U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 0-28581
5G WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 82-0351882
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1350 East Flamingo Road, Suite 414, Las Vegas, Nevada 89119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (702) 647-4877
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $0.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) been subject to such filing requirements for the past 90 days.
Yes No X .
As of March 31, 2003, the Registrant had 222,013,643 shares of
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X .
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2003 3
CONDENSED CONSOLIDATED STATEMENTS OF
LOSSES FOR THE THREE MONTHS ENDED
MARCH 31, 2003 AND MARCH 31, 2002 4
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THREE MONTHS ENDED
MARCH 31, 2003 AND MARCH 31, 2002 5
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS 6
ITEM 2. PLAN OF OPERATION 8
ITEM 3. CONTROLS AND PROCEDURES 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
CERTIFICATIONS 18
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
5G WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2003
(Unaudited)
ASSETS
Current Assets:
Cash $ 27,677
Accounts Receivable 9,312
Less: Allowance for Doubtful Accounts -
9,312
Other Assets 18,159
Total Current Assets 55,148
Fixed Assets
Computers and Related Equipment 199,843
Accumulated Depreciation (78,782)
121,061
Total Assets $176,209
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $ 186,801
Accrued Liabilities 308,696
Loans and Notes Payable 156,366
Convertible Debentures 257,654
Total Current Liabilities 909,517
Commitments and Contingencies -
Stockholders' Deficit:
Preferred Stock, $0.001 par value;
10,000,000 authorized; no shares outstanding -
Common Stock, $0.001 par value; 800,000,000
authorized; 222,013,643 issued and
outstanding at March 31, 2003 222,013
Paid in Capital 11,974,996
Accumulated Deficit (12,930,317)
Total Stockholders' Deficit (733,308)
Total Liabilities and Stockholders' Deficit 176,209
See Accompanying Notes to Condensed Consolidated Financial Statements
5G WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
Revenues
Licensing $ - -
Services 4,479 -
Other 13,980 -
18,459 -
Expenses
Selling General and Administrative 221,228 3,450,170
Depreciation and Amortization 16,118 -
Total 237,346 3,450,170
Net Loss Basic and Fully Diluted (218,887) (3,450,170)
Net Loss Per Common Share (0.001) (0.05)
Weighted Average Common Shares Outstanding 191,486,552 75,088,064
See Accompanying Notes to Condensed Consolidated Financial Statements
5G WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
Cash (Used) in From Operating Activities $ (22,243) $ (106,799)
Cash (Used) in Investing Activities (2,543) (106,109)
Cash Flows from Financing Activities 47,000 253,200
Net Increase in Cash 22,214 40,292
Cash At The Beginning of the Period 5,463 213
Cash At The End of the Period 27,677 40,505
Supplemental Disclosures:
Income Taxes paid for the period - -
See Accompanying Notes to Condensed Consolidated Financial Statements
5G WIRELESS COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited condensed consolidated financial statements
of 5G Wireless Communications, Inc., a Nevada corporation ("Company"),
have been prepared in accordance with the instructions to Form 10-QSB,
and therefore, do not include all the information necessary for a fair
presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Accordingly, the results from operations for the
three-month period ended March 31, 2003 are not necessarily indicative
of the results that may be expected for the year ended December 31,
2003. The unaudited consolidated financial statements should be read
in conjunction with the consolidated December 31, 2002 financial
statements and footnotes thereto included in the Company's Form 10-KSB.
Business and Basis of Presentation
The Company was incorporated on September 10, 1979. In March of 2001,
the Company merged with 5G Partners, (a private Canadian partnership),
resulting in a name change to the current name.
The Company provides patent pending, innovative wireless technology.
The primary thrust of the Company's business model focuses on a
subscriber based Internet service. Revenues are the result of
licensing the technology to specific geographic areas or territories,
from the delivery of broadband access to residential and business
subscribers, web hosting and design, and engineering consulting services.
Recently issued Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 updates, clarifies, and simplifies
existing accounting pronouncements. This statement rescinds SFAS
No. 4, which required all gains and losses from extinguishment of
debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result,
the criteria in Accounting Principles Board No. 30 will now be used
to classify those gains and losses. SFAS No. 64 amended SFAS No. 4
and is no longer necessary as SFAS No. 4 has been rescinded. SFAS
No. 44 has been rescinded as it is no longer necessary. SFAS No. 145
amends SFAS No. 13 to require that certain lease modifications that
have economic effects similar to sale-leaseback transactions be
accounted for in the same manner as sale-lease transactions. This
statement also makes technical corrections to existing pronouncements.
