UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
Commission file Number 333-38567
WORLD WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0549700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2441 South 3850 West, West Valley City, Utah 84120
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (801) 575-6600
Indicate by check mark whether registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes - x No - .
As of July 30, 1998, there were 11,237,144 shares of the
registrant's Common Stock, par value $0.001, issued and outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WORLD WIRELESS COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
June 30, December 31,
1998 1997
----------- -----------
Current Assets
Cash and cash equivalents $ 1,151,201 $ 218,234
Investment in securities available for sale 170,242 188,354
Trade receivables, net allowance 607,584 345,433
Other receivables 119,371 49,208
Inventory 490,658 496,432
Prepaid expenses 232,143 232,143
----------- -----------
Total Current Assets 2,771,199 1,529,804
----------- -----------
Equipment 2,620,749 1,589,248
Less accumulated depreciation (823,939) (455,985)
----------- -----------
Net Equipment 1,796,810 1,133,263
----------- -----------
Goodwill, net of accumulated amortization 6,969,602 7,214,066
----------- -----------
Other Assets, net of accumulated amortization 444,083 535,154
----------- -----------
Total Assets $11,981,694 $10,412,287
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
WORLD WIRELESS COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1998 1997
----------- ------------
Current Liabilities
Trade accounts payable $ 487,038 $ 524,093
Accrued liabilities 660,804 466,183
Notes payable - current portion 2,557,523 814,925
Capital lease obligation - current portion 381,917 -
----------- -----------
Total Current Liabilities 4,087,282 1,805,201
----------- -----------
Long-Term Liabilities
Notes payable 7,041 34,977
Capital lease obligation 433,018 -
----------- -----------
Total Liabilities 4,527,341 1,840,178
----------- -----------
Stockholders' Equity
Preferred stock - $0.001 par value; 1,000,000
shares authorized; no shares issued - -
Common stock - $0.001 par value; 50,000,000
shares authorized; issued and outstanding:
11,235,186 shares at June 30, 1998 and
10,225,260 shares at December
31, 1997 11,300 10,225
Additional paid-in capital 22,373,489 20,915,068
Unearned compensation - (1,410,509)
Receivable from shareholder (57,097) (18,409)
Accumulated deficit (14,968,581) (11,037,620)
Accumulated other comprehensive income 95,242 113,354
----------- -----------
Total Stockholders' Equity 7,454,353 8,572,109
----------- -----------
Total Liabilities and Stockholders' Equity $11,981,694 $10,412,287
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
WORLD WIRELESS COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 1,058,074 $ 1,183,167 $ 2,366,957 $ 1,875,494
Cost of Sales 900,129 626,449 1,556,577 1,070,097
----------- ----------- ----------- -----------
Gross Profit 157,945 556,718 810,380 805,397
----------- ----------- ----------- -----------
Expenses
Research and development 1,272,763 424,417 1,936,512 1,846,938
Selling, general &
administrative 1,269,140 696,254 2,654,236 1,380,840
Amortization of goodwill 122,232 396,482 244,464 602,996
Interest expense 201,076 13,606 225,657 22,597
----------- ----------- ----------- -----------
Total Expenses 2,865,211 1,530,759 5,060,869 3,853,371
----------- ----------- ----------- -----------
Gain from Sale of SecuriKey
Business - - 319,528 -
----------- ----------- ----------- -----------
Net Loss $(2,707,266) $ (974,041) $(3,930,961) $(3,047,974)
=========== =========== =========== ===========
Basic and Diluted Loss Per
Common Share $ (0.24) $ (0.10) $ (0.36) $ (0.36)
=========== =========== =========== ===========
Weighted Average Number of
Common Shares Used in Per
Share Calculation 11,141,692 9,398,213 10,807,073 8,440,219
=========== =========== =========== ===========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Loss $(2,707,266) $ (974,041) $(3,930,961) $(3,047,974)
Other Comprehensive Income
Unrealized loss on investments
in securities available-
for-sale (18,112) - (18,112) -
----------- ----------- ----------- -----------
Comprehensive Loss $(2,725,378) $ (974,041) $(3,949,073) $(3,047,974)
=========== =========== =========== ===========
</TABLE>
WORLD WIRELESS COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months
Ended June 30,
------------------------
1998 1997
----------- -----------
Cash Flows From Operating Activities
Net loss $(3,930,961) $(3,047,974)
Adjustments to reconcile net loss
to net cash used by operating activities:
Amortization of goodwill 244,464 413,003
Depreciation and amortization of other assets
and debt discount 519,057 91,341
Purchased research and development 300,000 1,258,000
Compensation from stock options granted 506,890 265,500
Valuation allowance on inventory and
other assets 239,066 -
Gain on sale of SecuriKey business (319,528) -
Changes in operating assets and liabilities,
net of effects of business acquired:
Accounts receivable, net of allowance (250,904) (380,126)
Inventory (158,647) (5,840)
Other assets (2,406) 1,792
Accounts payable (37,055) (92,413)
Accrued liabilities 207,025 (405,111)
----------- -----------
Net Cash and Cash Equivalents Used By
Operating Activities (2,682,999) (1,901,828)
----------- -----------
Cash Flows From Investing Activities
Payments for the purchase of property
and equipment (141,231) (404,381)
Proceeds from sale of SecuriKey business 372,499 -
Advance payments to affiliates to be acquired - (133,764)
Loan to a related company (56,410) -
Proceeds from receivable from shareholder 10,000 -
----------- -----------
Net Cash and Cash Equivalents Provided By
(Used By) Investing Activities 184,858 (538,145)
----------- -----------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 1,047,407 3,195,251
Proceeds from borrowings, net of discount 2,900,000 50,000
Principal payments on notes payable (389,665) (135,436)
Principal payments on capital lease obligation (126,634) -
----------- -----------
Net Cash and Cash Equivalents Provided By
Financing Activities 3,431,108 3,109,815
----------- -----------
Net Increase In Cash and Cash Equivalents 932,967 669,842
Cash and Cash Equivalents- Beginning of Period 218,234 37,278
----------- -----------
Cash and Cash Equivalents - End of Period $ 1,151,201 $ 707,120
=========== ===========
(Continued)
WORLD WIRELESS COMMUNICATIONS, INC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Supplemental Cash Flow Information -
