AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 2000
REGISTRATION NO. 333-42774
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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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)
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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
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Common stock, par value $0.01 per share 9,814,535(1) $ 1.47(1)
Common stock, par value $0.01 per share 225,000(2) $ 1.47(1)
Common stock, par value $0.01 per share 930,525(3) $ 1.47(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 OCTOBER 5, 2000
PROSPECTUS
10,970,060 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 29 of this prospectus are offering for
sale up to 10,970,060 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 10,970,060 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 $1.47 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 October 5, 2000
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TABLE OF CONTENTS
PAGE
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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
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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
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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 10,970,060 SHARES
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).
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<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 October 4, 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) 625,000 shares of common stock issuable upon exercise of
outstanding warrants, including the warrants exercisable for up to
225,000 shares of common stock which are included in this
registration statement; and
(c) shares of common stock issuable upon exercise of convertible
debentures.
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
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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.
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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
----------------------------------
BECAUSE OUR BUSINESS MODEL IS UNPROVEN, WE CANNOT ASSURE YOU THAT OUR REVENUE
WILL GROW OR THAT WE WILL BECOME PROFITABLE.
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 EQUITY AND DEBT FUNDING SOURCES MAY BE INADEQUATE TO FINANCE FUTURE
ACQUISITIONS, AND IF THEY ARE, MAY POSE OTHER RISKS WHICH COULD AFFECT OUR
FINANCIAL CONDITION.
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.
Both debt and equity financing involve risks. 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 afford protection.
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
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<PAGE>
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 CLAIMS FOR ACTIVITIES OF OUR CLIENTS USING OUR PRODUCTS AND SERVICES
WHICH COULD HARM OUR BUSINESS.
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.
WE MAY BE UNABLE TO ADAPT TO RAPID TECHNOLOGICAL CHANGES WHICH ARE PREVALENT IN
THE WIRELESS COMMUNICATIONS INDUSTRY.
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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 quickly could cause us to incur
losses and require 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.
A number of factors may inhibit Internet usage, including inadequate network
infrastructure, security concerns, inconsistent quality of services, and lack 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.
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.
WE MAY BE UNABLE TO GROW OUR NETWORKS AGGRESSIVELY, OR AT ALL, IF WE ARE UNABLE
TO FORM STRATEGIC ALLIANCES.
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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
LITIGATION MATTERS.
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 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 securities 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, large 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.
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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 ARE SUBJECT TO PENNY STOCK REGULATIONS
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.
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.
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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.
As of June 30, 2000, there were outstanding options, warrants and convertible
debentures to purchase an aggregate of 1,222,150 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 10,970,060 shares,
or 46% 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.
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. 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.
-11-
<PAGE>
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.
FUTURE SALES OF RESTRICTED SHARES COULD DECREASE THE MARKET PRICE OF OUR COMMON
STOCK AND IMPAIR OUR ABILITY TO RAISE CAPITAL.
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.
-12-
<PAGE>
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 the 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.
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.")
-13-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY NUMBER OF SHARES
NAME AND ADDRESS OF THE OWNED PRIOR TO OFFERED BY
SELLING STOCKHOLDERS THE OFFERING THIS PROSPECTUS
------------------------------------------------------- ------------------- ----------------
<S> <C> <C>
Whitsend Investments Limited 125,0001 9,694,3781
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)
------------------------------------------------------- ------------------- ----------------
AMRO International, S.A. 824,4201, 2 824,4201, 2
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)
------------------------------------------------------- ------------------- ----------------
Trinity Capital Advisors, Inc. 206,1051, 2 206,1051, 2
211 Sutter Street, 2nd Floor
San Francisco, CA 94108
(E. Edward Jung has control over the common stock
issued to this selling stockholder)
------------------------------------------------------- ------------------- ----------------
Technology Equity Fund Corp. 125,000 125,000
1209 Orange Street
Wilmington, DE 19801
(we have been unable to determine who has control
over the common stock issued to this selling
stockholder)
------------------------------------------------------- ------------------- ----------------
The Oxford Group, Inc. 100,000 100,000
870 East 9400 South
Sandy, UT 84094
(we have been unable to determine who has control
over the common stock issued to this selling
stockholder)
------------------------------------------------------- ------------------- ----------------
Schumann & Associates 20,157 20,157
2900 Bristol Street, Suite D208
Costa Mesa, CA 92626
(Kim Schumann has control over the common stock
issued to this selling stockholder)
------------------------------------------------------- ------------------- ----------------
<FN>
(1) Some of the shares included in this amount will only be issued and offered
for sale if the selling stockholders elect to exercise 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 are owned by the selling
stockholders as follows:
-14-
<PAGE>
Whitsend Investments Limited 125,000
AMRO International, S.A. 70,000
Trinity Capital Advisors, Inc. 30,000
(2) 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.
</TABLE>
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.
-15-
<PAGE>
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.
-16-
<PAGE>
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. 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. We are
seeking a judicial order to reduce the number of options the consultant is
entitled to retain.
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.