While those corrections are not substantive in nature, in some
instances, they may change accounting practice. The Company does
not expect adoption of SFAS No. 145 to have a material impact, if any,
on its financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." This statement
addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task
Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This
statement requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is
incurred. Under EITF Issue 94-3, a liability for an exit cost, as
defined, was recognized at the date of an entity's commitment to an
exit plan. The provisions of this statement are effective for exit or
disposal activities that are initiated after December 31, 2002 with
earlier application encouraged. The Company does not expect adoption
of SFAS No. 46 to have a material impact, if any, on its financial
position or results of operations.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of
Certain Financial Institutions." SFAS No. 147 removes the requirement
in SFAS No. 72 and Interpretation 9 thereto, to recognize and
amortize any excess of the fair value of liabilities assumed over the
fair value of tangible and identifiable intangible assets acquired as
an unidentifiable intangible asset. This statement requires that
those transactions be accounted for in accordance with SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." In addition, this statement amends SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," to
include certain financial institution-related intangible assets. This
statement is not applicable to the Company.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-
Based Compensation - Transition and Disclosure," an amendment of SFAS
No. 123. SFAS No. 148 provides alternative methods of transition for
a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends
the disclosure requirements of SFAS No. 123 to require more prominent
and more frequent disclosures in financial statements about the
effects of stock-based compensation. This statement is effective for
financial statements for fiscal years ending after December 15, 2002.
SFAS No. 148 will not have any impact on the Company's financial
statements as management does not have any intention to change to the
fair value method.
ITEM 2. PLAN OF OPERATION.
The following discussion should be read in conjunction with the
financial statements of the Registrant and notes thereto contained
elsewhere in this report.
Twelve-Month Plan of Operation.
The Registrant will utilize its wireless platform to extend
services to locations currently under serviced or not serviced at all
by the cable and DSL providers. The platform will reduce overall cost
by as much as 40% over other wireless providers and allow us to be
profitable in areas that will not be serviced by others because of the
capital requirements.
To date, the Registrant has built a wireless network in New York
State, California and Florida. In New York State, which was has been
the research and development area for the company, we anticipate very
minimal growth in subscribers as we develop new wireless solutions
that are developed and tested in the controlled environment in Sidney
and Bainbridge New York. Additional tower locations and bridging
locations have been added in 2002 to service clients in Binghamton,
Johnson City and Vestal. To facilitate additional growth, the
Registrant entered into a Licensing agreement with a territory partner
to market the Registrant service, unfortunately this relationship
faltered in late 2002 and resulted in a demand notice being issued and
a termination of the agreement by the Registrant. The Registrant is
currently reviewing all remedies and legal options. The Registrant has
also moved network equipment from Sidney, NY to co-location facilities
to provide better security and redundancy for the clients. However,
the Sidney facility will continue to be used as a point of presence.
In 2003, the company anticipates to more than quadrupling its
coverage area in California to include Marina Del Rey, Santa Monica,
Culver City, Century City, Hollywood and San Fernando Valley and
expects to expand its services in Garden Grove and Orange County.
The Registrant's rollout will balance the needs of an
initial base location and our evolving network footprint. The network
footprint is the single greatest asset of the Registrant. The
Registrant's network engineers can accurately predict capabilities,
extensive network modeling and business intelligence analysis into one
integrated environment, providing opportunities to optimize the value
of our network coverage. This means the Registrant will have a cost
advantage compared to its closest competitor.
The Registrant is also delivering VoIP wireless services as part
of a test facility in Florida. The Registrant has had success thus far
and plans to make technical improvements to perfect the system for
consumer use with a launch expected in 2003.
The Registrant is also looking at a series of smaller companies
to acquire or to enter into a joint venture to increase our
penetration into new markets and to establish a new bases of
operation. In addition, the company is seeking relationships with
ISP's who would like to offer broadband services to their subscriber
base and are willing to oversee the expansion as local operators in a
given territory.
The Registrant's research and development will focus on
developing new technology capable of delivering higher bandwidth
capacity over the existing network as well as development of a voice
over IP service for both business and residential users. In addition
the company will consider additional applications for patents in
addition to the one that has already been submitted to the U.S. Patent
and Trademark Office.
The Registrant plans to expand its network through the
negotiations with a number of building management companies, tower
suppliers, and site acquisition companies to assist in the timely
rollout of our network. Costs for these locations can vary widely
depending on the capacity requirements and equipment needed to service
that particular area.
To facilitate this growth, the Registrant intends to acquire
additional sales representatives, telemarketers, engineers and
technicians to service and maintain its networks. There will also be
a need to increase sales and support staff to ensure continued growth
and maintenance of the company's high quality of service. These
numbers may vary depending on the rollout time frames, capital costs,
and acquisition of staff from any potential company acquisitions.
The Registrant has devoted substantial resources to the
build out of its networks with limited resources applied to its
marketing programs. As a result, the Registrant has historically
experienced operating losses and negative cash flow. These operating
losses and negative cash flows may continue through additional
periods, however, the Registrant is currently focusing on several new
areas of expansion, including the development of a new market
strategy, establishing a credit line, expanding their network and
hiring more technicians to service their networks. The Registrant
intends to implement these new developments starting in 2003.
Risk Factors Connected with Plan of Operation.