For the Six Months
Ended June 30,
-------------------------
1998 1997
----------- -----------
Interest Paid $ 35,306 $ 8,186
Noncash Investing and Financing Activities -
During the six months ended June 30, 1997, $1,970 in long-term debt was
converted into 5,630 shares of common stock at $0.35 per share. The
Company issued 1,798,100 shares of common stock and 201,900 stock options
in exchange for all of the issued and outstanding common stock of Digital
Radio. In January and February 1997, which was prior to the effective date
of the merger, the Company advanced $118,764 to Digital Radio. In
conjunction with the merger, liabilities were assumed as follows:
Fair value of assets acquired $ 1,112,399
Purchased research and development 1,258,000
Goodwill 7,885,075
Common stock issued and stock options granted (8,674,062)
-----------
Liabilities Assumed $ 1,581,412
===========
During the six months ended June 30, 1998, the Company entered into certain
capital leases for computer equipment and related software valued at
$900,993. The Company issued a total of 98,926 shares of common stock of
which 10,000 shares, valued at $75,000, or $7.50 per share, were issued as
a preliminary cost towards obtaining a manufacturing contract, 60,000
shares, valued at $300,000, or $5.00 per share, were issued as payment for
radio technology, 5,000 shares, valued at $25,000, or $5.00 per share, were
issued in exchange for a note receivable, and 256,926 shares were issued on
the exercise of stock options by an employee, for which the Company
received a note in the amount of $47,852.
WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - INTERIM CONDENSED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements are unaudited.
In the opinion of management, all necessary adjustments (which include
only normal recurring adjustments) have been made to present fairly the
financial position, results of operations and cash flows for the periods
presented. Certain information and note disclosure normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the December
31, 1997 annual financial statements of the Company. The results of
operations for the six month period ended June 30, 1998 are not necessarily
indicative of the operating results to be expected for the full year.
NOTE 2-COMMON STOCK
During the second quarter of 1998, the Company issued 176,000 shares on the
exercise of options for which the Company received $62,170 in cash, with an
average exercise price of $0.35 per share.
NOTE 3-ACQUISITION OF PURCHASED RESEARCH & DEVELOPMENT
In May 1998, the Company acquired proprietary and intellectual property
rights in and to spread spectrum radio technology which has been accounted
for as purchased research and development. The acquisition of this
technology provides the Company with the ability to modify and update the
technology for use in its other radio products. The purchase price was
$305,651, of which $300,000 was paid by the issuance of 60,000 common
shares valued at $5.00 per share, with the balance being paid in cash for
closing and related costs. Additionally, the Company loaned $66,450 to the
seller to retire certain business debts. Of this amount, $41,450 was paid
in cash and carries simple interest at 10%. The balance of $25,000 was
advanced through the issuance of 5,000 common shares, valued at $5.00 per
share, to two creditors of the seller. The seller executed an unsecured
promissory note which is due on demand after the earlier of (1)
registration by the Company of the 60,000 shares of common stock or (2)
June 22, 1999.
NOTE 4-BRIDGE LOANS
In May 1998, the Company executed certain bridge loans, in the amount of
$2,500,000. The notes were initially issued with interest at 10%, and later
the notes were modified, retroactively, to bear interest at 16%. The
interest is payable quarterly, commencing on August 15, 1998.
The notes are due on May 15, 1999 and are secured by substantially all of
the assets of the Company. The notes become due earlier on a pro-rated
basis if the Company receives proceeds from issuance of equity securities.
Proceeds from additional issuances to the Company's principal shareholders
are exempt from this requirement. The notes may be voluntarily prepaid,
without penalty or premium, in whole or in part, at any time. Any
prepayment must include all accrued interest on the principal being
prepaid, through the date of prepayment.
In conjunction with these notes, the Company issued warrants to purchase
250,000 shares of common stock at an exercise price of $3.00 per share,
which was later reduced to $0.75 per share. The warrants expire on May 15,
2003. The quantity of warrants are subject to adjustment under certain
circumstances, such as stock splits. In the event the Company fails to
repay the notes at their maturity, the Company can be required to issue
warrants to purchase up to an additional 333,333 shares common stock,
exercisable for up to five years at an exercise price of $2.50 per share,
payable at the rate of 83,333 shares of common stock for each 90-day period
during which the default continues. The Company is obligated to register
the underlying shares and bear the cost burden of such registration.
The detachable warrants had a fair value of $867,856, or $3.47 per warrant
on the date issued, which has been accounted for as a discount of the
related notes and was credit to additional paid-in capital. The remaining
$1,632,144 of the proceeds was allocated to notes payable. The fair value
of the warrants was estimated on the date issued using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of
0.0%, expected volatility of 64.0%, risk-free interest rate of 5.0% and
expected life of the warrants of 5 years. Interest expense from the
amortization of the discount on the notes payable was $108,482 during the
three months ended June 30, 1998.
NOTE 5-REPURCHASE OF UNVESTED EMPLOYEE STOCK OPTIONS
In April 1998, the Board of Directors approved the repurchase of 638,236
unvested employee stock options which were for $6,382, or $0.01 per share
granted during the fourth quarter of 1997. The Company has recognized
compensation expense, relating to these options, of $412,005 in the first
quarter of 1998 and $94,886 in April 1998.
As a result of the repurchase, the Company eliminated $903,619 of
unrecognized deferred compensation.
NOTE 6-SUBSEQUENT EVENTS
In July 1998, the Company entered into a building lease and will bring
together, its corporate headquarters, manufacturing facilities and its main
engineering facilities. The Company anticipates moving into these new
facilities in October 1998.