-17-
<PAGE>
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
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
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 within 60 days from the
effective date of this prospectus, 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 $1.47 per share as of
October 5, 2000, obligate Whitsend Investments Limited to purchase up to
1,360,544 within 60 days from the effective date of this registration
statement.
(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 are currently
in a dispute as to the application of this agreement to our common shares, and
have filed a lawsuit in connection with this dispute, which 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.
-21-
<PAGE>
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 October 4, 2000, there were 12,988,947 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 597,150 shares of common
stock at an exercise price of $3 per share, and outstanding warrants to purchase
625,000 shares of common stock at exercise prices ranging from $3.00 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. If the conversion
price is not less than $7.00 per share, we may redeem the debentures for cash at
150% of the unpaid principal and accrued interest.
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. There were three investors who purchased securities
pursuant to this offering. Therefore the offering included less than 35
purchasers. Each of the three investors are "accredited investors" as defined
in Rule 501 and as a result the offering qualified as exempt from registration
in accordance with Rule 506. 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
-22-
<PAGE>
prospectus. The following is not intended to be a complete description of each
transaction or agreement described below, and the discussion in this
registration statement is qualified in its entirety by reference to the complete
transaction 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.
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.
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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, which introduced Whitsend Investments Limited to us). Triton West
Group 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 intend to 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 which would cause an issuance
of more than 2,452,789 shares of common stock under the private equity line
agreement, we would have to receive stockholder approval prior to any draw.
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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.
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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, 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;
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- 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.
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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.
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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 99.3]. The Oxford Group is named as a selling stockholder
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 99.4]. 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 99.2]. 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
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- 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 six-month
period ended June 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.
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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.
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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.
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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 June 30, 2000, we had approximately
368 high-speed wireless customers.
Dial-up Internet Access: As of June 30, 2000, we provided Internet access to
-------------------------
approximately 775 Internet users using dial-up connections. This service is
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 June 30, 2000, we provided these services to approximately
1067 customers.
Network Consulting: We offer design and implementation services for private
-------------------
wireless networks and consulting services to develop network hardware
components. As of June 30, 2000, we provided these services to approximately
28-30 customers, representing 11 percent 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.
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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 June 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 lines 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.
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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
comparison to our other services, will increase because the cost to upgrade 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
availability 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
telecommunications equipment from Adaptive Broadband Corporation.
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<PAGE>
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 agreement,
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 with the
performance of the other party. Obligations 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, and the remaining 80%
will be resold to third parties. We expect to purchase a minimum of $4.4
million, $6.4 million and $7.76 million of equipment for the first, second and
third year of the agreement. As of this filing, we anticipate that this
agreement will provide additional revenues from wireless equipment sales,
however, we cannot assure what effect the commitments required under the
agreement will have on our results of operations.
TRADEMARK, LICENSE AND INTELLECTUAL PROPERTY
Our primary service mark in our service area of Orange County is Global Pacific
Internet, because the name Worldwide Wireless was not available to us as a
corporate name from the Secretary of State of California. We are currently
seeking trademark protection for both "Global Pacific Internet" and "Worldwide
Wireless Networks." To the extent we succeed in obtaining a federal trademark
for "Worldwide 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
assurance that we will ever be able to do so. (See: Risk Factors). The
success of our business depends in part on brand recognition, trade secrets,
network hardware, and software which may be proprietary or purchased from
third-parties. 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 technology and
other intellectual property rights. Although we do not believe 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.
As of June 30, 2000, we held six (6) FCC private operational fixed microwave
radio station licenses. (See "Government Regulations" below). These licenses
have a term of ten years, the first of which will expire in July 2009. The
importance of having FCC licenses to companies like ours is that it establishes
superior rights as against third parties to provide our services using the
frequencies and in the locations for which these licenses are granted. We
intend to continue to apply for these licenses as our business and operations
expand.
PRODUCT DEVELOPMENT
We conduct research and development as an incidental activity to our
ordinary 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 increase market penetration within our current service
area as well as expand our wireless network to other areas in southern
California and in other locations where we believes it has an opportunity to
market its services successfully.
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<PAGE>
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 how and have
contributed $50,000 toward the capitalization of Pacific Bridge Net, a
subsidiary of Bridge Technology. The mission of Pacific Bridge Net is to
design, develop (patent and copyright), market and sell various devices required
to provide high speed broadband wireless access to the Internet backbone
infrastructure. We own a 20% interest in the venture, and will have the right to
sell any radio equipment which is developed through the venture in the United
States. As of December 31, 1999, the amount of this investment was reduced to
$36,885, resulting from our 20% allocation of the losses reported by Pacific
Bridge Net for fiscal year 1999. Pacific Bridge Net has finished an engineering
prototype of a wireless radio with a built-in firewall and integrated router
(which may eliminate the need for a proxy server or complicated network
configuration), and has been testing it for a period of approximately 12 weeks
for reliability and stability 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
electromagnetic spectrum (i.e., wireless services) and has exclusive
jurisdiction over all interstate telecommunications services, that is, those
that originate in one state and terminate in another state. State regulatory
commissions generally have jurisdiction over intrastate communications, that is,
those that originate and terminate within the same state. Municipalities and
other local jurisdictions may regulate limited aspects of our business by, for
example, imposing zoning and franchise requirements and requiring installation
permits. We are 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 not
requiring licensing from the Federal Communications Commission under current
regulations. As an Internet service provider we are not currently directly
regulated by the FCC or the Public Utilities Commission of any state. However,
as required by law, we license frequency spectrum directly from the FCC for some
of the high-speed portions of our wireless network. Changes in current state or
federal law, or in the interpretation of existing law, may cause increased
regulation of our business or restrictions on the unlicensed radio spectrum
currently used in the wireless networks.