(a) Limited Prior Operations, History of Operating Losses, and
Accumulated Deficit May Affect Ability of Registrant to Survive.
The Registrant has had limited prior operations to date. Since
the Registrant's principal activities to date have been limited to
organizational activities, research and development, and prospect
development, it has only a limited record of revenue-producing
operations under its current plan of business. Consequently, there is
only a limited operating history upon which to base an assumption that
the Registrant will be able to achieve its business plans. In
addition, the Registrant has only limited assets. As a result, there
can be no assurance that the Registrant will generate significant
revenues in the future; and there can be no assurance that the
Registrant will operate at a profitable level. If the Registrant is
unable to obtain customers and generate sufficient revenues so that it
can profitably operate, the Registrant's business will not succeed.
Accordingly, the Registrant's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered in
connection with the establishment of a new business.
The Registrant has incurred losses from operations: $6,446,987
for the fiscal year ended December 31, 2001, $6,189,924 for the fiscal
year ended December 31, 2002, and $218,887 for the three months ended
March 31, 2003. At March 31, 2003, the Registrant had an accumulated
deficit of $12,930,317.
As a result of the fixed nature of many of the Registrant's
expenses, the Registrant may be unable to adjust spending in a timely
manner to compensate for any unexpected delays in the development and
marketing of the Registrant's products or any capital raising or
revenue shortfall. Any such delays or shortfalls will have an
immediate adverse impact on the Registrant's operations and financial
condition.
(b) Need for Additional Financing May Affect Operations and Plan of Business.
The working capital requirements associated with the plan of
business of the Registrant will continue to be significant. The
Registrant anticipates, based on currently proposed assumptions
relating to its operations, that it cannot continue its operations
without securing additional financing. The Registrant anticipate, at
the present time, that it will need to raise up to $10,000,000 in the
next twelve months to implement its sales and marketing strategy and
grow. In the event that the Registrant's plans change or its
assumptions change (due to unanticipated expenses, technical
difficulties, or otherwise), the Registrant would be required to seek
additional financing sooner than currently anticipated or may be
required to significantly curtail or cease its operations.
Regardless of whether the Registrant's cash assets prove to be
inadequate to meet the Registrant's operational needs, the Registrant
might seek to compensate providers of services by issuance of stock in
lieu of cash.
If funding is insufficient at any time in the future, the
Registrant may not be able to take advantage of business opportunities
or respond to competitive pressures, any of which could have a
negative impact on the business, operating results and financial
condition. In addition, if additional shares were issued to obtain
financing, current shareholders may suffer a dilutive effect on their
percentage of stock ownership in the Registrant.
(c) Substantial Competition May Affect Ability to Sell Products.
The Registrant may experience substantial competition in its
efforts to locate and attract customers for its products. Many
competitors in the wireless industry have greater experience,
resources, and managerial capabilities than the Registrant and may be
in a better position than the Registrant to obtain access to attract
customers. There are a number of larger companies that will directly
compete with the Registrant. Such competition could have a material
adverse effect on the Registrant's profitability or viability.
(d) The Registrant's Success Will Depend on Its Ability to Develop
Products and Services That Keep Pace with Technological Advances.
The market for data access and communications services is
characterized by rapidly changing technology and evolving industry
standards in both the wireless and wire line industries. The
Registrant's success will depend to a substantial degree on our
ability to develop and introduce, in a timely and cost-effective
manner, enhancements to our high-speed service and new products that
meet changing customer requirements and evolving industry standards.
For example, increased data rates provided by wired data access
technologies, such as digital subscriber lines, may affect customer
perceptions as to the adequacy of our service and may also result in
the widespread development and acceptance of applications that require
a higher data transfer rate than our high-speed service provides. The
Registrant's technology or systems may become obsolete upon the
introduction of alternative technologies. If the Registrant does not
develop and introduce new products and services in a timely manner, it
may lose users to competing service providers, which would adversely
affect its business and results of operations.
(e) The Registrant's Intellectual Property Protection May Be
Inadequate to Protect Its Proprietary Rights.
The Registrant has submitted an application to the U.S. Patent
and Trademark Office (see Exhibit 99.2 to this Form 10-QSB) in
connection with a utility patent. The Registrant uses the term "5G
Wireless" in connection with its products and services. The
Registrant believes that its trademarks and copyrights, trade name and
the signature look have significant value and are important to the
marketing and promotion of the Registrant and its products and
services. Although the Registrant believes that its trademarks and
copyrights do not and will not infringe trademarks or violate
proprietary rights of others, it is possible that existing trademarks
and copyrights may not be valid or that infringement of existing or
future trademarks or proprietary rights may occur. In the event the
Registrant's trademarks or copyrights infringe trademarks or
proprietary rights of others, the Registrant may be required to change
its name or obtain a license. There can be no assurance that the
Registrant will be able to do so in a timely manner, on acceptable
terms and conditions, or at all. Failure to do any of the foregoing
could have a material adverse effect on the company. In addition,
there can be no assurance that the Registrant will have the financial
or other resources necessary to enforce or defend a trademark
infringement or proprietary rights violation action. Moreover, if the
Registrant's trademarks or copyrights infringe the trademarks or
proprietary rights of others, it could, under certain circumstances,
become liable for damages, which could have a material adverse effect
on the Registrant.