The lease is for a period of seven years with a monthly lease payment of
$23,922 and annual increases of 2.5%. Total future minimum lease payments
are $2,166,588.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
When used in this discussion, the words "expect(s)", "feel(s)",
"believe(s)", "will", "may", "anticipate(s)" and similar expressions are
intended to identify forward-looking statements. Such statements are
subject to certain risks and uncertainties, which could cause actual
results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements, and are
urged to carefully review and consider the various disclosures elsewhere in
this Form 10-Q.
Three Months Ended June 30, 1998 and 1997
-----------------------------------------
Sales in the six-month period ended June 30, 1998, were $2,366,957 compared
to sales of $1,875,494 during the six-month period ended June 30, 1997. The
Company's principal source of revenue for the six months ended June 30,
1998, was a design and development contract with Williams Telemetry, a
Williams company, in the amount of $1,766,073. Other significant revenues
include contract manufacturing of $283,660 and sales of the Company's own
branded goods of $219,625. Significant revenues for 1997 were derived from
an engineering contract with Kyushu Matsushita Electric Co. ("KME") in the
amount of $1,164,000 and contract manufacturing services, including sales
of SecuriKey products, of $711,494. The SecuriKey business was sold to a
prior employee/shareholder an no revenues were recorded in 1998.
Cost of sales for the six months ended June 30, 1998, were $1,556,577
compared to cost of sales for the six-month period ended June 30, 1997, of
$1,070,097. Cost of sales as a percentage of sales increased from 57% to
66% in the current period. The related gross profit for the six months
ended June 30, 1998 was $810,380 or 34% of sales compared to $805,397 or
43% of sales for the six-month period ended June 30, 1997. The decline in
gross profit resulted from a change in the mix of revenues (fee for
services versus contract manufacturing) and costs charged to engineering
contracts that were not billable.
The Company incurred research and development costs of $1,936,512 during
the six months ending June 30, 1998, relating to the development of
existing proprietary technology that the Company believes it will be able
to sell to existing customers and subsequently modify at the customers'
expense. Additionally, resources were expended for the development of the
Company's proprietary radios. Included in the $1,936,512 is $305,651 of
purchased research and development expense arising out of the acquisition
of radio technology in May 1998. The amount spent on research and
development for the current period was greater than the amount spent for
the six month period ended June 30, 1997 of $1,846,938, of which $1,258,000
was for purchased research and development expense arising out of the
acquisition of Digital Radio in February 1997.
The Company's selling, general and administrative expenses for the six
months ended June 30, 1998 increased to $2,654,236 from $1,380,840 for the
six-month period ended June 30, 1997. Included in the $2,654,236 is
$410,582 of non-cash compensation relating to the grant of stock options in
December 1997. Such increase also reflected a substantial increase in the
number of employees of the Company to approximately 90 in the current year
as compared to approximately 50 employees at June 30, 1997. Subsequent to
June 30, 1998, the Company reduced its employees by approximately 20%. In
addition, the Company increased the number of its higher paid employees as
a result of acquisitions in 1997. The Company also increased staffing in
anticipation of the launch of the Company's proprietary radio products. The
increase in costs was also attributable to its maintenance of duplicate
administrative facilities and related administrative expenses by virtue of
its two business locations in Utah. management anticipates the elimination
of duplicate administrative efforts by consolidating into one facility
during October 1998.
Interest expense for the six months ended June 30, 1998, increased to
$117,175 from $22,597 for the six-month period ended June 30, 1997, which
increase was attributable to the greater amount of the Company's
outstanding borrowings during the current year.
The Company's net loss of $3,822,479 for the six months ended June 30,
1998, represents an increase from the net loss of $3,047,974 for the six
months ended June 30, 1997, as a result of the above items.
During April 1998, the Board of Directors approved the repurchase of
unvested employee stock options at a price of $0.01 per share. These
options were granted during the fourth quarter of 1997. The repurchase
enables the Company to discontinue charging the difference between fair
market value in the stock at the time of option grant and the option
exercise price to operations.
Liquidity and Capital Resources
-------------------------------
The Company's liquidity at June 30, 1998 decreased compared to June 30,
1997. Current assets increased by $815,901, although, short term
borrowings increased by $3,284,583.
In order to sustain operations, the Company borrowed $2,500,000 pursuant to
an offering of units consisting of (a) its Senior Secured Notes, maturing
on or around May 15, 1999 and bearing simple interest at the rate of 16%
per annum, payable quarterly (the "Notes") and (b) warrants to purchase
250,000 shares of the Common Stock exercisable for up to five years from
the date of issuance at an excise price of $2.50 per share (subject to
adjustment under certain circumstances, such as stock splits). Moreover,
in the event the Company fails to pay the Notes at their maturity date, the
Company can be required to issue warrants to purchase up to an additional
333,333 shares of the Company's common stock exercisable for up to five
years at an exercise price of $2.50 per share (subject to adjustment under
certain circumstances), payable at the rate of 83,333 shares of Common
Stock for each 90-day period thereafter during which such default
continues. Such offering was made in a private placement transaction
exempt from registration under the Securities Act of 1933, as amended.
Nevertheless, in management's opinion, the Company will not be able to
satisfy its needs for additional capital through borrowing, but will be
able to meet these needs only by issuing additional equity securities.
Thus, the Company anticipates obtaining additional financing of at least
$5,000,000 through the sale of its equity securities but no such financing
has been consummated. Moreover, there can be no assurance that the Company
will be able to obtain any additional capital or, if so, on terms
acceptable to it.
