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 JUNE 30, 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 X No .
As of June 30, 2003, the Registrant had 249,324 036 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 JUNE 30, 2003 3
CONDENSED CONSOLIDATED STATEMENTS OF
LOSSES FOR THE SIX AND THREE MONTHS ENDED
JUNE 30, 2003 AND JUNE 30, 2002 4
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR SIX MONTHS ENDED
JUNE 30, 2003 AND JUNE 30, 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
5G WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2003
(Unaudited)
ASSETS
Current Assets
Cash $ 16,009
Accounts Receivable, Net of $5,900 Allowance
for Doubtful Accounts 6,182
Prepaid Expenses and Deposits 139,990
162,181
Property and Equipment, at Cost 205,287
Accumulated Depreciation (95,210)
Net Property and Equipment 110,077
Total Assets 272,258
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Loans and Notes Payable 216,827
Accounts Payable 240,171
Accrued Liabilities 347,448
Total Current Liabilities 804,446
5% Convertible Debentures 250,000
Commitments and Contingencies
Stockholders' Deficiency
Preferred Stock, $0.001 Par Value; 10,000,000
Shares Authorized;
None Issued or Outstanding -
Common Stock $0.001 Par Value; 800,000,000
Shares Authorized;
249,324 036, Issued and Outstanding 249,324
Additional Paid-in Capital 12,723,724
Accumulated Deficit (13,755,236)
Net Stockholders' Deficiency (782,188)
Total Liabilities and
Stockholders' Deficiency 272,258
See Accompanying Notes to Condensed Consolidated Financial Statements
5G WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Three Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Revenues
Equipment Sales $ 54,306 $ - $ 40,326 $ -
Services 17,333 6,011 12,854 6,011
Total Revenues 71,639 6,011 53,180 6,011
Cost of Revenues 57,256 2,437 57,256 2,437
Gross Profit (Loss) 14,383 3,574 (4,076) 3,574
Selling, General and
Administrative Expenses 825,091 3,071,256 603,863 (378,841)
Depreciation and Amortization 32,545 236 16,427 218
Total Operating Expenses 857,636 3,071,492 620,290 (378,623)
Operating Income (Loss) (843,253)(3,067,918) (624,366) 382,197
Gain on Disposition of Assets 2,235 - 2,235 -
Interest Income 43 - 43 -
Interest Expense (4,746) (4,453) (4,746) (4,398)
Net Income (Loss) (845,721)(3,072,371) (626,834) 377,799
Income (Loss) per Common Share
(Basic and Fully Dilutive) (0.00) (0.03) (0.00) 0.01
Weighted Average Common Shares
Outstanding 212,114,509 110,000,000 232,515,786 75,088,064
See Accompanying Notes to Condensed Consolidated Financial Statements
5G WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2003 2002
Cash Flows Used in Operating Activities $(176,788) $(536,592)
Cash Flows Provided by (Used in)
Investing Activities 4,256 (26,715)
Cash Flows Provided by Financing
Activities 183,078 673,229
Net Increase (Decrease) in Cash 10,546 109,922
Cash at Beginning of Period 5,463 213
Cash at End of Period 16,009 110,135
See Accompanying Notes to Condensed Consolidated Financial Statements
5G WIRELESS COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 3003
(Unaudited)
NOTE A - BUSINESS AND BASIS OF PRESENTATION
5G Wireless Communications, Inc. ("5G Wireless") was
incorporated in September 1979. In March 2001, the Company merged
with 5G Partners, a private Canadian partnership, resulting in a name
change to the current name.
In April 2002, 5G Wireless acquired Wireless Think Tank
("WTT"), a privately held entity, acquiring a 100% interest. The
stockholders of Wireless Think Tank were issued 15,387,425 shares of
5G Wireless' common stock in exchange for all the common stock of that
company. The issuance of the shares was recognized in the condensed
consolidated financial statements as $769,371 of compensation expense,
measured at the fair market value of the newly-issued common stock at
the date of issuance, as management determined that the fair value of
the tangible assets of WTT were not material. The accompanying
condensed consolidated financial statements include results of WTT
operations from the date of acquisition. Pro forma information
concerning this acquisition is included in Form 8-K/A filed June 26,
2003.