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<PAGE>
EMPLOYEES
We currently have a total of 51 employees all of which are full time. These
individuals bring us expertise in various aspects of sales, engineering,
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 results of
operations should be read in conjunction with our consolidated financial
statements, including all notes attached to these statements, which appear at
the end of this prospectus. In addition to historical information, the
discussion here and elsewhere in this prospectus contains some forward-looking
statements. These statements by their nature involve risks and uncertainties,
and should not be construed to imply any promise, certainty or likelihood that
these results or trends will necessarily continue in the future. Our actual
results in the future may differ significantly from those anticipated by these
forward-looking statements, due to many factors including those set out in the
"Risk Factors," "Business" and other sections of this prospectus.
Overview. Worldwide Wireless is a networking solutions company which provides
--------
high speed Internet access using our own wireless network, dial-up Internet
access, data center services and network consulting. Since April 1999 we have
undertaken large-scale commercial operations and have developed a commercial
customer base, a direct sales force and have expanded our wireless network. Our
primary 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 since our
inception, we have operated at a net loss, due primarily to our investment in
expanding our network coverage, which is expected to continue. Management
believes that our continued expansion will result in additional losses for the
foreseeable future, due to our continued expansion efforts beyond the amount of
revenues generated from our existing operations. We must fund these expansion
efforts, for the foreseeable 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
debt or equity capitalization in sufficient amounts or on acceptable terms to
continue to fund these expansion efforts (as further described below). We have
received a letter from one of our existing investors indicating a willingness to
provide additional debt and/or equity capitalization as may be determined
between us from time to time as our financial needs arise. Depending upon the
terms presented to us, we may or may not use all or any portion of this funding.
If we were unable to access this capital, or any other capital for expansion,
then Worldwide Wireless would be unable to continue its expansion as planned,
and would remain essentially an Orange County, California network. Management
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.
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<PAGE>
Revenues. We generate revenues primarily through the sale of annuity-like
--------
service contracts with customers, the sale and installation of wireless
networks, and network consulting. We recognize revenues when services are
completed. Our revenues for the twelve moths ended December 31, 1998 and
December 31, 1999 were $841,841 and $1,980,203, respectively. For the six-month
period ended June 30, 1999, our total revenues were $657,385. These revenues
increased by 155% to $1,674,994 for the same period ended June 30, 2000. We
believe that growth in revenue will come from additional penetration in markets
currently served by existing networks, expansion of complimentary product lines
to existing and new customers, and geographic expansion using currently deployed
technologies. We have spent, and intend to continue to spend, significant
resources on these activities.
Cost of Sales. Our cost of sales for goods sold consists of third-party network
-------------
usage and other outsourced service costs, and the cost of roof rights.
Third-party network costs are expensed in the period when services are rendered
and are generally proportional to the number of customers. Our total costs of
sale for goods and services sold for the years ended December 31, 1998 and 1999
equaled $1,430,600 and $1,980,203, respectively, and for the six months ended
June 30, 1999 and June 30, 2000, these costs were $260,285 and $1,030,841, an
increase of 296%. 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, sales
---------------------
commissions, employee benefits, travel and related expenses for our direct sales
force, fees paid to third-party sales agents, marketing and sales support
functions. For the years ended December 31, 1998 and December 31, 1999 our
sales and marketing expense equaled $158,592 and $616,022. For the six month
period ending June 30, 1999, our cost of sales and marketing expense was
$174,428, compared to $339,004 for the same period ended June 30, 2000, an
increase of 94%. In an effort to increase our revenues, user base and brand
awareness, we expect to increase significantly the amount of spending on sales
and marketing over the next year. Marketing costs associated with increasing
our user base, which to date have been minimal, are expensed in the period
incurred.
General and Administrative. General and administrative expenses include
----------------------------
salaries, employee benefits and expenses for our executive, finance,
depreciation of network equipment, technical staff costs, legal, and human
resources personnel. Investment in network equipment is related primarily to
geographic network expansion and incremental customer installations, which
result in increased depreciation expense in future periods. In addition,
general and administrative expenses include fees for professional services and
occupancy costs. Our general and administrative expenses were $455,126 for the
year ended December 31, 1998, and $2,377,133 for the year ended December 31,
1999. They were $662,780 for the six-months ended June 30, 1999, increasing
224% to $2,145,262 for that same period ended June 30, 2000. We expect general
and administrative expenses to increase in absolute dollars as we continue to
expand our administrative infrastructure to support the anticipated growth of
our business, including costs associated with being a public company.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since Pacific Link's inception, it has financed its operations primarily through
the private placement of equity securities, loans, leasing arrangements,
cash-flow from operations and the merger completed with Worldwide Wireless in
April 1999. As of June 30, 2000 cash reserves totaled $35,489, and current
assets totaled $2,939,258.