On December 19, 1997, the Company received initial orders for equipment
from Williams Telemetry, a Williams company. The orders cover a variety of
products, such as the WinGate(TM), radio transmitters and receivers and
spread spectrum transceivers. These radio products were designed by, and
with the WinGate, will be manufactured by the Company and will be used by
Williams Telemetry through its information gathering system. Initial
shipments began during July, 1998 and are anticipated to increase
significantly during calendar 1999. Total shipments under the contract are
expected to be completed in full by the end of the year 2000. If all
expectations are met, sales under the orders would potentially reach $70
million. Order quantities and shipping dates, however, are subject to
adjustment by Williams upon 90-day notice prior to the scheduled delivery
date, if its customers or other factors beyond its control make such
adjustment necessary. At the present time, therefore, orders can be
considered "firm" as to quantities and delivery dates only with respect to
units scheduled for shipment in the following quarter.
The Company also contracted with Williams for project management and
engineering design and support services relative to the Williams Telemetry
network on a fee-for-service basis.
Outlook
-------
The statements contained in this Outlook are based on current expectations.
These statements are forward looking and actual results may differ materially.
Management believes that, as deregulation of natural gas and other
utilities continues, multiple utility suppliers will be serving a given
city, neighborhood, or industrial park. Consequently, it will become more
difficult and time consuming for utility companies to read meters as they
will generally not be the provider to every user in the city or
neighborhood which will increase the cost effectiveness of reading utility
meters remotely. Management believes that the Williams Telemetry Network,
described in detail in the Prospectus dated February 17, 1998, is a viable
alternative to the current practice of manually reading meters.
Additionally, management believes that William's position as an affiliate
of a major transporter of natural gas in the United States positions it to
successfully market its telemetry network, which currently is designed to
use collector and repeater radios supplied by the Company to gather and
transmit data.
Management believes that the Company's relationship with Williams will
result in significant increases in sales of its radio products for use in
the Williams Telemetry Network. Significant increases in sales, however,
would lead to working capital requirements which would not be provided for
from funds generated by the initial sales of the products. The Company is
currently investigating the prospects of a private placement and ultimately
a secondary public offering to meet its working capital and operating
needs. However, there is no assurance that sufficient capital or any
capital will be raised from such endeavors.
The Company entered into a 7-year lease for a 34,000 square foot facility
in West Valley City, Utah. Occupancy date is October 15, 1998. The
Company will consolidate its American Fork, Utah and Salt Lake City, Utah
operations and staff into the new facility. Management expects the new
facility to provide sufficient manufacturing and office space for the
foreseeable future. However, if additional capacity were required,
management would consider out sourcing a portion of the manufacturing
overload.
If a portion of manufacturing is out-sourced, the Company may lose some
control over the following areas: cost, timeliness of deliveries and
quality. However, by out-sourcing a portion of its manufacturing, the
Company could avoid delays and costs associated with the expansion of its
own facilities. The magnitude of any expansion of the Company's
manufacturing capabilities that is required would be a direct function of
the sales increase and manufacturing overload, both of which are unknown at
this time.
The Company anticipates an increase in revenues from the sale and
manufacturing of the Company's proprietary radio products. The Company
will market a line of radios to OEM that incorporate them into products
such as wireless smoke and security alarm systems, ambulatory patient
wireless monitoring systems, retail point-of-sale systems, and the like.
The Company has begun providing initial sales samples, and believes there
is strong customer interest for the products; however, there can be no
assurance that the Company will be able to manufacture or sell sufficient
quantities at adequate gross margins to achieve profitability.
The Company completed development under a contract with (KME) that calls
for royalty payments upon shipment of certain KME products. Management
believes shipments of KME products containing the company's technology will
begin during the third quarter of 1998, and that royalty payments from the
contract will begin during the fourth quarter of 1998. Additionally,
management intends to enter into follow-on contracts with KME , whereby
the Company receives fees during the early stages of the agreement and is
entitled to royalties or gross profit splits based upon its customers'
sales of products into which the technology has been incorporated. It is
management's intent that the fees received will cover the Company's costs.
However, these fixed fee arrangements may not cover all of the Company's
costs incurred in fulfilling any such contract. Royalties or gross profit
splits resulting from sales of products using the technology developed
under the contract would enhance the Company's profitability if and when
received.
In anticipation of obtaining additional design and development contracts,
management must continually recruit and hire additional RF (radio
frequency), software, firmware and digital engineers. It is extremely
difficult, time-consuming and expensive to find engineers qualified in
those fields. There is no assurance the Company will be able to locate and
hire such qualified engineers. Associated with the hiring of each engineer
is the need for test and development equipment, software and work stations,
which increases the Company's cash requirements.
In summary, while management is optimistic about the Company's future, it
is fully aware that anticipated revenue increases from product sales,
design and development contracts and royalty income are by no means
assured, and that if such increases do materialize, the requirements for
capital are substantial, for which there is no present commitment.
Moreover, there can be no assurance that such capital or other financing
will be obtained when needed, or, if so, on terms acceptable to the
Company.
Impact of the Year 2000
-----------------------
Many computer systems experience problems handling dates beyond the year
1999. The Company continues to evaluate its computer systems and believes,
based upon representations from its software suppliers, that its operating
systems are substantially year 2000 compliant. In addition, the Company is
implementing validation procedures designed to evaluate the year 2000
exposure of its significant suppliers, other vendors and customers whose
systems may impact the Company's operations. However, it is impossible for
the Company to monitor the systems of all with whom it interacts, and there
can be no assurance that the failure of their systems would not have
material adverse impacts on the Company's business and operations.
PART II. OTHER INFORMATION
Item 5. Other Information
(a) During the second quarter James L. O'Callaghan joined the Company
as Chief Financial Officer.
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document
--------------------------------------------
1 (10) Loan Agreement dated as of May 15, 1998
2 (10) Letter agreement dated August 7, 1998
Re: Waiver and Amendment of Agreements
3 (10) Letter agreement dated September 11, 1998
Re: Waiver and Amendment of Agreements
4 (27) Financial Data Schedule
REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-k during the
quarter ended June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
World Wireless Communications
Date: October 30, 1998 By: /S/ David D. Singer
---------------------------
David D. Singer
President and Chief Executive Officer
Date: November 2, 1998 By: /S/ James L. O'Callaghan
---------------------------
James L. O'Callaghan
Chief Financial Officer
APPENDIX C
LOAN AGREEMENT
This Loan Agreement dated as of the 15th day of May, 1998 by
and between each party hereto making a loan pursuant to this
Agreement (individually "each Lender" and collectively the "Lender")
and World Wireless Communications, Inc., a Nevada corporation,
having an address at 150 Wright Brothers Drive, Suite 560, Salt
Lake City, Utah 84116 (the "Borrower").