5G Wireless provides patent pending, innovative wireless
technology which is best known for its recent breakthroughs in
extending the distance, user capacity and non-line-of-sight reception
of wireless services based on 802.11b (Wi-Fi) standards. 5G Wireless
is focused on Wireless Internet Service Providers, University and
Business Campuses, and Municipalities to create large and efficient
Wireless LAN's and WAN's, with far less equipment and expense than
competitors. Revenues are the result of sales of equipment and
subscriber based Internet service.
The accompanying condensed consolidated financial statements
have been prepared on a going concern basis that contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. As shown in the annual audited financial
statements included in Form 10-KSB as of and for the year ended
December 31, 2002, during the years ended December 31, 2002 and 2001,
5G Wireless incurred losses of $6,189,924 and $6,446,987,
respectively. In addition, 5G Wireless' cash flow requirements have
been met by the generation of capital through private placements of 5G
Wireless' common stock. Assurance cannot be given that this source of
financing will continue to be available to 5G Wireless and demand for
5G Wireless' equity instruments will be sufficient to meet its capital
needs. If 5G Wireless is unable to generate profits and unable to
continue to obtain financing for its working capital requirements, it
may have to curtail its business sharply or cease business altogether.
These condensed consolidated financial statements do not
include any adjustments relating to the recoverability and
classification of liabilities that might be necessary should 5G
Wireless be unable to continue as a going concern. 5G Wireless'
continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely
basis, to retain its current financing, to obtain additional
financing, and ultimately to attain profitability.
Management plans to continue raising additional capital through
the offering of private placements during the remainder of the year
ended December 31 2003.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General.
The accompanying unaudited condensed consolidated financial
statements of 5G Wireless Communications, Inc., a Nevada corporation,
and its wholly-owned subsidiary WTT (together, the "Company"), have
been prepared in accordance with the Securities and Exchange
Commission's instructions to Form 10-QSB and Item 310 to Regulation S-
B, 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. All significant intercompany
accounts and transactions are eliminated in consolidation. The
results of operations and cash flows for the periods ended June 30,
2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. The unaudited
condensed 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.
Use of Estimates in the Preparation of Financial Statements.
The preparation of condensed consolidated financial statements
in conformity with United States generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
Significant estimates are incorporated herein by reference to the
Company's consolidated financial statements as of and for the year
ended December 31, 2002 as presented in Form 10-KSB.
Reclassifications.
Certain balances reported in the Company's March 31, 2003, June
30, 2002 and December 31, 2002 consolidated financial statements have
been reclassified to conform to the presentation herein.
Recently issued Accounting Pronouncements.
In December 2002, the Financial Accounting Standards Board
("FASB") issued Statement of Financing Accounting Standards ("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 intend to change to the fair value method.
In April 2003, the FASB issued SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," that
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. This statement is
effective for contracts and hedging relationships entered into or
modified after June 30, 2003, with certain exceptions. Management
does not expect adoption of SFAS No. 149 to have a material impact, if
any, on its financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities
and Equity," that requires companies to classify as liabilities
financial instruments that embody unconditional obligations of the
company to redeem or repurchase the instrument, transfer assets or
settle by issuing a variable number of equity shares under certain
circumstances. It is to be implemented by reporting the cumulative
effect of a change in an accounting principle for financial
instruments created before the issuance date of the statement and
still existing at the beginning of an interim period of adoption.
This statement is effective for financial instruments entered into or
modified after May 31, 2003, with certain exceptions. Management does
not expect adoption of SFAS No. 150 to have a material impact, if any,
on its financial position or results of operations.
NOTE C - STOCK TRANSACTIONS
Preferred Stock.
No shares of preferred stock have been issued or are
outstanding. Dividends, voting rights and other terms, rights and
preferences of the preferred shares have not been designated but may
be designated by the Board of Directors from time to time.
Common Stock.
