AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 2000
REGISTRATION NO. 333-42774
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------
WORLDWIDE WIRELESS NETWORKS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 7389 88-0286466
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
770 THE CITY DRIVE SOUTH, SUITE 3700
ORANGE, CALIFORNIA 92868
(714) 937-5500
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
------------------------------------
Approximate date of commencement of proposed sale to the public: from time to
time after the effective date of this registration statement. From time to time
after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. / /
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PRICE PER
REGISTERED REGISTERED SHARE
- --------------------------------------- -------------- ------------
Common stock, par value $0.01 per share 9,814,535(1) $ 1.03(1)
Common stock, par value $0.01 per share 1,225,000(2) $ 1.03(1)
Common stock, par value $0.01 per share 930,525(3) $ 1.03(1)
(1) Closing price on October 5, 2000, pursuant to Rule 457(c) under the
Securities Act.
(2) Shares registered pursuant to this prospectus will become issuable upon
the exercise of warrants issued by the registrant.
(3) Shares registered pursuant to this prospectus will become issuable upon
the conversion of convertible debentures issued by the registrant.
THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON THE DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED NOVEMBER 20,2000
PROSPECTUS
11,970,060 shares of common stock
The information in this prospectus may be changed. The selling stockholders may
not sell their common stock until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell common stock, and it is not soliciting an offer to buy common stock, in
any state where the offer or sale of common stock is not permitted. THE SALE OF
COMMON STOCK BY THE SELLING STOCKHOLDERS HAS NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The selling stockholders listed on page 14 of this prospectus are offering for
sale up to 11,970,060 shares of our common stock. All proceeds from the sale of
common stock under this prospectus will go to the selling stockholders. We will
not receive any proceeds from the sale of common stock. Of the 11,970,060 shares
offered in this prospectus, 225,000 shares are issuable upon the exercise of
warrants.
Our common stock is traded under the symbol "WWWN" on the OTC Bulletin Board.
The last reported sale price on the OTC Bulletin Board for our common stock on
October 4, 2000 was $1.03 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
The date of this prospectus is November 20, 2000
-1-
<PAGE>
TABLE OF CONTENTS
PAGE
ITEM 3: SUMMARY INFORMATION AND RISK FACTORS. . . . . . . . . . . . . . 3
ITEM 4: USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 5: DETERMINATION OF OFFERING PRICE. . . . . . . . . . . . . . . . . 13
ITEM 6: DILUTION - NOT APPLICABLE. . . . . . . . . . . . . . . . . . . . 13
ITEM 7: SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . 13
ITEM 8: PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 9: LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 10: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS. . . . . . . 18
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . 19
ITEM 12: DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . 22
ITEM 13: INTERESTS OF NAMED EXPERTS AND COUNSEL . . . . . . . . . . . . . 30
ITEM 16: DESCRIPTION OF THE BUSINESS . . . . . . . . . . . . . . . . . . 31
ITEM 17: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . 38
ITEM 18: DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . 42
ITEM 19: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . 42
ITEM 20: MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 44
ITEM 21: EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . 45
ITEM 22: FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . F-1
ITEM 23: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . . . F-30
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . II-1
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION . . . . . . . . . . II-1
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . II-1
ITEM 27: EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . II-5
ITEM 28: UNDERTAKINGS. . . . . . . . . . . . . . . . . . . . . . . . . . II-8
-2-
<PAGE>
ITEM 3: SUMMARY INFORMATION AND RISK FACTORS
PROSPECTUS SUMMARY
AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS
"WE," "US" OR "WORLDWIDE WIRELESS" MEAN WORLDWIDE WIRELESS NETWORKS, INC., DOING
BUSINESS AS GLOBAL PACIFIC INTERNET IN THE STATE OF CALIFORNIA. THIS SUMMARY
HIGHLIGHTS INFORMATION WHICH IS CONTAINED IN MORE DETAIL ELSEWHERE IN THIS
PROSPECTUS, AND WHICH WE FEEL IS MATERIAL FOR AN INVESTOR TO CONSIDER AND
UNDERSTAND BEFORE MAKING A DECISION TO INVEST IN OUR COMPANY. YOU SHOULD READ
THE ENTIRE PROSPECTUS CAREFULLY.
WORLDWIDE WIRELESS NETWORKS, INC.
Worldwide Wireless Networks, Inc. was incorporated in the state of Nevada on
June 10, 1992 as Second Investors Group, Inc. On June 19, 1998, Second
Investors changed its corporate name to Progressive Environmental Recovery
Corporation. On March 5, 1999, Progressive Environmental changed its corporate
name to Worldwide Wireless Networks, Inc. We were originally organized as a
"blank check" company and our purpose was to seek out investment opportunities
in emerging technology companies. We remained inactive until our reverse merger
with Pacific Link Internet, Inc. ("Pacific Link") in April of 1999. (See:
"Management's Discussion and Analysis - Reverse Merger Treatment.")
As a result of the reverse merger, we acquired the business assets of Pacific
Link, a California corporation doing business as Global Pacific Internet in
California. Pacific Link operated wireless network systems for customers in the
Orange County, California area. Pursuant to the merger agreement, we issued
7,000,000 common shares of Worldwide Wireless in exchange for 500,000 common
shares held by the Pacific Link shareholders, which represented all of that
company's outstanding shares. The directors and officers of Worldwide Wireless
resigned, and the management of Pacific Link filled the vacancies. The former
shareholders of Pacific Link obtained 62.5% of the total voting power of
Worldwide Wireless at that time.
We are a networking solutions company which specializes in providing our
customers with high-speed Internet access using our own wireless network. Other
products we provide include direct service links, which are connections of a
customer's computer network to the Internet via our wireless network, and frame
relay connections, which are wired connections between a customer's computer and
a router which sends the data to the desired end connection. We also provide
web hosting and network consulting. We serve all sizes of commercial
businesses, including the home office market.
We have a short operating history, and have experienced cumulative operating
losses of $3,900,835 in that time, primarily due to continued investments we
have made in an effort to expand our existing network. We have entered into
several private placements of debt and equity securities in order to obtain
expansion capital, including the transactions described elsewhere in this
prospectus, and we will continue to require additional funds to implement our
national and international expansion plans until the time our revenues generated
from internal operations are sufficient to cover all of our capital
requirements. Until then, we anticipate we will be forced to continue to raise
-3-
<PAGE>
funds through the sale of debt and/or equity instruments, which may greatly
dilute the percentage of ownership which our existing shareholders own of our
company. If we are unable to access this capital, then we will be unable to
continue our expansion as planned, and could remain essentially an Orange
County, California network. Management has developed a cost reduction plan
which could be implemented and this plan would allow us to operate profitably,
but with no meaningful expansion or growth.
Large scale commercial operations began in April 1999 and, as of June 30, 2000,
we provided high-speed wireless services to approximately 368 commercial
customers. Our high-speed wireless network currently serves approximately 85% of
the Orange County, California area and, on March 2000, we initiated operations
in Los Angeles County, California, as well. We deliver DSL (Digital Subscriber
Line) and 100 Mbps wireless services to our customers, which are high speed
Internet access options. We opened a co-location facility providing central
office services to 12 customers as of June 30, 2000. To facilitate our market
expansion we hired a direct sales force with support and management teams.
Our name, Worldwide Wireless Networks, was designed to indicate to customers and
others our vision of providing our high-speed Internet access services through
the development of an international network. We are a very young company, and
to date our operations have been primarily focused on growing our Southern
California customer base. With the exception of our investment in Bridge
Technologies, described later in this prospectus, we have no current
international operations or offices. As we mature, our business objective is to
further develop our international operations, as we believe that the wireless
technologies we provide are well-suited for the international marketplace. Due
to a conflict with corporate names in California, Worldwide Wireless is doing
business as "Global Pacific Internet" in California. We are reviewing what, if
anything, can be done to resolve that conflict, while at the same time
determining what actions we may be able to take to further protect the name
Worldwide Wireless Networks in general.
We are incorporated under the laws of the State of Nevada. Our principal
executive offices are located at 770 The City Drive South, Suite 3700, Orange,
California 92868 and our telephone number is (714) 937-5500.
THE OFFERING
Common stock offered by the selling stockholders 11,970,060 shares
of which only 445,157 shares are outstanding as of
the date of this prospectus
Common stock outstanding 12,988,947 shares
USE OF PROCEEDS. We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders. We may, however, receive proceeds from
the exercise of the warrants should the holders of the warrants choose to
exercise them (which is solely in the holders' discretion).
-4-
<PAGE>
RISK FACTORS. An investment in the common stock offered in this prospectus
involves a great deal of risk. See the section called "Risk Factors."
Our OTC Bulletin Board symbol "WWWN"
The information above about our outstanding common stock is based on information
as of November 17, 2000. This information does not include:
(a) 597,150 shares of common stock reserved for issuance upon exercise
of options granted under our 1999 Stock Option Plan;
(b) 392,500 shares of common stock reserved for issuance upon exercise
of options granted to Cliff Bream as part of his separation
agreement with Worldwide Wireless;
(c) 1,225,000 shares of common stock issuable upon exercise of our
outstanding warrants described later in this prospectus;
(d) shares of common stock issuable upon exercise of convertible
debentures; and
(e) shares of common stock issuable under a private equity line of
credit described later in this prospectus.
EXCEPT AS OTHERWISE INDICATED, ALL REFERENCES IN THIS PROSPECTUS TO THE NUMBER
OF SHARES OF COMMON STOCK OUTSTANDING DO NOT INCLUDE ANY OF THESE SHARES.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS HIGHLY SPECULATIVE, INVOLVES A HIGH DEGREE
OF RISK AND SHOULD BE CONSIDERED ONLY BY THOSE PERSONS WHO ARE ABLE TO AFFORD A
LOSS OF THEIR ENTIRE INVESTMENT. IN EVALUATING OUR BUSINESS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO
THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS.
RISKS RELATING TO OUR FINANCIAL CONDITION
- ----------------------------------------------
WE HAVE A HISTORY OF LOSSES, A SIGNIFICANT WORKING DEFICIT AND EXPECT THAT
LOSSES WILL CONTINUE IN THE FUTURE EVEN IF THE GROWTH CAPITAL WE NEED IS
OBTAINED.
For the six months ended June 30, 2000 we incurred a net loss of $1,865,907.
For the fiscal years ended December 31, 1999 and 1998, we incurred net losses of
$2,051,252 and $330,183, respectively. We have incurred a net loss in each year
of our existence, and have financed our operations primarily through the sale of
equity and debt securities. We expect to continue to incur net losses for the
foreseeable future, as we make further capital investment into building our
infrastructure and developing our wireless networks. Even if we are successful
in attracting the capital we need, we may not be able to achieve or sustain
significant revenues or profitability on a quarterly or annual basis in the near
future.
WE MAY BE UNABLE TO OBTAIN THE FINANCING WE NEED TO CONTINUE OUR OPERATIONS.
We have experienced significant cash flow difficulties during the last several
years, particularly in our efforts to expand. Our ability to exercise our
business plan and to grow our operations as we hope to do could be significantly
impacted if we are unable to raise additional financing and resolve our
outstanding liabilities. We will need additional financing to continue our
operations, manage our outstanding indebtedness and execute our business plan.
--------------------------------------------------------------------------------
-5-
<PAGE>
If we are unable to obtain the financing we need, through transactions like the
ones with the selling stockholders described in this prospectus, our ability to
expand our networks would be stalled, and we would most likely remain a small,
regional wireless operator with a very limited opportunity to increase our
profitability from operations. We are presently negotiating with potential
financing sources in an attempt to raise additional debt or equity capital, but
we may not be able to do so in sufficient amounts, or under terms which are
favorable to us. Other than the arrangements we have with the selling
stockholders described in this prospectus, we have no commitments, agreements or
understandings regarding additional financing.
Risks Relating to our Business
Our unproven business model may result in our inability to grow our business,
realize potential profits, withstand competitive forces or sustain our
operations.
Our business model depends upon our ability to develop and market wireless
technologies, services and products which allow our customers to integrate
both Internet and traditional sales channels. The potential profitability
of this business model is unproven. Alternatively, we may be forced by
competitive pressures, industry consolidation or otherwise, to change our
business model. Our business model may not be successful and we may not sustain
revenue growth or achieve or sustain profitability.
Our debt and equity funding sources may be inadequate to finance future
acquisitions and, even if they are, our financial condition may be adversely
affected by the high borrowing costs of debt, or the highly-dilutive impact of
equity, if we are unable to obtain funding on reasonable terms.
We believe that making acquisitions of businesses and products which complement
our core business services will be an important element of our business
strategy. Our ability to engage in these acquisitions depends on our ability
to obtain debt or equity financing. These types of financing may not be
available or, if they are, they may not be available on terms acceptable to us.
Our inability to obtain this financing could make us unable to pursue our
acquisition strategy. Debt financing may require us to pay significant amounts
of interest and principal payments, reducing the resources available to us to
expand our existing businesses. Some types of equity financing may be highly
dilutive to our stockholders' interest in our assets and earnings.
We are a technology-based company that depends upon intellectual property
rights to develop, market and sell our products and services, but we may not
be able adequately to protect these intellectual property rights, either
because someone has a superior claim on these rights or because we do not
have adequate financial resources to protect our own claims.
As a high-technology company, we may need to rely on a combination of
trademarks, copyrights, patent rights, contractual rights, trade secrets and
other intellectual property rights to protect our business plan and our
proprietary products and services from infringement or unauthorized use by
third parties. We intend to monitor closely, and take steps to protect, our
intellectual property rights, including by obtaining signed non-disclosure
agreements prior to disclosing confidential information. We have not,
however, filed for statutory protection of any of our intellectual property,
either through the registration of federal or state trademarks, service marks,
copyrights or patents, and it may be that third parties have or could develop
superior rights to our intellectual property before we are able to file for
this protection. To the extent that any third party already has a superior
claim to any of these rights, which could exist if they began using the right
earlier in time than we did, we may not ever be able to protect our rights.
Even if no competing rights are claimed by any third party at this time, our
financial condition does not make it feasible to file for intellectual
property right protection for all of our intellectual property rights in all
jurisdictions where we may conduct business. By the time we may be able to
do so financially, a third party could have developed a prior claim to these
rights which would render us unable to file for protection at that time.
As an example, we have been unable to file to do business in the State of
California under the name Worldwide Wireless Networks, Inc., and have had to
continue to use the name Global Pacific Internet, due to a conflict with a
company that had a prior existing claim to Worldwide Wireless Networks name
in that state. While our management does not believe that the inability
to use this name in California has had an adverse effect on its business
operations there, it may in the future or other similar conflicts may be
discovered which could have an adverse impact on our ability to conduct
business as we want to. Similarly, if any party were to assert that our
proprietary technology infringed upon the rights of others, the costs of
defending against these claims can be so large that it could have a
negative impact on our business, financial condition and/or future
prospects, even if we were ultimately found to have done nothing wrong.
We may face potential claims if our clients conduct harmful or illegal
activities using our products and services and, even if these claims are
without merit, they could harm our business and reputation by causing us
to expend significant resources to defend ourselves.
Some of our products and services involve the transmission of information
over the Internet. Our products or services could be used to transmit
harmful applications, negative messages, unauthorized reproduction of
copyrighted material, inaccurate data or computer viruses to end users.
Any transmission of this kind could damage our reputation or give rise
to legal claims against us. We could spend a significant amount of time
and money defending these legal claims.
In addition, our clients may not comply with federal, state and local
laws when promoting their products and services. We cannot predict
whether our role in facilitating these marketing activities would expose
us to liability under current or future laws. Any claims made against us
could be costly and time consuming to defend, even if we ultimately
prevail in, or are dismissed from, these cases. If we are exposed to
this kind of liability, we could be required to pay substantial fines
or penalties, redesign our business methods, discontinue some of our
services or otherwise expend resources to avoid liability.
If we are unable to adapt to the rapid technological changes which
are prevalent in the wireless communications industry today, it may
adversely impact our ability to market our products effectively,
withstand competition or meet our customers' technological requirements,
any of which could have an adverse impact on our financial condition.
The wireless communications market is characterized by rapidly
changing technologies, frequent new product and service introductions,
short development cycles and evolving industry standards. The recent
growth of the Internet, and intense competition from both US and foreign
companies in our industry, exacerbate these market characteristics.
Our future success will depend on our ability to adapt to rapidly
changing technologies by maintaining and improving the performance
features and reliability of our services. We may experience technical
difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services. In addition,
any new enhancements to our products and services must meet the
requirements of our current and prospective users. We could incur
substantial costs to modify our infrastructure and our range of
products and services to adapt to rapid technological change.
Our inability to adapt additional capital expenditures which
would affect the value of our business and of the securities
being offered in this prospectus.
We may be unable to expand our wireless networks if we cannot
reliably depend on the development of the infrastructure of the
Internet generally. Demand for our Internet-based products and
services could be adversely affected if consumers are concerned
about the integrity of the Internet, including with respect to
security, capacity, reliable performance and other factors.
A number of factors may inhibit Internet usage, including
inadequate network infrastructure, security concerns, inconsistent
quality of services, and of availability of cost-effective,
high-speed service. If Internet usage grows, its infrastructure
may not be able to support the demands placed on it by this
growth and its performance and reliability may decline. In
addition, a number of Web-based businesses have experienced
interruptions in their services as a result of outages and
other delays occurring throughout the Internet. We depend
upon consumer confidence in, and the reliability of, the
Internet to market and sell our wireless services to our customers.
If outages or delays occur frequently on the Internet in the
future, Internet usage, and the usage of our products and services,
could grow more slowly or decline, and this could result in lower
earnings for our shareholders.
We may not be able to locate, or afford to purchase, sufficient
points-of-presence to conduct our operations in the jurisdictions
where we are seeking to do business and, even if we are able to
find sufficient space, if the availability of points-of-presence
is or becomes scarce, the competition for sites among wireless
providers and others may drive up the price of these sites
to a level which is not feasible economically for us or which
we cannot afford.
As the market for wireless products and services matures, the
roof-top spaces and other locations available to place radios
and antennae, known in the industry as a point-of-presence,
or a POP, may become scarce. The effect of this would be to
increase, perhaps significantly, the rental values associated
with leasing these roof-top and other rights, to the extent
that we are able to identify sufficient space in our required
locations at all. We may not be able to compete effectively
with much larger wireless providers that have better resources
available to them with which to acquire roof-top rights and
other POP locations. If that happens, the quality and scope
of our services could be greatly restricted, which would have
a negative impact upon our business and financial condition.
If we are unable to form strategic alliances, we may be unable
to withstand the competitive pressures of larger companies
with greater resources, which would make it more difficult, if
not impossible, to grow our wireless network.
We intend to focus on developing, operating, and entering into
strategic relationships with third parties to quickly implement
our business plan and to provide promotional and other direct
marketing services utilizing telephony, the Internet and
wireless communications. To accomplish our strategy, we will
be competing with national and international wireless service
providers desiring to invest in identical opportunities.
Many of these competitors will have longer operating
histories, greater name recognition, larger client bases and
significantly greater financial, technical and marketing
resources than us. To combat these market differences,
we intend to pursue a strategy of seeking strategic
relationships with larger companies that can support
our efforts. If we are unable to attract the interest of
these strategic partners, or to negotiate arrangements with
them that are favorable to us, then we may be unable to
compete effectively with the larger competitors discussed above.
Our operating results and financial condition could be
negatively impacted by currently pending or future legal
proceedings.
From time to time, we are involved in litigation incidental
to our business. Even if we are successful in any given
lawsuit, litigation can be expensive and time consuming
to prosecute or defend, and could cause our customers to
delay or cancel purchase orders until these lawsuits are
resolved. Currently, we are involved in a lawsuit with
Pacific Industrial Partners, LLC ("PIP"). If we are unable
to have Worldwide Wireless dismissed from the lawsuit
filed against us by PIP, and they were to prevail on all
or a significant portion of their claims against us, then
enforcement of the judgment would have a materially adverse
impact upon us and our financial condition.