WHEREAS, each Lender is willing to lend to Borrower funds to
enable Borrower to conduct its business operations; and
WHEREAS, Borrower wishes to borrow funds from Lender in order
to conduct such operations;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
OBLIGATIONS
-----------
1.1 Simultaneously with the execution and the delivery of
this Agreement, Lender agrees to lend to Borrower the aggregate sum
of $2,500,000, in the amounts set forth on the signature page
hereto, which is to be used solely by Borrower in the operation of
its business as determined by the Board of Directors of Borrower in
accordance with the business plan previously delivered to Lender,
which amount shall be repaid on May 15, 1999 (the "Loan").
1.2 The Loan shall bear simple interest at the rate of 10%
per annum payable quarterly as provided in, and shall include any
additional expenses payable hereunder or under, the Note (as defined
in Section 1.3 hereof).
1.3 Simultaneously with the execution and delivery of this
Agreement, Borrower shall deliver to each Lender an executed
original of the note in the form of Exhibit A attached hereto for
the amount loaned to Borrower by such Lender (the "Note").
1.4 Simultaneously with the execution and the delivery of
this Agreement, Borrower shall deliver to each Lender an executed
original of the warrants in the form of Exhibit B attached hereto
representing its pro rata share thereof in consideration for the
amount loaned to Borrower by such Lender (the "Warrants").
1.5 Simultaneously with the execution and the delivery of
this Agreement, each Lender and Borrower will execute and deliver
the Pledge/Security Agreement attached hereto as Exhibit C (the
"Pledge/Security Agreement").
1.6 Simultaneously with the execution and the delivery of
this Agreement, each Lender and Borrower will execute and deliver
the Registration Rights Agreement attached hereto as Exhibit D (the
"Registration Rights Agreement").
1.7 Simultaneously with the execution and the delivery of
this Agreement, each Lender will execute and deliver the Pledgee
Representative Agreement attached to the Loan Agreement as Exhibit E.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH LENDER
---------------------------------------------
Each Lender represents and warrants to Borrower that:
2.1 Power and Authority. Each Lender which is a
corporation, limited liability company or partnership is a duly
organized, validly existing entity in good standing under the laws
of its respective state of formation; each Lender has all requisite
power and authority to carry on the business in which it is engaged;
each owns its assets; and each has the power and authority to
execute and deliver this Agreement and to perform all of its
respective obligations hereunder.
2.2 Authorization. This Agreement has been duly and validly
authorized, executed and delivered by each of them; and this Agreement
constitutes the valid and binding obligation of each and is enforceable
against each in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and other similar laws affecting creditors'
rights generally and by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law).
2.3 No Violations. Neither the execution and delivery of
this Agreement, nor the performance of any of their respective
obligations hereunder will violate (or, with the passage of time,
will violate) any material term, covenant, condition, or provision
of any contract (written or unwritten) or any document, certificate
of incorporation, by-law, judgment, decree, order, or regulation of
any court or governmental or regulatory authority by which any
Lender is bound or subject.
2.4 Brokers and Finders. Neither any Lender nor any of
its officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
------------------------------------------
3.1 Corporate Organization; Power and Authority. Borrower
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and has full
corporate power and authority to carry on its business as it is now
being conducted and to own the properties and assets it now owns; is
duly qualified or licensed to do business as a foreign corporation
in good standing in each jurisdiction in which Borrower's failure to
qualify to do business will have a material adverse effect on the
business, prospects, operations, properties, assets or condition
(financial or otherwise) of Borrower. The copies of the Certificate
of Incorporation and By-Laws of Borrower heretofore delivered to
Acquiror are complete and correct copies of such instruments as
presently in effect.
3.2 Authorization Borrower has full corporate power and
authority to enter into this Agreement and to carry out the
transactions contemplated hereby. The Board of Directors of
Borrower has taken all action required by law, Borrower's
Certificate of Incorporation, its By-Laws or otherwise to be taken
by them to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby,
including, without limitation, the issuance of the Notes and the
Warrants, and this Agreement is a valid and binding agreement of
Borrower enforceable in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights.
3.3 No Violations. Neither the execution and delivery of
this Agreement, nor the performance of any of their respective
obligations hereunder will violate (or, with the passage of time,
will violate) any material term, covenant, condition, or provision
of any contract (written or unwritten) or any document, certificate
of incorporation, by-law, judgment, decree, order, or regulation of
any court or governmental or regulatory authority by which Borrower
is bound or subject.
3.4 Capitalization. As of the date hereof, the
authorized capital stock of Borrower consisted of 50,000,000 shares
of common stock, $.001 par value per share, of which 11,077,110
shares were issued and outstanding, and, 1,000,000 shares of
preferred stock, par value $.001 per share, of which no shares were
issued and outstanding. All issued and outstanding shares of
capital stock of Borrower are validly issued, fully paid and
nonassessable, and all securities of the Borrower have been issued
in compliance with all applicable state and federal securities laws.
As of the date hereof, Borrower had outstanding (a) securities
convertible into or exchangeable for Borrower common stock, (b)
options, warrants or other rights to purchase or subscribe for
common stock or securities convertible into or exchangeable for
common stock of Borrower, or (c) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance
of any common stock of the Borrower, any such convertible or
exchangeable securities or any such options, warrants or rights,
totalling 1,327,495 shares.