During the three months ended June 30, 2003 5G Wireless issued
13,390,416 shares to professional consultants for services and
17,419,977 shares for conversion of all 6% convertible debentures, and
canceled 3,500,000 shares that were previously outstanding.
NOTE D - RECENT DEVELOPMENTS
Since June 30, 2003 5G Wireless has issued 2,220,000 shares of
common stock to professional consultants for services, and 432,080
shares of common stock to an officer per an employment agreement.
ITEM 2. PLAN OF OPERATION.
The following discussion should be read in conjunction with the
financial statements of 5G Wireless and notes thereto contained
elsewhere in this report.
Twelve-Month Plan of Operation.
5G Wireless provides patent pending, innovative wireless
technology which is best known for its recent breakthroughs in
extending the distance, user capacity and non-line-of-sight reception
of wireless services based on 802.11b (Wi-Fi) standards. 5G Wireless
is focused on Wireless Internet Service Providers, University and
Business Campuses, and Municipalities to create large and efficient
Wireless Local Area Networks ("LAN's") and Wide Area Networks
("WAN's"), with far less equipment and expense than competitors.
5G Wireless markets both outdoor and indoor Wi-Fi wireless radio
systems that, because of their distance and user capacity, can be used
in both wireless LAN and WAN applications. The outdoor products can
be configured in point-to-point or point-to-multipoint networks that
can reach distances of 8 miles or more in fixed wireless
configurations or up to 1 mile in roaming scenarios using laptops with
off-the-shelf Wi-Fi cards. Based on work in connection with a pending
patent in the areas of antenna design and wireless packet switching,
the systems can more readily penetrate buildings and trees than
competitors, and can handle up to 1000 users.
The indoor product shares many of the same strengths regarding
user capacity and penetration of objects, but is designed for lower
power, lower cost, and indoor distances up to 2,500 feet. Both
products provide unmatched security at both the hardware and software
levels, can transmit voice, data, and video at multi-megabit speeds,
and can work together seamlessly in wireless networks with each other
or with other common wireless network equipment.
Because of these advantages, 5G Wireless is enabling new
customers to put together wireless networks with fewer components that
cost less, perform better, and provide shorter returns on invested
capital.
In 2002 5G Wireless has built a wireless ISP network in New York
State and California. The New York State area focused on expanding
services as a WISP as well as being a research and development area
for 5G Wireless that will continue for the foreseeable future.
5G Wireless has expanded its coverage area in California and
quadrupled its coverage area to include Marina Del Rey, Santa Monica,
Culver City, and Century City. These areas have seen an increase in
the number of subscribers the company has as part of a local WISP
(Wireless Internet Service Provider). The company plans to maintain
this network to showcase a variety of unique network application such
as Voice Over Internet Protocol ("VoIP") and WiFi hotzones while
continuing to add additional clients to the network.
5G Wireless intends to focus on WISP's, university and business
campuses, and municipalities to create large and efficient wireless
LAN's and WAN's, with far less equipment and expense than competitors.
5G Wireless may also enter into a series of joint venture and/or
partnership arrangements to allow for a quicker penetration in key
vertical markets and to establish a new bases of operation. In
addition, the company is seeking relationships with other WISP's who
would like to offer broadband services to their subscriber base.
5G Wireless' 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.
To facilitate this growth, 5G Wireless 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 any acquisition of staff from any potential company acquisitions.
5G Wireless has devoted substantial resources to the build out of
its networks with limited resources applied to its marketing programs.
As a result, 5G Wireless has historically experienced operating losses
and negative cash flow. These operating losses and negative cash
flows may continue through additional periods, however, 5G Wireless is
currently focusing on several new areas of expansion, including the
development of a new market strategy, establishing a credit line,
expanding its networks and hiring more technicians to service its
networks.
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.
5G Wireless has had limited prior operations to date. Since 5G
Wireless' 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
5G Wireless will be able to achieve its business plans. In addition,
5G Wireless has only limited assets. As a result, there can be no
assurance that 5G Wireless will generate significant revenues in the
future; and there can be no assurance that 5G Wireless will operate at
a profitable level. If 5G Wireless is unable to obtain customers and
generate sufficient revenues so that it can profitably operate, 5G
Wireless' business will not succeed. Accordingly, 5G Wireless'
prospects must be considered in light of the risks, expenses and
difficulties frequently encountered in connection with the
establishment of a new business.