The Registrant also relies on trade secrets and proprietary know-
how and employs various methods to protect its concepts, ideas and
concepts in development. However, such methods may not afford
complete protection and there can be no assurance that others will not
independently develop similar know-how or obtain access to the
Registrant's know-how, concepts, ideas and documentation.
Furthermore, although the Registrant has or expects to have
confidentiality and non-competition agreements with its employees, and
appropriate consultants, there can be no assurance that such
arrangements will adequately protect the Registrant's trade secrets or
that others will not independently develop products similar to that of
the company.
(f) Other External Factors May Affect Viability of Registrant.
The industry of the Registrant in general is a speculative
venture necessarily involving some substantial risk. There is no
certainty that the expenditures to be made by the Registrant will
result in a commercially profitable business. The marketability of
its products will be affected by numerous factors beyond the control
of the Registrant. These factors include market fluctuations, and the
general state of the economy (including the rate of inflation, and
local economic conditions), which can affect companies' spending.
Factors that leave less money in the hands of potential customers of
the Registrant will likely have an adverse effect on the Registrant.
The exact effect of these factors cannot be accurately predicted, but
the combination of these factors may result in the Registrant not
receiving an adequate return on invested capital.
(g) Loss of Any of Current Management Could Have Adverse Impact on
Business and Prospects for Registrant.
The Registrant's success is dependent upon the hiring of key
administrative personnel. Only the Registrant's three officers have
employment agreements with the Registrant; therefore, there can be no
assurance that other personnel will remain employed by the Registrant,
or that the three officers will remain after the termination of such
agreements. Should any of these individuals cease to be affiliated
with the Registrant for any reason before qualified replacements could
be found, there could be material adverse effects on the Registrant=s
business and prospects. In addition, management has no experience is
managing companies in the same business as the Registrant.
In addition, all decisions with respect to the management of
the Registrant will be made exclusively by the officers and directors
of the Registrant. Shareholders of the Registrant will only have
rights associated with such ownership to make decisions that affect
the Registrant. The success of the Registrant, to a large extent,
will depend on the quality of the directors and officers of the
Registrant. Accordingly, no person should invest in the shares unless
he is willing to entrust all aspects of the management of the
Registrant to the officers and directors.
(h) Limitations on Liability, and Indemnification, of Directors
and Officers May Result in Expenditures by Registrant.
The Registrant's Articles of Incorporation include provisions to
eliminate, to the fullest extent permitted by the Nevada Revised
Statutes as in effect from time to time, the personal liability of
directors of the Registrant for monetary damages arising from a breach
of their fiduciary duties as directors. In addition, the Registrant's
Bylaws provide that the company shall indemnify the officers,
directors, and employees in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, except
in relation to matters as to which it shall be adjudged in such
action, suit or proceeding, or in connection with any appeal therein
that such officer, director or employee is liable for gross negligence
or misconduct in the performance of his duties. Any limitation on the
liability of any director, or indemnification of directors, officer,
or employees, could result in substantial expenditures being made by
the Registrant in covering any liability of such persons or in
indemnifying them.
(i) Potential Conflicts of Interest May Affect Ability of Officers
and Directors to Make Decisions in the Best Interests of Registrant.
The officers and directors have other interests to which they
devote time, either individually or through partnerships and
corporations in which they have an interest, hold an office, or serve
on boards of directors, and each will continue to do so
notwithstanding the fact that management time may be necessary to the
business of the Registrant. As a result, certain conflicts of interest
may exist between the Registrant and its officers and/or directors
that may not be susceptible to resolution. All of the potential
conflicts of interest will be resolved only through exercise by the
directors of such judgment as is consistent with their fiduciary
duties to the Registrant. It is the intention of management, so as to
minimize any potential conflicts of interest, to present first to the
board of directors to the Registrant, any proposed investments for its
evaluation.
(j) Control by Officers and Directors Over Affairs of the
Company May Override Wishes of Other Stockholders.
The Company's officers and directors beneficially own
approximately 15% of the outstanding shares of the Company's common
stock. As a result, such persons, acting together, have the ability
to exercise influence over all matters requiring stockholder approval.
Accordingly, it could be difficult for the investors hereunder to
effectuate control over the affairs of the Company. Therefore, it
should be assumed that the officers, directors, and principal common
shareholders who control these voting rights will be able, by virtue
of their stock holdings, to control the affairs and policies of the Company.
(k) Non-Cumulative Voting May Affect Ability of Shareholders to
Influence Registrant Decisions.