(See: Item 9 - Legal Proceedings.)
Risks Related to our Stock
We have a limited trading market, and given the historically
erratic trading patterns of our stock, as well as highly
unpredictable changes in the public stock markets generally,
the price of our common stock may be quite volatile for some
time to come.
There is a limited public trading market for our common stock
on the OTC Bulletin Board. We cannot assure you that a regular
trading market for our common stock will ever develop or that,
if developed, it will be sustained. As is the case with the s
ecurities of many emerging companies, the market price of our
common stock may also be highly volatile. Factors including
our operating results and announcements by us or our
competitors of new products or services, may significantly
impact the market price of our securities. Similarly, many
of the capital-raising activities we have engaged in, or may
be required to enter into in the future to obtain needed
funds, have resulted in, and may in the future result in,
arge blocks of stock being held by professional investors
who may from time to time release these shares into the
market place in a manner which could have a highly depressive
effect on the public market and valuation of our shares at
any given time and for any given period. Ultimately, we
have no control over the schedule or timing of how these
shares may be sold in the future, nor will we likely have
advance knowledge of these releases, and therefore our stock
prices may be affected significantly in the future by these
activities which, in some circumstances, could have a
material and adverse impact on the stock price of our
shares for a long time. If this were to happen, it
could materially affect our ability to raise funds under
favorable terms in the future.
In addition, in recent years, the stock market has
experienced a high level of price and volume volatility and
market prices for the securities of many companies have
experienced wide fluctuations not necessarily related to the
operating performance of these companies. Our common stock
may also experience this volatility.
Our shares have traded at low prices, and are currently
subject to penny stock regulations, which may have the effect
of exacerbating the volatility of our stock's price and trading
patterns. Additionally, the additional requirements imposed
on broker-dealers who trade in penny stocks may reduce the
speed at which transactions involving penny stocks can be
effected, and may also reduce the number of broker-dealers
willing to engage in such transactions, either of which can
adversely impact an investor's ability to trade shares of our
stock as rapidly as may be desired.
Broker-dealer practices in connection with transactions in
"penny stocks" are regulated by various penny stock rules
adopted by the Securities and Exchange Commission. Penny
stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on some national
securities exchanges or quoted on the Nasdaq system, provided
that current prices and volume information with respect to
transactions in these securities are provided by the exchange
or system). The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and
the risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and
its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules
generally require that prior to a transaction in a penny stock
the broker-dealer make a special written determination that
the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for our
stock when there is penny activity and our stock becomes
subject to the penny stock rules, and potentially could have
a depressive effect on the price of our shares generally.
We expect to enter into future agreements, which result in
significant dilution or substantial indebtedness, without
stockholder approval. Stockholders may be unable to review
proposed agreements before they are signed.
In all likelihood, stockholders will be unable to review
the terms of or vote on any potential relationships into
which we may enter. Consequently, stockholders are dependent
upon the Board of Directors' judgment with respect to
transactions of this nature. These transactions, if realized,
may involve the issuance of a significant number of additional
equity securities which could cause significant dilution or
the incurrence, assumption or issuance by us of substantial
indebtedness and the undertaking by us of material obligations
including, among other things, long-term employment,
consulting or management agreements.
The exercise or conversion of our outstanding derivative
securities into common stock, as well as the issuance of common
stock upon our use of the equity line of credit described later
in this prospectus, will dilute the percentage ownership of our
other stockholders, and the sale of this common stock in the
open market could adversely affect our market capitalization
by having a depressive effect on, and potentially significantly
driving down the price of, our common stock.
As of September 30, 2000, there were outstanding options,
warrants and convertible debentures to purchase an aggregate
of 2,214,650 shares of our common stock, and more options
can be granted in the future under our employee benefit plan.
Substantially all of the shares of common stock underlying
these securities are to be registered for unrestricted resale
under the Securities Act. The exercise or conversion of
outstanding stock options, warrants or other convertible
securities will dilute the percentage ownership of our
existing stockholders.
Our issuance of further shares and the eligibility of issued
shares for resale will dilute our common stock and may lower
the price of our common stock.
The common stock being offered in this prospectus represents
11,970,060 shares, or 48% of our total issued and outstanding
shares of common stock on a fully-diluted basis. If you invest
in our common stock, your interest will be diluted to the
extent of the differences between the price per share you
pay for the common stock and the pro forma as adjusted net
tangible book value per share of our common stock at the
time of sale. We calculate net tangible book value per
share by subtracting from our total assets all intangible
assets and total liabilities, and dividing the result by
the number of outstanding shares of common stock.
Furthermore, we may issue additional shares, options and
warrants and we may grant additional stock options to our
employees, officers, directors and consultants under our
stock option plan, all of which may further dilute our
net tangible book value.
Our sale of shares upon conversion of debentures and
exercising our equity line of credit for
shares at a price below the market price of our
common stock will have a dilutive impact on
our stockholders and could adversely effect our
market capitalization by having a depressive
effect on, or significantly driving down the price
of, our common stock.
We have issued debentures to AMRO International S.A. and
Trinity Capital Advisors, Inc. that may convert into
common stock at a discount to the then-prevailing market
price of our common stock. Discounted sales resulting
from the conversion of the debentures could have an
immediate adverse effect on the market price of the common
stock. To the extent that debenture and warrant holders
convert their securities and sell the underlying shares
into the market, the price of our shares may decrease due
to the additional shares in the market.
In addition, any sales in the public market of shares of our
common stock issuable upon the exercise or conversion of stock
options, warrants or convertible securities, or the perception
that these sales could occur, may adversely affect the prevailing
market price of our common stock,and may result in depressing our
share price generally and, potentially, driving our price down
significantly in a short period of time. Moreover, our ability
to obtain additional equity capital could be adversely affected
since the holders of outstanding warrants and options will likely
exercise these securities when we probably could obtain any needed
capital on terms more favorable than those provided by these
securities. We lack control over the timing of any exercise
or the number of shares issued or sold if this exercise occurs.
We have also entered into a private equity line of credit,
described later in this prospectus, under which we can draw down
financing in exchange for issuing shares of our common stock. These
shares will be issued to the lender providing this line of credit
at a significant discount from our market price for shares and,
if sold into the market in large blocks, could also have a depressive
effect on the market price for our shares. This, in turn,
could make it more difficult for us to obtain needed financing
under terms favorable to us.
The future sale of large blocks of currently restricted shares which
now exist or which may be issued by us in the future could decrease
the market price of our common stock and impair our ability to raise
capital. We may have no ability to know about or to control the timing
and/or the amount of restricted stock which private investors may sell
into the market in the future.
Future sales of common stock by existing stockholders under exemptions
from registration or through the exercise of outstanding registration
rights could materially adversely affect the market price of our common
stock and could materially impair our future ability to raise capital
through an offering of equity securities. A substantial number of
shares of common stock are, or in the near future will be, available
for sale under exemptions from registration, or are being registered
registration rights. We are unable to predict the effect, if any,
that market sales of these shares, or the availability of these shares
for future sale, will have on the prevailing market price of our
common stock at any given time.
ITEM 4: USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale
of the shares of common stock offered under this prospectus. We will
not receive any of the proceeds from the sale of shares of common
stock by the selling stockholders. Some of the shares of common
stock included in this prospectus will come from the exercise of
warrants, or the conversion of convertible debentures, which have
been sold by us to some selling stockholders. These selling
stockholders have no obligation to exercise or convert their securities,
and Worldwide Wireless may never receive any additional proceeds from
them. Any proceeds we do receive from them will be contributed to
working capital and will be used for general corporate purposes.
ITEM 5: DETERMINATION OF OFFERING PRICE
Each selling stockholder will determine the offering price at which
the shares included in this prospectus will be sold.
ITEM 6: DILUTION - not applicable
ITEM 7: SELLING SECURITY HOLDERS
Below is a table identifying the selling stockholders offering shares
through this prospectus, which includes:
- the number of shares of common stock currently owned by
each selling stockholder;
- the number of shares being offered by each selling stockholder;
and
- the number and percentage of shares of common stock to be held
by each selling stockholder after the completion of this
offering,assuming that all shares being offered by this
prospectus are sold.
In certain cases, the selling stockholders do not now own
beneficially the shares of our stock referenced in the table below.
These shares have been included because the selling stockholders
could receive up to the amount of shares indicated for each
selling stockholder within sixty days of the date of this prospectus.
In some cases, the selling stockholders may receive their shares
through the exercise of warrants or convertible debentures, the
terms of which are described later in this prospectus. In the
case of Whitsend Investments Limited,it can receive beneficial
ownership of the shares indicated if we elect to sell them under
our Private Equity Line of Credit Agreement with Whitsend
Investments Limited, the terms of which are described later
in this prospectus. We do anticipate, at this time, exercising
our rights to draw down funds from that agreement by selling
shares to Whitsend Investment Limited as soon as we are able to
once our registration statement, of which this prospectus is a part,
is declared effective by the Securities and Exchange Commission.
Except as otherwise indicated in the footnotes to the table below,
no selling stockholder has been an officer, director or employee
of Worldwide Wireless during the past three years. The selling
shareholders have represented that none of them are broker-dealers
or affiliates of broker-dealers. The inclusion of any shares in
this prospectus does not necessarily mean that the selling
stockholders will sell all or any of the common stock and,
if they do, we have no way of knowing at what prices these sales
might occur.
The selling stockholders provided us with all of the information
contained in this prospectus regarding themselves and their
share ownership. Because the selling stockholders may sell
all or part of their shares, we are unable to estimate the
number of shares that will be held by any selling stockholder
in the future. Beneficial ownership is determined in
accordance with SEC rules, and generally includes the voting or
investment power which any person has over securities. In
calculating the percentage ownership of each selling stockholder
that owns options, warrants or convertible debentures, we have
counted the shares of common stock underlying these securities
as outstanding shares if those securities could be exercised for,
or converted into, common stock within 60 days from the date of
this prospectus. (See "Plan of Distribution.")
NAME AND ADDRESS OF THE
SELLING STOCKHOLDERS
NUMBER OF
SHARES
BENEFICIALLY
OWNED PRIOR TO
THE OFFERING
NUMBER OF SHARES
OFFERED BY
THIS PROSPECTUS
Whitsend Investments Limited
c/o Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz, Liechtenstein
(Hans Gassner and Martin Gstoehl have control over
the common stock issued to this selling stockholder)
125,0001
9,694,3781,2
AMRO International, S.A.
c/o Utra Finance
Grossmunster Platz 26
Zurich CH 8022
Switzerland
(H.U. Bachofen and Michael Klee have control over
the common stock issued to this selling stockholder)
824,4201, 3
824,4201, 3
Trinity Capital Advisors, Inc.
211 Sutter Street, 2nd Floor
San Francisco, CA 94108
(E. Edward Jung has control over the common stock
issued to this selling stockholder)
206,1051, 3
206,1051, 3
Columbia Financial Group, Inc.
1301 York Road, Suite 400
Lutherville, MD 21093
(Timothy J. Rieu has control over the common stock
issued to this selling stockholder)
1,000,0001
1,000,0001
Technology Equity Fund Corp.
1209 Orange Street
Wilmington, DE 19801
(Richard Morgan has control over the common stock
issued to this selling stockholder)
125,000
125,000
The Oxford Group, Inc.
870 East 9400 South
Sandy, UT 84094
(Russell Haden has control over the common stock
issued to this selling stockholder)
100,000
100,000
Schumann & Associates
2900 Bristol Street, Suite D208
Costa Mesa, CA 92626
(Kim Schumann has control over the common stock
issued to this selling stockholder)
20,157
20,157
(1) Some of the shares included in this amount will only be
issued and offered for sale if the selling stockholders elect to
exercise 1,225,000 warrants purchased from us in a private offering.
The warrants issued to Whitsend Investments Limited have an
exercise price of $4.6875 and the warrants issued to AMRO
International, S.A. and Trinity Capital Advisors, Inc. have
an exercise price of $4.275. The warrants issued to Columbia
Financial Group have an exercise price of $1.10 per share.
The warrants are owned by the selling stockholders as follows:
Whitsend Investments Limited
125,000
AMRO International, S.A.
70,000
Trinity Capital Advisors, Inc.
30,000
Columbia Financial Group, Inc.
1,000,000
(2) This amount includes the maximum number of shares which
we could sell to Whitsend Investments Limited during the term
of the agreement, and which could then be resold to the public,
under the terms of our Private Equity Line of Credit Agreement
described above and later in this prospectus.
(3) Some of the shares included in this amount will only be
issued and offered for sale if the selling stockholders elect
to convert convertible debentures which they purchased from us
in a private offering. These convertible debentures have a
conversion price which is based upon the lesser of $3.1563
and 80% of the market price of our shares at the time they
are converted.
Dividend Policy
We have not paid cash dividends on our common stock since our
inception. We do not intend to pay cash dividends on our common
stock in the foreseeable future. We currently intend to reinvest
earnings, if any, in the development and expansion of our business.
The declaration of dividends in the future will be at the
election of our Board of Directors, to the extent they may
lawfully do so, and will depend upon our earnings, capital
requirements and financial position, general economic
conditions and other relevant factors.
ITEM 8: PLAN OF DISTRIBUTION
The selling stockholders may offer their shares at various times
in one or more of the following transactions:
- ordinary brokers transactions, which may include long
sales;
- cross or block trades or otherwise on the OTC Electronic
Bulletin Board;
- purchases by brokers, dealers or underwriters as principals,
and resale by these purchasers for their own accounts
using this prospectus;
- "at the market" sales to or through market makers, or
into an existing market for the common stock;
- in other ways not involving market makers or established
trading markets, including direct sales to purchasers or
sales made through agents;
- through the use of options, swaps or other derivative
securities;
- in connection with short sales of shares of common stock;
- option or other transactions; and
- any combination of the above transactions, or any other
legally available means.
Of the selling stockholders named in this prospectus, Whitsend
Investments Limited is an underwriter with respect to the sale
of shares which may be issued to it under the private equity
line of credit agreement, and AMRO International, S.A., Trinity
Capital Advisors, Inc. and Columbia Financial Group, Inc. may
be deemed underwriters under the applicable securities laws
in connection with their resale of shares received from their
exercise of warrants and/or convertible notes described elsewhere
in this prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of our shares of common stock may receive
compensation in the form of discounts, concessions or
commissions from the selling stockholders. Sometimes
commissions will also be paid wholly or partially by
the purchasers of these shares of common stock, for whom the
broker-dealers may act as agent or to whom they may sell as
principal, or both. The compensation paid or given to a
particular broker-dealer may sometimes be in excess of
customary commissions. Some of the selling stockholders
and any broker-dealers acting in connection with the sale of
the shares of common stock included in this prospectus are
underwriters within the meaning of Section 2(11) of the
Securities Act because of the manner in which these shares
are being purchased and resold. In those situations where a
selling stockholder is acting as an underwriter, any commissions
received by that selling stockholder, and any profit realized
on the resale of shares of common stock as principals, will be
considered underwriting compensation under the Securities Act.
Neither we nor any selling stockholder can presently estimate
the amount of this compensation. We don't know of any existing
arrangements between a selling stockholder and any other
shareholder, dealer, underwriter or agent relating to the sale
or distribution of the shares. The selling stockholders have
advised us that they do not intend to engage in short selling
activities in connection with their plan of distribution,
but we have no control over whether or not any selling stockholder
will actually engage in this activity.
The selling stockholders have represented to us that any
purchase or sale of shares of common stock by them will comply
with all applicable securities regulations then in effect, which
would include Regulation M adopted under the Securities Exchange
Act of 1934. In general, Rule 102 of Regulation M prohibits any
person connected with a distribution of our common stock from
directly or indirectly bidding for, or purchasing for any account
in which he or she has a beneficial interest, any of our common
stock or any right to purchase our common stock, for a period of
one business day before and after completion of his or her
participation in the distribution.
During the time a selling stockholder participates in a
distribution, Rule 104 of Regulation M prohibits that selling
stockholder, and any other persons engaged in the distribution,
from engaging in any stabilizing bid or purchasing our common
stock except for the purpose of preventing or retarding a decline
in the open market price of our common stock. No person may
effect any stabilizing transaction to facilitate any offering
at the market. If any selling stockholder offers and sells our
common stock at the market, Rule 104 prohibits that selling
stockholder from making any stabilizing transaction that involves
our common stock.
There can be no assurance that the selling stockholders will sell
any or all of the shares offered by them in this prospectus.
Also, there can be no assurance that each selling stockholder will,
in fact, comply with applicable securities regulations,
including Regulation M, in connection with the sale or distribution
of the shares. Beyond seeking the representations of the selling
stockholders that they will do so, Worldwide Wireless has no power
to compel them to comply with these regulations, nor will we
necessarily have any way of knowing whether or not they do.
ITEM 9: LEGAL PROCEEDINGS
Except as disclosed below, we are not involved in any material
pending legal proceedings, other than routine litigation
incidental to our business to which we are a party or in which
any of our property is subject.
On March 28, 2000, we filed a lawsuit in Orange County Superior
Court - Central Justice Center, against one of our former
consultants, DFL Capital Partners, LLC and our former legal
counsel, alleging, among other things, fraud and malpractice.
The dispute arises out of an Option Agreement we entered into
in 1998 for our consultant to provide technical and financial
advisory services in exchange for non-qualified options.
We retained legal counsel recommended to us by the consultant,
but were never advised that the partner of the law firm who
represented us specifically was, at the same time, also the
managing member of DFL Capital Partners, LLC. As a result of
this undisclosed conflict of interest, we believe that the
agreement which the law firm counseled us to sign did not
adequately protect us in terms of the services which we
understood we were supposed to receive and the number of
stock options which the consultant was to receive as compensation
for these services. This lawsuit has been dismissed but the
terms of the settlement have not yet been reached. Depending
upon the resolution of this lawsuit, the number of options
to purchase our common stock which the consultant may retain
could range from 50,000 to 700,000.
On July 12, 2000, a lawsuit was filed in Orange County Superior
Court against us and some of our officers, directors and
shareholders by Pacific Industrial Partners, LLC and its
corporate affiliates ("PIP") for breach of contract; breach
of the implied covenant of good faith and fair dealing;
promissory estoppel; and intentional interference with
existing contract. The dispute arises out of a convertible
debt proposal we signed dated January 6, 2000, as amended,
in which PIP proposed to finance up to $2.5 million dollars
through the purchase of convertible notes at eight percent
interest (with an option to purchase up to $3 million dollars
in additional notes). Under this proposal, the conversion
price was to be $2 per share for the initial notes, and 50% of
the average closing bid price for the 5 trading days prior
to conversion for the additional notes if PIP exercised its option.
In addition, PIP agreed to grant rooftop rights to us under
purportedly favorable leasing agreements. The proposal was
subject to completion of due diligence by PIP, the deposit of
$100,000 of earnest money into escrow by PIP, the negotiation
and execution of final legal documents and agreements between
PIP and us, the receipt of an opinion of counsel, and our
obtaining all legally-required consents to the transaction,
including the approvals of our shareholders and Board of Directors.
Upon receipt of the proposed legal documentation from PIP,
much of which contained terms and conditions not in the
original proposal letter, and which management and our
Board of Directors viewed as onerous to our company and
its existing shareholders, our legal counsel notified PIP's
counsel, at the direction of our board, that the board could
not vote in good faith to accept the new transaction terms
as proposed without breaking the fiduciary duties owed to
its shareholders, and we ceased negotiations with PIP.
Our management, including our in-house counsel, have
reviewed the complaint filed by PIP, and it feels there is
little merit in the claims raised by PIP. We intend to seek
a dismissal of this suit against all named defendants.
If we are unable to have Worldwide Wireless dismissed from
this lawsuit, and if PIP were to prevail on all or a significant
portion of its claims against us, then enforcement of this judgment
would have a materially adverse impact upon us and our financial
condition.
