by PIP, and it feels there is little merit in the claims raised by PIP.
We intend to seek a dismissal of this suit against all named defendants.
If we are unable to have Worldwide Wireless dismissed from this lawsuit, and if
PIP were to prevail on all or a significant portion of its claims against us,
then enforcement of this judgment would have a materially adverse impact upon
us and our financial condition.
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 with 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 Mr. Loftis for
breach of contract, breach of implied covenant of good faith, and
interference with contract, among other things. 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 plan to litigate 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.
Directors and Executive Officers
Name Age Position Held
Jack Tortorice 52 Chairman of the Board
Jerry Collazo 41 Chief Executive Officer,
Chief Financial Officer
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.
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 April1999). 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 feature
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 shall it 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
The following table sets forth the beneficial ownership of our outstanding
common stock owned by:
- - each person or group known by us to own beneficially more than 5% or
more of our outstanding common stock;
- - each of our executive officers;
- - each of our directors; and
- - all executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.
Except as indicated by footnote, as far as we know, the persons named in the
table below have sole voting power and investment power with respect to all
shares of common stock shown as beneficially owned by them. The percentage of
beneficial ownership is based on 14,525,277 shares of common stock outstanding
as of March 15, 2001.
Common Stock Beneficially Owned
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
Dennis Shen (Director)
and Susan Shen 2,798,5001 19.27%
770 The City Drive South,
Suite 3700
Orange, California 92868
Ming-Chau Yeung 688,0002 4.74%
9 Red Coat Place
Irvine, California 92602
Whitsend Investments Limited 1,485,5443 9.37%
c/o Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz, Liechtenstein
AMRO International S.A. 1,438,0024 9.9%
c/o Utra Finance
Grossmunster Platz 26
Zurich CH 8022
Switzerland
Trinity Capital Advisors, Inc. 1,438,0025 9.9%
211 Sutter Street, 2nd Floor
San Francisco, CA 94108
Columbia Financial Group, Inc. 1,000,0006 6.88%
1301 York Road, Suite 400
Lutherville, MD 21093
Steve Menzies 800,000 5.5%
6827 S. Industrial
Las Vegas, NV 89118
Jack Tortorice (Director) 2,775,5007 19.11%
770 The City Drive South, Suite 3700
Orange, California 92868
All executive officers and 5,574,000 38.37%
Directors as a group
(1) Dennis Shen is the record owner of 500,000 shares and options to
purchase 4,500 shares; he and Susan Shen 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.
(2) Includes options to purchase 3,600 shares exercisable within 60 days
from the date of this prospectus.
(3) 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 securities it may be obligated to acquire within 60
days from the date of this prospectus.
(4) Includes 70,000 warrants that can be exercised at the election of AMRO
within 60 days from the date of this prospectus, as well as 815,431 shares of
common stock it owns as a result of converting a portion of its convertible
debentures.
(5) Includes 603,282 shares of common stock that Trinity owns as a result
of converting a portion of its convertible debentures.
(6) Includes warrants to purchase 1,000,000 shares of common stock that
can be exercised by Columbia Financial Group, Inc. within 60 days from the date
of this prospectus.
(7) Includes options to purchase 4,500 shares exercisable within 60 days
from the date of this prospectus.
Disputed Beneficial Ownership
In September 1998, Pacific Link entered into an option agreement with DFL
Capital Partners, LLC. According to the agreement DFL Capital Partners, LLC
was granted the option to buy 50,000 common shares at $0.10 per share. The
right to exercise the option vested immediately and remained exercisable for
ten years. The amount of common shares subject to the options would adjust
according to recapitalizations of Pacific Link. The parties to this agreement
were in a dispute as to the application of this agreement to our common shares,
but the lawsuit regarding these options has been dismissed and the parties are
currently in negotiations to determine the terms of the settlement. The
lawsuit is described in detail under the heading "Legal Proceedings" above.
Depending upon the resolution of this dispute, we may have up to 700,000 common
shares subject to these options and if the optionee exercises the options, it
may become a 5% shareholder.
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 March 14, 2001, there were 14,525,277 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.
Options and Warrants
There are currently outstanding options to purchase 1,441,567 shares of common
stock at exercise prices ranging from $.25 to $3.00, and outstanding warrants
to purchase 1,225,000 shares of common stock at exercise prices ranging from
$1.10 to $5.00 per share.
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.
We believe that Whitsend Investments Limited made its investment decision and
became irrevocably bound to purchase up to 9,569,378 shares of common stock at
the time Whitsend Investments Limited executed the Private Equity Line of
Credit Agreement, prior to the filing of the registration statement. All of
the conditions to Whitsend's obligation to purchase shares from us contained in
Article 7 of that agreement are within our control, and there are no events in
Article 7 which would give a purchaser the right to terminate the Private
Equity Line of Credit Agreement. Therefore, because Whitsend Investments
Limited does not control any of the conditions giving rise to an obligation
to purchase shares and there are no events under which a purchaser may
terminate its obligation to purchase shares, the private placement was
completed prior to filing this registration statement.
Prior to engaging in the transactions described below involving Whitsend
Investments Limited, AMRO International, S.A., Trinity Capital Advisors, Inc.
and Triton West Group, Inc., Worldwide Wireless had no previous relationship
with these selling stockholders. We understand that they are in the business,
among other things, of providing the types of debt and equity capitalization
they have given to us to other publicly-traded corporations, under terms and
structures which may or may not be similar to those offered to us in the
private equity line of credit and convertible debenture purchase agreements
described below.
Since March 14, 2001, Trinity Capital Advisors has converted $71,000 of its
convertible debentures into 603,282 shares of our common stock, and AMRO
International has converted $90,000 of its convertible debentures into 815,431
shares of our common stock.