Holders of the shares are not entitled to accumulate their votes
for the election of directors or otherwise. Accordingly, the holders
of a majority of the shares present at a meeting of shareholders will
be able to elect all of the directors of the Registrant, and the
minority shareholders will not be able to elect a representative to
the Registrant's board of directors.
(l) Absence of Cash Dividends May Affect Investment Value of
Registrant's Stock.
The board of directors does not anticipate paying cash dividends
on the shares for the foreseeable future and intends to retain any
future earnings to finance the growth of the Registrant's business.
Payment of dividends, if any, will depend, among other factors, on
earnings, capital requirements, and the general operating and
financial condition of the Registrant, and will be subject to legal
limitations on the payment of dividends out of paid-in capital.
(m) No Assurance of Continued Public Trading Market and Risk of Low
Priced Securities May Affect Market Value of Registrant's Stock.
There has been only a limited public market for the common stock
of the Registrant. The common stock of the Registrant is currently
quoted on the Over the Counter Bulletin Board. As a result, an
investor may find it difficult to dispose of, or to obtain accurate
quotations as to the market value of the Registrant's securities. In
addition, the common stock is subject to the low-priced security or so
called "penny stock" rules that impose additional sales practice
requirements on broker-dealers who sell such securities. The
Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure in connection with any trades involving a stock
defined as a penny stock (generally, according to recent regulations
adopted by the U.S. Securities and Exchange Commission, any equity
security that has a market price of less than $5.00 per share, subject
to certain exceptions), including the delivery, prior to any penny
stock transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith. The regulations governing
low-priced or penny stocks sometimes limit the ability of broker-
dealers to sell the Registrant's common stock and thus, ultimately,
the ability of the investors to sell their securities in the secondary
market.
(n) Effects of Failure to Maintain Market Makers.
If the Registrant is unable to maintain a National Association of
Securities Dealers, Inc. member broker/dealers as market makers, the
liquidity of the common stock could be impaired, not only in the
number of shares of common stock which could be bought and sold, but
also through possible delays in the timing of transactions, and lower
prices for the common stock than might otherwise prevail.
Furthermore, the lack of market makers could result in persons being
unable to buy or sell shares of the common stock on any secondary
market. There can be no assurance the Registrant will be able to
maintain such market makers.
(o) Shares Eligible For Future Sale.
Approximately 24,000,000 of the 29,740,385 shares of common stock
that are currently held, directly or indirectly, by management have
been issued in reliance on the private placement exemption under the
Securities Act of 1933. Such shares will not be available for sale in
the open market without separate registration except in reliance upon
Rule 144 under the Securities Act of 1933. In general, under Rule 144
a person (or persons whose shares are aggregated) who has beneficially
owned shares acquired in a non-public transaction for at least one
year, including persons who may be deemed affiliates of the Registrant
(as that term is defined under that rule) would be entitled to sell
within any three-month period a number of shares that does not exceed
the greater of 1% of the then outstanding shares of common stock, or
the average weekly reported trading volume during the four calendar
weeks preceding such sale, provided that certain current public
information is then available. If a substantial number of the shares
owned by these shareholders were sold pursuant to Rule 144 or a
registered offering, the market price of the common stock could be
adversely affected.
Forward Looking Statements.
The foregoing Plan of Operation contains "forward looking
statements" within the meaning of Rule 175 of the Securities Act of
1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as
amended, including statements regarding, among other items, the
Registrant's business strategies, continued growth in the Registrant's
markets, projections, and anticipated trends in the Registrant's
business and the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-
looking statements are based largely on the Registrant's expectations
and are subject to a number of risks and uncertainties, certain of
which are beyond the Registrant's control. The Registrant cautions
that these statements are further qualified by important factors that
could cause actual results to differ materially from those in the
forward looking statements, including, among others, the following:
reduced or lack of increase in demand for the Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant's operations. In light of these
risks and uncertainties, there can be no assurance that the forward-
looking information contained herein will in fact transpire or prove
to be accurate. The Registrant disclaims any intent or obligation to
update "forward looking statements."
ITEM 3. CONTROLS AND PROCEDURES.
Controls and Procedures.
(a) Evaluation of disclosure controls and procedures.
Within the 90 days prior to March 31, 2003, the Registrant
carried out an evaluation of the effectiveness of the design and
operation of its disclosure controls and procedures pursuant to Rule
13a-14 under the Securities Exchange Act of 1934 ("Exchange Act").
This evaluation was done under the supervision and with the
participation of the Registrant's President. Based upon that
evaluation, they concluded that the Registrant's disclosure controls
and procedures are effective in gathering, analyzing and disclosing
information needed to satisfy the Registrant's disclosure obligations
under the Exchange Act.
(b) Changes in internal controls.
There were no significant changes in the Registrant's internal
controls or in its factors that could significantly affect those
controls since the most recent evaluation of such controls.
Critical Accounting Policies.
