U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number: 333-61424
US WIRELESS ONLINE, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 82-0505220
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
745 WEST MAIN STREET, SUITE 100, LOUISVILLE, KENTUCKY 40202
(Address of principal executive offices)
(502) 213-3700
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under plan confirmed by a court. Yes ____ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
The aggregate number of shares issued and outstanding of the issuer's common
stock as of June 30, 2004 was 15,485,806 shares of $0.001par value.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
FORM 10-QSB
U.S. WIRELESS ONLINE, INC.
INDEX
Page
----
PART I.. Financial Information
Item 1. Financial Statements 3
Consolidated Balance Sheets (Assets) - June 30, 2004 (Unaudited) and
December 31, 2003. 3
Consolidated Balance Sheets (Liabilities and Stockholders' Equity) - June
30, 2004 (Unaudited) and December 31, 2003. 4
Statements of Operations (Unaudited) - Three months ended June 30, 2004
and 2003 5
Statements of Cash Flows (Unaudited) - Three months ended June 30,
2004 and 2003 6-7
Notes to financial statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial Condition or
Plan of Operation 9
Item 3. Controls and Procedures 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
(Inapplicable items have been omitted)
2
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -------------------------------
In the opinion of management, the accompanying unaudited financial statements
included in this Form 10-QSB reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods presented. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year.
U.S. WIRELESS ONLINE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30, December 31,
2004 2003
----------- -------------
(unaudited)
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . . $ 1,231 $ -
Accounts Receivables(Net of Allowance of $2,600) 126,672 148,568
Prepaid Expenses . . . . . . . . . . . . . . . . 20,042 22,125
----------- -------------
Total Current Assets . . . . . . . . . . . . . 147,945 170,693
----------- -------------
Property & Equipment (Net) . . . . . . . . . . . . 504,642 683,612
----------- -------------
Other Assets
Client Base (Net). . . . . . . . . . . . . . . 82,000 120,000
Deposits . . . . . . . . . . . . . . . . . . . 20,549 2,048
----------- -------------
Total Other Assets . . . . . . . . . . . . . . 102,549 122,048
----------- -------------
Total Assets . . . . . . . . . . . . . . . . . $ 755,136 $ 976,353
=========== =============
The accompanying notes are an integral part of these financial statements.
3
U.S. WIRELESS ONLINE, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
2004 2003
----------- ---------------
(unaudited)
Current Liabilities
Bank Overdrafts. . . . . . . . . . . . . . . . . . . . . . . . $ - $ 28,438
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . 893,243 806,964
Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . 93,120 75,038
Deffered Revenue . . . . . . . . . . . . . . . . . . . . . . . 19,722 19,722
Current Portion of Long term debt. . . . . . . . . . . . . . . 1,523,419 1,556,073
----------- ---------------
Total Current Liabilities. . . . . . . . . . . . . . . . . . 2,529,504 2,486,235
----------- ---------------
Long-Term Debt
Convertible Debentures . . . . . . . . . . . . . . . . . . . . 316,844 316,844
Notes Payable. . . . . . . . . . . . . . . . . . . . . . . . . 1,438,120 1,213,838
Note Payable - related party . . . . . . . . . . . . . . . . . 250,000 251,636
Lease Obligation . . . . . . . . . . . . . . . . . . . . . . . 4,917 11,639
Current Portion of Long Term Debt. . . . . . . . . . . . . . . (1,523,419) (1,556,073)
----------- ---------------
Total Long Term Debt . . . . . . . . . . . . . . . . . . . . 486,462 237,884
----------- ---------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . 3,015,966 2,724,119
----------- ---------------
Stockholders' Equity
Common Stock, Authorized 100,000,000 Shares, $.001 Par Value,
Issued and Outstanding 15,485,806 shares . . . . . . . . . . 15,486 15,486
Additional Paid in Capital . . . . . . . . . . . . . . . . . . 3,423,258 3,423,258
Retained Earnings (Deficit). . . . . . . . . . . . . . . . . . (5,699,574) (5,186,509)
----------- ---------------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . (2,260,830) (1,747,766)
----------- ---------------
Total Liabilities and Stockholders' Equity . . . . . . . . . $ 755,136 $ 976,353
=========== ===============
The accompanying notes are an integral part of these financial statements.