Private equity line of credit agreement
Whitsend Investments Limited, a British Virgin Islands corporation, entered
into a Private Equity Line of Credit Agreement with us, dated as of June
19, 2000, for the future issuance and purchase of shares of our common stock.
The purpose of this agreement is to provide Worldwide Wireless with the ability
to access and draw down funds when we need them for working capital, up to the
maximum amount of $20 million, under the conditions specified in the agreement.
Under that agreement, Whitsend Investments Limited has committed to purchase
up to the $20 million worth of shares of our common stock over a three-year
period. Once every 15 trading days we may request a draw of up to $500,000 of
that amount. If we elect to receive any of these funds, we will fix a specific
date on which to calculate the appropriate price to charge Whitsend Investments
Limited for our shares.
Convertible debenture 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. Also, in the event the registration statement of
which this prospectus is a part is not declared effective by December 1, 2000,
these purchasers have the right to terminate their agreement.
Our Transactions with the Other Selling Stockholders
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 a payment agreement with Mr. Menzies,
and in anticipation of that, we are registering 800,000 shares.
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 250,000 shares for each of Mr. Maxik and Mr. Capporicci, as full
compensation for services rendered to date.
We entered into a marketing agreement with Sinclair Davis Corporation in
November 2000, which, by mutual agreement between the parties, was cancelled.
In order to pay Sinclair Davis for services already rendered, the Company and
Sinclair Davis have agreed to compensation in the amount of 262,500 shares of
free-trading stock, which is being registered under this Registration
Statement.
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
Accountants
The audited, consolidated financial statements of Worldwide Wireless Networks,
Inc. as of December 31, 1999 and 1998 and for the years then ended have been
included in reliance upon the reports of Crouch, Bierwolf and Chisholm, and
the unaudited, consolidated financial statements of Worldwide Wireless at
December 31, 2000, and for the year then ended, have been prepared by our
management for inclusion in this registration statement, pending completion of
our audit for that period, which will be included in our annual report on Form
10-K which is required to be filed with the Securities and Exchange Commission
on or before March 28, 2001.
Legal Matters
The legality of the shares of common stock offered under this prospectus will
be passed upon for Worldwide Wireless by Feldhake, August & Roquemore, LLP,
19900 MacArthur Boulevard, Suite 850, Irvine, California, 92612.
Some other matters involving Worldwide Wireless and described in this
prospectus, including matters involving our pending and threatened litigation,
have been passed upon by Thomas J. Rotert, formerly of the law firm of Schumann
& Associates, who serves as General Counsel to Worldwide Wireless. Schumann &
Associates owns shares of our common stock with a market value in excess of
$50,000, which shares are being included in and offered for sale under this
prospectus. Mr. Rotert formerly served as our Secretary and Treasurer and was
also a member of our Board of Directors until his resignation on December 20,
2000.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is The Depository Trust
Company.
Agent for Service
Our agent for service of process is Michael J. Morrison, Esq., 1495 Ridgeview
Drive, Suite 220, Reno, NV 89509.
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 eighteen months and covers an estimated 85% of Orange County,
California and, since December 31, 1999, we have also been providing wireless
services in Los Angeles 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.
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.
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 December 31, 2000, we had
approximately 388 high-speed wireless customers.
Dial-up Internet Access: As of December 31, 2000, 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 have 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 December 31, 2000, 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. As of December 31, 2000, we provided these services to
approximately 11 customers, representing 3% of our total revenues for that
fiscal quarter.
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 expansion to
markets in Southern California, management believes that we can utilize our
existing network assets, brand equity, central facilities, administration, and
technical resources to efficiently grow our business.
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.
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 year 1999,
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 December 31, 2000, we
estimate that our revenue from contracts for services ordered but not yet
filled to be approximately $120,000, of which approximately $10,000 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., Winstar
Communications, Inc., and NEXTLINK 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.
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 principle 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 have committed to purchase 2,624 units, 5,120 units and 7,760
units during the first, second and third years of the agreement, respectively.
Units consist of subscriber units or access points. Subscriber units refer to
individual customers and access points refer to POPs. The agreement may be
terminated by written notice from either party for occurrence of several
specific events, notably, if either party is not satisfied with the
performance of the other party. Obligations of the agreement will survive
early termination to the extent purchase orders are accepted by Adaptive
Broadband Corporation and minimum additional payments are required.
We anticipate that approximately 20% of the equipment purchased as a result of
the agreement will be used in our own wireless operations, and the remaining
80% will be resold to third parties. We expect to purchase a minimum of
$4.4 million, $6.4 million and $7.76 million of equipment for the first, second
and third year of the agreement. As of this filing, we anticipate that this
agreement will provide additional revenues from wireless equipment sales,
however, we cannot assure what effect the commitments required under the
agreement will have on our results of operations.
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. We expect to devote substantial
resources to increase market penetration within our current service area as
well as expand our wireless network to other areas in southern California and
in other locations where we believes it has an opportunity to market its
services successfully.
In May of 1999 we entered into a joint venture with Bridge Technology, Inc.
Pursuant to the agreement, we have agreed to provide our know how and have
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 which 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 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 39 employees all of which are full time. 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.
Overview. Worldwide Wireless is a networking solutions company which provides
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. Recently, we have also initiated operations in Los
Angeles County, California. While we have experienced revenue growth since our
inception, we have operated at a net loss, due primarily to our investment in
expanding our network coverage, which is expected to continue. Management
believes that our continued expansion will result in additional losses
for the foreseeable future, due to our continued expansion efforts beyond the
amount of revenues generated from our existing operations. We must fund these
expansion efforts, for the foreseeable future, from the incurrence of debt
and/or the sale of equity, and 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 these expansion efforts (as further
described below). We have received a letter from one of our existing investors
indicating a willingness to provide additional debt and/or equity
capitalization as may be determined between us from time to time as our
financial needs arise. Depending upon the terms presented to us, we may or may
not use all or any portion of this funding. If we were unable to access this
capital, or any other capital for expansion, then Worldwide Wireless would be
unable to continue its expansion as planned, and would remain essentially an
Orange County, California network. Management has developed a cost reduction
plan which could be implemented should this occur, and this plan would allow
Worldwide Wireless to operate profitably, with little to no expansion or
growth.