5G Wireless 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 $845,721 for the six months ended
June 30, 2003. At June 30, 2003, 5G Wireless had an accumulated
deficit of $13,755,236.
As a result of the fixed nature of many of the company's
expenses, 5G Wireless may be unable to adjust spending in a timely
manner to compensate for any unexpected delays in the development and
marketing of 5G Wireless' products or any capital raising or revenue
shortfall. Any such delays or shortfalls will have an immediate
adverse impact on 5G Wireless' 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 5G Wireless will continue to be significant. Management
anticipates, based on currently proposed assumptions relating to its
operations, that it cannot continue its operations without securing
additional financing. Management anticipates, 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 5G Wireless' plans change or its assumptions change (due to
unanticipated expenses, technical difficulties, or otherwise), the
company 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 5G Wireless' cash assets prove to be
inadequate to meet the company's operational needs, management 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, 5G
Wireless 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 5G Wireless.
(c) Substantial Competition May Affect Ability to Sell Products.
5G Wireless 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 5G Wireless and may be in a better
position than the company to obtain access to attract customers.
There are a number of larger companies that will directly compete with
5G Wireless. Such competition could have a material adverse effect on
5G Wireless' profitability or viability.
(d) 5G Wireless' 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. 5G Wireless'
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. 5G Wireless' technology or
systems may become obsolete upon the introduction of alternative
technologies. If 5G Wireless 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) 5G Wireless' Intellectual Property Protection May Be Inadequate
to Protect Its Proprietary Rights.
5G Wireless has submitted an application to the U.S. Patent and
Trademark Office (see Exhibit 99 to this Form 10-QSB) in connection
with a utility patent. 5G Wireless 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 company and
its products and services. Although 5G Wireless 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 5G Wireless' trademarks or copyrights infringe trademarks or
proprietary rights of others, the company may be required to change
its name or obtain a license. There can be no assurance that 5G
Wireless 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 5G Wireless will have the financial or other
resources necessary to enforce or defend a trademark infringement or
proprietary rights violation action. Moreover, if 5G Wireless'
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 company.
5G Wireless 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 5G
Wireless' know-how, concepts, ideas and documentation. Furthermore,
although 5G Wireless 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 company'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 5G Wireless in general is a speculative venture
necessarily involving some substantial risk. There is no certainty
that the expenditures to be made by 5G Wireless will result in a
commercially profitable business. The marketability of its products
will be affected by numerous factors beyond the control of 5G
Wireless. 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 5G
Wireless will likely have an adverse effect on the company. The exact
effect of these factors cannot be accurately predicted, but the
combination of these factors may result in 5G Wireless 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.
5G Wireless' success is dependent upon the hiring of key
administrative personnel. Only 5G Wireless' three officers have
employment agreements with the company; therefore, there can be no
assurance that other personnel will remain employed by 5G Wireless, or
that the three officers will remain after the termination of such
agreements. Should any of these individuals cease to be affiliated
with 5G Wireless for any reason before qualified replacements could be
found, there could be material adverse effects on the company's
business and prospects. In addition, management has no experience is
managing companies in the same business as 5G Wireless.
In addition, all decisions with respect to the management of 5G
Wireless will be made exclusively by the officers and directors of the
company. Shareholders of 5G Wireless will only have rights associated
with such ownership to make decisions that affect the company. The
success of 5G Wireless, to a large extent, will depend on the quality
of the directors and officers of the company. Accordingly, no person
should invest in the company unless he or she is willing to entrust
all aspects of the management of 5G Wireless to the officers and
directors.
(h) Limitations on Liability, and Indemnification, of Directors
and Officers May Result in Expenditures by Registrant.
5G Wireless' 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 company for monetary damages arising from a breach of
their fiduciary duties as directors. In addition, 5G Wireless' 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
5G Wireless 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 5G Wireless. As a result, certain conflicts of interest
may exist between 5G Wireless 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 5G
Wireless. It is the intention of management, so as to minimize any
potential conflicts of interest, to present first to the board of
directors to 5G Wireless, 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 12% 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 5G Wireless, and the minority
shareholders will not be able to elect a representative to the
company'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 5G Wireless' business.