ITEM 10: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS
TEM 10: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS
The names, ages and positions of the current directors, executive officers and
key employees of Worldwide Wireless are set forth below. Biographical
information for each of these persons is also presented below. Our executive
officers are appointed by our Board of Directors and serve at its discretion.
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
Name Age Position Held
- ---- --- -------------
<S> <C> <C>
Jack Tortorice 51 Chief Executive Officer
and Chairman of the Board
Thomas J. Rotert, Esq. 34 Director, Secretary and Treasurer
Jerry Collazo 41 Chief Financial Officer
</TABLE>
JACK TORTORICE. Chief Executive Officer and Director since April of 1999. He
served as CEO, Chairman of the Board and a Director of Pacific Link from October
1997 to May 1999. Prior to joining Pacific Link, he was General Manager for the
sales and marketing division of Frontier Communications from January 1995 to
June 1997. Prior positions include: General Manager for Sales and Operations of
ITT Courier related to computer equipment sales; Vice President of Sales for
Automatic Data Processing selling payroll outsourcing; and sales positions for
Wang Labs and Xerox. Mr. Tortorice graduated with a Masters in Business
Administration from Pepperdine University in 1989 and received a bachelor's
degree in economics from Edinboro University in Pennsylvania in 1973.
THOMAS J. ROTERT, ESQ. Secretary and Treasurer. Mr. Rotert was appointed as a
Director and General Counsel on October 1, 1999. He was appointed as our
corporate secretary and treasurer on February 21, 2000. He is a licensed
attorney in the state of California and practices in the areas of civil
litigation, primarily, and some corporate and transactional law. From May 1998
to the present he has been a partner in the law firm of Schuman & Associates,
located in Costa Mesa, California. From October 1997 through May 1998 he was
employed as an attorney for Sayer & Associates, a California firm. He was
litigation counsel for Bollington & Roberts, another California firm, from 1992
to October 1997. He received a Juris Doctorate from Western State University in
1993 and a bachelor's from the University of Kansas in 1989.
-18-
<PAGE>
JERRY COLLAZO. Most recently, Mr. Collazo served from August 1996 to April 1998
as COO of Xtend Micro Products. From August 1995 to July 1996, he served as CFO
of Powerwave Technologies (NASDAQ:PWAV), a leader in wireless
telecommunications, helping the company grow to $60 million in revenues. Prior
to that, he served as CFO of Young Minds, Inc. Mr. Collazo has also served as
Director of Finance and Tax for Seagate Technology (NYSE:SEG) (formerly Archive
Corporation), a $400 million revenue company. In addition, he has served as a
manager at Ernst & Young. Mr. Collazo is a CPA, and holds a Masters in Business
Administration from UCLA, a Masters in Business Taxation from Golden Gate
University and a BS in Accounting from Fort Lewis College.
Involvement in Legal Proceedings
Mr. Rotert filed a Chapter 7 voluntary bankruptcy petition in February 1998
in the Central District of California Division of the United States
Bankruptcy Court, which was discharged in June of 1998.
In February 2000, we learned that one of our directors, Dennis Shen, who
had served in this capacity since the inception of Worldwide Wireless, had
been convicted in California in 1996 of two counts involving the receipt or
concealment of stolen property, both of which were dropped to misdemeanor
counts and which, it appears, were eventually expunged at the bench and
entered as not guilty pleas. Although Mr. Shen has had a close and
valuable relationship with Worldwide Wireless since its initial operations,
and it is expected that he will continue to provide valuable services to us
as a consultant and significant shareholder in the future, upon learning
of these convictions Mr. Shen's resignation was accepted by our Board of
Directors on February 23, 2000. Susan Shen, the wife of Dennis Shen, was
not implicated in any of the charges discussed above, but resigned her
position as our Secretary and Treasurer on about the same date. She
continues to be a full-time employee of Worldwide Wireless, and Shen
family members continue to be significant shareholders of our company.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our outstanding
common stock owned by:
- each person or group known by us to own beneficially more than 5% or
more of our outstanding common stock;
- each of our executive officers;
- each of our directors; and
- all executive officers and directors as a group.
-19-
<PAGE>
Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.
Except as indicated by footnote, as far as we know, the persons named in the
table below have sole voting power and investment power with respect to all
shares of common stock shown as beneficially owned by them. The percentage of
beneficial ownership is based on 12,858,947 shares of common stock outstanding
as of June 30, 2000.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
- -------------------------------- -------------------- --------------------
<S> <C> <C>
Dennis and Susan Shen 3,084,500(1) 23.9%
770 The City Drive South,
Suite 3700
Orange, California 92868
Sean LeMons 777,600(2) 6.1%
15123 Brookhurst #205
Westminster, California 92683
Ming-Chau Yeung 774,000(1) 6.0%
9 Red Coat Place
Irvine, California 92602
Whitsend Investments Limited 1,485,544(3) 11.44%
c/o Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz, Liechtenstein
AMRO International S.A. 814,420(4) 6.27%
c/o Utra Finance
Grossmunster Platz 26
Zurich CH 8022
Switzerland
Columbia Financial Group, Inc 1,000,000(5) 9.34%
1301 York Road, Suite 400
Lutherville, MD 21093
Jack Tortorice (Director) 2,975,500(5) 23.1%
770 The City Drive South,
Suite 3700
Orange, California 92868
-20-
<PAGE>
Thomas Rotert , Esq. (Director) 25,000 0.02%
2900 Bristol Street
Suite D-208
Costa Mesa, CA 92626
All executive officers and 3,000,500 23.33%
Directors as a group
<FN>
(1) Dennis Shen is the record owner of 500,000 shares and options to purchase
4,500 shares; he and Susan Shen jointly own 1,806,000 shares, and they
share voting and investment power over 774,000 shares held by Susan's
mother, Ming-Chau Yeung.
(2) Includes options to purchase 3,600 shares exercisable within 60 days.
(3) Reflects 125,000 warrants to purchase common stock which can be exercised
at the election of Whitsend Investments Limited during the term of this
agreement as well as 1,360,544 shares which could, if we elected in our sole
discretion to draw down on our private equity line of credit under the
terms described later in this prospectus, and assuming no change in
our current share price of $1.03 per share as of November 17, 2000,
obligate Whitsend Investments Limited to purchase up to 1,360,544
during the term of the agreement
(4) Reflects 70,000 warrants which can be exercised at the election of AMRO
International, S.A. within 60 days from the effective date of this
prospectus, and 744,420 convertible debentures which can be converted into
common stock within 60 days from the effective date of this prospectus.
(5) Includes options to purchase 4,500 shares exercisable within 60 days.
</TABLE>
Disputed Beneficial Ownership
In September 1998, Pacific Link entered into an option agreement with DFL
Capital Partners, LLC. According to the agreement DFL Capital Partners, LLC
was granted the option to buy 50,000 common shares at $0.10 per share.
The right to exercise the option vested immediately and remained exercisable
for ten years The amount of common shares subject to the options would adjust
according to recapitalizations of Pacific Link. The parties to this agreement
were in a dispute as to the application of this agreement to our common shares,
but the lawsuit regarding these options has been dismissed and the parties
are currently in negotiations to determine the terms of the settlement.
The lawsuit is described in detail under the heading "Legal Proceedings"
above. Depending upon the resolution of this dispute, we may have up to
700,000 common shares subject to these options and if the optionee
exercises the options it may become a 5% shareholder.
ITEM 12: DESCRIPTION OF SECURITIES
The following is a summary of the material terms of our capital stock,
qualified in its entirety by, the provisions of our Certificate of
Incorporation, as amended, and the Amended and Restated Bylaws that are
referenced as exhibits to this registration statement and by provisions of
applicable law.
Common Stock
We are presently authorized to issue up to 50,000,000 shares of common
stock, $.001 par value per share. As of November 17, 2000, there were
12,894,060 shares of common stock outstanding. The holders of
common stock are entitled to one vote for each share held of record
on each matter submitted to a vote of stockholders. There is no cumulative
voting for election of directors. Additionally, there are no dividend
rights for common stockholders. Dividends may be granted at the discretion
of the Board of Directors, and no dividends are expected to be declared
in the foreseeable future.
Options and Warrants
There are currently outstanding options to purchase 989,650 shares of
common stock at an exercise price of $3 per share, and outstanding
warrants to purchase 1,225,000 shares of common
stock at exercise prices ranging from $1.10 to $5.00 per share.
Convertible Debentures
On June 30, 2000, we entered into a Convertible Debenture and Warrant
Purchase Agreement having an aggregate principal amount of $1,000,000.
The convertible debentures mature on June 30, 2003 and bear interest
at 7% per annum until the earlier of conversion into our common stock
or maturity. Interest is payable quarterly in arrears on September 1,
October 1, January 1 and June 1 of each year commencing on September 1,
2000. The convertible debentures are convertible by the holder at any
time prior to the close of business on June 30, 2003. The conversion
price is equal to the lesser of $3.1563 per share or 80% of the market
price as of the date on which the holder of the debenture gives notice
of their intention to convert the debentures. Under the terms of our
agreement (which was drafted before the applicable conversion price was
calculated and fixed), we may redeem the debentures for cash at 150% of
the amount of unpaid principal and accrued interest on these debentures
if the conversion price is not less than $7.00 per share. Since the
price of our common stock was less than $7.00 per share when our
agreement was subsequently signed by the selling stockholders,
the applicable conversion price fixed by this agreement will always
be less than $7.00 per share and we have no ability to redeem these
debentures for cash.
Transactions with selling stockholders
The shares to be registered pursuant to the registration statement
and this prospectus have been issued in, or underlay derivative
securities exercisable for or convertible into shares which were
issued in, private transactions exempted pursuant to Sections 4(2)
or 4(6), or other applicable exemptions, of the Securities Act from
the registration provisions contained in Section 5 of the Securities
Act. Each offering included less than 35 purchasers, other than
"accredited investors"as defined in Rule 501, and as a result
each offering qualified as exempt from registration in accordance
with Rules 505 and/or 506 of Regulation D. The following
pages briefly describe the agreements and transactions we
entered into with each of the selling stockholders with
respect to each class of security registered under this
prospectus. The following discussion provides an understanding
of the material terms of each transaction referenced below.
It is not intended to be a complete description of each agreement
described below, and the discussion in this registration
statement is qualified in its entirety by reference to the
documents included or referenced in the exhibits to this
registration statement.
We believe that Whitsend Investments Limited made its investment
decision and became irrevocably bound to purchase up to 9,569,378
shares of common stock at the time Whitsend Investments Limited
executed the Private Equity Line of Credit Agreement, prior to
the filing of the registration statement. All of the conditions
to Whitsend's obligation to purchase shares from us contained in
Article 7 of that agreement are within our control, and there
are no events in Article 7 which would give a purchaser the
right to terminate the Private Equity Line of Credit Agreement.
Therefore, because Whitsend Investments Limited does not control
any of the conditions giving rise to an obligation to purchase
shares and there are no events under which a purchaser may
terminate its obligation to purchase shares, the private placement
was completed prior to filing this registration statement.
Prior to engaging in the transactions described below involving
Whitsend Investments Limited, AMRO International, S.A., Trinity
Capital Advisors, Inc. and Triton West Group, Inc.,Worldwide
Wireless had no previous relationship with these selling
stockholders. We understand that they are in the business,
among other things, of providing the types of debt and equity
capitalization they have given to us to other publicly-traded
corporations, under terms and structures which may or may not
be similar to those offered to us in the private equity line of
credit and convertible debenture purchase agreements described
below.
Trinity Capital Advisors introduced AMRO International and
Whitsend Investment Limited,investment fund companies, to
Worldwide Wireless as investors. Trinity Capital Advisors,
also an investment fund company, learned about us while
researching for an investment opportunity in the wireless
broadband industry. Worldwide Wireless entered into the
agreements based on capital requirements for expansion
of its business.
Columbia Financial Group, Inc. received a total of 1,000,000
warrants and 200,000 shares of restricted common stock in
consideration for the performance provided and to be provided to
Worldwide Wireless of investor relations and press relations
services. These services have an approximate market value of
$10,000 per year, and its contract with us runs through September
2001. Columbia Financial Group, Inc. began providing us services
in June 1999. The value of the options given by Worldwide Wireless
to Columbia Financial Group, Inc. in consideration for
its services has also been established as $10,000, using
the Black-Scholes method of calculation.
Mutual Ventures Corporation, one of our principal shareholders,
has had ongoing relationships with Technology Equity Fund Corporation
and The Oxford Group, Inc. Schumann & Associates has served as our
general counsel since inception, for which it has received the
shares of our common stock which are being offered
through this prospectus.
Private equity line of credit agreement
Overview
Whitsend Investments Limited, a British Virgin Islands corporation,
entered into a Private Equity Line of Credit Agreement with us,
dated as of June 19, 2000, for the future issuance and purchase
of shares of our common stock. The purpose of this agreement is
to provide Worldwide Wireless with the ability to access and draw
down funds when we need them for working capital, up to the
maximum amount of $20 million, under the conditions specified
in the agreement. Under that agreement, Whitsend Investments
Limited has committed to purchase up to the $20 million worth
of shares of our common stock over a three-year period. Once
every 15 trading days we may request a draw of up to $500,000
of that amount. If we elect to receive any of these funds, we
will fix a specific date on which to calculate the appropriate
price to charge Whitsend Investments Limited for our shares. This
price will be calculated using a formula based on the average trading
price of our common stock for the five-day period starting two days
before the calculation date and ending two days after it. Each draw
must be for at least $75,000.
Once the relevant average trading price for that period is calculated,
Whitsend Investments Limited receives a discount on the purchase of our
shares equal to twelve percent of this amount.
Under the private equity line agreement, Worldwide Wireless is never
under any obligation to request a draw for any specific period, or
at all. If we do elect to raise funds under this agreement, however,
the aggregate total of all draws we take during the 3 year period
cannot exceed twenty million dollars, and no single draw can exceed
five hundred thousand dollars (except in the event that these
funds are to be used for corporate acquisitions, in which case that
limitation does not apply). For each draw requested under the
private equity line agreement, we will receive the amount of the
requested draw (less an escrow agent's fee of $1,500 per
transaction and a 4% finder's fee payable to Triton West Group,
Inc., which introduced Whitsend Investments Limited to us). Triton
West Group, Inc. is not obligated to purchase any of our
shares under the private equity line agreement.
Rather than providing Whitsend Investments Limited with a cash
commitment fee, we have issued to Whitsend Investments Limited
warrants to purchase up to 125,000 shares of our common
stock at an exercise price of $4.6875. The warrants expire June
19, 2003. The common stock issuable upon exercise of those
warrants, as well as all shares issuable to Whitsend Investments
Limited if we elect to use the entire private equity line under
the agreement, are included in the shares being registered in
this registration statement or this prospectus.
Based on a review of our trading volume and stock price history,
and the number of draws we could make, we are registering 9,569,378
shares of common stock for possible issuance under the equity line
of credit agreement, and 125,000 shares of common stock underlying
the warrants delivered to Whitsend Investments Limited as described
above. The listing requirements of The Nasdaq SmallCap Market
prohibit us from issuing 20% or more of our issued and outstanding
shares of common stock in a single transaction if the shares of
common stock may be issued for less than the greater of market
value or book value unless we get stockholder approval. Based on
shares of common stock issued and outstanding on July 10, 2000, the
date of the closing of the common stock purchase agreement, if we
were to become listed on the Small Cap Market, which we may apply
for once we meet the applicable listing requirements, we would not
be able to issue to Whitsend Investments Limited more than 2,552,789
shares under the equity line of credit agreement and the warrants
without the approval of our stockholders (assuming the same number
of shares of common stock are outstanding then as are outstanding
today). Because 125,000 of these shares of common stock are
committed to the Whitsend Investments Limited warrant, if we
wish to draw amounts under the equity line of credit agreement
common stock under the private equity line agreement, we would
have to receive stockholder approval prior to any draw.
In addition, the private equity line of credit agreement does not
permit us to draw down funds if the issuance of shares of
common stock to Whitsend Investments Limited pursuant to the draw
would result in Whitsend Investments Limited owning more than
9.9% of our outstanding common stock on the date we request the
draw. In order for us to utilize the equity line of credit
to its full extent, a combination of an increase in our price
per share and the selling off of pre-draw holdings by Whitsend
Investments Limited must take place.
The draw down procedure and the stock purchases
We may request a draw by faxing a notice to Whitsend Investments
Limited, stating the amount of the draw we wish to receive. We may
also tell them the minimum price, if any, at which we are willing
to sell the shares of our common stock, which protects us from having
to sell our shares too cheaply in the event that our trading price
should drop significantly during the 5-day calculation period after
we have requested the draw. The purchase price for our shares will be
eighty-eight percent of the average trading price determined during
that 5-day period. We are limited to a mandatory period of fifteen
trading days between draws (except under special circumstances
designated in the agreement, as in the case of an acquisition),
unless this restriction is waived by Whitsend Investments Limited.
Amount of the draw
The amount of the draw which Worldwide Wireless will receive
will be the amount we have requested, with a minimum draw of
$75,000 and a maximum draw of $500,000, less the escrow
and finders fees described above.
Number of shares of our common stock issuable upon a draw
To determine the number of shares of our common stock which we must
issue in connection with a draw, we will calculate the average
trading price during the five-day period described above, then reduce
that amount by 12% to reflect the discount to our market price which
Whitsend Investments Limited receives under our agreement. The
aggregate amount of the draw we have requested is then divided by
this discounted price per share to calculate the number of shares we
must. The amount of their discount reduces automatically to 10% in
the event our common stock is approved for listing on the Nasdaq
SmallCap Market or on another national securities market
or exchange.
Sample stock purchase calculation
The following is an example of the calculation of the draw
down amount and the number of shares of our common stock we
would issue to Whitsend Investments Limited in connection
with the draw based on the hypothetical assumptions described
below. These assumptions are being provided for purposes of
illustration only, and not to indicate that we expect them
to come to pass at any time in the future. A sample of how
the calculation of the draw would work is as follows:
We provide a notice of a requested draw to Whitsend Investments
Limited indicating that we wish to draw down $500,000, which
is the maximum amount for any draw. The date we pick to fix
our market price is the Wednesday following the day we give
notice of our draw request. The average market price of our
common stock for the five-day period beginning on the Monday of
that week and ending on the Friday of that week (assuming that
stock trading occurs on all five days) is $3.00. Multiplying
the average market price ($3.00) by 88%, the applicable purchase
price for our shares would be $2.64. Dividing the amount of
the draw by this purchase price, Whitsend Investments Limited
would purchase 189,394 shares for $500,000. The net proceeds
from this draw to Worldwide Wireless, after deducting the $1500
escrow charge and the 4% finder's fee to Triton West Group, Inc.
would be $478,500.
Suppose that the notice specified a minimum threshold amount
of $3.50 per share, below which we will not sell any shares
of common stock to Whitsend Investments Limited during this
draw down period. We are not required to sell below the threshold
price, and Whitsend Investments Limited has the option, but not
the obligation, to purchase shares at this price even though it is
higher than the formula would require.
Whitsend Investments Limited will send the applicable purchase
price to the escrow agent, and we will deliver the shares of
common stock purchased to the Depository Trust Company to be
credited to the Whitsend Investments Limited account within
three trading days after settlement, upon confirmation by the
escrow agent of receipt of the purchase price. The delivery of
the requisite number of shares of common stock and payment of
the draw will take place through the escrow agent, Epstein,
Becker & Green, P.C. in New York, N.Y.
Necessary conditions before Whitsend Investments Limited is
obliged to purchase shares of our common stock.