Revenues. We generate revenues primarily through the sale of annuity-like
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, 1998, December 31, 1999 and December 31, 2000 were $841,841, $1,980,203,
and $3,346,583, 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 fifteen
wireless customers at December 31, 1998, one hundred and ninety 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 $30,243 for the twelve months ended December 31, 1998
to $251,037 for the twelve months ended December 31, 1999, and to $944,052
for the twelve months ended December 31, 2000, an increase of 276%. 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
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 costs of sale for goods and services sold for the years
ended December 31, 1998, 1999, and 2000 equaled $430,600, $972,802, and
$2,272,999, respectively, an increase of 134% between December 31, 1999 and
December 31, 2000. The increase in our cost of sales for the twelve months
ended December 31, 1999 and 2000 is relative to the increase in revenue
generated from our growth in wireless customers and equipment sales. We do not
currently 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
commissions, employee benefits, travel and related expenses for our direc
t sales force, fees paid to third-party sales agents, marketing and sales
support functions. For the years ended December 31, 1998, December 31, 1999,
and December 31, 2000 our sales and marketing expense equaled $158,592,
$616,022, and $892,467, respectively. The increase in sales and marketing
expense for the twelve months ended December 31, 1999 and December 31, 2000
which was attributable to expanding our sales department from two sales
representatives at December 31, 1998 to ten at December 31, 1999. In the
fourth quarter 2000, management restructured the sales department by reducing
the number of sales representatives to six and eliminating the telemarketing
group as part of a reorientation toward a concentration on the Orange County
market and tempering our Los Angeles expansion. During the first nine months
of 2000, we incurred more salary and commission expenses. In an effort to
increase our revenues, user base and brand awareness, we expect to increase
significantly the amount of spending on sales and marketing over the next
year. Marketing costs associated with increasing our user base, which to
date have been minimal, are expensed in the period incurred.
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 $455,126 for the
year ended December 31, 1998, $2,377,133 for the year ended December 31, 1999,
and $3,740,216 for the year ended December 31, 2000. This represents an
increase of $1,363,083 or 58% for the twelve months ended December 31, 2000.
The increase in general and administrative expense for the twelve months ended
December 31, 1999 and December 31, 2000 are attributable to hiring additional
personnel, incurring more legal, professional and outside services as related
to being a public company, and increased depreciation expense due to continued
expansion of our network. We expect general and administrative expenses to
increase in absolute dollars as we continue to expand our administrative
infrastructure to support the anticipated growth of our business, including
costs associated with being a public company.
Bad Debt Expense increased significantly for the year ended December 31, 2000
to $185,920 from $40,317 for the year ended December 31, 1999, an increase of
$145,603 or 362%. As a percentage of sales, bad debt expense was 2.04% of
sales in fiscal 1999 and 5.56% of sales in fiscal 2000. Worldwide Wireless
Networks' 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, above that
which occurs due to increased revenue, to these economic problems.
To address these problems, Management has instated stricter credit standards
and has increased marketing to more established companies to minimize bad debt
exposure.
Liquidity and Capital Resources
Since Pacific Link's inception, it has financed its operations primarily
through the private placement of equity securities, loans, leasing
arrangements, cash-flow from operations and the merger completed with
Worldwide Wireless in April 1999. As of December 31, 2000 cash reserves
totaled $121,329, and current assets totaled $2,581,129.
Our current liabilities as of December 31, 2000 were $5,163,310 of which
$1,663,079 accounted for the current portion of our long-term liabilities
discussed above, and $3,053,078 is attributable to current accounts payable.
We anticipate a reduction of approximately $10,798 in the first quarter of 2001
due to the expiration of capital lease obligations and $8,878.64 due to the
maturity of a note payable. Of the remaining current portion of long-term
liabilities, one note with outstanding principal of $130,403 requires monthly
payments of $16,667 including interest; the other notes do not require payment
until maturity. Management is negotiating maturity extensions; however no
assurances can be given that such extensions will be achieved. 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 December 31,
2000, we had $1,100,000 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 December 31, 2000, our principal commitments, other than our commitment
to Adaptive Broadband Corporation described above under the heading Principal
Suppliers, consisted of office, roof-rights payments, and equipment leases.
Future minimum principal payments on notes payable were approximately $139,281.
Future minimum capital lease payments were $10,798 through 2001. Operating
lease payments due through the end of fiscal years 2000 and 2001 were $472,136
and $472,912, respectively.
Interest expense consists primarily of interest accrued for 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 primarily attributable to the interest expense on
the $2,188,000 of additional long-term debt incurred during the twelve months
ended December 31, 2000 of which funds were used to continue expansion and
increase the customer base in our existing market.
Net cash used to fund our operating activities for the year ended December 31,
2000 was $2,362,903 compared to $865,302 in funds utilized by operating
activities for the year ended December 31, 1999 which is an increase of 173%.
Net cash used for operating activities consisted primarily of net operating
losses and network asset purchases.
Net cash provided by our financing activities was $3,101,132 for the year ended
December 31, 2000, an increase of $1,071,461 from the $2,029,671 for the year
ended December 31, 1999. 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 $4,524,854
or $.36 per share, compared to $2,051,252, or $.21 per share, for the fiscal
year ended December 31, 1999. As discussed above fiscal year 2000 was impacted
by costs associated with increases in the number of sales personnel,
administrative personnel, professional and consulting services and depreciation
expenses.
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.