The Securities and Exchange Commission recently issued Financial
Reporting release No. 60, "Cautionary Advice Regarding Disclosure
About Critical Accounting Policies" ("FRR 60"), suggesting companies
provide additional disclosure and commentary on their most critical
accounting policies. In FRR 60, the SEC defined the most critical
accounting policies as the ones that are most important to the
portrayal of a company's financial condition and operating results,
and require management to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. Based on this definition, the
Registrant's most critical accounting policies include: non-cash
compensation valuation that affects the total expenses reported in the
current period. The methods, estimates and judgments the Registrant
uses in applying these most critical accounting policies have a
significant impact on the results the Registrant reports in its
financial statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Other than as set forth below, the Registrant is not a party to
any material pending legal proceedings and, to the best of its
knowledge, no such action by or against the Registrant has been threatened.
On July 17, 2002, an action was filed against the Registrant in
the High Court of the Hong Kong Special Administrative Region, Court
of First Instance: Skyhub Asia Holdings Limited v. 5G Wireless
Communications Inc., Action No. 2767. In this action, the plaintiff
alleges breach of contract in connection with an agreement between the
plaintiff and the Registrant, dated May 19, 2001 (see Exhibit 2.4 to
this Form 10-QSB), and seeks monetary damages in the amount of
$919,400 and interest. The Registrant has filed an answer to this
complaint, and asserted certain counterclaims against the plaintiff,
including fraud and breach of contract. The Registrant believes that
this case is without merit, but is unable to take any position at this
time as to the likely outcome of the matter. The Registrant intends
to vigorously defend this action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Specific Sales.
The Registrant sold the following securities without registration
(restricted) during the three months ended March 31, 2003:
(a) At various times from January 8, 2003 to March 28, 2003, the
Registrant issued a total of 27,828,540 shares of common stock in
connection with conversion of convertible debentures issued by the
Registrant on February 12, 2002 (see Exhibit 4.4 to this Form 10-QSB).
The original debentures issued to two investors were broken up to a
total of 11 investors. The shares issued were valued between $0.0015
and $0.003.
(b) On January 29, 2003, the Registrant issued 400,000 shares to
one individual for accounting services, valued at $2,800 ($0.007 per
share). On this date, the Registrant also issued 3,000,000 shares of
common stock to one company as office rent, valued at $21,000 ($0.007
per share).
No commissions were paid in connection with any of these sales.
These sales were undertaken under Rule 506 of Regulation D under the
Securities Act of 1933, as amended ("Act"), by the fact that:
- the sales were made to a sophisticated or accredited investors as
defined in Rule 502;
- the Registrant gave each purchaser the opportunity to ask
questions and receive answers concerning the terms and conditions
of the offering and to obtain any additional information which
the Registrant possessed or could acquire without unreasonable
effort or expense that is necessary to verify the accuracy of
information furnished;
- at a reasonable time prior to the sale of securities, the
Registrant advised each purchaser of the limitations on resale in
the manner contained in Rule 502(d)2 of this section;
- neither the Registrant nor any person acting on its behalf sold
the securities by any form of general solicitation or general
advertising; and
- the Registrant exercised reasonable care to assure that each
purchaser of the securities is not an underwriter within the
meaning of Section 2(11) of the Act in compliance with Rule 502(d).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits.
Exhibits included or incorporated by reference herein are set
forth in the attached Exhibit Index.
Reports on Form 8-K.
No reports on Form 8-K were filed during the first quarter of the
fiscal year covered by this Form 10-QSB.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 23, 2003 /s/ Jerry Dix
Jerry Dix, Chief Executive
Officer/President
Dated: May 23, 2003 /s/ Don Boudewyn
Don Boudewyn, Assistant
Secretary/Treasurer/Chief
Operating Officer
CERTIFICATIONS
I, Jerry Dix, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of 5G
Wireless Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the
periods presented in this quarterly report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and
the audit committee of Registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls;
6. The Registrant's other certifying officer and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Dated: May 23, 2003 /s/ Jerry Dix
Jerry Dix, Chief Executive
Officer/President
I, Don Boudewyn, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of 5G
Wireless Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the
periods presented in this quarterly report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and
the audit committee of Registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls;
6. The Registrant's other certifying officer and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Dated: May 23, 2003 /s/ Don Boudewyn
Don Boudewyn, Assistant
Secretary/Treasurer/Chief
Operating Officer
EXHIBIT INDEX
Number Description
2.1 Agreement and Plan of Reorganization and Merger between
Tesmark, Inc., an Idaho corporation, and the Registrant
(formerly know as Tesmark, Inc.), a Nevada corporation,
dated November 10, 1998 (incorporated by reference to
Exhibit 2 of the Form 10-SB filed on December 15, 1999).
2.2 Acquisition Agreement between the Registrant, and Richard
Lejeunesse, Curtis Mearns, and Don Boudewyn, a partnership
(known as 5G Partners), dated December 15, 2000, as amended
(incorporated by reference to Exhibit 10 of the Form 8-K
filed on February 14, 2001).