The following conditions must be satisfied before Whitsend
Investments Limited is obligated to purchase the shares of
our common stock that we wish to sell from time to time under
the Agreement
- this registration statement for the shares of common
stock we will be issuing must be declared effective by the
Securities and Exchange Commission and must remain effective
and available as of the draw down settlement date for making
unrestricted resales of the shares of common stock purchased
by Whitsend Investments Limited;
- there can be no material adverse change in our business,
operations, properties, prospects or financial condition;
- we must not have merged or consolidated with or into
another company or transferred all or substantially all of
our assets to another company, unless the acquiring company
has agreed to honor the terms of the Agreement;
- no statute, rule, regulation, executive order, decree,
ruling or injunction may be in effect which prohibits
consummation of the transactions contemplated by the Agreement;
- no litigation or proceeding adverse to us, to Whitsend
Investments Limited or to any of their affiliates, can be pending,
nor can any investigation by any governmental authority be
threatened against us or them seeking to restrain, prevent or
change the transactions contemplated by the private equity line of
credit agreement, or seeking damages in connection with these
transactions; and
- trading in our shares of common stock must not have
been suspended by the Securities and Exchange Commission.
In the event that we do not register the shares as required
by this agreement, we will incur penalties in the amount of
two percent of the aggregate market value of the shares of common
stock purchased from us, including the warrant shares.
Restrictions on future financing
The agreement with Whitsend Investments limits our ability
to raise money by selling our securities for cash at a discount
to their market price during the commitment period under any
other equity line of credit, and Whitsend Investments Limited
has a first right of refusal to elect to participate in our
future financing activities.
There are exceptions to this limitation for securities
sold in the following situations:
- in a registered public offering which is underwritten
by one or more established investment banks;
- pursuant to any presently existing or future employee
benefit plan which plan has been or is approved by our stockholders;
- pursuant to any compensatory plan for a full-time
employee or key consultant;
- in connection with a strategic partnership or other
business transaction, the principal purpose of which is not
simply to raise money; or
- in a transaction to which Whitsend Investments Limited
gives its written approval, which approval cannot be unreasonably
withheld.
Timing and Costs of closing the transaction
At the closing of the transaction on June 19, 2000, we delivered
the requisite opinion of counsel to Whitsend Investments Limited
and paid the escrow agent, Epstein, Becker & Green, P.C. of
New York, $20,000 for Whitsend Investments Limited's legal,
administrative and escrow costs.
Termination of the purchase agreement
Whitsend Investments Limited may terminate its funding and stock
purchase obligations under the private equity line of credit
agreements with us if any of the following events occur:
- we suffer a material adverse change in our business,
operations, properties, or financial condition;
- a stop order or suspension of the effectiveness of
the registration statement for an aggregate of thirty trading
days occurs;
- we file for protection from our creditors; or
- this registration statement is not declared effective
by the Securities and Exchange Commission by December 1, 2000.
Indemnification to and from Whitsend Investments Limited
Whitsend Investments Limited is entitled to customary
indemnification from us for any losses or liabilities suffered
by it based upon material misstatements or omissions from the
registration statement and the prospectus, except as they relate
to information supplied to us by Whitsend Investments Limited
for inclusion in the registration statement and this prospectus.
Conversely, we are entitled to indemnification from Whitsend
Investments Limited for material misstatements or omissions
in the information supplied to us by them for inclusion in
the registration statement or this prospectus.
Convertible debenture purchase agreement
On June 30, 2000, we entered into a convertible debenture
and warrant purchase agreement with AMRO International S.A.
and Trinity Capital Advisors, Inc. for the purchase of
debentures having an aggregate principal amount of $1,000,000.
The convertible debentures are set to mature on June 30, 2003
with interest accruing at 7% per annum from the date the
convertible debentures were issued until the earlier to occur of
conversion of the debentures into shares of our common stock or
June 30, 2003. Until conversion, the interest accruing on the
debentures shall be payable quarterly in arrears, on September
1, October 1, January 1 and June 1 of each year, commencing
September 1, 2000.
The convertible debentures are convertible by the holder into
shares of our common stock at any time prior to the close of
business on June 30, 2003. The conversion price will be the
amount which is equal to the lesser of $3.1563 per share or
80% of the market price of our shares as of the date on which
a conversion notice is received by us. Under our agreement,
because the conversion price will always be less than $7.00
per share, we may elect, upon seven days' notice to the
debenture holders to honor all or any part of the conversion
notice in cash rather than stock, and we must provide notice
specifying the dollar amount to be paid in cash. We have the
right to redeem the convertible debentures for an amount equal
to 150% of their unpaid principal balance, plus all accrued but
unpaid interest outstanding on that amount at the time of
redemption. We are obligated to reserve for issuance upon
conversion a sufficient number of shares of common stock,
and to register and maintain an effective registration statement
for the shares of common stock reserved for issuance. The
beneficial conversion feature associated with the issuance
of the convertible debenture will result in a charge of
approximately $25,000 to interest expense during the third
quarter of our current fiscal year.
We received proceeds from the sale of the debentures in the
amount of $1,000,000, less the amount of $7,000 for escrow,
administrative and legal fees payable to Epstein, Becker & Green,
P.C. A finder's fee of 5,000 shares of our common stock was
paid to Triton West Group, Inc. under the terms of our debenture
purchase agreement.
In the event that we do not register the shares as required by
our agreement with the purchasers of these debentures, we will
incur penalties in the amount of two percent of the aggregate
market value of our shares of common stock covered by that
agreement. Also, in the event the registration statement
of which this prospectus is a part is not declared effective
by December 1,
2000, these purchasers have the right to terminate their agreement.
Worldwide Wireless entered into an oral agreement on or about
May 15, 2000 to register 100,000 shares of our common stock
previously issued to The Oxford Group, Inc. The Board of
Directors resolution evidencing this transaction is attached
as Exhibit 99.2. The Oxford Group is named as a selling s
tockholder in this registration statement.
We also entered into an oral agreement on or about June
1, 2000 to register 20,157 shares of our common stock previously
issued to Schumann & Associates. The Board of Directors resolution
evidencing this transaction is attached as Exhibit 99.3.
Schumann & Associates is named as a selling stockholder
in this registration statement.
We also entered into an oral agreement on or about July 19,
2000 to register 125,000 shares of our common stock previously
issued to Technology Equity Fund Corporation. The Board of
Directors resolution evidencing this transaction is attached
as Exhibit 99.4. Technology Equity Fund Corporation is named
as a selling stockholder in this registration statement.
Where you can find more information
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission.
You may read and copy any document we file at the SEC's public
reference room at the following locations:
- Main Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549
- Regional Public Reference Room, 75 Park Place, 14th Floor,
New York, New York 10007
- Regional Public Reference Room, Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
You may obtain information on the operation of the SEC's public
reference rooms by calling the SEC at (800) SEC-0330.
We are required to file these documents with the SEC
electronically. You can access the electronic versions
of these filings on the Internet at the SEC's web site, located at
http://www.sec.gov.
We have included this prospectus in our registration statement
that we filed with the SEC. The registration statement
provides additional information that we are not required
to include in the prospectus. You can receive a copy of
the entire registration statement as described above. Although
this prospectus describes the material terms of contracts,
agreements and other documents filed as exhibits to the
registration statement, you should read the exhibits for a more
complete description of the document or matter involved.
ITEM 13: INTERESTS OF NAMED EXPERTS AND COUNSEL
Accountants
The consolidated financial statements of Worldwide Wireless
Networks, Inc. as of December 31, 1999 and 1998 and for the
years then ended, and for the nine-month period ended September 30,
2000, included in this prospectus have been included in reliance
upon the reports of Crouch, Bierwolf and Chisholm and Chisholm
& Associates, respectively, given on the authority of said
firms as experts in auditing and accounting.
Legal Matters
The legality of the shares of common stock offered under
this prospectus will be passed upon for Worldwide Wireless
by Feldhake, August & Roquemore, LLP, 19900 MacArthur Boulevard,
Suite 850, Irvine, California, 92612.
Some other matters involving Worldwide Wireless and described
in this prospectus, including matters involving our pending
and threatened litigation, have been passed upon by Thomas J.
Rotert, formerly of the law firm of Schumann & Associates,
who serves as our Secretary, Treasurer and General Counsel,
and is also a member of our Board of Directors. Schumann &
Associates owns shares of our common stock with a market
value in excess of $50,000, which shares are being included
in and offered for sale under this prospectus.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock
is The Depository Trust Company.
Agent for Service
Our agent for service of process is Michael J. Morrison, Esq.,
1495 Ridgeview Drive, Suite 220, Reno, NV 89509.
ITEM 16: DESCRIPTION OF THE BUSINESS
Wireless Network
We have the technical expertise to build and operate large scale
wireless networks without relying on an existing wire-based
network, such as a telephone network's copper lines. Our wireless
network allows the user to connect to an Internet service
provider bandwidth via a radio modem. Typically a customer
relies on an incumbent local exchange carrier such as a
telephone company's copper wires or a cable company's television
coaxial plant to provide the physical means for the
customer to connect to the Internet.
Our primary means of providing our wireless services is a
wireless network consisting of an operations center, centralized
base stations known as "points-of-presence", and distribution radios
which connect to the end customer. We currently operate a
wireless network which has been operational for approximately
eighteen months and covers an estimated 85% of Orange County,
California and, since December 31, 1999, we have also been
providing wireless services in Los Angeles County, California.
We currently rely on fifteen, fully-operational POPs, which are
generally located on the tops of tall buildings. We negotiate
long- term site licenses for each POP location.
The typical POP site consists of one indoor/outdoor equipment
cabinet (62" H x 23" W x 34" D) and an array of four to eight
small sectional antennas (42" H x 4" W). The sectional antennas
can be painted any color to match existing surroundings. There
is no roof penetration, and once the system is installed there
are minimum inspections. We pay for all costs associated with the
installation and our unit requires a single phase 110 volt
outlet for power.
As part of our network expansion and in the course of normal
operations, we are negotiating to expand our rights associated
with the current POP locations as well as acquire additional
point-of-presence locations. Management believes that the
current market for these facilities is sufficient to meet our
needs, and that they are reasonably priced; however, the
ability to acquire and maintain these rights is, and will
continue to be, a material factor in our success.
In general, our end customers must be within five miles of a
POP and have line-of-sight visibility between the POP and an
antenna located at their building. The five mile standard
is based upon the equipment we use, existing interference and
equipment reliability. Other companies may use greater distances
from a POP, and we do as well, but we have adopted five miles
as a general guideline for our connections. Each end customer
must install a rooftop or window radio with an antenna. When the
customer accesses the Internet, the signal travels over its
building's wiring or wireless network to the rooftop or
window antenna. The antenna sends the data signal to a
nearby POP, where the signal is communicated to our broadband
switching center and then onto its final destination.
Our wireless network has been designed to provide our customers
with flexible, rapidly-installed and reliable high-speed internet
connectivity. For example, during the Panasonic Shock Wave
Beach Games in August of 1999 we established a temporary
wireless system which provided Internet access to the participants
on the beach. We are able to install the necessary equipment at
a customer's business within two to five days. Actual
installation of a wireless system may take as little as four
hours. Installation and incorporation into our wireless network
can be accomplished as fast as within 48 hours following a
signed service order. This can be accomplished when we rely
on installation scheduling and preparation prior to contract
signing.However, we generally plan for a three week time period
for completion of installation. We manage our network traffic
by using routing equipment that measures and controls packet flows
(data bundled for transmission) and we install equipment with
performance levels that meet or exceed those required by the customer.
Our wireless network is engineered to provide high reliability and
wide area coverage. We generally operate at a greater than 98% uptime.
Our wireless networks are capable of high speeds of 128 kbps through
100 Mbps speeds. Kbps stands for Kilobits per second, and Mbps
stands for megabits per second; the number of bits per second is
the industry standard of measurement of how fast data can be
transmitted over the Internet. Our wireless system and Digital
Subscriber Lines (which are enhanced copper lines that connect to
a local telephone company system and then directly to the Internet),
provide connection to the Internet at high speeds. Our wireless
connections can provide transmissions at greater speeds than a
dial up connection. For example, a dial up modem transmits at
28,000 to 56,000 bps; a T1 line (which is a dedicated telephone
cable with a bundle of twenty-four voice or data lines) transmits
at 1.544 Mbps, and our wireless network transmits at a rate of 100
Mbps. These high speed connections allow files, documents
and voice transmissions to be dispatched over the Internet
in much shorter time periods.
We operate on a combination of licensed frequencies of 23 Ghz
and unlicensed frequencies in the 2.4 Ghz ISM bandwidth, 5.8
Ghz ISM bandwidth, and 5.2 Ghz UNII bandwidth ranges. Ghz,
(giga hertz) is a measurement of electromagnetic energy which
is equivalent to one "wave" or cycle per second. The bandwidth
range determines whether federal licensing is required. Some
frequencies must be licensed by the U.S. Federal Communications
Commission, whereas unlicensed frequencies are part of the radio
spectrum that the general public may use for personal
radios. The licensing required is determined on a site-by-site
basis, depending on the distance and type of network link.
Reliability is achieved through redundant radio links and
wired line back-up. Security is provided through spread
spectrum radio links and encryption, among other standard
security measures. Our radio modem transmits data by a microwave
frequency which changes 32 times a second. During our initial
twelve months of operations we experienced no significant
weather interference, nor did we expect to, since the low
frequencies which we use are rarely affected by weather conditions
(other than hail). We are not sure how a wireless network in
geographical areas with more severe weather than Southern
California would be affected, but management does not believe
that weather conditions will pose a significant factor to
our ability to provide high-quality wireless services.
Principal Services
High-speed Internet: We offer connections to the Internet at
speeds from 128 kbps to 100 Mbps. This service provides
always-connected, secure access for all sizes of commercial businesses.
These connections are primarily supported by our wireless
network with the balance of customers being served by DSL
and leased T-1 circuits. We enhance our service by balancing and
distributing our traffic across our upstream connections,
which include Digital Broadcast Networks, Savis, and Exodus
networks. As of September 30, 2000, we had approximately 388
high-speed wireless customers.
Dial-up Internet Access: As of September 30, 2000, we did not
provide Internet access to Internet users using dial-up connections.
This service was previously marketed to the general public throughout
Orange County and to our commercial customers to support work-at-home,
remote server access, and other business applications. As of
August 31, 2000, we have divested our dial-up division because we
felt the cost of operating this service exceeded the revenue value
it did, or would in the future, provide to us.
Data Center Services: We offer web hosting, web site development
and co-location services to our customers. Our co-location service
allows a customer located outside our wireless network to physically
place a computer connected to the customer's network in
a secure facility with a high-speed physical connection
to the Internet. As of September 30, 2000, we provided these
services to approximately 292 customers.
Network Consulting: We offer design and implementation services
for private wireless networks and consulting services to develop
network hardware components. As of September 30, 2000,
we provided these services to approximately 11 customers,
representing 3% of our total revenues for that fiscal quarter.
Business and Operating Strategies
Our historical sales have resulted from domestic operations
primarily located in Orange County, California. This area has
a high concentration of technology-oriented businesses that represent
our prime targeted customers due to their need for high-speed
Internet access. By focusing our expansion to markets in Southern
California, management believes that we can utilize our existing
network assets, brand equity, central facilities, administration,
and technical resources to efficiently grow our business.
We generally work with our end customer when providing network
access. We believe that a direct customer relationship provides
the opportunity for us to cross-sell network products,
improve customer satisfaction, and reduces the chance of
customer attrition. In May 1999, we created a direct sales force
to market and sell our products and services. This sales force markets
our services to businesses of all sizes within our network service
area, and is supported by our customer service, technical experts,
and outbound telemarketing activities. This direct sales
activity is supplemented by telemarketing sales agents and through
customer referrals.
At the local level, we advertise in general print media and through
publications targeted at the information professional. During late
1999 we established an e-commerce site, www.airwaveproducts.com, to
sell wireless network equipment to enterprise customers and
Internet service providers. Although no revenues were generated
from this site during fiscal year 1999, management believes that
in the future an increasing percentage of our revenues will be
attributable to the sale of products and services over the Internet.
Our backlog results from the difference in timing between a firm
customer order and the installation of all services ordered by
the customer. In general, our target interval for installation
is three weeks. As of September 30, 2000, we estimate that our
revenue from contracts for services ordered but not yet filled
to be approximately $120,000, of which approximately $10,000
represents recurring monthly revenue, and the rest represents
one-time revenue from the sale of
equipment.
Competition
Our market is crowded with companies which provide both wired
and wireless Internet networks and Internet access to businesses
and individuals. We face competition from existing network and
Internet service providers, most of whom have financial
resources, brand recognition, work coverage, technical
resources, and sales forces much larger than ours. These
providers may have substantial financial and technical resources
directed at the same markets served by us. As a result, from
time to time, we may need to adjust the pricing of our products,
expend more funds to acquire customers and may experience higher
customer attrition. In addition, we need to be able successfully
to compete with the larger and more established companies that
already provide Internet service.
In the wireless market we compete with, among others, Teligent,
Inc., Winstar Communications, Inc., and NEXTLINK Communications,
Inc., each of which offers wireless directional, high-speed
network services; Pacific Bell, AT&T, World Com, Qwest, Cox
Communications, Sprint and similarly situated telecommunications
companies, which offer Internet products as stand-alone
products or in a bundle with telecommunications, network
services, or wide-area networking; and companies like Covad
and Rhythms Net Connections, which are representative of service
providers who provide high-speed network facilities primarily
by using state-of-the-art modems in conjunction with the
facilities of incumbent local exchange carriers.
Similarly, we compete with Time Warner, @Work, and other cable
television companies which have converted cable television coaxial
ines to support bi-directional, high-speed network services, and we
also compete with Internet-dedicated access companies, like Verio,
Concentric, and Level 3, which specialize in Internet protocol
products that include data center services, web
hosting, virtual private networking, network consulting,
and related products and services.
We compete with these companies in the areas of rapid
installation, technical performance, quality
of customer service and price. We have the capacity
to deliver Internet service in 48 hours
because at a minimum our service may only require
installation of a radio and antennae at a
customer's site. Competing technologies that rely on
physical wiring may require 30 to 45 days
for the necessary wiring to be installed. We develop
our networks primarily with our own internal
engineering expertise, and we believe the use of our
own personnel increases the uniqueness of
our service and prevents direct copy by our competition.
Use of our own technical network
configuration, radio technology, and POP site
implementations reduce costs and improve
performance.
Although pricing is an important factor in our customers'
purchase decisions, we believe that customer relationships,
customer service and consistent quality will be the key to
generating customer loyalty. During the past several years
management has observed market prices for network services
declining, which is a trend management believes will likely
continue. As prices decline for any given speed of service,
we expect that our total number of customers will increase
due to more individuals and companies having access to, and
deciding to use, these services. As the total number of
customers increase, the proportion of customers purchasing
our high-speed services, which are more expensive in compar-
ison to our other services, will increase because the cost
to ugrade a customer's speed is generally minimal.
Many of our competitors rely on existing networks of copper lines owned
by third parties. We believe these networks are facing increased demand
from individuals and businesses for new services at a reasonable cost.
Our management believes that elimination of reliance on third parties
reduces our costs by eliminating the expense of payments to these third
parties for labor costs associated with installation and costs of
troubleshooting network problems. Further, we believe that capital
expenditures associated with constructing our wireless network are
substantially lower because we do not physically have to construct a
wire network.
Principal Suppliers
Our principle suppliers provide hardware and software that is
incorporated into our networks. While no single vendor represents a
majority of capital spending, network performance depends on the
operation and support of these products. We rely on third-party
vendors for equipment, upstream bandwidth, operational software, and
product support. We currently rely on six vendors for our equipment
and four vendors for upstream bandwidth access. Our product availa-
bility and network performance may be diminished when and if these
providers limit the availability of service, delay product, or deviate
from our expectations for performance. However, management believes
these vendors could be replaced within approximately 60 days should
that become necessary in the future. Our agreements with our
customers typically require specific performance on our part for
financial, service, or operational actions, and any failure in
our performance due to a vendor's non-performance could result in
penalties and/or increased costs of operation for us. As is
customary in the industry, damages owed by a company for failure
to provide bandwidth are generally limited to service credits for
the circuits affected.