Our current business plan calls for us to launch wireless networks in San
Diego, Santa Barbara and Ontario, California, and Honolulu, Hawaii during
the period between the fourth quarter of 2000 to the second quarter of 2001
. We have recently launched the Los Angeles Wireless network. We anticipate
that during this expansion based upon our historical funding of expansion
efforts, we will remain unprofitable in each market for at least 12 to 18
months after launch. We expect that we will require outside financing of at
least $1,000,000 to $3,000,000 per location to establish and deploy our network
in the areas mentioned above, in addition to any revenues generated from
operations. We intend to explore the letter we received from one of our
shareholders to determine if mutually agreeable terms can be reached whereby it
would provide debt and/or equity capitalization to help finance our expansion
efforts, and, even if acceptable terms can be negotiated, additional external
funds will also have to be raised.
We have investigated the availability, source and terms for external debt
financing and are exploring options which may be available to us. However,
we cannot assure that we will be able to obtain financing on terms agreeable to
us. Also, the acquisition of funding through the issuance of debt could
result in a substantial portion of our cash flows from operations being
dedicated to the repayment of principal and interest on the indebtedness, and
could render us more vulnerable to competitive and economic downturns.
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 type of offering or the type or number o
f 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 almost
exclusively in Orange County and Los Angeles County, California. 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 developed a cost reduction plan that, if deemed necessary, will
mandate our elimination of some outside services and costs associated with
expansion, and a reduction in company staffing. Management believes that the
implementation of this cost reduction plan would allow the company to maintain
its current customer base and to meet all of its 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 two office spaces in Irvine, California. One office space,
located at 5 Park Place, is 1,062 square feet and houses our sales agents.
This lease will expire in April of 2003, and requires a basic rent payment of
$2,549 per month (which is subject to adjustments for the term of the lease).
The other office space is located at 8001 Irvine Center Drive, and is subleased
to a computer consulting company for the cost of the lease (which is
approximately $4,021 per month). Recently, to facilitate our expansion into
Los Angeles County, California, we opened a sales office there 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.
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
December 31, 1999, 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 third quarter of 2000. 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 0.40625
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 .85
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 December 31, 2000, we had approximately 118 stockholders of record.
Management controls, directly and beneficially, 5,574,000 of our outstanding
shares, representing approximately 38.4% of all shares outstanding. We have
1,225,000 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 a disputed options contract
entered into by Pacific Link in September 1998. (See "Disputed Beneficial
Ownership," page 24).
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
Principal Position Annual Salary Annual Salary Projected Annual
for FY 1999 for FY 2000(1,2) Salary for FY 2001(3)
Jack Tortorice
Director $98,000(4) $140,000 N/A
Charles C. Bream III $0(2) $140,000(5) $0
Thomas Rotert $0 $58,125(6) $0
Jerry Collazo
Chief Financial Officer N/A $60,000 $130,000
(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 FY 2000. He resigned from his position as Chief Executive Officer
on January 4, 2001, and the Company will pay $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
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 December 31, 2000, there were 1,049,067 options granted, of which 728,746
options are 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.
ITEM 22: FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Worldwide Wireless Networks, Inc. Consolidated Financial Statements dated
December 31, 1999 and December 31, 1998.
Independent Accountants Report
Page
F-2
Consolidated Balance Sheets
F-4 - F-5
Consolidated Statement of Operations
F-6
Consolidated Statement of Stockholders' Equity
F-7
Consolidated Statement of Cash Flows
F-8 - F-9
Notes to Financial Statements
F-10 - F-20
Worldwide Wireless Networks, Inc. Unaudited Consolidated Financial
Statements dated December 31, 2000
Page
Unaudited Consolidated Balance Sheets
F-22 - F-23
Unaudited Consolidated Statement of Operations
F-24
Unaudited Consolidated Statement of Cash Flows
F-25 - F-26
Notes to Unaudited Consolidated Financial Statements
F27 - F-29
Worldwide Wireless Networks, Inc.
(Formerly Pacific Link Internet, Inc.)
Consolidated Financial Statements
December 31, 1999 and 1998
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
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, 1999 and 1998 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then
ended and from inception on August 1, 1997 through December 31, 1997.
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, 1999 and 1998 and the results of its operations and cash
flows for the years then ended and from inception on August 1, 1997
through December 31, 1997 in conformity with generally accepted
accounting principles.
Salt Lake City, Utah
February 18, 2000
Worldwide Wireless Networks, Inc.
(formerly Pacific Link Internet, Inc.)
Consolidated Financial Statements
December 31, 1999 and 1998
Worldwide Wireless Networks, Inc.
Consolidated Balance Sheets
ASSETS
December 31,1999 1998
CURRENT ASSETS
Cash and Cash Equivalents (Note 1) $ 136,311 $ 0
Accounts receivable (net of allowance for
doubtful accounts of $20,000 and
$2,200, respectively) 165,091 29,340
Employee advance 3,000 0
Inventory 129,861 0
Prepaid Expenses 18,912 0
------- ------
Total Current Assets 453,175 29,340
------- ------
PROPERTY & EQUIPMENT (Note 1)
Office equipment 103,231 28,833
Leased equipment 177,653 209,751
Machinery equipment 1,109,524 226,878
--------- -------
1,390,408 465,462
Less:
Accumulated depreciation - leased equipment (165,255) (130,111)
Accumulated depreciation (282,495) (28,491)
------- ------
Total Property & Equipment 942,658 306,860
------- ------
OTHER ASSETS
Investments (Note 3) 36,885 0
Deferred Charges (Note 1) 21,984 10,428
Deposits 36,197 15,184
------- ------
Total Other Assets 95,066 25,612
------- ------
TOTAL ASSETS $ 1,490,899 $ 361,812
========= =======
Worldwide Wireless Networks, Inc.
(formerly Pacific Link Internet, Inc.)