2.3 Share Purchase Agreement between the Registrant, and Sea
Union Industries Pte. Ltd., Richard Lajeunesse, Rita Chou,
Peter Chen, Yeo Lai Ann, Tan Lam Im, Choa So Chin, Tan Ching
Khoon, Tan Sek Toh, and 5G Wireless Communication Pte. Inc.
(formerly known as Peteson Investment Pte Ltd.), dated May
5, 2001 (incorporated by reference to Exhibit 2 of the Form
8-K filed on June 5, 2001).
2.4 Purchase Agreement between the Registrant and Skyhub Asia
Holdings Limited, eVision USA.com, and eBanker USA.com,
dated May 19, 2001 (incorporated by reference to Exhibit 2.4
of the Form 10-KSB filed on April 18, 2002).
2.5 Definitive Acquisition Agreement between the Registrant and
Wireless Think Tank, dated April 30, 2002 (incorporated by
reference to Exhibit 2 of the Form 8-K filed on August 13, 2002).
3.1 Articles of Incorporation, dated September 24, 1998
(incorporated by reference to Exhibit 3 of the Form 10-SB
filed on December 15, 1999).
3.2 Certificate of Amendment to Articles of Incorporation, dated
May 5, 2000 (incorporated by reference to Exhibit 3.3 of the
Form SB-2 filed on January 10, 2002).
3.3 Certificate of Amendment to Articles of Incorporation, dated
January 19, 2001 (incorporated by reference to Exhibit 3.1
of the Form 8-K filed on February 14, 2001).
3.4 Certificate of Amendment to Articles of Incorporation, dated
January 21, 2003 (incorporated by reference to Exhibit 3.4
of the Form 10-KSB filed on May 8, 2003).
3.5 Bylaws, dated September 25, 2002 (incorporated by reference
to Exhibit 3.5 of the Form 10-KSB filed on May 8, 2003).
4.1 2001 Stock Incentive Plan, dated November 1, 2001
(incorporated by reference to Exhibit 10 of the Form S-8
filed on December 10, 2001).
4.2 Non-Employee Directors and Consultants Retainer Stock Plan,
dated January 30, 2002 (incorporated by reference to Exhibit
4.1 of the Form S-8 filed on January 31, 2002).
4.3 Amended and Restated Stock Incentive Plan, dated January 30,
2002 (incorporated by reference to Exhibit 4.2 of the Form
S-8 filed on January 31, 2002).
4.4 Form of Subscription Agreement Between the Registrant and
investors, dated February 12, 2002 (including the following
exhibits: Exhibit A: Form of Notice of Conversion; Exhibit
B: Form of Registration Rights Agreement; Exhibit C: Form of
Debenture; and Exhibit D: Form of Opinion of Registrant's
Counsel) (the following to this agreement have been omitted:
Exhibit E: Board Resolution; Schedule 3(A): Subsidiaries;
Schedule 3(C): Capitalization; Schedule 3(E): Conflicts;
Schedule 3(G): Material Changes; Schedule 3(H): Litigation;
Schedule 3(L): Intellectual Property; Schedule 3(N): Liens;
and Schedule 3(T): Certain Transactions) (incorporated by
reference to Exhibit 4.4 of the Form 10-QSB filed on May 20, 2002).
4.5 Escrow Agreement between the Registrant, First Union Bank,
and May Davis Group, Inc., dated February 12, 2002
(incorporated by reference to Exhibit 4.5 of the Form 10-QSB
filed on May 20, 2002).
4.6 Form of Escrow Agreement between the Registrant, Joseph B.
LaRocco, Esq., and investors, dated February 12, 2002
(incorporated by reference to Exhibit 4.6 of the Form 10-QSB
filed on May 20, 2002).
4.7 Security Agreement (Stock Pledge) between the Registrant and
investors, dated February 12, 2002 (incorporated by
reference to Exhibit 4.7 of the Form 10-QSB filed on May 20, 2002).
10.1 Consulting Agreement between the Registrant and Allan
Schwabe, dated November 1, 2000 (incorporated by reference
to Exhibit 10.1 of the Form 10-KSB filed on April 18, 2002).
10.2 Consulting Agreement between the Registrant and Cameron
House Publishing, LLC, dated April 1, 2001 (incorporated by
reference to Exhibit 10.2 of the Form 10-KSB filed on April
18, 2002).
10.3 Consulting Agreement between the Registrant and 519021 BC.
Ltd., dated April 1, 2001 (incorporated by reference to
Exhibit 10.3 of the Form 10-KSB filed on April 18, 2002).
10.4 Employment Agreement between the Registrant and Richard
Lajeunesse, dated April 1, 2001 (incorporated by reference
to Exhibit 10.4 of the Form 10-KSB filed on April 18, 2002).
10.5 Finder's Fee Agreement for Financing between the Registrant
and Allen Schwabe, dated April 1, 2001 (incorporated by
reference to Exhibit 10.5 of the Form 10-KSB filed on April
18, 2002).