In November 1999, we entered into a contract to purchase wireless tele
commnications equipment from Adaptive Broadband Corporation. Pursuant
to the agreement we have committed to purchase 2,624 units, 5,120 units
and 7,760 units during the first, second and third years of the agree-
ment, respectively. Units consist of subscriber units or access points.
Subscriber units refer to individual customers and access points refer
to POPs. The agreement may be terminated by written notice from either
party for occurrence of several specific events, notably, if either
party is not satisfied ith the performance of the other party. Obli-
gations of the agreement will survive early termination to the extent
purchase orders are accepted by Adaptive Broadband Corporation and
minimum additional payments are required.
We anticipate that approximately 20% of the equipment purchased as a
resulT of the agreement will be used in our own wireless operations, an
d the remaining 80% will be resold to third parties.
We expect to purchase a minimum of $4.4 million, $6.4 million and $7.7
6 million of equipment for the first, second and third year of the agr
eement. As of this filing, we anticipate that this agreement will pro
vide additional revenues from wireless equipment sales, however, we ca
nnot assure what effect the commitments required under the agreement w
ill have on our results of operations.
Trademark, License and Intellectual Property
Our primary service mark in our service area of Orange County is Globa
l Paific Internet, because the name Worldwide Wireless was not availa
ble to us as a corporate name from the Secretary of
State of California. We are currently seeking trademark protection fo
r both "Global Pacific Internet" and "Worldwide Wireless Networks." T
o the extent we succeed in obtaining a federal trademark for "Worldwid
e Wireless Networks," we may be able to enforce our right to use that
trademark as our corporate name in California, but there can be no ass
urance that we will ever be able to do so. The success of our busines
s deends in part on brand recognition, trade secrets, network hardware
, and software which may be proprietary or purchased from third-partie
s. We rely upon a combination of licenses, confidentiality agreements
and other contractual covenants, as well as the statutory protections
of the California Trade Secrets Act to establish and protect our techn
olog and other intellectual property rights. Although we do not belie
ve that our intellectual property infringes on the rights of any other
party, third-parties may in the future assert claims for infringement
which may be successful and/or require substantial resources to defend
. Other than in California, we have no knowledge of any condition or
circmstance which would cause a conflict with our trademark or name in
any jurisdiction, although there can be no assurance that a condition
or circumstance of this type does not exist, or will not develop in the
future. (See: Risk Factors - Risks Relating to Our Business.)
As of September 30, 2000, we held six (6) FCC private operational fixe
d mirowave radio station licenses. (See "Government Regulations" belo
w). These licenses have a term of ten years, the first
of which will expire in July 2009. The importance of having FCC licen
ses to companies like ours is that it establishes superior rights as a
gainst third parties to provide our services using the frequencies and
in the locations for which these licenses are granted. We intend to c
ontinue to apply for these licenses as our business and operations expand.
Product Development
We conduct research and development as an incidental activity to our o
rdinry operations. Therefore, we have not spent any material amount
for research and development during the past
two fiscal years. We expect to devote substantial resources to increa
se market penetration within our current service area as well as expan
d our wireless network to other areas in southern California and in ot
her locations where we believes it has an opportunity to market its se
rvices successfully.
In May of 1999 we entered into a joint venture with Bridge Technology,
Inc. Pursuant to the agreement, we have agreed to provide our know ho
w and have contributed $50,000 toward the
capitalization of Pacific Bridge Net, a subsidiary of Bridge Technolog
y. The mission of Pacific Bridge Net is to design, develop (patent an
d copyright), market and sell various devices required to provide high
speed broadband wireless access to the Internet backbone infrastructur
e. We own a 20% interest in the venture, and will have the right to se
ll any radio equipment which is developed through the venture in the U
nite States. As of December 31, 1999, the amount of this investment w
as reduced to $36,885, resulting from our 20% allocation of the losses
reported by Pacific Bridge Net for fiscal year 1999. Pacific Bridge Ne
t has finished an engineering prototype of a wireless radio with a bui
lt-in firewall and integrated router (which may eliminate the need for
a prxy server or complicated network configuration), and has been test
ing it for a period of approximately 12 weeks for reliability and stab
ility in real wireless network deployment. The formal agreement was
terminated by mutual consent as of July 1, 2000, however we continue to
make sales of equipment through Global Bridge E Net for use both in the
U.S. and Asia.
Government Regulation
At the federal level, the FCC has jurisdiction over the use of the ele
ctroagnetic spectrum (i.e., wireless services) and has exclusive juri
sdiction over all interstate telecommunications services,
that is, those that originate in one state and terminate in another st
ate. State regulatory commissions generally have jurisdiction over in
trastate communications, that is, those that originate and terminate w
ithin the same state. Municipalities and other local jurisdictions ma
y regulate limited aspects of our business by, for example, imposing z
oning and franchise requirements and requiring installation permits.
We ae also subject to taxation at the federal and state levels and may
be subject to varying taxes and fees from local jurisdictions.
A large portion of our wireless networks operate in a radio spectrum n
ot rquiring licensing from the Federal Communications Commission unde
r current regulations. As an Internet service
provider we are not currently directly regulated by the FCC or the Pub
lic Utilities Commission of any state. However, as required by law, w
e license frequency spectrum directly from the FCC for some of the hig
h-speed portions of our wireless network. Changes in current state or
federal law, or in the interpretation of existing law, may cause incre
ased regulation of our business or restrictions on the unlicensed radio
spectrum currently used in the wireless networks.
Employees
We currently have a total of 39 employees all of which are full time.
Thes individuals bring us expertise in various aspects of sales, engi
neering, customer service, finance and network
operations. The majority of our employees are based in Orange County,
California. We believe we have good relations with our employees, and
none are covered by any collective bargaining agreement.
ITEM 17: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and r
esuls of operations should be read in conjunction with our consolidat
ed financial statements, including all notes attached to
these statements, which appear at the end of this prospectus. In addi
tion to historical information, the discussion here and elsewhere in t
his prospectus contains some forward-looking statements. These statem
ents by their nature involve risks and uncertainties, and should not b
e construed to imply any promise, certainty or likelihood that these r
esults or trends will necessarily continue in the future. Our actual
resuts in the future may differ significantly from those anticipated b
y these forward-looking statements, due to many factors including thos
e set out in the "Risk Factors," "Business" and other sections of this
prospectus.
Overview. Worldwide Wireless is a networking solutions company which
provdes high speed Internet access using our own wireless network, di
al-up Internet access, data center services and
network consulting. Since April 1999 we have undertaken large-scale c
ommercial operations and have developed a commercial customer base, a
direct sales force and have expanded our wireless network. Our primar
y market is currently Orange County, California, where we operate our
wireless network. Recently, we have also initiated operations in Los
Angeles County, California. While we have experienced revenue growth
sinc our inception, we have operated at a net loss, due primarily to o
ur investment in expanding our network coverage, which is expected to
continue. Management believes that our continued expansion will resul
t in additional losses for the foreseeable future, due to our continue
d expansion efforts beyond the amount of revenues generated from our e
xistng operations. We must fund these expansion efforts, for the fore
seeable future, from the incurrence of debt and/or the sale of equity,
and there can be no assurance that we will be able to access either de
bt or equity capitalization in sufficient amounts or on acceptable ter
ms to continue to fund these expansion efforts (as further described b
elow. We have received a letter from one of our existing investors in
dicating a willingness to provide additional debt and/or equity capita
lization as may be determined between us from time to time as our fina
ncial needs arise. Depending upon the terms presented to us, we may o
r may not use all or any portion of this funding. If we were unable t
o acess this capital, or any other capital for expansion, then Worldwi
de Wireless would be unable to continue its expansion as planned, and
would remain essentially an Orange County, California network. Manage
ment has developed a cost reduction plan which could be implemented
should this occur, and this plan would allow Worldwide Wireless to
operate profitably, with little to no expansion or growth.
Revenues. We generate revenues primarily through the sale of annuity-
likeservice contracts with customers, the sale of equipment and insta
llation of wireless networks, and network consulting.
We recognize revenues when services are completed. Our revenues for t
he twelve months ended December 31, 1998 and December 31, 1999 were $8
41,841 and $1,980,203, respectively. For the nine-month period ended
September 30, 1999, our total revenues were $1,228,457. These revenue
s increased by 124% to $2,757,520 for the same period ended September
30, 2000. The increase in revenue for the twelve months ended December
31,199 and the nine months ended September 30, 2000 are primarily attr
ibutable to an increase in the number of wireless customers. We had ap
proximately fifteen wireless customers at December 31, 1998, one hundr
ed and ninety at December 31, 1999, and three hundred and eighty eight
at September 30, 2000. In addition to the growth in our wireless cust
omerbase, equipment sales increased from $30,243 to $251,037 for the t
welve months ended December 31,1998 and December 31,1999, respectively
. We believe that growth in revenue will come from additional penetrat
ion in markets currently served by existing networks, expansion of com
plimentary product lines to existing and new customers, and geographic
expasion using currently deployed technologies. We have spent, and in
tend to continue to spend, significant resources on these activities.
Cost of Sales. Our cost of sales for goods sold consists of third-par
ty ntwork usage and other outsourced service costs, and the cost of r
oof rights. Third-party network costs are expensed in
the period when services are rendered and are generally proportional t
o the number of customers. Our total costs of sale for goods and serv
ices sold for the years ended December 31, 1998 and 1999 equaled $430,
600 and $972,802, respectively, and for the nine months ended Septembe
r 30, 1999 and September 30, 2000, these costs were $513,073 and $1,83
5,716, respectively, an increase of 258%. The increase in our cost of
sale for the twelve months ended December 31, 1999 and the nine months
ended September 30, 2000 is relative to the increase in revenue genera
ted from our growth in wireless customers and equipment sales. We do
not currently anticipate that inflation will have a material impact on
our results of operations in the near future.
Sales and Marketing. Sales and marketing expenses include salaries, s
alescommissions, employee benefits, travel and related expenses for o
ur direct sales force, fees paid to third-party sales
agents, marketing and sales support functions. For the years ended De
cember 31, 1998 and December 31, 1999 our sales and marketing expense
equaled $158,592 and $616,022. For the nine month period ending Septe
mber 30, 1999, our cost of sales and marketing expense was $357,573, c
ompared to $574,966 for the same period ended September 30, 2000, an i
ncrease of 61% or $217,393 in the aggregate. The increase in sales and
markting expense for the twelve months ended December 31,1999 and the
nine months ended September 30,2000 are attributable to expanding our
sales department from two sales representatives at December 31, 1998 t
o ten at December 31,1999. Consequently, we incurred more salary and
commission expenses. In an effort to increase our revenues, user bas
e an brand awareness, we expect to increase significantly the amount o
f spending on sales and marketing over the next year. Marketing costs
associated with increasing our user base, which to date have been mini
mal, are expensed in the period incurred.
General and Administrative. General and administrative expenses inclu
de slaries, employee benefits and expenses for our executive, finance
, depreciation of network equipment, technical
staff costs, legal, and human resources personnel. Investment in netwo
rk equipment is related primarily to geographic network expansion and
incremental customer installations, which result in increased deprecia
tion expense in future periods. In addition, general and administrati
ve expenses include fees for professional services and occupancy costs
. Our general and administrative expenses were $455,126 for the year
ende December 31, 1998, and $2,377,133 for the year ended December 31,
1999. They were $1,060,983 for the nine months ended September 30, 19
99, increasing 206% to $3,248,688 for that same period ended September
30, 2000. The increase in general and administrative expense for the t
welve months ended December 31,1999 and the nine months ended Septembe
r 302000 are attributable to hiring additional personnel, incurring mo
re legal, professional and outside services as related to being a publ
ic company, and increased depreciation expense due to continued expans
ion of our network. We expect general and administrative expenses to
increase in absolute dollars as we continue to expand our administrati
ve ifrastructure to support the anticipated growth of our business, in
cluding costs associated with being a public company.
Liquidity and Capital Resources
Since Pacific Link's inception, it has financed its operations primari
ly trough the private placement of equity securities, loans, leasing
arrangements, cash-flow from operations and the
merger completed withWorldwide Wireless in April 1999. As of Septembe
r 30, 2000 cash reserves totaled $176,633, and current assets totaled
$2,799,943.
Our current liabilities as of September 30, 2000 were $4,732,681 of wh
ich 1,285,151 accounted for the current portion of our long-term liab
ilities discussed above, and $2,999,357 is attributable
to current accounts payable. We anticipate a reduction of approximate
ly $17,567 in October 2000, due to the expiration of capital lease obl
igations. We have paid interest rates ranging from 15.5% to 32.5%, or
an average of 21.7%, on these obligations as a new company without a c
redit history. As of September 30, 2000, we had $1,000,000 in long-te
rm liabilities (other than the current portion of long-term liabilitie
s dicussed above and reflected on our financial statement as a current
liability).
As of September 30, 2000, our principal commitments, other than our co
mmitent to Adaptive Broadband Corporation described above under the h
eading Principal Suppliers, consisted of
office, roof-rights payments, and equipment leases. Future minimum pr
incipal payments on notes payable were approximately $158,791. Future
minimum lease payments were $20,250 with $18,665 through 2000 and $5,4
84 through 2001. Of that amount, capital lease payments due through t
he end of fiscal years 2000 and 2001 were $16,523 and $1,585, respecti
vely, and operating lease payments due through the same periods were $
212,77 and $283,836, respectively.
Interest expense for fiscal year 1999 was $46,895, which represented a
decrase of $4,560 from interest expense of $51,455 for fiscal year 19
98. The decrease was primarily attributable to the
expiration of approximately 65% of the capital leases previously enter
ed into by the Company in connection with the provision of dial-up ser
vices, and the ability of the Company to outsource such dial-up servic
es without having to replace such capital leases.
Interest expense consists primarily of interest accrued for notes paya
ble. Interest expense increased 307% to $107,806 for the nine months
ended September 30, 2000 compared to interest
expense of $26,484 for the nine months ended September 30, 1999. This
increase is primarily attributable to the interest accrued on notes pa
yable of which funds were used to continue expansion and increase the
customer base in our existing market.
Net cash used to fund our operating activities for the year ended Dece
mber31, 1999 was $865,302 compared to $180,584 in funds provided by o
perating activities for the year ended
December 31, 1998. Net cash used for operating activities consisted p
rimarily of net operating losses and network asset purchases. For the
nine months ended September 30, 2000, our operating activities used $1
,815,750, an increase of 183% from the amount of $642,623 used to fund
our operating activities during the nine months ended September 30, 1999.
Net cash provided by our financing activities was $2,029,671 for the p
erio ended December 31, 1999, up from $11,986 for that period ended D
ecember 31, 1998. For the nine months ended
September 30, 1999 and September 30, 2000, our financing activities pr
ovided net cash of $1,572,015 and $2,680,687, respectively, an increas
e of 71%. Net cash provided by financing activities was attributable
to the sale of our securities prior to the merger in April 1999, and t
he sale of other debt and equity securities as described in the Recent
Transactions section below.
Our net loss for the fiscal year ended December 31, 1999, totaled $2,0
51,22, or $.208 per share, compared to $330,183, or $.052 per share,
for the fiscal year ended December 31, 1998. As
discussed above the 1999 period was impacted by costs associated with
increases in the number of sales personnel, administrative personnel,
professional and consulting services and depreciation expenses.
We incurred a net loss of $3,009,656, or $.241 per share, for the nine
monts ended September 30, 2000, compared to $712,990, or $.070 per sh
are, for the nine months ended September 30,
1999. As discussed above, the nine months ended September 30, 2000 we
re impacted by costs associated with the Tarrab Capital Group merger,
increases in our customer base, sales personnel, administrative person
nel, executive management personnel, professional services, and deprec
iation expenses.
We expect to continue to incur significant capital expenditures in the
futue in our current market of Orange County, including additions and
enhancements to our server and network
infrastructure, software licenses and furniture, fixtures and equipmen
t. The actual amount of capital expenditures will depend on the rate
of growth in our user base and available resources, which is difficult
to predict and which could change dramatically over time. Technologic
al advances may also require us to make capital expenditures to develo
p or acquire new equipment or technology.
Our current business plan calls for us to launch wireless networks in
San iego, Santa Barbara and Ontario, California, and Honolulu, Hawaii
during the period between the fourth quarter of
2000 to the second quarter of 2001. We have recently launched the Los
Angeles Wireless network. We anticipate that during this expansion ba
sed upon our historical funding of expansion efforts, we will remain u
nprofitable in each market for at least 12 to 18 months after launch.
We expect that we will require outside financing of at least $1,000,00
0 to $3,000,000 per location to establish and deploy our network in th
e areas mentioned above, in addition to any revenues generated from op
eratons. We intend to explore the letter we received from one of our
shareholders to determine if mutually agreeable terms can be reached w
hereby it would provide debt and/or equity capitalization to help fina
nce our expansion efforts, and, even if acceptable terms can be negotiated,
additional external funds will also have to be raised.
We have investigated the availability, source and terms for external d
ebt inancing and are exploring options which may be available to us.
However, we cannot assure that we will be able
to obtain financing onterms agreeable to us. Also, the acquisition of
funding through the issuance of debt could result in a substantial por
tion of our cash flows from operations being dedicated to the repaymen
t of principal and interest on the indebtedness, and could render us m
ore vulnerable to competitive and economic downturns.
Any future securities offerings will be effected through registered of
ferigs, or in compliance with applicable exemptions under federal and
state laws. The purchasers and manner of issuance will
be determinedaccording to our financial needs and the terms available.
After determination of the availability of debt financing we may elect
to offer securities and, accordingly, will determine the type of offer
ing or the type or number of securities which we will offer at that ti
me. However, we cannot assure that a future securities offering will b
e successful. We have no plans to make a public offering of our comm
on sock at this time. We also note that each time if we issue more sh
ares of our common stock our shareholders will experience dilution in
the percentage of ownership of their common stock.
During fiscal year ended December 31, 1999 and the company's nine mont
h inerim period ended September 30, 2000, the company did not generat
e positive cash flows. Based on our current
capital position, we arelimited to expanding our network of services t
o customers located almost exclusively in Orange County and Los Angele
s. We are currently reliant upon cash flows generated from operations
, which our management has determined are not adequate to maintain cur
rent personnel and expansion levels for the next 12 months. As a resu
lt of this inadequacy, our management has developed a cost reduction p
lan hat, if deemed necessary, will mandate our elimination of some out
side services and costs associated with expansion, and a reduction in
company staffing. Management believes that the implementation of this
cost reduction plan would allow the company to maintain its current cu
stomer base and to meet all of its debt and operational expense
requirements.
ITEM 18: DESCRIPTION OF PROPERTY
Our principal executive offices are located in the City of Orange, Cal
iforia, where we lease 8,728 square feet of office space with roof ri
ghts for antennas. We renewed the lease on March 30,
1999 and it will expire in 2004. The monthly rent ranges from approxi
mately $16,583 in the first year to $18,329 in the fifth year. This o
ffice space is in good condition and satisfies our current space needs.
We also lease two office spaces in Irvine, California. One office spa
ce, ocated at 5 Park Place, is 1,062 square feet and houses our sales
agents. This lease will expire in April of 2003, and
requires a basic rent payment of $2,549 per month (which is subject to
adjustments for the term of the lease). The other office space is loc
ated at 8001 Irvine Center Drive, and is subleased to a computer consu
lting company for the cost of the lease (which is approximately $4,021
per month). Recently, to facilitate our expansion into Los Angeles Co
unty, California, we opened a sales office there comprising 1,993 squa
re fet, located at 5933 Century Boulevard, Los Angeles, CA. The lease
for that office has a five-year term, expiring in March 2005. Monthly
rent there is $2,889.85 for the first thirty months of the lease, esca
lating to $3,089.15 for the remainder of our lease term.
ITEM 19: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Worldwide Wireless has entered into employment agreements with Jack To
rtorce who currently serves as our chairman of the Board of Directors
and chief executive officer. These agreements
call for us to compensate Mr. Tortorice with a combination of cash and
stock, as described above (See: "Executive Compensation").