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,1999 1998
CURRENT LIABILITIES
Bank overdrafts $ 0 $ 4,092
Accounts payable 655,485 522,337
Accrued expenses 83,933 0
Lines of credit (Note 5) 89,323 98,471
Unearned revenue (Note 1) 102,356 23,542
Current portion of long-term liabilities (Note 4) 665,355 102,517
------- -------
Total Current Liabilities 1,596,452 750,959
--------- -------
LONG TERM LIABILITIES (Note 4)
Unearned Revenue (Note 1) 0 17,948
Notes payable (Note 4) 562,245 9,277
Notes payable-related party (Note 4) 75,000 31,300
Capital lease obligations (Note 4) 30,340 88,190
Less current portion (665,355) (102,517)
------- -------
Total long term Liabilities 2,230 44,198
--------- -------
TOTAL LIABILITIES 1,598,682 795,157
--------- -------
STOCKHOLDERS' EQUITY
Common stock, 50,000,000 shares
of $.001 par value authorized,
11,799,988 and 7,000,000 shares issued
and outstanding 11,800 7,000
Additional paid in capital 2,415,345 98,145
Retained earnings (2,534,928) (483,676)
Officer receivables 0 (54,814)
--------- -------
Total Stockholders' Equity (107,783) (433,345)
--------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,490,899 $ 361,812
========= =======
Worldwide Wireless Networks, Inc.
Consolidated Statements of Operations
From
inception on
For the years August 1,1997
ended through
December 31 December 31
1999 1998 1997
--------- ------- -------
REVENUES $ 1,980,203 $ 841,841 $ 271,841
COST OF SALES 972,802 430,600 189,382
--------- ------- -------
GROSS PROFIT 1,007,401 411,241 82,459
--------- ------- -------
SELLING EXPENSES 616,022 158,592 68,827
BAD DEBT EXPENSE 40,317 94,861 15,657
GENERAL &
ADMINISTRATIVE EXPENSES 2,377,133 455,126 138,939
--------- ------- -------
TOTAL OPERATING EXPENSES 3,033,472 708,579 223,423
--------- ------- -------
OPERATING INCOME (LOSS) (2,026,071) (297,338) (140,964)
--------- ------- -------
OTHER INCOME
AND (EXPENSES)
Loss on investment (13,115) 0 0
Miscellaneous income 34,829 19,410 6,163
Interest expense (46,895) (51,455) (18,692)
--------- ------- -------
Total Other Income
and (Expenses) (25,181) (32,045) (12,529)
--------- ------- -------
INCOME (LOSS)
BEFORE INCOME TAXES (2,051,252) (329,383) (153,493)
PROVISION FOR
INCOME TAXES (Note 1) 0 800 0
--------- ------- -------
NET INCOME (LOSS) $ (2,051,252) $ (330,183) $ (153,493)
========= ======= =======
NET INCOME (LOSS)
PER SHARE $ (.21) $ (.05 ) $ (.03)
========= ======= =======
WEIGHTED AVERAGE
OUTSTANDING SHARES 9,883,325 6,440,000 5,880,000
========= ======= =======
Worldwide Wireless Networks, Inc.
Consolidated Statements of Stockholders' Equity
From inception on August 1, 1997 through December 31, 1999 and 1998
Additional Retained
Common Stock Paid in Earnings
Shares Amount Capital (Deficit)
Balance at inception on
August 1, 1997 0 $ 0 $ 0 $ 0
Shares issued to organizers for cash 5,880,000 5,880 (3,380) 0
Net income (loss) for the period
ended December 31, 1997 0 0 0 (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 0
Net income (loss) for the year
ended December 31, 1998 0 0 0 (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 0
April 2, 1999 - Stock issued for cash
and services valued at $2.00 per share 400,000 400 799,600 0
June 1999 Warrants issued for services 0 0 122,000 0
December 1999 - Stock issued for
cash at $2 per share 200,000 200 399,800 0
Net income (loss) for year ended
December 31, 1999 0 0 0 (2,051,252)
---------- ------ ---------
Balance on December 31, 1999 11,799,988 $ 11,800 $ 2,415,345 $ (2,534,928)
========== ====== =========
Worldwide Wireless Networks, Inc.
Consolidated Statements of Cash Flows
From inception
For the years on August 1,
ended 1997 through
December 31 December 31,
1999 1998 1997
Cash Flows From Operating Activities
Net income (loss) $ (2,051,252) $(330,183) $(153,493)
Non-cash items:
Depreciation & amortization 321,246 97,736 26,362
Bad debt 0 94,836 15,657
Loss on investment 13,115 0 0
Stock and warrants issued for services 822,000 0 0
(Increase)/decrease in current assets:
Accounts receivable (135,751) (17,401) (14,114)
Accounts receivable-related party 54,814 (39,486) (18,853)
Employee advance (3,000) 0 0
Prepaid expenses (18,912) 3,263 (3,263)
Deferred charges (11,556) (10,428) 0
Inventory (129,861) 0 0
Increase/(decrease) in current liabilities:
Bank overdraft (4,092) 4,092 0
Accounts payable 133,148 336,665 128,317
Accrued expenses 83,933 0 0
Unearned revenue 60,866 41,490 0
-------- ------- -------
Net Cash Provided (Used)
by Operating Activities (865,302) 180,584 (19,387)
-------- ------- -------
Cash Flows from Investing Activities
Purchase of property and equipment (957,045) (187,411) (57,269)
Cash paid for deposits (21,013) (6,113) (9,071)
Cash paid for Investments (50,000) 0 0
-------- ------- -------
Net Cash Provided (Used)
by Investing Activities (1,028,058) (193,524) (66,340)
========= ======= ======
Worldwide Wireless Networks, Inc.