3.5 Financial Statements; SEC Filings. (a) Borrower
has heretofore delivered to Lender an audited financial statement of
the Company and its subsidiaries for the year ended December 31,
1997 (the "Financial Statement"). The Financial Statement and the
notes thereto are true, complete and accurate and fairly present the
assets, liabilities and financial condition of Borrower as at the
date thereof, and such statement of income and the notes thereto are
true, complete and accurate and fairly present the results of
operations for the period therein referred to all in accordance with
generally accepted accounting principles consistently applied
throughout the period involved.
(b) Borrower has heretofore delivered to each Lender a
copy of its Prospectus dated February 17, 1998 filed with the
Securities and Exchange Commission and its Special Financial Report
filed pursuant to Section 15(d)-2 of the Securities Exchange Act of
1934, receipt of which is acknowledged.
3.6 Title to Properties; Encumbrances. Borrower has good,
valid and marketable title to all the properties and assets which it
purports to own (real, personal and mixed, tangible and intangible),
including, without limitation, all the properties and assets
reflected in the Financial Statement and all the properties and
assets purchased by Borrower since the date of the Financial
Statement. Except as set forth in the Financial Statement or
reflected therein as a capital lease,
all such properties and assets are free and clear of all title
defects or objections, liens, claims, charges, security interests or
other encumbrances of any nature whatsoever, including, without
limitation, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest
retention arrangements, and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature whatsoever
except, with respect to all such properties and assets, (a) liens
shown on the Financial Statement as securing specified liabilities
or obligations and liens incurred in connection with the purchase of
property and/or assets, if such purchase was effected after the date
of the Financial Statement, with respect to which no default exists;
(b) minor imperfections of title, if any, none of which is
substantial in amount, materially detract from the value or impair
the use of the property subject thereto, or impair the operations of
Borrower and which have arisen only in the ordinary course of
business and consistent with past practice since the date of the
Financial Statement; and (c) liens for current taxes not yet due.
With respect to the property and assets it leases, Borrower is in
compliance with such leases, and Borrower holds valid leasehold
interests in such property and assets free of any liens,
encumbrances and security interests of any party other than the
lessors of such property and assets.
3.7 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental
or other regulatory or administrative agency or commission pending
or, to the best knowledge of Borrower, threatened against or
involving Borrower, or which challenges the validity of this
Agreement or any action taken or to be taken by Borrower pursuant to
this Agreement or in connection with the transactions contemplated
hereby; and Borrower does not know or have any reason to know of any
valid basis for any such action, proceeding or investigation.
3.8 Consents and Approvals of Governmental Authorities.
No consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority is
required to be obtained or made by Borrower in connection with the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
3.9 Brokers and Finders. Neither Borrower nor any of its
officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by
this Agreement, except for any liability which Borrower has to Bruce
D. Cowen and James Kelly relating thereto.
3.10 Subsidiaries. Borrower does not own, directly or
indirectly, any capital stock or other equity securities of any
other corporation or have any direct or indirect equity or ownership
interest in any other business, except its wholly-owned subsidiaries
and other entities listed in Section 3.10 of the Disclosure
Schedule.
3.11 Taxes. Borrower has filed all tax returns that are
required to have been filed in any jurisdiction, and has paid all
taxes shown to be due and payable on such returns and all the taxes
and assessments levied upon it or its properties, assets, income or
franchises, to the extent such taxes and assessments have become due
and payable and before they have become delinquent, except for taxes
and assessments the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings
and with respect to which Borrower has established adequate
reserves. To the best of Borrower's knowledge, there are no tax
examinations in progress involving Borrower for any fiscal period or
periods, and no notice of any claim for taxes, whether pending or
threatened, has been received, and no requests for waivers of the
time to assess any such taxes are pending.
3.12 Affiliate Transactions. Except as set forth on
Section 3.12 of the Disclosure Schedule, Borrower is not party to
any contract with any Affiliate of Borrower. "Affiliate" shall
mean, with respect to Borrower, any person or entity that directly
or indirectly controls, is controlled by, or is under common control
with Borrower. For purposes of this definition, "control" of an
entity shall mean the power, directly or indirectly, either to (i)
vote 10% or more of the securities having ordinary voting power for
the election of directors of such entity or (ii) direct or cause the
direction of the management and policies of such entity, whether
through the ownership of voting securities, by contract or
otherwise. Section 3.12 of the Disclosure Schedule sets forth a
complete and accurate list of all of the Affiliates of Borrower.
ARTICLE IV
MISCELLANEOUS PROVISIONS
------------------------
4.1 Notices. All notices or other communications
required or permitted to be given pursuant to this Agreement shall
be in writing and shall be considered as duly given on (a) the date
of delivery, if delivered in person, by nationally recognized
overnight delivery service or by facsimile or (b) three days after
mailing if mailed from within the continental United States by
registered or certified mail, return receipt requested to the party
entitled to receive the same, if to the Borrower, World Wireless
Communications, Inc., 150 Wright Brothers Drive, Suite 560, Salt
Lake City, Utah 84116, with a copy to Law Offices of Stephen R.
Field, 620 Fifth Avenue, New York, New York, Attn: Stephen R. Field,
Esq.; and if to a Lender, at his or its address as set forth in the
books and records of the Lender. Any party may change his or its
address by giving notice to the other party stating his or its new
address. Commencing on the 10th day after the giving of such
notice, such newly designated address shall be such party's address
for the purpose of all notices or other communications required or
permitted to be given pursuant to this Agreement.
4.2 Governing Law. This Agreement and the rights of the
parties hereunder shall be governed by and construed in accordance
with the laws of the State of Utah, without regard to its conflicts
of law principles. All parties hereto (i) agree that any legal suit,
action or proceeding arising out of or relating to this Agreement
shall be instituted only in a federal or state court in Salt Lake
City, Utah or in the State of Colorado, (ii) waive any objection
which they may now or hereafter have to the laying of the venue of
any such suit, action or proceeding, and (iii) irrevocably submit to
the jurisdiction of any federal or state court in Salt Lake City,
Utah or in the State of Colorado in any such suit, action or
proceeding, but such consent shall not constitute a general
appearance or be available to any other person who is not a party to
this Agreement. All parties hereto agree that the mailing of any
process in any suit, action or proceeding in accordance with the
notice provisions of this Agreement shall constitute personal
service thereof.