4
U.S. WIRELESS ONLINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues . . . . . . . . . . . . . . 349,712 428,550 726,806 840,532
Cost of Sales. . . . . . . . . . . . 253,738 229,565 499,467 444,747
------------ ------------ ------------ ------------
Gross Profit (Loss). . . . . . . . . 95,974 198,985 227,339 395,785
Operating Expenses
General & Administrative . . . . . 347,484 464,010 711,714 761,797
------------ ------------ ------------ ------------
Total Operating Expenses . . . . 347,484 464,010 711,714 761,797
------------ ------------ ------------ ------------
Net Operating Income (Loss). . . . . (251,510) (265,025) (484,375) (366,012)
------------ ------------ ------------ ------------
Other Income(Expense)
Acquisition Expense. . . . . . . . - (250,000) - (250,000)
Interest Expense . . . . . . . . . (13,793) (13,738) (28,690) (25,991)
------------ ------------ ------------ ------------
Total Other Income(Expense). . . (13,793) (263,738) (28,690) (275,991)
------------ ------------ ------------ ------------
Net Income (Loss). . . . . . . . . . $ (265,303) $ (528,763) $ (513,065) $ (642,003)
============ ============ ============ ============
Net Income (Loss) Per Share. . . . . $ (0.02) $ (0.03) $ (0.03) $ (0.04)
============ ============ ============ ============
Weighted Average Shares Outstanding. 15,485,806 15,485,806 15,485,806 15,485,806
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
5
U.S. WIRELESS ONLINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended
June 30,
------------------------
2004 2003
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . $(513,065) $(642,003)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operations:
Depreciation & Amortization. . . . . . . . . . . . . . . . 201,378 139,823
Shares issued for Services . . . . . . . . . . . . . . . . - 24,282
Bad Debt Expense . . . . . . . . . . . . . . . . . . . . . - 2,112
Change in Assets and Liabilities
Gain on Sale of Equipment. . . . . . . . . . . . . . . . . (42,000)
Increase (Decrease) in Bank Overdraft . . . . . . . . . . (28,438) 54,804
(Increase) Decrease in Accounts Receivable . . . . . . . . 21,896 3,792
(Increase) Decrease in Deferred Revenue. . . . . . . . . . - (17,394)
(Increase) Decrease in Deposits and Prepaids . . . . . . . (16,418) 9,661
Increase (Decrease) in Accounts Payable/ Accrued Expenses. 104,361 30,156
------------ ----------
Net Cash Provided(Used) by Operating Activities . . . . . . . (272,286) (394,767)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of Property and Equipment. . . . . . . . . . . . . . . . 77,159 -
Purchases of Property and Equipment . . . . . . . . . . . . . (29,705) (17,443)
------------ ----------
Net Cash Provided (Used) by Investing Activities. . . . . . . 47,454 (17,443)
------------ ----------
The accompanying notes are an integral part of these financial statements.
6
U.S. WIRELESS ONLINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (CONTINUED)
For the Six
Months Ended
June 30,
-------- -----------
2004 2003
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on Long Term Debt . . . . . . . . . . . (62,185) (103,751)
Proceeds from Long Term Debt. . . . . . . . . . 288,248 500,000
Proceeds from Stock Issuance. . . . . . . . . . - 12,000
--------- ----------
Net Cash Provided(Used) by Financing Activities 226,063 408,249
--------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS . 1,231 (3,961)
--------- ----------
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD . . . - 3,961
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD. . . . $ 1,231 $ -
========= ==========
Cash Paid For:
Interest. . . . . . . . . . . . . . . . . . . . $ - $ -
========= ==========
Income Taxes. . . . . . . . . . . . . . . . . . $ - $ -
========= ==========
Non-Cash Activities:
Shares issued for Services. . . . . . . . . . . . $ - $ 24,282
========= ==========
The accompanying notes are an integral part of these financial statements.
7
U.S. WIRELESS ONLINE, INC.
Notes to the Consolidated Financial Statements
June 30, 2004
GENERAL
- -------
U.S. Wireless Online, Inc. (the Company) has elected to omit substantially all
footnotes to the financial statements for the three months and six months ended
June 30, 2004 since there have been no material changes (other than indicated in
other footnotes) to the information previously reported by the Company in their
Annual Report filed on Form 10-KSB for the fiscal year ended December 31, 2003.