Consolidated Statements of Cash Flows
(continued)
Cash Flows from Financing Activities
Advances on line of credit 98 3,860 54,719
Cash paid on line of credit (9,246) 0 0
Cash from sale of stock 500,000 72,645 32,500
Cash received from debt financing 633,468 0 35,000
Principal payments on long-term debt (94,649) (64,519) (35,538)
Cash received in merger with Worldwide 1,000,000 0 0
--------- ------- ------
Net Cash Provided (Used)
by Financing Activities 2,029,671 11,986 86,681
--------- ------- ------
Increase/(decrease) in cash 136,311 (954) 954
Cash and Cash Equivalents
at Beginning of Period 0 954 0
--------- ------- ------
Cash and Cash Equivalents
at End of Period $ 136,311 $ 0 $ 954
========= ======= ======
Supplemental Cash Flow Information:
Cash paid for interest $ 28,119 $ 61,725 $ 8,422
Cash paid for income taxes $ 0 $ 0 $ 0
Non-cash financing transaction:
Purchase of equipment
with lease obligations $ 0 $ 24,784 $ 184,967
Stock and warrants issued for services $ 822,000 $ 0 $ 0
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The audited financial statements presented for December 31, 1999 and 1998,
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
ceasedto 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, therefore the December 31, 1999 period is consolidated
and the December 31,1998 and 1997 is that of the accounting acquirer (Pacific
Link Internet, Inc.) only.
b. Recognition of Revenue, Deferred Charges, Unearned Revenue
The Company recognizes income and expense on the accrual basis of
accounting. During 1998 and 1999, 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. The 1998 and 1997 weighted average shares have been retroactively
restated for the stock split treatment of the reverse merger for comparability
purposes. Fully diluted earnings per share has not been presented, because
the earnings per share is the same. Warrants to purchase 400,000 common shares
and employee stock options have been eliminated in the fully diluted earnings
per share due to their anti-dilutive effect.
NOTE 1 - Summary of Significant Accounting Policies (continued)
d. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating loss
carryforwards totaling approximately $2,535,000 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, 1999 and 1998:
Deferred tax asset: 1999 1998
NOL carrryforward $ 861,900 $ 163,000
Valuation allowance (861,900) (163,000)
Total $ 0 $ 0
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.
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, 1999, 1998 and
1997 is $321,246, $97,736 and $26,362, respectively.
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, 1999, the balance due
is $75,000.
NOTE 3 - Investment
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.
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.
NOTE 4 - Long-Term Liabilities
Long Term Liabilities are detailed in the following
schedules as of December 31, 1999 and 1998:
Notes payable is detailed as follows: 1999 1998
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 9,277
Note payable to a corporation, payments due
monthly of $5,457 until paid in full, bears
interest at 12%, unsecured note 58,468 0
Note payable to a corporation, no monthly
payment, matures March 2000, bears interest
at 11%, guaranteed by an officer of the
Company and secured by business assets 500,000 0
Total Notes Payable 562,245 9,277
NOTE 4 - Long-Term Liabilities (continued)
Total Notes Payable 562,245 9,277
Notes payable related party is detailed as follows:
Note payable to a shareholder, non interest
bearing, due upon demand, unsecured note $ 0 $ 15,000
Note payable to a shareholder, non interest
bearing, due upon demand, unsecured note 0 16,300
Note payable to a shareholder, no monthly
payment, payable on demand, bears interest
at 10%, unsecured note 25,000 0
Note payable to a shareholder, no monthly
payment, payable on demand, bears interest
at 10%, unsecured note 50,000 0
Total notes payable - related party 75,000 31,300
Capital lease obligations are detailed in the following schedule
as of December 31, 1999 and 1998:
1999 1998
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. $ 8,815 $ 13,790
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. 2,743 4,091
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. 17,567 23,689
NOTE 4 - Long-Term Liabilities (continued)
December 31,
1999 1998
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 12,644
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $841 through October 1999, bears
interest at 17%, secured by equipment. 0 7,792
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $721 through January 2000, bears
interest at 19.4%, secured by equipment. 0 8,388
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $545 through August 1999, bears
interest at 19.2%, secured by equipment. 0 3,582
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $997 through December 1999, bears
interest at 24.1%, secured by equipment. 0 10,532
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $680 through January 1999, bears
interest at 24.1%, secured by equipment. 0 667
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $338 through July 1999, bears
interest at 19.1%, secured by equipment. 0 2,219
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $205 through April 1999, bears
interest at 15.2%, secured by equipment. 0 796
------ ------
Total Lease Obligations 30,340 88,190
====== ======
NOTE 4 - Long-Term Liabilities (continued) December 31
1999 1998
Total long term liabilities 667,585 128,767
Less current portion of:
Notes payable 562,245 5,526
Notes payable - related party 75,000 31,300
Capital lease obligations 28,110 65,691
------- -------
Total current portion 665,355 102,517
------- -------
Net Long Term Liabilities $ 2,230 $ 26,250
======= =======
Future minimum principal payments on notes payable are as
follows at December 31, 1999:
2000 637,245
Total notes payable $ 637,245
Future minimum lease payments are as follows at December 31, 1999:
2000 32,626
2001 1,585
-------
Less portion representing interest 3,871
-------
Total $ 30,340
=======
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, 1999 and 1998 were $89,323 and
$98,471, 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.
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.
NOTE 7 - Commitments and Contingencies (continued)
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.
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.
Future minimum operating lease payments are as follows at
December 31, 1999:
2000 $ 264,836
2001 265,473
2002 263,134
2003 216,578
2004 33,153
Total $ 1,043,174
The Company is obligated under employment contracts to officers
of the Company through December 31, 2003, for $110,000 total
compensation per year.
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.
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
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.