Our current liabilities as of June 30, 2000 were $4,371,107, of which $1,123,144
accounted for the current portion of our long-term liabilities discussed above,
and $2,918,731 is attributable to current accounts payable. We anticipate a
reduction of approximately $17,567 in October 2000, due to the expiration of
capital lease obligations. 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
credit history. As of June 30, 2000, we had no long-term liabilities (other
than the current portion of long-term liabilities discussed above and reflected
on our financial statement as a current liability).
As of June 30, 2000, our principal commitments, other than our commitment to
Adaptive Broadband Corporation described above under the heading Principal
---------
Suppliers, consisted of office, roof-rights payments, and equipment leases.
---------
Future minimum principal payments on notes payable were approximately $39,445.
Future minimum lease payments were $20,250 with $18,665 through 2000 and $5,484
through 2001. Of that amount, capital lease payments due through the end of
fiscal years 2000 and 2001 were $16,523 and $1,585, respectively, and operating
lease payments due through the same periods were $212,877 and $283,836,
respectively.
Interest expense consists primarily of interest accrued for notes payable.
Interest expense increased 271% to $58,484 for the six months ended June 30,
2000 compared to interest expense of $15,739 for the six months ended June 30,
1999. This increase is primarily attributable to the interest accrued on notes
payable of $1,005,036 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 December 31,
1999 was $865,302 compared to $180,584 in funds provided by operating activities
for the year ended December 31, 1998. Net cash used for operating activities
consisted primarily of net operating losses and network asset purchases. For
the six months ended June 30, 2000, our operating activities used $1,320,836, an
increase of 148% from the amount of $539,253 used to fund our operating
activities during the six months ended June 30, 1999.
Net cash provided by our financing activities was $2,029,671 for the period
ended December 31, 1999, up from $11,986 for that period ended December 31,
1998. For the six months ended June 30, 1999 and June 30, 2000, our financing
activities provided net cash of $1,031,818 and $1,775, 559, respectively, an
increase of 72%. Net cash provided by financing activities was attributable to
the sale of our securities prior to the merger in April 1999, and the sale of
other debt and equity securities as described in the Recent Transactions section
below.
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<PAGE>
We incurred a net loss of $1,865,907, or $.15 per share, for the six months
ended June 30, 2000, compared to $443,895, or $.05 per share, for the six months
ended June 30, 1999. As discussed above, the six months ended June 30, 2000
were impacted by costs associated with the Tarrab Capital Group merger,
increases in our customer base, sales personnel, administrative personnel,
executive management personnel, professional services, and depreciation
expenses.
We expect to continue to incur significant capital expenditures in the future in
our current market of Orange County, including additions and enhancements to our
server and network infrastructure, software licenses and furniture, fixtures and
equipment. 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. Technological advances may also
require us to make capital expenditures to develop or acquire new equipment or
technology.
Our current business plan calls for us to launch wireless networks in San Diego,
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 based upon our historical funding of expansion efforts, we will
remain unprofitable in each market for at least 12 to 18 months after launch.
We expect that we will require outside financing of at least $1,000,000 to
$3,000,000 per location to establish and deploy our network in the areas
mentioned above, in addition to any revenues generated from operations. We
intend to explore the letter we received from one of our shareholders to
determine if mutually agreeable terms can be reached whereby it would provide
debt and/or equity capitalization to help finance 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 debt
financing and are exploring options which may be available to us. However, we
cannot assure that we will be able to obtain financing on terms agreeable to us.
Also, the acquisition of funding through the issuance of debt could result in a
substantial portion of our cash flows from operations being dedicated to the
repayment of principal and interest on the indebtedness, and could render us
more vulnerable to competitive and economic downturns.
Any future securities offerings will be effected through registered offerings,
or in compliance with applicable exemptions under federal and state laws. The
purchasers and manner of issuance will be determined according 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 offering or the type or number of securities which we will offer at that
time. However, we cannot assure that a future securities offering will be
successful. We have no plans to make a public offering of our common stock at
this time. We also note that each time if we issue more shares 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 six month interim
period ended June 30, 2000, the company did not generate positive cash flows.
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<PAGE>
Based on our current capital position, we are limited to expanding our network
of services to customers located almost exclusively in Orange County and Los
Angeles. We are currently reliant upon cash flows generated from operations,
which our management has determined are not adequate to maintain current
personnel and expansion levels for the next 12 months. As a result of this
inadequacy, our management has developed a cost reduction plan that, if deemed
necessary, will mandate our elimination of some outside 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 customer 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, California,
where we lease 8,728 square feet of office space with roof rights for antennas.