Payment of dividends, if any, will depend, among other factors, on
earnings, capital requirements, and the general operating and
financial condition of 5G Wireless, 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 5G Wireless. The common stock of 5G Wireless 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 5G Wireless' 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 5G Wireless' 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 5G Wireless 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 5G Wireless 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 5G Wireless
(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, 5G
Wireless' business strategies, continued growth in the company's
markets, projections, and anticipated trends in the company'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 5G Wireless' expectations and
are subject to a number of risks and uncertainties, certain of which
are beyond the company's control. 5G Wireless 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 5G Wireless' products, competitive pricing
pressures, changes in the market price of ingredients used in 5G
Wireless' products and the level of expenses incurred in 5G Wireless'
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. 5G Wireless'
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 the end of the period covered by this
report, 5G Wireless 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 5G Wireless' President. Based upon that
evaluation, they concluded that 5G Wireless' disclosure controls and
procedures are effective in gathering, analyzing and disclosing
information needed to satisfy the company's disclosure obligations
under the Exchange Act.
(b) Changes in internal controls.
There were no significant changes in 5G Wireless' 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 has 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, 5G Wireless'
most critical accounting policies include: non-cash compensation
valuation that affects the total expenses reported in the current
period. The methods, estimates and judgments 5G Wireless uses in
applying these most critical accounting policies have a significant
impact on the results 5G Wireless reports in its financial statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Other than as set forth below, 5G Wireless is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against 5G Wireless has been threatened.
On July 17, 2002, an action was filed against 5G Wireless 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 5G Wireless, 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. 5G Wireless has filed an answer to this complaint, and
asserted certain counterclaims against the plaintiff, including fraud
and breach of contract. 5G Wireless 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. 5G Wireless intends to vigorously
defend this action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
5G Wireless sold the following securities without registration
(restricted) during the three months ended June 30, 2003:
(a) At various times from April 3, 2003 to June 27, 2003, 5G
Wireless issued a total of 8,984,166 shares of common stock to three
individuals and two companies for consulting services rendered to 5G
Wireless. These services were valued at a total of $194,400 (average
price of $0.0126 per share).
(b) On April 30, 2003, 5G Wireless issued 10,000,000 shares of
common stock to one company in conversion of a $50,000 debt owed by 5G
Wireless to this firm (valued at $0.005 per share).
(c) At various times from May 4, 2003 to May 30, 2003, 5G
Wireless issued a total of 7,419,977 shares of common stock in
connection with conversion of convertible debentures issued by 5G
Wireless 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 $0.003
and $0.0205 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 investor as
defined in Rule 502;
- 5G Wireless 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 5G
Wireless 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, 5G Wireless
advised each purchaser of the limitations on resale in the manner
contained in Rule 502(d)2 of this section;
- neither 5G Wireless nor any person acting on its behalf sold the
securities by any form of general solicitation or general
advertising; and
- 5G Wireless 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).
On June 24, 2003, 5G Wireless cancelled a total of 3,100,000
restricted shares of common stock originally issued to one individual
and one company in connection with rent to be paid by 5G Wireless;
they decided not to accept such shares in lieu of the rent payments.
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.
The following reports on Form 8-K were filed during the second
quarter of the fiscal year covered by this Form 10-QSB:
(a) A Form 8-K filed on April 16, 2003 to report a change in 5G
Wireless' certifying account.
(b) An amended Form 8-K filed on June 26, 2003 to report on the
audited financial statements of Wireless Think Tank, as well as
pro forma financial information in connection with this
acquisition.