Thomas Rotert, Esq., a director of Worldwide Wireless, also serves as
our orporate secretary and treasurer. Mr. Rotert does not receive an
y compensation for serving in these capacities,
however his law firm,Schumann & Associates, has been engaged to repres
ent us as general legal counsel, for which they have received compensa
tion in cash as well as shares of our common stock. All stock earned
by Schumann & Associates was accrued monthly and accounted for at its
trading price at the end of each month, and were granted at the rate o
f $10,000 worth of shares per month of service, until May 31, 2000, by
which time 20,157 shares had been earned.
Dennis Shen, who formerly served as a director of Worldwide Wireless,
resined from that position in February 2000 (See "Executive Officers"
). He has continued to provide services to us
under a Consulting Agreement, for which he receives cash compensation
equal to $50,000 per year, and will be responsible for, among other th
ings, monitoring the Pacific Bridge Net and Global Bridge E Net ventur
es on behalf of Worldwide Wireless. (See: "Business: Product Developme
nt").
Sean LeMons, another founder of Worldwide Wireless and a holder of mor
e thn 5% of our outstanding stock, is an employee of Worldwide Wirele
ss. His annual salary for FY 1999 was $57,600.
During 1999, we paid $15,000 to a shareholder for a note payable which
was utstanding from December 31, 1997. This amount was received as a
loan to us on a verbal basis from Ming Chan
Yeung, Susan Shen's mother and also one of our shareholders. The $15,
000 was received by us in November 1997 and subsequently paid off in A
pril 1999. These funds were raised for purposes of meeting the compan
y's operating expenses.
During 1999, we paid $16,300 to a shareholder for a note payable which
was utstanding from December 31, 1998. This amount was received as a
loan to us from Zhi Gang Zhang a
shareholder and outside consultant. The $16,300 was received by us in
July 1998 and subsequently paid off in April 1999. These funds were ra
ised for purposes of meeting our operating expenses.
During 1999, we received $75,000 from a shareholder for a note payable
. Asof December 31, 1999, the balance due is $75,000. This amount wa
s received by us in exchange for two
Promissory Notes from Andrew Taubman, a shareholder and outside consul
tant. The first note dated August 6, 1999 was for $50,000, and the se
cond note dated September 22, 1999 was for $25,000. These funds were r
aised in connection with our expansion efforts. They accrue interest
at the rate of 10% per year and are payable on demand.
ITEM 20: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is traded over-the-counter and quoted on the Over the
Couner Electronic Bulletin Board under the symbol "WWWN." The follow
ing table represents the range of the high
and low bid prices of our stock as reported by the NASDAQ Trading and
Market Services for each fiscal quarter beginning with the third quart
er of 1997 and ending with the third quarter of 2000. These quotation
s represent prices between dealers, may not include retail markups, ma
rkdowns, or commissions, and may not necessarily represent actual
transactions.
Year Quarter High Low
------ ----------------- ------ ------
1997 Third Quarter 0.25 0.125
Fourth Quarter 0.13 0.13
1998 First Quarter 0.125 0.10
1999 First Quarter 4.0 4.0
Second Quarter 6.0 0.40625
Third Quarter 4.75 2.875
Fourth Quarter 4.00 2.50
2000 First Quarter 9.56 4.50
2000 Second Quarter 7.85 3.19
2000 Third Quarter 3.56 0.85
During 1997 and 1998 our market was sporadically and thinly traded. T
herewas no trading activity during the second, third and fourth quart
ers of 1998. Trading activity increased in August
of 1999. The price per share of companies situated similarly to World
wide Wireless have also exhibited extreme volatility in response to co
mpany-specific information as well as general market conditions. Shar
eholders should consider the possibility of the loss of the entire val
ue of their shares.
As of September 30, 2000, we had approximately 122 stockholders of rec
ord. Management controls, directly and beneficially, 7,636,600 of our
outstanding shares, representing
approximately 59% of all shares outstanding. We have 625,000 common s
hares subject to warrants and convertible debentures. Approximately 8
,400,000 shares of our outstanding common stock are subject to the res
ale limitations of Rule 144. We may have 442,500 to 1,092,500 common
shares subject to options pending the resolution of a disputed options
contract entered into by Pacific Link in September 1998. (See "Disputed
Beneficial Ownership," page 29).
ITEM 21: EXECUTIVE COMPENSATION
The following table shows compensation of our executive officers for our last
completed fiscal year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<S> <C> <C> <C>
Name and Annual Salary Annual Salary Project Annual Salary
Principal Position for FY 1999 for FY 2000(1,2) for FY 2001(3)
- ------------------------ -------------- --------------- ---------------------
Jack Tortorice 98,000(4) $ 140,000 $ 150,000
Chief Executive Officer
and Director
Charles C. Bream III 0(2) $ 140,000(5) $ 0
Thomas Rotert 0 $ 58,125(6) $ 0
Secretary and Treasurer
Jerry Collazo N/A $ 60,000 $ 130,000
Chief Financial Officer
<FN>
(1) This column represents actual compensation earned through the date of this
prospectus, and projected amounts to be earned during the remaining portion
of this fiscal year on an annualized basis.
(2) No member of our executive management has received any bonus or other
special compensation other than the options described in this prospectus.
None is expected to be given in the foreseeable future.
(3) This column represents management's best estimate of what executive
compensation may be during fiscal year 2001, at current levels and assuming
no material changes in our executive management team during that period.
(4) Mr. Tortorice's employment contract calls for an annual salary of $150,000
for FY 2000.
(5) Mr. Bream resigned as President of Worldwide Wireless on October 5, 2000.
(6) Mr. Rotert received 25,000 shares of common stock for services valued at
$58,125.
</TABLE>
COMPENSATION OF DIRECTORS
We do not have any standard arrangement for compensation of our directors for
any services provided as director, including services for committee
participation or for special assignments.
EMPLOYMENT CONTRACTS
On January 1, 1999, we amended our employment agreement with Mr. Tortorice. The
agreement is for an initial term of five years, terminating on December 31,
2003. However, the agreement automatically renews for one year for the next
four years after the initial term. Mr. Tortorice receives a salary of $150,000
per year and no contractual commitments for additional stock options other than
rights he is entitled to under the 1999 stock option plan. He has a $500 car
allowance per month and will be reimbursed for expenses incurred on our behalf.
-45-
<PAGE>
We may terminate the agreement for cause, as defined in the agreement. Pursuant
to the agreement, if we terminate the agreement we have agreed to buy back his
original shares, 3,500 common shares, for $25 a share and we will distribute a
pro rata share of profits to each of them. Mr. Tortorice may terminate the
agreement by giving us 30 days notice.
On January 1, 2000, we entered into an employment agreement with Mr. Bream to
serve as a President and Chief Operating Officer for an initial term of five
years, terminating on December 31, 2004. Mr. Bream resigned from this position
effective October 4, 2000. Under the terms of a Separation Agreement we entered
into with Mr. Bream at that time, he is entitled to a severance package of six
months compensation, payment for his accrued but unused vacation benefit, an
allowance for medical and dental benefits and 2 options to purchase 580,000
shares of our common stock for $3.00 per share. These options expire on January
1, 2010.
On July 17, 2000, we entered into an employment agreement with Mr. Collazo to
serve as the Chief Financial Officer for an initial term of three years,
terminating on July 17, 2003. However, the agreement automatically renews for
one year successive terms after the initial term. Mr. Collazo receives a salary
of $130,000 per year and may receive a bonus up to 35% and he received an option
to purchase 300,000 shares of stock at $3.00 per share vesting ratably over a
period of two years. He will also be reimbursed for expenses incurred on our
behalf. Mr. Collazo or Worldwide Wireless may terminate the agreement by giving
30 days notice.
1999 STOCK OPTION PLAN
On August 13, 1999, Worldwide Wireless established an Employee Stock Ownership
Plan. The Plan covers both current and prospective employees, consultants and
directors. Executive officers and employees are covered under the provisions
governing the incentive stock options, and consultants will be covered under the
provisions governing the nonstatutory stock options.
The exercise price for each option is established by our Board of Directors.
The exercise price per share for a qualified incentive stock option cannot be
less than the fair market value of a share of stock on the date the option is
granted. The exercise price per share for a non-qualified stock option cannot
be less than 85% of the fair market value of a share of stock on the date the
option is granted.
As of June 30, 2000, there were 597,150 options granted, of which 309,947 have
vested. In accordance with FASB No. 123, we are not required to recognize
compensation when the options vest since the exercise price for all the options
granted were at fair market value on the date of the grant. No options are
exercisable after the expiration of 10 years after the date they are granted.
The maximum number of shares which can be issued under the plan is 1,000,000.
We may also issue options other than under our stock option plan.
ITEM 22: FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS - DATED 1999 AND 1998
Worldwide Wireless Networks, Inc. Consolidated Financial Statements dated
December 31, 1999 and December 31, 1998.
PAGE
Consolidated Balance Sheets F-3 - F-4
Consolidated Statement of Operations F-5
Consolidated Statement of Stockholders Equity F-6
Consolidated Statement of Cash Flow F-7 - F-8
Notes to Financial Statements F-9 - F-19
WorldWide Wiresless Network, Inc. Consolidated Financial Statement dated
September 30, 2000
Consolidated Balance Sheets F-21 - F-22
Consolidated Statement of Operations F-23
Consolidated Statement of Cash Flow F-24
Notes to Financial Statements F-25 - F-27
<PAGE>
F-2
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
(Formerly Pacific Link)
Consolidated Balance Sheets
ASSETS
------
December 31
1999 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents (Note 1) $ 136,311 $ -
Accounts receivable (net of allowance for
doubtful accounts of $20,000 and
$2,200, respectively) 165,091 29,340
Employee advance 3,000 -
Inventory 129,861 -
Prepaid Expenses 18,912 -
------------ ------------
Total Current Assets 453,175 29,340
------------ ------------
PROPERTY & EQUIPMENT (Note 1)
Office equipment 103,231 28,833
Leased equipment 177,653 209,751
Machinery equipment 1,109,524 226,878
------------ ------------
1,390,408 465,462
Less:
Accumulated depreciation - leased equipment (165,255) (130,111)
Accumulated depreciation (282,495) (28,491)
------------ ------------
Total Property & Equipment 942,658 306,860
------------ ------------
OTHER ASSETS
Investments (Note 3) 36,885 -
Deferred Charges (Note 1) 21,984 10,428
Deposits 36,197 15,184
------------ ------------
Total Other Assets 95,066 25,612
------------ ------------
TOTAL ASSETS $ 1,490,899 $ 361,812
============ ============
F-3
<PAGE>
WORLDWIDE WIRELESS NETWORKS, INC.
(formerly Pacific Link Internet, Inc.)
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31
1999 1998
------------ ------------
CURRENT LIABILITIES
Bank overdrafts $ - $ 4,092
Accounts payable 655,485 522,337
Accrued expenses 83,933 -
Lines of credit (Note 5) 89,323 98,471
Unearned revenue (Note 1) 102,356 23,542
Current portion of long-term liabilities (Note 4) 665,355 102,517
------------ ------------
Total Current Liabilities 1,596,452 750,959
------------ ------------
LONG TERM LIABILITIES (Note 4)
Unearned Revenue (Note 1) - 17,948
Notes payable (Note 4) 562,245 9,277
Notes payable-related party (Note 4) 75,000 31,300
Capital lease obligations (Note 4) 30,340 88,190
Less current portion (665,355) (102,517)
------------ ------------
Total long term Liabilities 2,230 44,198
------------ ------------
TOTAL LIABILITIES 1,598,682 795,157
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, 50,000,000 shares
of $.001 par value authorized,
11,799,988 and 7,000,000 shares issued
and outstanding 11,800 7,000
Additional paid in capital 2,415,345 98,145
Retained earnings (2,534,928) (483,676)
Officer receivables - (54,814)
------------ ------------
Total Stockholders' Equity (107,783) (433,345)
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,490,899 $ 361,812
============ ============
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Statements of Operations
From
inception on
For the years August 1,1997
ended through
December 31 December 31
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
REVENUES $ 1,980,203 $ 841,841 $ 271,841
COST OF SALES 972,802 430,600 189,382
GROSS PROFIT 1,007,401 411,241 82,459
SELLING EXPENSES 616,022 158,592 68,827
BAD DEBT EXPENSE 40,317 94,861 15,657
GENERAL &
ADMINISTRATIVE EXPENSES 2,377,133 455,126 138,939
TOTAL OPERATING EXPENSES 3,033,472 708,579 223,423
OPERATING INCOME (LOSS) (2,026,071) (297,338) (140,964)
OTHER INCOME
AND (EXPENSES)
Loss on investment (13,115) - -
Miscellaneous income 34,829 19,410 6,163
Interest expense (46,895) (51,455) (18,692)
Total Other Income
and (Expenses) (25,181) (32,045) (12,529)
INCOME (LOSS)
BEFORE INCOME TAXES (2,051,252) (329,383) (153,493)
PROVISION FOR
INCOME TAXES (Note 1) - 800 -
NET INCOME (LOSS) $(2,051,252) $ (330,183) $ (153,493)
NET INCOME (LOSS) PER SHARE $ (.208) $ (.052) $ (.027)
WEIGHTED AVERAGE
OUTSTANDING SHARES 9,883,325 6,440,000 5,880,000
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Statements of Stockholders' Equity
From inception on August 1, 1997 through December 31, 1999 and 1998
Additional Retained
Common Stock Paid in Earnings
Shares Amount Capital (Deficit)
<S> <C> <C> <C> <C>
Balance at inception on
August 1, 1997 - $ - $ - $ -
Shares issued to organizers
for cash 5,880,000 5,880 (3,380) -
Net income (loss) for the period
ended December 31, 1997 - - (153,493)
Balance on December 31, 1997 5,880,000 5,880 (3,380) (153,493)
Shares issued for cash 1,120,000 1,120 101,525 -
Net income (loss) for the year
ended December 31, 1998 - - - (330,183)
Balance on December 31, 1998 7,000,000 7,000 98,145 (483,676)
April 1, 1999 - Reverse acquisition
and reorganization adjustment 4,199,988 4,200 995,800 -
April 2, 1999 - Stock issued for
cash and services valued at
$2.00 per share 400,000 400 799,600 -
June 1999 Warrants issued for services - - 122,000 -
December 1999 - Stock issued for
cash at $2 per share 200,000 200 399,800 -
Net income (loss) for year ended
December 31, 1999 - - - (2,051,252)
Balance on December 31, 1999 11,799,988 $ 11,800 $2,415,345 $(2,534,928)
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Statements of Cash Flows
From inception on August 1, 1997 through the years ended 1997 and 1998
December 31 December 31
1999 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $(2,051,252) $(330,183) $(153,493)
Non-cash items:
Depreciation & amortization 321,246 97,736 26,362
Bad debt - 94,836 15,657
Loss on investment 13,115 - -
Stock and warrants issued for services 822,000 - -
(Increase)/decrease in cu (135,751) (17,401) (14,114)
Accounts receivable-related part 54,814 (39,486) (18,853)
Employee advance (3,000) - -
Prepaid expenses (18,912) 3,263 (3,263)
Deferred charges (11,556) (10,428) -
Inventory (129,861) - -
Increase/(decrease) in current liabilities:
Bank overdraft (4,092) 4,092 -
Accounts payable 133,148 336,665 128,317
Accrued expenses 83,933 - -
Unearned revenue 60,866 41,490 -
------------ ---------- ----------
Net Cash Provided (Used)
by Operating Activities (865,302) 180,584 (19,387)
------------ ---------- ----------
Cash Flows from Investing Activities
Purchase of property and equipment (957,045) (187,411) (57,269)
Cash paid for deposits (21,013) (6,113) (9,071)
Cash paid for Investments (50,000) - -
------------ ---------- ----------
Net Cash Provided (Used)
by Investing Activities (1,028,058) (193,524) (66,340)
------------ ---------- ----------
F-7
<PAGE>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Statements of Cash Flows
(continued)
Cash Flows from Financing Activities
Advances on line of credit 98 3,860 54,719
Cash paid on line of credit (9,246) - -
Cash from sale of stock 500,000 72,645 32,500
Cash received from debt financing 633,468 - 35,000
Principal payments on long-term debt (94,649) (64,519) (35,538)
Cash received in merger with Worldwide 1,000,000 - -
Net Cash Provided (Used)
by Financing Activities 2,029,671 11,986 86,681
Increase/(decrease) in cash 136,311 (954) 954
Cash and Cash Equivalents
at Beginning of Period - 954 -
Cash and Cash Equivalents
at End of Period $ 136,311 $ - $ 954
Supplemental Cash Flow Information:
Cash paid for interest $ 28,119 $ 61,725 $ 8,422
Cash paid for income taxes $ - $ - $ -
Non-cash financing transaction:
Purchase of equipment
with lease obligations $ - $ 24,784 $184,967
Stock and warrants issued for services $ 822,000 $ - $ -
</TABLE>
F-8
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The audited financial statements presented for December 31, 1999 and 1998,
are those of Worldwide Wireless Networks, Inc. (formerly Pacific Link Internet,
Inc.) (The Company). The Company was incorporated under the laws of the State of
California on September 22, 1997, however operations began on August 1, 1997.
The Company provides wireless internet access to business and individuals. The
Company's headquarters are located in Orange, California.
On April 1, 1999 the Company merged with Worldwide Wireless Networks, Inc.
(Worldwide) a public company with no operations, and assumed the name of
Worldwide Wireless Networks, Inc. Pursuant to the merger, Pacific Link ceased
to exist and Worldwide became the surviving corporation. Worldwide was
organized in the State of Nevada on June 10, 1992. Worldwide recently raised
$1,000,000 in anticipation of the merger, and provided this as the only asset to
the newly combined organization. The merger was treated as a reverse merger for
accounting purposes, therefore the December 31, 1999 period is consolidated and
the December 31,1998 and 1997 is that of the accounting acquirer (Pacific Link
Internet, Inc.) only.
b. Recognition of Revenue, Deferred Charges, Unearned Revenue
The Company recognizes income and expense on the accrual basis of
accounting. During 1998 and 1999, the Company entered into various sales
agreements whereby, a third party financial institution pays a factored sales
amount to the Company for sales contracts received from customers with terms of
1 to 3 years. The Company has deferred the revenue on these contracts to be
recognized over the time of the contract. Unearned revenue has been established
on the books in order to defer the revenues received from the third party on
these contracts. The corresponding factoring fee has been deferred as an asset
called "deferred charges" and is also recognized over the life of the contract.
All other sales are recorded when the services are completed.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements. The 1998 and 1997 weighted average shares have been retroactively
restated for the stock split treatment of the reverse merger for comparability
purposes. Fully diluted earnings per share has not been presented, because the
earnings per share is the same. Warrants to purchase 400,000 common shares and
employee stock options have been eliminated in the fully diluted earnings per
share due to their anti-dilutive effect.
F-9
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (continued)
d. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating loss
carryforwards totaling approximately $2,535,000 that will be offset against
future taxable income. These NOL carryforwards begin to expire in the year
2013. No tax benefit has been reported in the financial statements because the
Company has yet to generate taxable income.
Deferred tax assets and the valuation account is as follows at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
Deferred tax asset: 1999 1998
---------- ----------
<S> <C> <C>
NOL carrryforward $ 861,900 $ 163,000
Valuation allowance (861,900) (163,000)
---------- ----------
Total $ - $ -
========== ==========
</TABLE>
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
f. Property and Equipment
Expenditures for property and equipment and for renewals and betterments,
which extend the originally estimated economic life of assets or convert the
assets to a new use, are capitalized at cost. Expenditures for maintenance,
repairs and other renewals of items are charged to expense. When items are
disposed of, the cost and accumulated depreciation are eliminated from the
accounts, and any gain or loss is included in the results of operations. Assets
are reviewed by management annually for impairment and are written down to fair
market value if impairment exists.