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, 1999, there are 326,175 options granted, of
which 33,216 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:
Options Available for Weighted Average
Grant Options Outstanding Exercise Price
Granted 1,000,000 326,175 3.00
Exercised 0 0 0
Cancelled / Forfeited 0 0 0
Balances, 12/31/99 1,000,000 326,175 3.00
Pro forma information regarding net income and earnings per
share is required by SFAS No. 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 1999
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%
NOTE 8 - Employee Stock Option Plan (continued)
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:
1999 1998
Pro forma net income (2,120,000) (330,183)
Pro forma basic earnings per share (.22) (.05)
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. The Company recorded expenses of $122,000 in connection
with the warrant issuance. No warrants were exercised at
December 31, 1999 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
NOTE 11 - Subsequent Events
On February 10, 2000, the Company entered an agreement to
acquire all outstanding stock of Tarrab Capital Group, a Nevada
corporation, with the issuance of 5,000 shares of the Company.
Tarrab is an inactive public company with no assets and no
revenues or operations for the year ended December 31, 1999.
NOTE 12 - Stockholders' Equity Transactions
During 1998, the Company issued 1,120,000 shares of common
stock at $.10 per share for cash.
On April 1, 1999, the Company issued 7,000,000 shares in the
reverse merger acquisition with Pacific Link Internet
(See Note 9).
On April 2, 1999, the Company issued 400,000 shares of common
stock for cash of $100,000 and services valued at $700,000.
In June 1999, the Company issued warrants to purchase stock at
3.00, 4.00 and 5.00 per share, valued at $122,000 (See Note 10).
In December1999, the Company issued 200,000 shares of common
stock for cash of $400,000, at $2 per share, from a private
investor.
NOTE 13 - Prior Period Restatement
Accounts receivable - related party was reclassified as a
contra equity account for the period ended December 31, 1998,
to conform to SEC regulations for officer receivables.
Assets decreased by $54,814 and Equity decreased the same
amount for this restatement.
Worldwide Wireless Networks, Inc.
(Formerly Pacific Link Internet, Inc.)
Unaudited Consolidated Financial Statements
December 31, 2000
Worldwide Wireless Networks, Inc.
Unaudited Consolidated Balance Sheets
ASSETS December 31, 2000 December 31,1999
(Unaudited)
CURRENT ASSETS
Cash and Cash Equivalents $121,329 $136,311
Accounts Receivable (net of allowance for doubtful
accounts of $3,577 and $20,000 respectively) 269,837 165,091
Other Receivables 9,917 3,000
Inventory 2,143,463 129,861
Prepaid Expenses 36,583 18,912
--------- ---------
Total Current Assets 2,581,129 453,175
--------- ---------
PROPERTY & EQUIPMENT
Office Equipment 197,592 103,231
Leased Equipment 61,315 177,653
Machinery Equipment 1,839,674 1,109,524
2,098,581 1,390,408
--------- ---------
Less:
Accumulated Depreciation - leased equipment (61,315) (165,255)
Accumulated Depreciation (801,474) (282,495)
--------- ---------
Total Property & Equipment 1,235,792 942,658
--------- ---------
OTHER ASSETS
Investments available for sale 300,000 36,885
Deferred Charges 2,858 21,984
Deposits 54,421 36,197
--------- ---------
Total Other Assets 355,729 95,066
--------- ---------
TOTAL ASSETS $4,172,200 $1,490,899
========= =========
Worldwide Wireless Networks, Inc.
Unaudited Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, 2000 December 31, 1999
(Unaudited)
CURRENT LIABILITIES
Accounts Payable $3,053,078 $655,485
Accrued Expenses 286,790 83,933
Lines of Credit 69,839 89,323
Unearned Revenue 13,259 102,356
Customer Deposits 77,265 0
Current Portion of Long Term Liabilities 1,663,079 665,355
--------- ---------
Total Current Liabilities 5,163,310 1,596,452
--------- ---------
LONG TERM LIABILITIES
Notes Payable 2,564,281 562,245
Notes Payable - Related Party 188,000 75,000
Capital Lease Payable 10,798 30,340
Less Current Portion (1,663,079) (665,355)
--------- ---------
Total Long Term Liabilities 1,100,000 2,230
--------- ---------
TOTAL LIABILITIES 6,263,310 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 5,255,828 2,415,345
Accumulated Comprehensive Income (400,000) 0
Retained Earnings (6,959,7820) (2,534,928)
---------- ---------
Total Stockholders' Equity (2,091,110) (107,783)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,172,200 $1,490,899
========= =========
Worldwide Wireless Networks, Inc.
Unaudited Consolidated Statements of Operations
Three Months Ended
December 31,
2000 1999 2000 1999
SALES $589,063 $751,072 $3,346,583 $ 1,980,203
COST OF GOODS SOLD 437,283 459,729 2,272,999 972,802
------- ------- --------- ---------
GROSS PROFIT 151,780 292,017 1,073,584 1,007,401
------- ------- --------- ---------
OPERATING EXPENSES
General and Administrative 491,528 1,316,150 3,740,216 2,377,133
Sales 317,501 258,449 892,467 616,022
Bad Debt Expense 185,920 40,317 185,920 40,317
------- --------- --------- ---------
TOTAL OPERATING EXPENSES 994,949 1,614,916 4,818,603 3,033,472
------- --------- --------- ---------
OPERATING INCOME (LOSS) (843,169) (1,322,899) (3,745,019) (2,026,071)
------- --------- --------- ---------
OTHER INCOME AND (EXPENSE)
Loss on Investment (36,885) (13,115) (36,885) (13,115)
Loss on Abandonment of Equipment (6,134) 0 (6,134) 0
Loss of Value on Stock Investment (600,000) 0 (500,000) 0
Interest Expense (78,689) (20,411) (186,495) (46,895)
Miscellaneous Income 49,679 18,163 49,679 34,829
------- --------- --------- ---------
(672,029) (15,363) (779,835) (25,181)
------- --------- --------- ---------
NET INCOME (LOSS) ($1,515,198) ($1,338,262) ($4,424,854) ($2,051,252)
========= ========= ========= =========
NET INCOME (LOSS) PER SHARE $ (0.12) $ (0.12) $ (0.36) $ (0.21)
--------- --------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 12,844,060 11,599,988 12,609,093 9,883,325
========== ========== ========== =========
Worldwide Wireless Networks, Inc.