4.3 Entire Agreement; Waiver of Breach. This Agreement
constitutes the entire agreement among the parties and supersedes
any prior agreement or understanding among them with respect to the
subject matter hereof, and it may not be modified or amended in any
manner other than as provided herein; and no waiver of any breach or
condition of this Agreement shall be deemed to have occurred unless
such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver
of any subsequent breach or condition of a like or different nature.
4.4 Binding Effect; Assignability. This Agreement and
all the terms and provisions hereof shall be binding upon and shall
inure to the benefit of the parties and their respective heirs,
successors and permitted assigns. This Agreement and the rights of
the parties hereunder shall not be assigned except with the written
consent of all parties hereto.
4.5 Captions. Captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit
or extend the scope or intent of this Agreement or any provision hereof.
4.6 Number and Gender. Wherever from the context it
appears appropriate, each term stated in either the singular or the
plural shall include the singular and the plural, and pronouns
stated in either the masculine, the feminine or the neuter gender
shall include the masculine, feminine and neuter.
4.7 Severability. If any provision of this Agreement
shall be held invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were
not contained herein.
4.8 Amendments. This Agreement may not be amended except
in a writing signed by all of the parties hereto.
4.9 Survival of Representations and Warranties. The
representations and warranties of each party hereto shall survive
the execution and the delivery of this Agreement until one year from
the date hereof.
4.11 Costs and Expenses. Upon Closing, Borrower shall pay
or reimburse The McCloskey Trust for up to $2,500 of its costs and
expenses incurred in entering into this transaction, including its
reasonable attorneys fees, which amount may be deducted from the
loan proceeds. After the Closing, in the event of any dispute
arising under this Agreement, the prevailing party in such dispute
shall be entitled to recover its costs and expenses, including
attorneys fees, from the other.
IN WITNESS WEREOF, each of the parties has signed this
Agreement as of the date first written above.
WORLD WIRELESS COMMUNICATIONS, INC.
By: /S/ David Singer
----------------------------
David Singer, President
BORROWER
LOAN AMOUNT LENDER
$1,100,000 THE McCLOSKEY TRUST
----------------------------
By: /S/ Thomas D. McCloskey, Jr.
------------------------------
Thomas D. McCloskey, Jr., Trustee
$100,000 DPM INVESTMENT CORP.
------------------------------
BY: /S/Thomas D. McCloskey, Jr.
------------------------------
Thomas D. McCloskey, Jr., Vice President
$100,000 FRYING PAN PARTNERS, LLC.
------------------------------
BY: /S/ David L. Marrs
------------------------------
David L. Marrs, Member
$750,000 KATHRYN R. BRAITHWAITE
------------------------------
BY: /S/ Kathryn R. Braithwaite
------------------------------
Kathryn R. Braithwaite
$200,000 CJL INVESTMENTS, LLC
------------------------------
BY: /S/ John H. Perry, III
------------------------------
John H. Perry, III, Managing - Member
$125,000 SCOTT W. RYAN
------------------------------
BY: /S/ Scott W. Ryan
------------------------------
Scott W. Ryan
$125,000 WARREN PALITZ
------------------------------
BY: /S/ Warren Palitz
------------------------------
Warren Palitz
August 7, 1998
TO: Purchasers of Units consisting of $100,000 principal amount of
10% Senior Secured Notes of World Wireless Communications, Inc. (The
"Company") and one warrant to purchase 10,000 shares of Common Stock
of the Company (individually each a "Lender" and collectively the
"Lenders")
Re: Waiver and Amendment of Agreements
Ladies and Gentlemen:
Reference is made to the Loan Agreement between the
Lenders and the Company dated as of May 15, 1998 (the "Agreement"),
including each note attached thereto as Exhibit A (the "Note"), each
warrant attached thereto as Exhibit B (the "Warrant") and the
Pledge/Security Agreement attached thereto as Exhibit C (the
"Pledge/Security Agreement").
As an inducement for each Lender to waive the default of
the Company under section4(e) of each note and Section 2.2(c)(v) of the
Pledge/Security Agreement, the Company and each Lender agree to amend
the above-referenced documents as described herein:
1. (a) The interest rate of each Note on the first page
shall be changed to "16% per annum," effective as of May 15, 1998.
(b) Section 3(b) of each Note shall be amended to
read as follows, effective as of May 15, 1998:
"Notwithstanding anything contained herein to the
contrary, this Note shall be mandatorily prepaid in the event that
the Maker closes an offering of its securities, whether through one
or more private placement or secondary public offerings, in which
the Maker raises gross proceeds from such transaction or
transactions of at least $2,500,000, or, on a pro rata basis with
the holders of identical notes of the Company, if less than
$2,500,000 is so raised, excluding in any case any funds raised from
Lancer Partners L.P., Lancer Offshore L.P., Michael Lauer and their
affiliates."
(c) Interest on each Note shall be paid commencing
"August 15, 1998," effective as of may 15, 1998.
2. Each Warrant shall be amended to provide that the
purchase price per share shall be "$2.50" in the first paragraph
thereof, effective as of May 15, 1998.
In consideration of the foregoing amendments, each Lender
unconditionally and irrevocably waives the Company's default under
Section 4(e) of each Note and Section 2.2(c)(v) of the Pledge/Security
Agreement for the quarter ended June 30, 1998, including without
limitation, any and all rights remedies set forth therein, effective
as of August 7, 1998.
Except as amended as set forth herein, the Agreement, each
Note, each Warrant and the Pledge/Security Agreement shall continue
in full force and effect.
If this letter accurately sets forth our understanding,
please sign your name below and return your signed original to us
immediately.
Very truly yours,
WORLD WIRELESS COMMUNICATIONS, INC.