We renewed the lease on March 30, 1999 and it will expire in 2004. The monthly
rent ranges from approximately $16,583 in the first year to $18,329 in the fifth
year. This office space is in good condition and satisfies our current space
needs.
We also lease two office spaces in Irvine, California. One office space,
located 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 located at 8001 Irvine Center Drive, and is subleased to a
computer consulting company for the cost of the lease (which is approximately
$4,021 per month). Recently, to facilitate our expansion into Los Angeles
County, California, we opened a sales office there comprising 1,993 square feet,
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, escalating 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 Tortorice
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
corporate secretary and treasurer. Mr. Rotert does not receive any compensation
for serving in these capacities, however his law firm, Schumann & Associates,
has been engaged to represent us as general legal counsel, for which they have
received compensation in cash as well as options to purchase shares of our
common stock. All stock to which Schumann & Associates is entitled is
purchasable at its trading price on the date these options are exercised, and
options are earned at the end of each month at the rate of 10,000 options per
month of service.
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<PAGE>
Dennis Shen, who formerly served as a director of Worldwide Wireless, resigned
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 things, monitoring the Pacific Bridge Net and Global Bridge E
Net ventures on behalf of Worldwide Wireless. (See: "Business: Product
Development").
Sean LeMons, another founder of Worldwide Wireless and a holder of more than 5%
of our outstanding stock, is an employee of Worldwide Wireless. His annual
salary for FY 1999 was $57,600.
During 1999, we paid $15,000 to a shareholder for a note payable which was
outstanding 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 April 1999. These funds were raised for purposes of meeting the
company's operating expenses.
During 1999, we paid $16,300 to a shareholder for a note payable which was
outstanding 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 raised for purposes of meeting our operating expenses.
During 1999, we received $75,000 from a shareholder for a note payable. As of
December 31, 1999, the balance due is $75,000. This amount was received by us
in exchange for two Promissory Notes from Andrew Taubman, a shareholder and
outside consultant. The first note dated August 6, 1999 was for $50,000, and
the second note dated September 22, 1999 was for $25,000. These funds were
raised in connection with our expansion efforts. They accrue interest at the
rate of 10% per year and are payable on demand.
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<PAGE>
ITEM 20: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded over-the-counter and quoted on the Over the Counter
Electronic Bulletin Board under the symbol "WWWN." The following 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 quarter of 1997 and ending with the second quarter of 2000. These
quotations represent prices between dealers, may not include retail markups,
markdowns, 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
During 1997 and 1998 our market was sporadically and thinly traded. There was
no trading activity during the second, third and fourth quarters of 1998.
Trading activity increased in August of 1999. The price per share of companies
situated similarly to Worldwide Wireless have also exhibited extreme volatility
in response to company-specific information as well as general market
conditions. Shareholders should consider the possibility of the loss of the
entire value of their shares.
As of June 30, 2000, we had approximately 128 stockholders of record.
Management controls, directly and beneficially, 7,636,600 of our outstanding
shares, registering 59% of all shares outstanding. We have 625,000 common
shares subject to warrants and convertible debentures. Approximately 8,400,000
shares of our outstanding common stock are subject to the resale limitations of
Rule 144. We may have 50,000 to 700,000 common shares subject to options
pending the resolution of a disputed options contract entered into by Pacific
Link in September of 1998. (See "Disputed Beneficial Ownership," page 29).
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<PAGE>
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
Name and Annual Salary Annual Salary Project Annual Salary
Principal Position for FY 1999 for FY 2000(1,2) for FY 2001(3)
------------------------ -------------- --------------- ---------------------
<S> <C> <C> <C>
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.
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<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.
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<PAGE>
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
Independent Accountants Report F-2
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-18
F-1
<PAGE>
WORLDWIDE WIRELESS NETWORKS, INC.
(Formerly Pacific Link Internet, Inc.)
Consolidated Financial Statements
December 31, 1999 and 1998
Independent Accountants Report
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Office (801) 363-1175
Fax (801) 363-0615
To the Board of Directors and Stockholders
of Worldwide Wireless Networks, Inc. (formerly Pacific Link Internet, Inc.):
We have audited the accompanying consolidated balance sheets of Worldwide
Wireless Networks, Inc. (formerly Pacific Link Internet, Inc.) as of December
31, 1999 and 1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended and from inception
on August 1, 1997 through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Worldwide Wireless Networks,
Inc. (formerly Pacific Link Internet, Inc.) as of December 31, 1999 and 1998 and
the results of its operations and cash flows for the years then ended and from
inception on August 1, 1997 through December 31, 1997 in conformity with
generally accepted accounting principles.
Salt Lake City, Utah
February 18, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
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.
F-18
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report for the fiscal year ended
December 31, 1999, dated February 19, 2000, in this registration statement on
Form SB-2/A for Worldwide Wireless Networks, Inc.
Crouch, Bierwolf, & Chisholm
(As prepared by Todd Chisholm)
Salt Lake City, Utah
October 4, 2000
F-19
<PAGE>
INDEX TO FINANCIAL STATEMENTS - DATED JUNE 30, 2000
Worldwide Wireless Networks, Inc. Consolidated Financial Statements dated June
30, 2000.