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: August 14, 2003 /s/ Jerry Dix
Jerry Dix, Chief Executive Officer
Dated: August 14, 2003 /s/ Don Boudewyn
Don Boudewyn, Executive Vice
President/Assistant
Secretary/Treasurer
EXHIBIT INDEX
Number Description
2.1 Agreement and Plan of Reorganization and Merger between
Tesmark, Inc., an Idaho corporation, and 5G Wireless
(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 5G Wireless, 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 5G Wireless, 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 5G Wireless 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 5G Wireless 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 5G Wireless 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 5G Wireless, 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 5G Wireless, 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 5G Wireless and
investors, dated February 12, 2002 (incorporated by
reference to Exhibit 4.7 of the Form 10-QSB filed on May 20, 2002).
4.8 Amended and Restated Non-Employee Directors and Consultants
Retainer Stock Plan, dated June 1, 2003 (incorporated by
reference to Exhibit 4 of the Form S-8 POS filed on June 26, 2003).
10.1 Employment Agreement between 5G Wireless and Jerry Dix,
dated February 1, 2002 (incorporated by reference to Exhibit
10.12 of the Form 10-KSB filed on April 18, 2002).
10.2 Employment Agreement between 5G Wireless and Don Boudewyn,
dated February 1, 2002 (incorporated by reference to Exhibit
10.13 of the Form 10-KSB filed on April 18, 2002).
10.3 Consulting Services Agreement between 5G Wireless and Steve
Lipman, dated February 6, 2002 (incorporated by reference to
Exhibit 10.14 of the Form 10-KSB filed on April 18, 2002).
10.4 Consulting Services Agreement between 5G Wireless and Robert
Kirish, dated February 6, 2002 (incorporated by reference to
Exhibit 10.15 of the Form 10-KSB filed on April 18, 2002).
10.5 Employment Agreement between 5G Wireless and Brian Corty,
dated March 1, 2002 (incorporated by reference to Exhibit
10.16 of the Form 10-KSB filed on April 18, 2002).
10.6 Employment Agreement Amendment between 5G Wireless and Don
Boudewyn, dated April 1, 2002 (incorporated by reference to
Exhibit 10.17 of the Form 10-KSB filed on April 18, 2002).
10.7 Consulting Services Agreement between 5G Wireless 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).
10.8 Consulting Services Agreement between 5G Wireless and Asher
Avitan, dated May 1, 2002 (incorporated by reference to
Exhibit 10.19 of the Form 10-QSB filed on August 27, 2002).
10.9 Consulting Services Agreement between 5G Wireless 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).
10.10 Consulting Agreement between 5G Wireless and VMarketing
Ltd., dated May 1, 2002 (incorporated by reference to
Exhibit 10.21 of the Form 10-QSB filed on August 27, 2002).
10.11 Consulting Services Agreement between 5G Wireless and Dan
Bell, dated May 1, 2002 (incorporated by reference to
Exhibit 10.22 of the Form 10-QSB filed on August 27, 2002).
10.12 Consulting Agreement between 5G Wireless and MONBARR
Holdings, dated May 20, 2002 (incorporated by reference to
Exhibit 10.23 of the Form 10-QSB filed on August 27, 2002).
10.13 Consulting Services Agreement between 5G Wireless and Paul
Levinson, dated May 24, 2002 (incorporated by reference to
Exhibit 10.24 of the Form 10-QSB filed on August 27, 2002).
10.14 Consulting Services Agreement between 5G Wireless and Donna
Buys, dated June 12, 2002 (incorporated by reference to
Exhibit 10.26 of the Form 10-QSB filed on August 27, 2002).
10.15 Consulting Services Agreement between 5G Wireless and Curtis
Mearns, dated June 17, 2002 (incorporated by reference to
Exhibit 10.27 of the Form 10-QSB filed on August 27, 2002).
10.16 Consulting Services Agreement between 5G Wireless 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).
10.17 Consulting Agreement between 5G Wireless 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 5G Wireless (incorporated by reference to
Exhibit 21 of the Form 10-QSB filed on August 27, 2002).
31.1 Rule 13a-14(a)/15d-14(a) Certification (see below).
31.2 Rule 13a-14(a)/15d-14(a) Certification (see below).
32 Section 1350 Certification (see below).
99 Patent Application, dated March 28, 2002 (incorporated by
reference to Exhibit 99.2 of the Form 10-KSB filed on May 8, 2003).