UNAUDITED INFORMATION
- ----------------------
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all adjustments which
are, in the opinion of management, necessary to properly reflect the results of
the interim period presented. The information presented is not necessarily
indicative of the results from operations expected for the full fiscal year.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
When used in this report, the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," "intend," and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act
of 1934 regarding events, conditions, and financial trends that may affect the
Company's future plans of operations, business strategy, operating results, and
financial position. Persons reviewing this report are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Such factors are discussed under the "Item 2. Management's Discussion
and Analysis of Financial Condition or Plan of Operations," and also include
general economic factors and conditions that may directly or indirectly impact
the Company's financial condition or results of operations.
OUR HISTORY AND BUSINESS
We were formed as a Nevada corporation under the name Llebpmac, Inc. on May 4,
1998. We originally incorporated to open and operate a restaurant. From 1998
through early 2000 we conducted initial research but ultimately did not open the
restaurant. On October 2, 2000, our shareholders approved a two for one forward
split of our outstanding common stock and we changed our purpose to be a
wholesale snack food merchandiser. On October 10, 2000, we entered into a
license agreement to market potato chips in Japan and other Asian markets under
the Idaho Chips trademark. On November 1, 2000, we changed our name to Cach
Foods, Inc. to reflect our change in purpose.
Cach Foods, Inc. became a public company on October 17, 2001. From October 2001
through April 2003, we conducted research on producing, manufacturing and
distributing potato chips and other snack foods. In April of 2003, our license
agreement to market Idaho Chips expired and we ceased our snack food activities.
On May 12, 2003, we entered an agreement and plan of reorganization with US
Wireless Online, Inc. The agreement closed on May 19, 2003. Prior to closing,
the Company effected a 0.48 to one reverse split of the then 12,152,000
currently issued and outstanding shares into 5,832,960 shares. Our former
president and director then cancelled 3,820,000 post-split shares that he owned.
As a result of this series of transactions, 11,492,565 post-reverse split shares
of Cach Foods common stock were exchanged for all of the issued and outstanding
shares of US Wireless Online, Inc. making US Wireless Online, Inc. a
wholly-owned subsidiary of Cach Foods.
Pursuant to the Agreement, the former officers and directors of Cach Foods
resigned and David M. Ragland, Doug Keeney, Dan Burke, Sr., and James D. Murphy
became directors of the Company and the Company changed its name from Cach
Foods, Inc. to US Wireless Online, Inc.
US Wireless Online incorporated in 2000 to offer high-speed, low cost Internet
access to small and medium sized businesses. After six months of development
and beta testing, US Wireless Online inaugurated commercial service in Atlanta,
Georgia on January 1, 2001. In February 2001, US Wireless Online successfully
bid for certain operating assets of SENETS, a Multiple Dwelling Unit ("MDU")
operator then undertaking reorganization under Chapter 11 of the US Bankruptcy
Code. US Wireless Online used these assets to upgrade the Atlanta network. In
May 2001, US Wireless Online successfully acquired the wireless operations of
Darwin, Inc., a hybrid MDU/wireless operator in Kentucky then also undertaking
9
reorganization under Chapter 11. Through the Darwin acquisition, US Wireless
Online acquired markets in Kentucky and Ohio and acquired a carrier-grade
Network Operations Center.
PRODUCTS
US Wireless Online's core service is high-speed, wireless Internet access for
business. Services are provided to businesses in Louisville, Kentucky;
Cincinnati, Columbus and Dayton, Ohio; and Atlanta, Georgia.
US Wireless Online sells three products within these areas- high-speed Internet
access (priced in four tiers from 128 kilobits to 2 megabits); Wi-Fi (wireless
broadband) networks; and broadband connections in two convention centers.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2004 AND 2003
Revenues for US Wireless for the three-month period ended June 30, 2004 were
$349,712 with a cost of sales of $253,738 resulting in a gross profit of
$95,974. Revenues for the three-month period ended June 30, 2003 were $428,550
with a cost of sales of $229,565 and a resulting gross profit of $198,985.
Operating expenses and general and administrative expenses during the
three-month period ended June 30, 2004 were $347,484 resulting in a net
operating loss of $251,510. Interest expense during this period was $13,793. As
a result of the foregoing, we realized a net loss of $265,303 during the
three-month period ended June 30, 2004. Operating expenses and general and
administrative expenses during the three-month period ended June 30, 2003 were
$464,010 and resulted in a net operating loss for the period of $265,025.
Interest expense during the three-month period ended June 30, 2003 was $13,738
and the Company recorded an acquisition expense of $250,000. As a result, our
net loss for the period was $528,738.