Unaudited Consolidated Statements of Cash Flows
Twelve Months Ended December 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($4,524,854) ($2,051,252)
Net Cash Used in Operating Activities:
Depreciation and Amortization 575,717 321,246
Bad Debt (16,423) 0
Shares Issued for Services 545,407 822,000
Shares Issued for Insurance Policy 33,000 0
Loss on Investment 536,885 0
Loss on Abandonment 6,134 0
(Increase) Decrease in:
Accounts Receivable (88,323) (135,751)
Other Current Assets (6,917) 51,814
Inventory (2,013,602) (129,861)
Prepaid Expenses (17,671) (18,912)
Deferred Charges 19,126 (11,556)
Increase (Decrease) in:
Bank Overdraft 0 (4,092)
Accounts Payable and Accrued Expenses 2,600,450 214,081
Customer Deposits 77,265 0
Unearned Revenue (89,097) 60,866
--------- ---------
Net Cash Provided (Used) by Operating Activities (2,262,903) (865,302)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (774,987) (957,045)
Cash Paid for Deposits (16,224) (21,013)
Cash paid for Investments 0 (50,000)
Net Cash Provided (Used) by Investing Activities (791,211) (1,028,058
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) on Lines of Credit (19,484) (9,148)
Proceeds from Debt Financing 2,188,000 633,468
Principal Payments on Debt Financing (92,505) (94,649)
Cash Received in Merger with Worldwide 0 1,000,000
Cash Paid for Registration Fees (6,879)
Shares Issued for Cash 970,000 0
--------- ---------
Net Cash Provided (Used) by Financing Activities 3,039,132 500,000
--------- ---------
2,029,671
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (14,982)
--------- ---------
Cash & Cash Equivalents - Beginning 136,311 136,311
--------- ---------
Cash & Cash Equivalents - Ending $121,329 0
Supplemental Cash Flow Information $136,311
Cash paid for interest $ 29,202
========= =========
Cash paid for income taxes $ 0 $ 26,484
========= =========
Non-cash financing transactions $ 0
========= =========
Investment acquired by issuing stock $1,200,000
========= =========
Stock issued for notes payable $ 100,000 $ 0
========= =========
Note Payable Issued for Stock $ 500,000 $ 0
========= =========
Worldwide Wireless Networks, Inc.
Notes to the Unaudited Consolidated Financial Statements
December 31, 2000
NOTES TO FINANCIAL STATEMENTS
Worldwide Wireless Networks, Inc. (the "Company") has elected to
omit substantially all footnotes to the financial statements for
the twelve months ended December 31, 2000, 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 Form 10-KSB for the Fiscal year ended December 31,
1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and
records of the Company without audit. However, such information
reflects all adjustments which are, in the opinion of management,
necessary to properly reflect the results of the period presented
and are of a normal and recurring nature . The information
presented is not necessarily indicative of the results from
operations expected for the full fiscal year.
MERGER WITH TARRAB CAPITAL GROUP
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 or
liabilities and ceased to exist.
In connection with the merger, the Company issued
200,000 shares of restricted common stock for legal fees valued
at $400,000.
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.
INVESTMENTS AVAILABLE FOR SALE (continued)
On June 28, 2000, Worldwide Wireless issued 300,000 shares of
common stock valued at $1,200,000 at $4.00 per share to Bridge
Technology, Inc. (Bridge) in exchange for 150,000 shares of Bridge
stock valued at $1,200,000 or $8.00 per share. The fair values of
these securities were determined by their quoted market prices on
the date of the exchange.
At September 30, 2000, this investment's stock price in the market
had decreased by $0.50 per share. In accordance with SFAS 115, we
recognized the decrease in market value as temporary, and the
$0.50 per share decline in value was recorded as a comprehensive
loss that is reported as an adjustment to the equity section on
our Balance Sheet.
Since the period ended September 30, 2000, this investment's stock
price in the market has continued to decrease substantially. In
order to remain in compliance with SFAS 115, we recorded a loss on
investment to recognize an other than temporary loss on our
December 31, 2000 Income Statement. Based on the decline in the
price per share over the last six months we recorded a permanent
write down of our investment from $8.00 per share to $4.00 per
share or $600,000.
INVENTORY
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
As of December 31, 2000, $1,750,000 of inventory consists of
purchases from Adaptive, representing approximately 75% of our
total inventory. Management believes that all of this inventory
is saleable at its fair market value, and can be used to roll out
our networks in the future in accordance with our business plan.
WARRANTS
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.
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.
On June 30, 2000, the Company entered into a Convertible Debenture
and Warrants Purchase Agreement with several investors. Pursuant
to this 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 120% of the closing price on the trading day immediately preceding
the closing date. These warrants expire on June 30, 2003.
CONVERTIBLE DEBENTURES
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.
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.
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.
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.
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 14, 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.
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.
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;7
(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 direct
ors nd 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 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 furnihed 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.
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
5.1 Opinion of Feldhake, August & Roquemore LLP, dated March 14,
2001, as to Legality of Shares Offered
6.1 N/A
7.1 N/A
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
10.14* Consultant Agreement, dated November 2000, between Worldwide
Wireless and Columbia Financial Group
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 Accountants ________________, 2001,
for year-end financial statements
23.2 Consent of Feldhake, August & Roquemore LLP
27.1 Financial Data Schedule
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
10.15 Settlement Agreement, dated January 25, 2001, between Worldwide
Wireless and Sinclair Davis Trading Corporation.
* As previously filed with the Form SB-2/A on November 21, 2000