PAGE
Independent Accountants Report F-21
Consolidated Balance Sheets F-22 - F-23
Consolidated Statement of Operations F-24
Consolidated Statement of Cash Flow F-25 - F-26
Notes to Financial Statements F-27 - F-30
F-20
<PAGE>
WORLDWIDE WIRELESS NETWORKS, INC.
(Formerly Pacific Link Internet, Inc.)
Consolidated Financial Statements
June 30, 2000
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Worldwide Wireless Networks, Inc. (formerly Pacific Link Internet, Inc.)
Orange, CA
We have reviewed the accompanying condensed consolidated balance sheet of
Worldwide Wireless Networks, Inc. (formerly Pacific Link Internet, Inc.) and
subsidiary as of June 30, 2000 and the related condensed consolidated statements
of income and cash flows for the period then ended. These financial statements
are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1999, and the related statements
of income, retained earnings, and cash flows for the year then ended (not
presented herein); and in our report dated February 18, 2000, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 1999, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
The accompanying statements of operations and cash flows for the period ended
June 30, 1999 were not audited or reviewed by us and, accordingly, we do not
express an opinion on them.
Chisholm & Associates
August 12, 2000
F-21
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Balance Sheets
June 30, 2000
ASSETS
------
June 30, 2000 December 31, 1999
------------------- -------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 35,489 $ 136,311
Accounts Receivable (net of allowance for doubtful
accounts of $54,553 and $20,000 respectively) 489,167 165,091
Other Receivables 25,820 3,000
Inventory 2,353,367 129,861
Prepaid Expenses 35,415 18,912
------------------- -------------------
Total Current Assets 2,939,258 453,175
------------------- -------------------
PROPERTY & EQUIPMENT
Office Equipment 188,957 103,231
Leased Equipment 61,315 177,653
Machinery Equipment 1,563,432 1,109,524
------------------- -------------------
1,813,704 1,390,408
Less:
Accumulated Depreciation - leased equipment (59,137) (165,255)
Accumulated Depreciation (523,979) (282,495)
------------------- -------------------
Total Property & Equipment 1,230,588 942,658
------------------- -------------------
OTHER ASSETS
Investments 1,236,885 36,885
Deferred Charges 12,421 21,984
Deposits 61,671 36,197
------------------- -------------------
Total Other Assets 1,310,977 95,066
------------------- -------------------
TOTAL ASSETS $ 5,480,823 $ 1,490,899
=================== ===================
F-22
<PAGE>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Balance Sheets
June 30, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, 2000 December 31, 1999
------------------- -------------------
(Unaudited)
CURRENT LIABILITIES
Accounts Payable $ 2,918,731 $ 655,485
Accrued Expenses 143,219 83,933
Lines of Credit 80,595 89,323
Unearned Revenue 105,418 102,356
Current Portion of Long Term Liabilities 1,123,144 665,355
------------------- -------------------
Total Current Liabilities 4,371,107 1,596,452
------------------- -------------------
LONG TERM LIABILITIES
Notes Payable 1,030,036 562,245
Notes Payable - Related Party 75,000 75,000
Capitla Lease Payable 18,108 30,340
Less Current Portion (1,123,144) (665,355)
------------------- -------------------
Total Long Term Liabilities - 2,230
------------------- -------------------
TOTAL LIABILITIES 4,371,107 1,598,682
------------------- -------------------
STOCKHOLDERS' EQUITY
Common Stock, 50,000,000 shares of $.001 par value
authorized, 12,858,947 and 11,799,988 shares
issued and outstanding 12,859 11,800
Additional Paid In Capital 4,997,692 2,415,345
Retained Earnings (3,900,835) (2,534,928)
------------------- -------------------
Total Stockholders' Equity 1,109,716 (107,783)
------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,480,823 $ 1,490,899
=================== ===================
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Statements of Operations
(Unaudited)
June 30, 2000
Three Months Ended Six Months Ended
-------------------- -------------------
June 30, June 30,
--------- ---------
2000 1999 2000 1999
------------ ------------ ------------- ----------
<S> <C> <C> <C> <C>
SALES $ 857,767 $ 429,160 $ 1,674,994 657,385
COST OF GOODS SOLD 470,549 $ 129,749 1,030,841 260,285
-------------------------- -------------------------
GROSS PROFIT 387,218 299,411 644,153 397,100
-------------------------- -------------------------
OPERATING EXPENSES
General And Administrative Expenses 1,018,749 $ 403,564 2,145,262 662,780
Sales 176,572 $ 129,667 339,004 174,428
-------------------------- -------------------------
TOTAL OPERATING EXPENSES 1,195,321 533,231 2,484,266 837,208
-------------------------- -------------------------
OPERATING INCOME (LOSS) (808,103) (233,820) (1,840,113) (440,108)
OTHER INCOME AND (EXPENSE)
Interest Expense (37,157) ($5,533) (58,484) (15,739)
Miscellaneous Income 29,645 $ 11,952 32,690 11,952
-------------------------- -------------------------
(7,512) 6,419 (25,794) (3,787)
-------------------------- -------------------------
NET INCOME (LOSS) ($815,615) ($227,401) ($1,865,907) ($443,895)
========================== =========================
NET INCOME (LOSS) PER SHARE ($0.07) ($0.02) ($0.15) ($0.05)
-------------------------- -------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 12,370,658 11,599,988 12,281,380 9,299,994
========================== =========================
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
June 30, 2000
Six Months Ended June 30,
-----------------------------
2000 1999
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($1,865,907) ($443,895)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation and Amortization 251,703 113,718
Bad Debt 34,553 -