All revenues during the three-month period ended June 30, 2004 derived from US
Wireless' Internet service activities. Our predecessor, Cach Foods, did not
generate any revenue from inception through May of 2003. Pursuant to the May 19,
2003 Agreement and Plan of Reorganization, U.S. Wireless became a wholly-owned
subsidiary of Cach Foods, Inc. and the Company's name was changed to U.S.
Wireless Online, Inc. The financial figures reported for the three-month period
ended June 30, 2003 in this report's financial statements reflect operations
conducted by both US Wireless Online, the privately held company prior to the
reorganization with Cach Foods and US Wireless Online, the public company
subsequent to the May 19, 2003 reorganization. The majority of expenses during
the three-month period ended June 30, 2004 consisted of salaries, office
rentals, legal, accounting and other professional fees.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2004 AND 2003
Revenues for US Wireless for the six-month period ended June 30, 2004 were
$726,806 with a cost of sales of $499,467 resulting in a gross profit of
$227,339. Revenues for the six-month period ended June 30, 2003 were $840,532
with a cost of sales of $444,747 and a resulting gross profit of $395,785.
Operating expenses and general and administrative expenses during the six-month
period ended June 30, 2004 were $711,714 resulting in a net operating loss of
$484,375. Interest expense during this period was $28,690. As a result of the
foregoing, we realized a net loss of $513,065 during the six-month period ended
June 30, 2004. Operating expenses and general and administrative expenses during
the six-month period ended June 30, 2003 were $761,797 and resulted in a net
operating loss for the period of $366,012. Interest expense during the six-month
period ended June 30, 2003 was $25,991 and the Company recorded an acquisition
expense of $250,000. As a result, our net loss for the six-month period was
$642,003.
10
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2004, total assets were $755,136. Total current assets were $147,945
consisting of $1,231 in cash, $126,672 in accounts receivable and $20,042 in
prepaid expenses. We also had property and equipment valued at $504,642. Other
assets consisted of our client base valued at $82,000 and $20,549 in deposits.
At December 31, 2003, total assets were $976,353 consisting of $170,693 in
current assets, $683,612 in property and other assets of $122,048.
Total liabilities at June 30, 2004 were $3,015,966. Current liabilities were
$2,529,504 consisting of $893,243 in accounts payable, $93,120 in accrued
expenses and $19,722 in deferred revenue and $1,523,419 in current portion of
long term debt. Other liabilities at June 30, 2004 consisted of $316,844 in
convertible debentures, $1,438,120 in notes payable, $250,000 in notes payable
to David Hayes, a shareholder, and David Ragland, the Chairman of the Board of
US Wireless, and $4,917 in long-term lease obligations and $(1,523,419) in
current portion of long term debt. Notes payable at December 31, 2003 include a
$250,000 note payable that was issued to an unrelated party in May of 2003 to
help cover acquisition expenses. At December 31, 2003 the $250,000 note was in
default.
Total liabilities at December 31, 2003 were $2,724,119 consisting of $2,486,235
in current liabilities and $237,884 in long-term debt.
Management believes that we have sufficient anticipated accounts receivable on
hand to meet our immediate operating expenses. However, we will require
additional funding to reduce our liabilities. We propose to fund our continuing
operations through the sale of common stock, however, we cannot guarantee that
we will generate sufficient proceeds to fund our operations and settle our
debts. If we require additional capital, we may seek advances from officers or
shareholders, or explore other debt financing strategies.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on the evaluation of
our disclosure controls and procedures (as defined in Securities Exchange Act of
1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules
13a-15(b) or 15d-15(b), our Chief Executive Officer and our Chief Financial
Officer have concluded that as of the end of the period covered by this report,
our disclosure controls and procedures were effective.
(b) Changes in internal controls. There were no changes in our internal control
over financial reporting that occurred during our most recent fiscal quarter
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT NUMBER TITLE LOCATION
31.1 Certification of Chief Executive Officer pursuant to Attached
Section 302 of the Sarbanes- Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Attached
Section 302 of the Sarbanes- Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to Attached
Section 906 of the Sarbanes- Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to Attached
Section 906 of the Sarbanes- Oxley Act of 2002
11
REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by U.S. Wireless Online, Inc. during the
three-month period covered by this report.
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
US WIRELESS ONLINE, INC.
Date: August 23, 2004 By: /s/ Douglas Keeney
-------------------------
Douglas Keeney
Chief Executive Officer
Date: August 23, 2004 By: /s/ Daniel P. Burke, Sr.
-------------------------------
Daniel P. Burke, Sr.
Chief Financial Officer
12