10.6 Consulting Agreement between the Registrant and Michael Tan,
dated May 1, 2001 (incorporated by reference to Exhibit 10.6
of the Form 10-KSB filed on April 18, 2002).
10.7 Consulting Agreement between the Registrant and Market Force
Inc., dated May 3, 2001 (incorporated by reference to
Exhibit 10.7 of the Form 10-KSB filed on April 18, 2002).
10.8 Employment Agreement between the Registrant and Cameron
Robb, dated July 1, 2001 (incorporated by reference to
Exhibit 10.8 of the Form 10-KSB filed on April 18, 2002).
10.9 Independent Contractor/Consulting Agreement between the
Registrant and Brent Fouch, dated September 1, 2001
(incorporated by reference to Exhibit 10 of the Form S-8
filed on October 4, 2001).
10.10 Independent Contractor/Consulting Agreement between the
Registrant and Cameron Robb, dated November 1, 2001
(incorporated by reference to Exhibit 10 of the Form S-8
filed on December 10, 2001).
10.11 Independent Contractor/Consulting Agreement between the
Registrant and Michael Tan, dated November 1, 2001
(incorporated by reference to Exhibit 10 of the Form S-8
filed on December 10, 2001).
10.12 Employment Agreement between the Registrant and Jerry Dix,
dated February 1, 2002 (incorporated by reference to Exhibit
10.12 of the Form 10-KSB filed on April 18, 2002).
10.13 Employment Agreement between the Registrant and Don
Boudewyn, dated February 1, 2002 (incorporated by reference
to Exhibit 10.13 of the Form 10-KSB filed on April 18, 2002).
10.14 Consulting Services Agreement between the Registrant and
Steve Lipman, dated February 6, 2002 (incorporated by
reference to Exhibit 10.14 of the Form 10-KSB filed on April 18, 2002).
10.15 Consulting Services Agreement between the Registrant and
Robert Kirish, dated February 6, 2002 (incorporated by
reference to Exhibit 10.15 of the Form 10-KSB filed on April 18, 2002).
10.16 Employment Agreement between the Registrant and Brian Corty,
dated March 1, 2002 (incorporated by reference to Exhibit
10.16 of the Form 10-KSB filed on April 18, 2002).
10.17 Employment Agreement Amendment between the Registrant and
Don Boudewyn, dated April 1, 2002 (incorporated by reference
to Exhibit 10.17 of the Form 10-KSB filed on April 18, 2002).
10.18 Consulting Services Agreement between the Registrant and Air
Communications, Inc., dated February 18, 2002 (incorporated
by reference to Exhibit 10.18 of the Form 10-QSB filed on
August 27, 2002).
10.19 Consulting Services Agreement between the Registrant and
Asher Avitan, dated May 1, 2002 (incorporated by reference
to Exhibit 10.19 of the Form 10-QSB filed on August 27, 2002).
10.20 Consulting Services Agreement between the Registrant and
Marc J. Burling, dated May 1, 2002 (incorporated by
reference to Exhibit 10.20 of the Form 10-QSB filed on
August 27, 2002).
10.21 Consulting Agreement between the Registrant and VMarketing
Ltd., dated May 1, 2002 (incorporated by reference to
Exhibit 10.21 of the Form 10-QSB filed on August 27, 2002).
10.22 Consulting Services Agreement between the Registrant and Dan
Bell, dated May 1, 2002 (incorporated by reference to
Exhibit 10.22 of the Form 10-QSB filed on August 27, 2002).
10.23 Consulting Agreement between the Registrant and MONBARR
Holdings, dated May 20, 2002 (incorporated by reference to
Exhibit 10.23 of the Form 10-QSB filed on August 27, 2002).
10.24 Consulting Services Agreement between the Registrant and
Paul Levinson, dated May 24, 2002 (incorporated by reference
to Exhibit 10.24 of the Form 10-QSB filed on August 27, 2002).
10.25 Consulting Services Agreement between the Registrant and
Donna Buys, dated June 12, 2002 (incorporated by reference
to Exhibit 10.26 of the Form 10-QSB filed on August 27, 2002).
10.26 Consulting Services Agreement between the Registrant and
Curtis Mearns, dated June 17, 2002 (incorporated by
reference to Exhibit 10.27 of the Form 10-QSB filed on
August 27, 2002).
10.27 Consulting Services Agreement between the Registrant and
Jones Family Trust, dated June 20, 2002 (incorporated by
reference to Exhibit 10.28 of the Form 10-QSB filed on
August 27, 2002).
10.28 Consulting Agreement between the Registrant and Service
Group, dated July 5, 2002 (incorporated by reference to
Exhibit 10.28 of the Form 10-QSB filed on December 3, 2002).
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the Form 10-QSB filed on August 27, 2002).
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350) (see below).
99.2 Patent Application, dated March 28, 2002 (incorporated by
reference to Exhibit 99.2 of the Form 10-KSB filed on May 8, 2003).