The provision for depreciation is calculated using the straight-line
method over the estimated useful lives of the assets. Useful lives of assets
are as follows: Computer and wireless network equipment - 3 years; DSL equipment
- - 1 year; Furniture and fixtures - 7 years; Office equipment -
5 years
Depreciation expense for the period ended December 31, 1999, 1998 and 1997 is
$321,246, $97,736 and $26,362, respectively.
F-10
<PAGE>
NOTE 2 - Related Party Transactions
During 1999, the Company paid $16,300 to a shareholder for a note payable
which was outstanding from December 31,1998.
During 1999, the Company paid $15,000 to a shareholder for a note payable
which was outstanding from December 31, 1997.
During 1999, the Company received $75,000 from a shareholder for a note
payable. As of December 31, 1999, the balance due is $75,000.
NOTE 3 - Investment
In April 1999, the Company entered into an agreement with Bridge
Technology, Inc., wherein the Company contributed $50,000 for a 20% interest in
Pacific Bridge Net (PBN). In addition to the capital contribution, the Company
was to provide consulting services to PBN for $50,000.
As of December 31, 1999, the investment has been reduced from $50,000
to $36,885 due to the Company's 20% share of the $65,575 loss reported by PBN.
The Company uses the equity method of accounting for this investment.
NOTE 4 - Long-Term Liabilities
Long Term Liabilities are detailed in the following schedules as of December 31,
1999 and 1998:
<TABLE>
<CAPTION>
December 31
Notes payable is detailed as follows: 1999 1998
-------- --------
<S> <C> <C>
Note payable to an individual, payments due
monthly of $500 through July 2000, bears
interest at 7%, secured by equipment and
other assets. 3,777 9,277
Note payable to a corporation, payments due
monthly of $5,457 until paid in full, bears
interest at 12%, unsecured note 58,468 -
Note payable to a corporation, no monthly
payment, matures March 2000, bears interest
at 11%, guaranteed by an officer of the
Company and secured by business assets 500,000 -
-------- --------
Total Notes Payable 562,245 9,277
-------- --------
F-11
<PAGE>
NOTE 4 - Long-Term Liabilities (continued)
December 31
Notes payable is detailed as follows: 1999 1998
-------- --------
Notes payable related party is detailed as follows:
Note payable to a shareholder, non interest
bearing, due upon demand, unsecured note $ - $ 15,000
Note payable to a shareholder, non interest
bearing, due upon demand, unsecured note - 16,300
Note payable to a shareholder, no monthly
payment, payable on demand, bears interest
at 10%, unsecured note 25,000 -
Note payable to a shareholder, no monthly
payment, payable on demand, bears interest
at 10%, unsecured note 50,000 -
-------- --------
Total notes payable - related party 75,000 31,300
-------- --------
Capital lease obligations are detailed in the following schedule as of
December 31, 1999 and 1998:
1999 1998
-------- --------
Capital lease obligation to a corporation
for antenna equipment, lease payments due
monthly of $710 through January 2001,
bears interest at 19.7%, secured by antenna
equipment. $ 8,815 $ 13,790
Capital lease obligation to a corporation
for wireless equipment, lease payments due
monthly of $175 through May 2001,
bears interest at 18%, secured by
wireless equipment. 2,743 4,091
Capital lease obligation to a corporation
for wireless equipment, lease payments due
monthly of $1,244 through October 2000,
bears interest at 15.5%, secured by wireless
equipment. 17,567 23,689
F-12
<PAGE>
December 31
Notes payable is detailed as follows: 1999 1998
-------- --------
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $1,248 through December 1999, bears
interest at 32.5%, secured by equipment. 1,215 12,644
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $841 through October 1999, bears
interest at 17%, secured by equipment. - 7,792
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $721 through January 2000, bears
interest at 19.4%, secured by equipment. - 8,388
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $545 through August 1999, bears
interest at 19.2%, secured by equipment. - 3,582
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $997 through December 1999, bears
interest at 24.1%, secured by equipment. - 10,532
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $680 through January 1999, bears
interest at 24.1%, secured by equipment. - 667
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $338 through July 1999, bears
interest at 19.1%, secured by equipment. - 2,219
Capital lease obligation to a corporation
for equipment, lease payments due monthly
of $205 through April 1999, bears
interest at 15.2%, secured by equipment. - 796
-------- --------
Total Lease Obligations 30,340 88,190
-------- --------
F-13
<PAGE>
NOTE 4 - Long-Term Liabilities (continued)
December 31
Notes payable is detailed as follows: 1999 1998
-------- --------
Total long term liabilities 667,585 128,767
Less current portion of:
Notes payable 562,245 5,526
Notes payable - related party 75,000 31,300
Capital lease obligations 28,110 65,691
-------- --------
Total current portion 665,355 102,517
-------- --------
Net Long Term Liabilities $ 2,230 $ 26,250
======== ========
Future minimum principal payments on notes payable are as follows at December 31, 1999:
2000 637,245
--------
Total notes payable $637,245
========
Future minimum lease payments are as follows at December 31, 1999:
</TABLE>
2000 637,245
--------
Total notes payable $637,245
========
Future minimum lease payments are as follows at December 31, 1999:
2000 32,626
2001 1,585
--------
-
Less portion representing interest 3,871
--------
Total $ 30,340
========
Future minimum lease payments are as follows at December 31, 1999:
NOTE 5 - Lines of Credit
The Company has three lines of credit with three banks with total credit of
$106,000. The average interest rate is 11.75%. The balances due at December
31, 1999 and 1998 were $89,323 and $98,471, respectively.
NOTE 6 - Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. In these financial
statements, assets, liabilities, revenues and expenses involve reliance on
management's estimates. Actual results could differ from those estimates.
F-14
<PAGE>
NOTE 7 - Commitments and Contingencies
The Company has an operating lease for office space. Monthly lease
payments are due of $2,549 for sixty months starting May 1, 1998 and ending
April 30, 2003.
The Company has an operating lease for antenna space on a roof. The
agreement calls for monthly payments of $350 the first six months, $450 the next
six months, and $500 for the remaining 48 months of the sixty-month contract.
The lease began on September 15, 1998 and ends on August 31, 2003.
The Company has an operating lease for office space. Monthly lease
payments are due of $4,021 for sixty months starting October 15, 1998 and ending
September 30, 2003.
The Company has an operating lease for office space. Monthly lease
payments are due of $10,083 and the lease expires in March 2004.
The Company has an operating lease for roof space. Monthly lease payments
are due of $250 for sixty months starting September 15, 1998 and ending August
31, 2003.
The Company has an operating lease for roof space. Monthly lease payments are
due of $300 for sixty months starting November 16, 1998 and ending October 31,
2003.
The Company has an operating lease for roof space that could potentially
secure up to three antennas. The agreement calls for minimum monthly payments
for the initial antenna of $1,000 the first twelve months, $1,050 the next
twelve months, $1,103 the following twelve months, $1,158 the next twelve
months, and $1,216 for the remaining twelve months of the sixty-month contract.
Each additional antenna (limit of three total) will require monthly payments of
$750 the first twelve months, $788 the next twelve months, $827 the following
twelve months, $868 the next twelve months, and $912 the remaining twelve
months. The lease began on October 1, 1998 and ends on September 30, 2003.
The Company has an operating lease for roof space. Monthly lease payments are
due of $1,300 for use of a one directional antenna or $1,300 for use of a four
directional antenna for sixty months starting October 1, 1998 and ending
September 30, 2003.
The Company has an operating lease for roof space. Monthly lease payments are
due of $250 for thirty-six months starting December 2, 1998 and ending November
30, 2001.
The Company has an operating lease for roof space. Monthly lease payments
are due of $200 for thirty-six months starting August 1, 1999 and ending July
31, 2002.
The Company has an operating lease for roof space. Monthly lease payments
are due of $300 for thirty-six months starting April 1, 1999 and ending March
31, 2004.
F-15
<PAGE>
NOTE 7 - Commitments and Contingencies (continued)
Future minimum operating lease payments are as follows at December 31,
1999:
<TABLE>
<CAPTION>
2000 $ 264,836
<S> <C> <C>
2001 265,473
2002 263,134
2003 216,578
2004 33,153
----------
Total $1,043,174
==========
</TABLE>
The Company is obligated under employment contracts to officers of the
Company through December 31, 2003, for $110,000 total compensation per year.
The Company has an investor group committed to providing capital for the
Company's continued expansion and operations. If this funding source did not
provide the necessary capital needed, the Company would need to find additional
sources of funding, or cut back on the expansion process to maintain operations.
In November 1999, the Company entered into a purchase agreement with
Adaptive Broadband Corporation(Adaptive). The Company has agreed to purchase
wireless telecommunications equipment from Adaptive.
Details of the agreement are as follows:
<TABLE>
<CAPTION>
Unit Prices
------------
Subscriber Access
Time Frame Quantity Commitment Units Points
- ------------------------- ------------------------- -------------- ----------
<S> <C> <C> <C>
0-12 months after 2,624 units $1,675,000 $2,075,000
effective date
13-24 months after additional 5,120 units $1,250,000 $1,650,000
effective date
25-36 months after additional 7,760 units $1,000,000 $1,400,000
</TABLE>
F-16
<PAGE>
NOTE 8 - Employee Stock Option Plan
On August 13, 1999, the Company established an Employee Stock Ownership
Plan (the Plan). The Plan covers both current and prospective employees,
consultants and directors. Employees will be covered under the Incentive Stock
Option and consultants will be covered under the Nonstatutory Stock Option.
The exercise price for each option shall be established by the Company
Board of Directors. The exercise price per share for an Incentive Stock Option
cannot be less than the fair market value of a share of stock on the effective
grant date. The exercise price per share for a Nonstatutory Stock Option cannot
be less than 85% of the fair market value of a share of stock on the effective
date of the option.
As of December 31, 1999, there are 326,175 options granted, of which 33,216
are vested. Per FASB 123, the Company is not required to recognize compensation
when the options vest since exercise price for all the options granted were at
fair market value on the date of grant. No options are exercisable after the
expiration of 10 years after the effective grant date. The maximum number of
shares to be issued under the plan is 1,000,000.
A summary of the option activity follows:
Options Available for Options Weighted Average
Grant Outstanding Exercise Price
Granted 1,000,000 326,175 3.00
Exercised 0 0 0
Cancelled / Forfeited 0 0 0
Balances, 12/31/99 1,000,000 326,175 3.00
NOTE 9 - Reverse Acquisition and Reorganization
Effective April 1, 1999, Pacific Link Internet, Inc. (Pacific) (a private
company) was acquired by Worldwide Wireless Networks, Inc. (Worldwide) (a
public company). Worldwide issued 7,000,000 shares to the shareholders of
Pacific in exchange for all shares of Pacific, thus making it a wholly owned
subsidiary of Worldwide. The agreement provides for the acquisition to be
treated as a reverse acquisition, thus making Pacific the accounting survivor.
Because the historical financial information in these financial statements prior
to the reverse acquisition (April 1, 1999) is that of the accounting acquirer
(Pacific), a forward stock split of 14 for 1 has been retroactively applied to
show the effects of the 7,000,000 share issuance as though it happened ratably
since inception of Pacific. The management of Worldwide resigned and the
management and board of Pacific filled the vacancy.
In January 1999, $1,000,000 was advanced to the Company from investors as
an investment. Of the 4,199,988 shares issued, 200,000 post merger shares were
issued to the investors in relation to the $1,000,000 investment.
F-17
<PAGE>
NOTE 10 - Warrants
In June 1999, the Company issued warrants to purchase common stock at
various prices for services. The fair value of the warrants were determined
using the Black-Scholes option pricing model with the following assumptions:
risk free interest rate of 7%; warrant life of 5 years; volatility of 25% with
no dividend yield. The Company recorded expenses of $122,000 in connection with
the warrant issuance. No warrants were exercised at December 31, 1999 and the
following are outstanding:
Warrants Exercise Price
-------- ---------------
100,000 $3.00 per share
100,000 4.00 per share
200,000 5.00 per share
--------
400,000
========
NOTE 11 - Subsequent Events
On February 10, 2000, the Company entered an agreement to acquire all
outstanding stock of Tarrab Capital Group, a Nevada corporation, with the
issuance of 5,000 shares of the Company. Tarrab is an inactive public company
with no assets and no revenues or operations for the year ended December 31,
1999.
NOTE 12 - Stockholders' Equity Transactions
During 1998, the Company issued 1,120,000 shares of common stock at
$.10 per share for cash.
On April 1, 1999, the Company issued 7,000,000 shares in the reverse merger
acquisition with Pacific Link Internet (See Note 9).
On April 2, 1999, the Company issued 400,000 shares of common stock for
cash of $100,000 and services valued at $700,000.
In June 1999, the Company issued warrants to purchase stock at 3.00, 4.00
and 5.00 per share, valued at $122,000 (See Note 10).
In December 1999, the Company issued 200,000 shares of common stock for
cash of $400,000, at $2 per share, from a private investor.
NOTE 13 - Prior Period Restatement
Accounts receivable - related party was reclassified as a contra
equity account for the period ended December 31, 1998, to conform to SEC
regulations for officer receivables. Assets decreased by $54,814 and Equity
decreased the same amount for this restatement.
<PAGE>
INDEX TO FINANCIAL STATEMENTS - DATED SEPTEMBER 30, 2000
Worldwide Wireless Networks, Inc. Consolidated Financial Statements dated
September 30, 2000.
Worldwide Wireless Networks, Inc.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash and Cash Equivalents $ 176,633 $ 136,311
Accounts Receivable (net of allowance for doubtful
accounts of $12,495 and $20,000 respectively) 398,647 165,091
Other Receivables
14,887 3,000
Inventory 2,157,568 129,861
Prepaid Expenses 52,208 18,912
--------- ---------
Total Current Assets 2,799,943 453,175
========= =========
PROPERTY & EQUIPMENT
Office Equipment 197,593 103,231
Leased Equipment 61,315 177,653
Machinery Equipment 1,834,603 1,109,524
--------- ---------
2,093,511 1,390,408
Less:
Accumulated Depreciation - leased equipment (61,316) (165,255)
Accumulated Depreciation (671,418) (282,495)
--------- ---------
Total Property & Equipment 1,360,777 942,658
--------- ---------
OTHER ASSETS
Investments available for sale 1,161,885 36,885
Deferred Charges 7,640 21,984
Deposits 51,524 36,197
--------- ---------
Total Other Assets 1,221,049 95,066
--------- ---------
TOTAL ASSETS $ 5,381,769 $ 1,490,899
========= =========
</TABLE>
Worldwide Wireless Networks, Inc.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 2000 December 31, 1999
(Unaudited)
CURRENT LIABILITIES
Accounts Payable $ 2,999,357 $ 655,485
Accrued Expenses 277,381 83,933
Lines of Credit 79,266 89,323
Unearned Revenue 35,417 102,356
Customer Deposits 56,109 -
Current Portion of Long Term Liabilities 1,285,151 665,355
--------- ---------
Total Current Liabilities 4,732,681 1,596,452
--------- ---------
LONG TERM LIABILITIES
Notes Payable 2,194,370 562,245
Notes Payable - Related Party 75,000 75,000
Capital Lease Payable 15,781 30,340
Less Current Portion (1,285,151) (665,355)
--------- ---------
Total Long Term Liabilities 1,000,000 2,230
--------- ---------
TOTAL LIABILITIES 5,732,681 1,598,682
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock, 50,000,000 shares of $.001 par value
authorized, 12,844,060 and 11,799,988 shares
issued and outstanding 12,844 11,800
Additional Paid In Capital
5,255,828 2,415,345
Accumulated Comprehensive Income (75,000) -
Retained Earnings (5,544,584) (2,534,928)
Total Stockholders' Equity (350,912) (107,783)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,381,769 $ 1,490,899
</TABLE>
Worldwide Wireless Networks, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Nine Months
Ended Ended
September 30 September 30,
2000 1999 2000 1999
SALES $ 1,046,146 $ 571,072 $ 2,757,520 $ 1,228,457
COST OF GOODS SOLD 804,875 252,788 1,835,716 513,073
--------- ------- --------- ---------
GROSS PROFIT 241,271 318,284 921,804 715,384
--------- ------- --------- ---------
OPERATING EXPENSES
General And Administrative
Expenses 972,520 398,203 3,248,688 1,060,983
Sales 366,868 183,145 574,966 357,573
--------- ------- --------- ---------
TOTAL OPERATING EXPENSES 1,339,388 581,348 3,823,654 1,418,556
--------- ------- --------- ---------
OPERATING INCOME (LOSS) (1,098,117) (263,064) (2,901,850) (703,172)
--------- ------- --------- ---------
OTHER INCOME AND (EXPENSE)
Interest Expense (49,322) (10,745) (107,806) (26,484)
Miscellaneous Income 3,690 4,714 - 16,666
--------- ------- --------- ---------
(45,632) (6,031) (107,806) (9,818)
--------- ------- --------- ---------
NET INCOME (LOSS) ($1,143,749) ($269,095) ($3,009,656) ($712,990)
========= ======== ========= =========
NET INCOME (LOSS) PER SHARE $ (0.089) $ (0.023) $ (0.241) $ (0.070)
--------- -------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 12,833,214 11,599,988 12,511,135 10,122,214
========== ========== ========== ==========
</TABLE>
Worldwide Wireless Networks, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended September 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($3,009,656) ($712,990)
Net Cash Used in Operating Activities:
Depreciation and Amortization 401,322 207,001
Bad Debt (7,505) -
Shares Issued for Services 545,407 -
Shares Issued for Insurance Policy 33,000 -
(Increase) Decrease in:
Accounts Receivable (226,051) (161,545)
Other Current Assets (14,237) (1,451)
Inventory (2,027,707) (34,459)
Prepaid Expenses (26,755) (27,136)
Deferred Charges - (16,338)
Increase (Decrease) in:
Bank Overdraft - (4,092)
Accounts Payable and Accrued Expenses 2,537,318 31,905
Customer Deposits 56,109 -
Lines of Credit (10,057) (6,542)
Unearned Revenue (66,938) 83,024
Net Cash Provided (Used) by Operating Activities (1,815,750) (642,623)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (819,441) (785,796)
Cash Paid for Deposits (15,327) (11,287)
Cash paid for Investments - (50,000)
Cash from Deferred Charges 7,803 -
Net Cash Provided (Used) by Investing Activities (826,965) (847,083)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Debt Financing 1,775,000 550,000
Principal Payments on Debt Financing (57,434) (77,985)
Cash Received in Merger with Worldwide - 1,000,000
Cash Paid for Registration Fees (6,879) -
Shares Issued for Cash 970,000 100,000
Net Cash Provided (Used) by Financing Activities 2,680,687 1,572,015
Net Increase (Decrease) in Cash and Cash Equivalents 37,972 82,309
Cash & Cash Equivalents - Beginning 136,311 -
Cash & Cash Equivalents - Ending $ 174,283 $ 82,309
Supplemental Cash Flow Information
Cash paid for interest $ 12,422 $ 26,484
Cash paid for income taxes $ - $ -
Non-cash financing transactions
Investment acquired by issuing stock $ 1,200,000 $ -
Stock issued for notes payable $ 100,000 $ -
</TABLE>
Worldwide Wireless Networks, Inc.
Notes to the Financial Statements
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
Worldwide Wireless Networks, Inc. (the "Company") has elected to omit
subsantially all footnotes to the financial statements for the nine
months ended September 30, 2000, since there have been no material
changes (other than indicated in other footnotes) to the information
previously reported by the Company in their Annual Report filed on
Form 10-KSB for the Fiscal year ended December 31, 1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records
of the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to
properly reflect the results of the period presented and are of a
normal and recurring nature. The information presented is not
necessarily indicative of the results from operations expected for
the full fiscal year.
MERGER WITH TARRAB CAPITAL GROUP
On February 10, 2000, the Company issued 5,000 shares of restricted
common stock valued at $20,000 for all of the outstanding shares of
Tarrab Capital Group(TCG), a Nevada Corporation. At the date of the
merger, TCG had no assets or liabilities and ceased to exist.