By: /S/ David D. Singer
------------------------------
David D. Singer, President
THE McCLOSKEY TRUST
By: /S/ William R. Jordan /S/ Scott Ryan
- -------------------------------- -----------------------------
William R. Jordan, IV Mr. Scott Ryan
Trustee 111 Presidential Blvd.
P.O. Box 7846 Suite 246
Aspen, CO 81612 Bala Cynwyd, PA 19004
DPM INVESTMENT CORP.
By: /S/ David L. Marrs /S/ Warren Palitz
- --------------------------- -----------------------------
Suite 246 Mr. Warren Palitz
David L. Marrs, Sec/Treas 111 Presidential Blvd.
P.O. Box 7846 Bala Cynwyd, PA 19004
Aspen, CO 81612
FRYING PAN PARTNERS, LLC.
By: /S/David L. Marrs /S/ K. R. Braithwaite
- ---------------------- -----------------------------
David L. Marrs, Member Ms. K.R. Braithwaite
P.O. Box 7846 3267 Paseo Gallita
Aspen, CO 81612 San Clemente, CA 92672-3514
CJL INVESTMENTS, LLC
By: /S/ John H. Perry
- -----------------------
John H. Perry, III, Managing-Member
September 11, 1998
TO: Purchasers of Units consisting of $250,000 principal amount of
10% Senior Secured Notes of World Wireless Communications, Inc. (The
"Company") and one warrant to purchase 25,000 shares of Common Stock
of the Company (individually each a "Lender" and collectively the
"Lenders")
Re: Waiver and Amendment of Agreements
Ladies and Gentlemen:
Reference is made to the Loan Agreement between the
Lenders and the Company dated as of May 15, 1998 (the "Agreement"),
including each note attached thereto as Exhibit A (the "Note"), each
warrant attached thereto as Exhibit B (the "Warrant") and the
Pledge/Security Agreement attached thereto as Exhibit C (the
"Pledge/Security Agreement"), as amended by letter agreement dated
August 7, 1998.
As an inducement for the Company to consummate an offering
of its common stock pursuant to the Confidential Private Placement
Memorandum dated September 9, 1998 (the "Offering"), the Company and
each Lender agree to amend the above-referenced documents as
described herein:
1. Section 3(b) of each Note shall be amended to read as
follows, effective as of May 15, 1998:
"Notwithstanding anything contained herein to the
contrary, this Note shall be mandatorily prepaid in the event that
the Maker closes an offering of its securities, whether through one
or more private placement or secondary public offerings, in which
the Maker raises gross proceeds from such transaction or
transactions of at least $2,500,000, or, on a pro rata basis with
the holders of identical notes of the Company, if less than
$2,500,000 is so raised, excluding in any case any funds raised from
Lancer Partners L.P., Lancer Offshore L.P., Michael Lauer and their
affiliates and except that only 50% of the first $2,500,000 of gross
proceeds raised by the Maker in such transaction or transaction on
or before October 12, 1998 (excluding any funds raised from Lancer
Partners L.P., Lancer Offshore L.P., Michael Lauer and their
affiliates) shall be used to prepay this Note."
2. Each warrant shall be amended to provide that the
purchase price share of common stock of the Company shall be "$0.75"
in the first paragraph thereof, effective as of May 15, 1998.
In consideration of the foregoing amendments each Lender
unconditionally and irrevocably waives the application of the
anti-dilution provisions of each Warrant with respect to the
Offering.
Except as amended as set forth herein, the Agreement, each
Note, each Warrant and the Pledge/Security Agreement shall continue
in full force and effect.
If this letter accurately sets forth our understanding,
please sign your name below and return your signed original to us
immediately.
Very truly yours,
WORLD WIRELESS COMMUNICATIONS, INC.
By: /S/ David D. Singer
------------------------------
David D. Singer, President
THE McCLOSKEY TRUST
By: /S/ Thomas D. McCloskey, Jr. /S/ Scott Ryan
- -------------------------------- -----------------------------
Thomas D. McCloskey, Jr., Mr. Scott Ryan
Trustee 111 Presidential Blvd.
P.O. Box 7846 Suite 246
Aspen, CO 81612 Bala Cynwyd, PA 19004
DPM INVESTMENT CORP.
By: /S/ Thomas D. McCloskey, Jr. /S/ Warren Palitz
- --------------------------- -----------------------------
Suite 246 Mr. Warren Palitz
Thomas D. McCloskey, Jr. , V.P. 111 Presidential Blvd.
P.O. Box 7846 Bala Cynwyd, PA 19004
Aspen, CO 81612
FRYING PAN PARTNERS, LLC.
By: /S/David L. Marrs /S/ K.R. Braithwaite
- ---------------------- ------------------------------
David L. Marrs, Member Ms. K.R. Braithwaite
P.O. Box 7846 3267 Paseo Gallita
Aspen, CO 81612 San Clemente, CA 92672-3514
CJL INVESTMENTS, LLC
By: /S/ John H. Perry
- -----------------------
John H. Perry, III, Managing-Member
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTRED FROM THE
BALANCE SHEET AS OF JUNE 30, 1998, AND STATEMENTS OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,151,201
<SECURITIES> 170,242
<RECEIVABLES> 756,955
<ALLOWANCES> (30,000)
<INVENTORY> 490,658
<CURRENT-ASSETS> 2,771,199
<PP&E> 2,620,749
<DEPRECIATION> (823,939)
<TOTAL-ASSETS> 11,981,694
<CURRENT-LIABILITIES> 4,087,282
<BONDS> 440,059
0
0
<COMMON> 11,300
<OTHER-SE> 7,443,043
<TOTAL-LIABILITY-AND-EQUITY> 11,981,694
<SALES> 2,366,957
<TOTAL-REVENUES> 2,686,485
<CGS> 1,556,577
<TOTAL-COSTS> 1,556,577
<OTHER-EXPENSES> 4,835,212
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225,657
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,930,961)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,930,961)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