Shares Issued for Services 530,407 -
Shares Issued for Insurance Policy 33,000 -
Changes in Asset and Liabilities
(Increase) Decrease in:
Accounts Receivable (358,629) (162,946)
Other Receivables (22,821) (951)
Inventory (2,223,506) (25,685)
Prepaid Expenses (16,503) (27,097)
Deferred Charges - (18,448)
Increase (Decrease) in:
Bank Overdraft - (4,092)
Accounts Payable and Accrued Expenses 2,322,532 (64,028)
Lines of Credit (8,728) -
Unearned Revenue 3,063 94,171
--------------------------
Net Cash Provided (Used) by Operating Activities (1,320,836) (539,253)
--------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (539,634) (430,127)
Cash Paid for Deposits (25,474) (10,338)
Cash from Deferred Charges 9,563 -
--------------------------
Net Cash Provided (Used) by Investing Activities (555,545) (440,465)
--------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Debt Financing 600,000 -
Principal Payments on Debt Financing (44,441) (68,182)
Shares Issued for Cash 1,220,000 1,100,000
--------------------------
Net Cash Provided (Used) by Financing Activities 1,775,559 1,031,818
--------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (100,822) 52,100
--------------------------
F-25
<PAGE>
WORLDWIDE WIRELESS NETWORKS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
June 30, 2000
Cash and Cash Equivalents
Beginning 136,311 -
--------------------------
Ending $ 35,489 $ 52,100
==========================
Supplemental Cash Flow Information
Cash paid for interest $ 9,953 $ 15,739
==========================
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>
F-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Worldwide Wireless Networks, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the three months
ended March 31, 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.
INVESTMENT
Bridge stock valued at $1,200,000. The Company uses the cost method of
accounting.
INVENTORY
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.
F-27
<PAGE>
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>
As of June 30, 2000, $1,900,000 of inventory consists of purchases from
Adaptive.
WARRANTS
On June 19, 2000, the Company entered into a Private Equity Line of Credit
Agreement with Whitsend Investments Ltd. (Whitsend). Pursuant to this
agreement, 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 obligated 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 preceding 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 $3.1563 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. 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.
F-28
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report for the six months ended June
30, 2000, dated August 12, 2000, in this registration statement on Form SB-2/A
for Worldwide Wireless Networks, Inc.
Chisholm & Associates
North Salt Lake, Utah
October 4, 2000
F-29
<PAGE>
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.
F-30
<PAGE>
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 misconduct toward 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 with the proceeding. Also, we are
authorized to purchase insurance on behalf of 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.
During 1998, subsequent to the issuance of the founders' stock, we issued 80,000
shares of common stock at $0.10 per share. 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
II - 1
<PAGE>
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 in
consideration for services rendered on our behalf. The warrants are exercisable
for an aggregate of 400,000 common shares. 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 a
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 transaction was
exempt pursuant to Sections 3 and 4 of the Securities Act of 1933 and applicable
state exemptions.
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 transaction was exempt pursuant to Section 3 and 4 of the
Securities Act of 1933 and applicable state exemptions.
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 pursuant to Sections 3
and 4 of the Securities Act of 1933 and applicable state exemptions.
II - 2
<PAGE>
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 pursuant to Section 3 and 4 of the
Securities Act of 1933 and applicable state exemptions.
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 pursuant
to Section 3 and 4 of the Securities Act of 1933 and applicable state
exemptions.
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.
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 pursuant to Section 3 and 4 of the Securities Act of 1933 and applicable
state exemptions.
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 pursuant
to Section 3 and 4 of the Securities Act of 1933 and applicable state
exemptions.
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 pursuant
to Section 3 and 4 of the Securities Act of 1933 and applicable state
exemptions.
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.
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.
All shares exchanged will become free trading upon registration with the
Securities and Exchange Commission.
II - 3
<PAGE>
On July 10, 2000, we issued 5,000 shares of common stock to Triton West Group
for consideration of the services rendered in regards to the Convertible
Debenture and Warrants Purchase Agreement. A copy of the Convertible Debenture
and Warrants Purchase Agreement were filed as exhibits to the Form SB2
Registration filed on August 1, 2000.
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
pursuant to Section 3 and 4 of the Securities Act of 1933 and applicable state
exemptions. These investors are selling stockholders in this registration
statement.
In each of the private transactions above, we believe 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 of changes 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.