In connection with the merger, the Company issued 200,000 shares of
restricted common stock for legal fees valued at $400,000.
INVESTMENTS AVAILABLE FOR SALE
Management determines the appropriate classification of marketable
equity security investments at the time of purchase and reevaluates
such designation as of each balance sheet date. Unrestricted and
restricted marketable equity securities have been classified as
available for sale. Available for sale securities are carried at fair
value, with the unrealized gains and losses, net of tax, reported as a
net amount in accumulated comprehensive income. Realized gains and
losses and declines in value judged to be other-than-temporary on
available for sale securities are included in investment income. The
cost of securities sold is based on the specific identification method.
Interest and dividends on securities classified as available for sale
are included in investment income.
On June 28, 2000, the Company issued 300,000 shares of common stock
valued at $1,200,000 to Bridge Technology, Inc.(Bridge) in exchange for
150,000 shares of Bridge stock valued at $1,200,000. The fair value of
this security was determined by the quoted stock price on the market at
the time of purchase.
During the nine months ended September 30, 2000, the Company recorded
$75,000 of unrecognized losses on securities available for sale in
accumulated comprehensive income in equity. The aggregate fair value of
the securities available for sale at September 30, 2000 is $1,161,885.
No securities were sold during the nine months ended September 30, 2000,
therefore no gains or losses have been realized in the statement of
operations.
INVENTORY
In November 1999, the Company entered into a purchase agreement with
Adaptive Broadband Corporation. The Company has agreed to purchase
wireless telecommunications equipment from Adaptive Broadband
Corporation.
Details of the agreement are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Unit Prices
-----------
Subscriber Access
Time Frame Quantity Commitment Units Points
- ----------------- ---------------------- ---------- ----------
0-12 months after 2,624 units $1,675,000 $2,075,000
effective date
13-24 months after additional 5,120 units $1,250,000 $1,650,000
effective date
25-36 months after additional 7,760 units $1,000,000 $1,400,000
</TABLE>
As of September 30, 2000, $1,750,000 of inventory consists of purchases
from Adaptive Broadband Corporation.
WARRANTS
On June 19, 2000, the Company entered into a Private Equity Line of Credit
Agreement with Whitsend Investments Ltd(Whitsend). Pursuant to this agree-
ment, Whitsend has committed up to $20,000,000 for the purchase of
the Company's common stock over a 36 month period. Once every 15 days,
the Company may borrow up to $500,000 from Whitsend. The Company is
not bligated to draw on any of the available funds. In lieu of providing
Whitsend with a minimum aggregate draw down commitment, the Company has
issued 125,000 warrants for the purchase of its shares of common stock at
$4.69 per share. These warrants expire on June 19, 2003.
On June 30, 2000, the Company entered into a Convertible Debenture and
Warrants Purchase Agreement with several investors. Pursuant to this
agreement, the Company converted $1,000,000 of its notes payable to
$1,000,000 in convertible debentures and issued 100,000 warrants. The
exercise price per share under these warrants will be 120% of the closing
price on the trading day immediately preceeding the closing date. These
warrants expire on June 30, 2003.
CONVERTIBLE DEBENTURES
On June 30, 2000, the Company entered into a Convertible Debenture
and Warrant Purchase Agreement having an aggregate principal amount of
$1,000,000. The convertible debentures mature on June 30, 2003 and bear
interest at 7% per annum until the earlier of conversion into the Company's
common stock or maturity. Interest is payable quarterly in arrears on
September 1, October 1, January 1 and June 1 of each year commencing on
September 1, 2000.
The convertible debentures are convertible by the holder at any time prior
to the close of business on June 30, 2003. The conversion price is equal
to the lesser of $3.66 per share or 80% of the market price as of the date
on which the holder of the debenture gives notice of their intention to
convert the debentures. If the conversion price is not less than $7.00
per share, the Company may redeem the debentures for cash at 150% of the
unpaid principal and accrued interest.
ITEM 23: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have had no change in, or disagreements with, our principal
independent accountant during our last three fiscal years.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation and bylaws provide for the
indemnification of present and former directors and officers
and each person who serves at our request as our officer or director.
To the full extent of Nevada Revised Statutes Sections 78.7502 and
78.751 indemnification for a director is mandatory and indemnification
for an officer, agent or employee is permissive. We will indemnify
these individuals against all costs, expenses and liabilities reasonably
incurred in a threatened, pending or completed action, suit or proceeding
brought because the individual is our director or officer. The
individual must have conducted himself in good faith and reasonably
believed that his conduct was in, or not opposed to, our best interest.
In a criminal action he must not have had a reasonable cause to believe
his conduct was unlawful. This right of indemnification shall not be
exclusive of other rights the individual is entitled to as a matter of law
or otherwise.We will not indemnify an individual adjudged liable due
to his negligence or willful misconducttoward us, adjudged liable to
us, or if he improperly received personal benefit. Indemnification
in a derivative action is limited to reasonable expenses incurred
in connection withthe proceeding. Also, we are authorized
to purchase insurance on behalfof an individual for liabilities
incurred whether or not we would have the power or obligation to
indemnify him pursuant to our bylaws.
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The selling stockholders will pay all brokerage commissions and
discounts attributable to the sale of the shares plus fees and
expenses relating to the registration of their shares. We are
responsible for all other costs, expenses and fees incurred in
registering the shares offered by this prospectus,which are
estimated to be $25,000.
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities we
have sold within the past three years without registration:
At the inception of Pacific Link, the founders received
an aggregate of 420,000 shares of common stock. The
issuance of these shares was exempt from registration
under the Securities Act of 1933 by reason of Section
4(2) as a private transaction not involving a public distribution.
During 1998, subsequent to the issuance of the founders'
stock, we issued 80,000 shares of common stock at $0.10
per share in reliance upon the exemption provided by Section 4(2)
of the Securities Act of 1933 as a private transaction not
involving any public distribution. On April 1, 1999, in
conjunction with our reverse merger, we effected a forward
stock split in which each shareholder received 14 shares for every
single share of common stock owned by that shareholder. As a
result, the shares issued to founders became 5,880,000 shares,
and the shares issued for cash became 1,120,000 shares, for a
total of 7,000,000 shares which were then used to effect the
reverse merger. (See Consolidated Statements of Shareholders'
Equity in our Audit Report for 1999, and Footnote 9 and 12
attached to that audit report).
On April 2, 1999, we sold 400,000 common shares to
Andrew Taubman for $100,000 and recognized services valued
at $700,000, or $2.00 per share. The issuance of these shares
was exempt from registration under the Securities Act of 1933 by
reason of Section 4(2) as a private transaction not involving
a public distribution.
On June 1, 1999, we agreed to issue warrants to Columbia
Financial Group, Inc. in consideration for services rendered
on our behalf. The warrants are exercisable for an
aggregate of 400,000 common shares. The services which
Columbia Financial Group, Inc. performed for us involved
the preparation and dissemination to our shareholders, the
media and others, information concerning Worldwide Wireless
and our activities. Based upon our negotiation of,
and entry into some agreements with, other companies providing
or offering to provide these services to us for only cash, as well
as our understanding of which Columbia Financial Group, Inc.
charges to other clients in cash for the same type of services,
we value the service provided to us by Columbia Financial Group,
Inc. at approximately $10,000 per year of service. The fair
value of the warrants were determined using the Black-Scholes
option pricing model with the following assumptions:risk free
interest rate of 7%; warrant life of 5 years; volatility of 25%
with no dividend yield. We recorded expenses of $122,000 in
connection with the warrant issuance. The issuance of these
shares was exempt from registration under the Securities Act
of 1933 by reason of Section 4(2) as private transaction
not involving a public distribution.
On December 6 and 8, 1999 we sold an aggregate of 200,000
common shares, 100,000 on each date, to SGS Holdings for
$400,000, or $2.00 per share. The issuance of these shares
was exempt from registration under the Securities Act of 1933
by reason of Section 4(2) as a private
transaction not involving a public distribution.
On January 5, 2000 we issued 250,000 restricted common
shares to Pacific First National Corp.,Inc. in consideration
of $500,000.00. The issuance of these shares was exempt from
registration under the Securities Act of 1933 by reason of
Section 4(2) as a private transaction not involving a
public distribution.
Pursuant to an Acquisition Agreement and Plan of Merger
(the "Merger Agreement") dated as of February 10, 2000
between Worldwide Wireless and Tarrab Capital Group ("TCG"),
a Nevada corporation, all the outstanding shares of common
stock of TCG were exchanged for 5,000 shares of our 144
restricted common stock in a transaction in which we were
the successor corporation and TCG will cease to exist.
A copy of the Merger Agreement and Certificate of Merger were
filed as exhibits to the Form 8-K filed in February, 2000.
On February 10, 2000, we issued 200,000 restricted common
shares to Mutual Ventures Corporation in consideration of
$400,000 in legal fees paid to Sperry, Young & Stoecklein
for services rendered in connection with the Tarrab Capital
Group Merger. Mutual Ventures Corporation paid for these
legal services on our behalf. The issuance of these shares
was exempt from registration under the Securities Act of 1933
by reason of Section 4(2) as a private transaction not
involving a public distribution.
On March 13, 2000 we issued 8,000 restricted common shares
to Universal Business Insurance, Inc. in consideration of
an officer and director liability insurance policy valued
at $33,000.00. The transaction was exempt from registration
pursuant to 4(2) of the Securities Act of 1933 as a
private offering not involving any public distribution.
Subsequent to the close of the first quarter, Worldwide
Wireless awarded 915 shares to Robert P. Kelly, Jr.
and Mimi Grant, joint owners of Southern California
Technology Executive Network in compensation for its
membership in that organization. The transaction was
exempt from registration pursuant to 4(2) of the
Securities Act of 1933 as a private offering not
involving any public distribution.
On May 15, 2000 we issued 100,000 restricted common
shares to The Oxford Group, Inc. in consideration of
$350,000 in cash. The transaction was exempt from
registration pursuant to 4(2) of the Securities Act
of 1933 as a private offering not involving any public
distribution.
On May 25, 2000, we issued 144,887 shares of common stock
for cash of $500,000 at $3.45 per share, from a private
investor on June 30, 2000. We subsequently recalled
the shares and the $500,000 was rolled into an agreement
to sell $1,000,000 of convertible debentures and warrants
to AMRO International, S.A. and Trinity Capital Advisors,
Inc. A condition of the purchase is that we must register
the shares of common stock underlying these debentures
and warrants with the SEC. These investors are selling
stockholders in this registration statement. As the
shares originally issued in May have not yet been
physically returned to us, we are continuing to
reflect them as issued and outstanding; however, we
anticipate that they will be returned and cancelled out
in the fourth quarter of 2000. The transaction was exempt
from registration pursuant to 4(2) of the Securities A
ct of 1933 as a private offering not involving any public
distribution.
On June 1, 2000, we issued 20,157 shares of common
stock to Schumann & Associates in consideration of
legal and management services rendered between
October 1999 and May 31,2000, which were valued at
$46,865. The transaction was exempt from registration
pursuant to 4(2) of the Securities Act of 1933 as a
private offering not involving any public distribution.
On June 1, 2000, Worldwide Wireless Networks, Inc.
issued 25,000 shares of common stock for services
valued at $58,125. The transaction was exempt from
registration pursuant to 4(2) of the Securities Act of
1933 as a private offering not involving any public
distribution.
On June 14, 2000, Worldwide Wireless Networks, Inc.
issued 5,000 shares of common stock for services
valued at $17,250. The transaction was exempt from
registration pursuant to 4(2) of the Securities Act
of 1933 as a private offering notinvolving any public
distribution.
On June 19, 2000, we entered into a Private Equity
line of Credit Agreement with Whitsend Investments
Limited, one of the selling shareholders. The terms of
the agreement allow for periodic draw downs of the
funding at the discretion of Worldwide Wireless Networks,
Inc., the Investor is committed to purchasing up to
$20,000,000 of our common stock and 125,000 warrants.
A condition to draw down is that Worldwide Wireless
Networks, Inc. must register the investor securities
with the SEC. Accordingly, no shares or other
securities will be issued to Whitsend without
first being registered for public resale.
On June 28, 2000, we issued 300,000 restricted common
shares to Bridge Technology, Inc. ("BTI") valued at
$4.00 per share in consideration of the issuance of
150,000 BTI unrestricted common shares valued at $8.00
per share. The transaction was exempt from registration
pursuant to 4(2) of the Securities Act of 1933 as a
private offering not involving any public distribution.
On July 10, 2000, we issued 5,000 shares of common
stock to Triton West Group, Inc. in consideration
for services rendered to us in advising us as to
the structure of, and helping us identify institutional
purchasers of, our convertible debentures and warrants.
A copy of the Convertible Debenture and Warrant Purchase
Agreements, which references the involvement ofTriton
West Group, Inc. in that transaction, were filed
as exhibits to the Form SB2 Registration Statement
filed on August 1, 2000. Based upon our assessment
of the value of the services provided to us, and the
market value of our stocks at the time of the transaction,
we have valued the shares given to Triton West Group,
Inc. at $15,000 in the aggregate. The transaction was
exempt from registration pursuant to 4(2) of the
Securities Act of 1933 as a private offering not
involving any public distribution.
On July 12, 2000, we agreed to issue warrants to
Columbia Financial Group, Inc. in consideration for
services rendered on our behalf. The warrants are
exercisable for an aggregate of 600,000 common shares.
The services which Columbia Financial Group, Inc.
performed for us involved the preparation and
dissemination to our shareholders, the media
and others, information concerning Worldwide Wireless
and our activities. Based upon our negotiation of,
and entry into some agreements with, other companies
providing or offering to provide these services to
us for
only cash, as well as our understanding of which
Columbia Financial Group, Inc. charges to other
clients in cash for the same type of services, we
value the service provided to us by Columbia Financial
Group, Inc. at approximately $10,000 per year of service.
The issuance of these shares was exempt from registration
under the Securities Act of 1933 by reason of Section 4(2)
as a private transaction not involving a public distribution.
On July 19, 2000 we issued 125,000 restricted common shares
to Technology Equity Fund Corp.in consideration of $250,000
in cash. The transaction was exempt from registration pursuant
to 4(2) of the Securities Act of 1933 as a private offering not
involving any public distribution. These investors are selling
stockholders in this registration statement.
In each of the private transactions above referenced above,
we believe (and have received investor representations to
the effect that) each purchaser:
(a) was aware that the securities had not been
registered under federal securities laws;(b)acquired the
securities for his/her/its own account for investment purposes
of the federal securities laws;
(c) understood that the securities would need to be
indefinitely held unless registered
or an exemption from registration applied to a proposed
disposition; and (d) was aware that the certificate
representing the securities would bear a legend
restricting its transfer. We believe that, in light of
the above, the sale of our securities to the respective
acquirers did not constitute the sale of an unregistered
security in violation of the federal securities laws and
regulations by reason of the exemptions provided under
Sections 3(b) and 4(2) of the Securities Act, and the
rules and regulations promulgated thereunder.
Compliance with Section 16 of the Securities Exchange Act of 1934.
Section 16(a) of the Exchange Act requires Worldwide Wireless's
directors and officers and persons who beneficially own more
than ten percent of Worldwide Wireless's common stock to file
with the Securities and Exchange Commission initial reports
of ownership and reports ofchanges in ownership of common
stock in Worldwide Wireless. Officers, directors and greater-
than-ten percent shareholders are required by Commission
regulation to furnish Worldwide Wireless with copies of all
Section 16(a) reports they filed. To Worldwide Wireless's
knowledge, based solely on review of the copies of reports
furnished to Worldwide Wireless and written representation
that no other reports were required, during the fiscal year
ended December 31, 1999, these persons complied with all
Section 16(a) filing requirements.
ITEM 27: EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------
2.1 Agreement and Plan of Merger, dated March 31, 1999, between
Worldwide Wireless and Pacific Link Internet, Inc.
2.2 Articles of Merger, dated April 9, 1999, between Worldwide
Wireless and Pacific Link Internet, Inc.
2.3 Acquisition Agreement and Plan of Merger, dated February
10, 2000, between Worldwide Wireless and Tarrab Capital
Group, Inc.
2.4 Certificate of Merger, dated February 10, 2000, between
Worldwide Wireless and Tarrab Capital Group, Inc.
2.5 Letter of Intent dated May 8, 2000 between Worldwide
Wireless and 1st Universe Internet
3.1 Articles of Incorporation of Second Investors
Group, Inc. dated June 10, 1992
3.2 Certificate of Amendment to Articles of Incorporation
of Second Investors Group, Inc. filed June 19, 1998
3.3 Certificate of Amendment to Articles of Incorporation
of Progressive Environmental Recovery Corporation dated
January 29, 1999
3.4 Amended and Restated Bylaws of Worldwide Wireless
Networks, Inc., dated September 14, 1999
4.1 Form of Stock Purchase Warrant Agreement
4.2 Form of 7% Convertible Debenture
5.1 Opinion of Feldhake, August & Roquemore, LLP, dated October
5, 2000, as to Legality of Shares Offered
5.2 Opinion of Feldhake, August & Roquemore, LLP, dated
November 17, 2000, as to Legality of Shares Offered
II-5
10.1 Lease Agreement, dated March 30, 1999, between
Worldwide Wireless and NL-Orange, LP
10.2 Agreement, dated May 20, 1999, between Bridge
Technology, Inc. and Worldwide Wireless
10.3 Consultant Agreement, dated June 1, 1999, between Worldwide
Wireless and Columbia Financial Group
10.4 Employment Agreement, dated 1997, between Worldwide
Wireless and Dennis Shen
10.5 Microwave radio status license, call sign WP0T648, dated
July 7, 1999, between Worldwide Wireless and the FCC
10.6 Microwave radio status license call sign WP0T649, dated
July 7, 1999, between Worldwide Wireless and the FCC
10.7 Purchase Agreement, dated October 27, 1999, between Adaptive
Broadband Corporation and Worldwide Wireless
10.8 Private Equity Line of Credit Agreement date June 19, 2000,
between Worldwide Wireless and Whitsend Investments Limited
10.9 Registration Rights Agreement, dated June 19, 2000,
between Worldwide Wireless and Whitsend Investments Limited
10.10 Convertible Debenture and Warrants Purchase Agreement,
dated June 30, 2000, between Worldwide Wireless and AMRO
International, S.A. and Trinity Capital Advisors, Inc.
10.11 Registration Rights Agreement dated June 30, 2000, between
Worldwide Wireless and AMRO International, S.A. and
Trinity Capital Advisors, Inc.
10.12 Employment Agreement with Charles Bream dated January 1, 2000
10.13 Consultant Agreement, dated July 12, 2000, between Worldwide
Wireless and Columbia Financial Group
10.14 Consultant Agreement, dated November 2000, between Worldwide
Wireless and Columbia Financial Group
15.1 Independent Auditor's Report
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Public Accountants dated November 1, 2000,
for year-end financial statements
23.2 Consent of Independent Public Accountants dated November 13, 2000,
for September 30, 2000 financial statements
23.3 Consent of Feldhake, August & Roquemore, LLP
27.1 Financial Data Schedule
II- 6
99.1 Press release dated May 8, 2000 by Worldwide Wireless and
announcing the purchase of the assets of 1st Universe Internet
99.2 Resolution of the Board of Directors of Worldwide Wireless
dated May 15, 2000 authorizing the issuance of shares to
Technology Equity Fund Corporation
99.3 Resolution of the Board of Directors of Worldwide Wireless
dated June 1, 2000 authorizing the issuance of shares to The Oxford Group
99.4 Resolution of the Board of Directors of Worldwide Wireless
dated July 19, 2000authorizing the issuance of shares to Schumann
& Associates
99.5 Resolution of the Board of Directors of Worldwide Wireless dated
October 18, 2000 authorizing the amendment of the Warrant Agreements
with Columbia Financial Group, Inc. to amend the exercise price of
the warrants
II - 7