II - 4
<PAGE>
ITEM 27: EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------------------ ------------------------------------------------------------
2.1b Agreement and Plan of Merger, dated March 31, 1999,
between Worldwide Wireless and Pacific Link Internet, Inc.,
2.2b Articles of Merger, dated April 9, 1999, between Worldwide
Wireless and Pacific Link Internet, Inc.
2.3b Agreement and Plan of Merger, dated February 10, 2000,
between Worldwide Wireless and Tarrab Capital Group, Inc.
2.4b Certificate of Merger, dated February 10, 2000, between
Worldwide Wireless and Tarrab Capital Group, Inc.
3.1a Articles of Incorporation of Second Investors Group, Inc.
dated June 10, 1992
3.2a Certificate of Amendment to Articles of Incorporation of
Second Investors Group, Inc. filed June 19, 1998
3.3a Certificate of Amendment to Articles of Incorporation of
Progressive Environmental Recovery Corporation dated
January 29, 1999
3.4a Amended and Restated Bylaws of Worldwide Wireless
Networks, Inc., dated September 14, 1999
5.1 Opinion of Feldhake, August & Roquemore, LLP, dated
October 5, 2000, as to Legality of Shares Offered
10.1a Lease Agreement, dated March 30, 1999, between
Worldwide Wireless and NL-Orange, LP
10.2a Technology, Inc. and Worldwide Wireless,.
10.3a Worldwide Wireless and Columbia Financial Group
10.4a Form of Employment Agreement
II - 5
<PAGE>
10.5a Microwave radio status license call sign WP0T648, dated
July 7, 1999, between Worldwide Wireless and the FCC
10.6a Microwave radio status license call sign WP0T649, dated
July 7, 1999, between Worldwide Wireless and the FCC
10.7a Agreement, dated May 20, 1999, between Bridge
Technology, Inc. and Worldwide Wireless
10.8a Purchase Agreement, dated October 27, 1999, between
Adaptive Broadband Corporation and Worldwide Wireless
10.9c Registration Rights Agreement, dated June 19, 2000,
between Worldwide Wireless and Whitsend Investments
Limited
10.9c Escrow Agreement, dated June 19, 2000, between
Worldwide Wireless and Whitsend Investments Limited
and Epstein Becker & Green, P.C.
10.10c Form of Stock Purchase Warrant
10.11c Convertible Debenture and Warrants Purchase Agreement,
dated June 30, 2000, between Worldwide Wireless and
AMRO International, S.A. and Trinity Capital Advisors,
Inc.
10.12c Form of 7% Convertible Debenture
10.13c Registration Rights Agreement dated June 30, 2000, between
Worldwide Wireless and AMRO International, S.A. and
Trinity Capital Advisors, Inc.
10.14c Escrow Agreement dated June 30, 2000, between Worldwide
Wireless and AMRO International, S.A., Trinity Capital
Advisors, Inc. and Epstein Becker & Green, P.C.
10.15c Form of Instructions to Transfer Agent.
21.1a Subsidiaries of the Registrant, filed Nov. 8, 1999
27.1 Financial Data Schedule
99.1c Resolution of the Board of Directors of Worldwide Wireless
dated July 19, 2000 authorizing the issuance of shares to
Technology Equity Fund Corporation
II - 6
<PAGE>
99.2c Resolution of the Board of Directors of Worldwide Wireless
dated May 15, 2000 authorizing the issuance of shares to The
Oxford Group
99.3c Resolution of the Board of Directors of Worldwide Wireless
dated June 1, 2000 authorizing the issuance of shares to
Schumann & Associates
a Incorporated by reference from our Form 10SB12G, filed November 8, 1999.
b Incorporated by reference from our Form 8-K, filed February 11, 2000.
c Incorporated by reference from our Form SB-2, filed August 11, 2000.
II - 7
<PAGE>
ITEM 28: UNDERTAKINGS
The undersigned registrant will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) reflect any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) include in
the prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the registration statement; and (iii)
include any additional or changed material on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of Worldwide Wireless
pursuant to the above mentioned provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
these liabilities (other than the payment by us of expenses incurred or paid by
a director, officer or controlling person of Worldwide Wireless in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether this indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of this
issue.
(4) The undersigned registrant undertakes to supplement the prospectus, after
the end of the subscription period, to include the results of the subscription
offer, the transactions by the underwriters during the subscription period, the
amount of unsubscribed securities that the underwriters will purchase and the
terms of any later reoffering. If the underwriters make any public offering of
the securities on terms different from those on the cover page of the
prospectus, we will file a post-effective amendment to state the terms of this
offering.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Worldwide Wireless Networks, Inc.
------------------------------------
(Registrant)
By: _________________________________
Jack Tortorice, Chief Executive Officer
Date: October 5, 2000
In accordance with the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the Registrant, in the capacities
and on the date indicated.
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<PAGE>
CONSENT OF FELDHAKE, AUGUST & ROQUEMORE, LLP
We hereby consent to the use of our legal opinion dated October 5, 2000, in
this registration statement on Form SB-2/A for Worldwide Wireless Networks, Inc.
Feldhake, August & Roquemore, LLP
Irvine, California
October 5, 2000
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