UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11968
Worldwide Wireless Networks, Inc.
(Name of registrant in its charter)
Nevada 88-0286466
(State of incorporation) (I.R.S. Employer Identification No.)
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)
________________
Securities registered pursuant to Section 12(b) of the Act:
None
________________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
Indicate by check mark whether the registrant (1) has filed all report
s reuired to be filed by Section 13 or 15(d) of the Securities Exchan
ge Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) and has
been subject to such filing requirements for the past 90 days.
Yes X No
---
As of September 30, 2000, there were 12,844,060 shares of the issuer's
Common Stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
The registrant represents that the Consolidated Financial Statements
furnished herein have been reviewed by Crouch, Bierwolf & Chisholm, the
company's independent auditors, and prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior
years, and that such Consolidated Financial Statements reflect, in the
opinion of the management of the Company, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
consolidated financial position of Worldwide Wireless Networks, Inc. and
its subsidiaries (the "Company"), as ofSeptember 30, 2000, and the
results of its operations and its cash flows for the three months then
ended.
Worldwide Wireless Networks, Inc.
(Formerly Pacific Link Internet, Inc.)
Consolidated Financial Statements
September 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 Wrldwide Wireless Networks, Inc. (formerly Pacific Link Internet,
Inc.) and subsidiary as of September 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 September 30, 1999 were not audited or reviewed by us and, accordingly,
we do not express an opinion on them.
/s/ Chisholm & Associates
---------------------
Chisholm & Associates
November 1, 2000
Worldwide Wireless Networks, Inc.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash and Cash Equivalents $ 176,633 $ 136,311
Accounts Receivable (net of allowance for doubtful
accounts of $12,495 and $20,000 respectively) 398,647 165,091
Other Receivables
14,887 3,000
Inventory 2,157,568 129,861
Prepaid Expenses 52,208 18,912
--------- ---------
Total Current Assets 2,799,943 453,175
========= =========
PROPERTY & EQUIPMENT
Office Equipment 197,593 103,231
Leased Equipment 61,315 177,653
Machinery Equipment 1,834,603 1,109,524
--------- ---------
2,093,511 1,390,408
Less:
Accumulated Depreciation - leased equipment (61,316) (165,255)
Accumulated Depreciation (671,418) (282,495)
--------- ---------
Total Property & Equipment 1,360,777 942,658
--------- ---------
OTHER ASSETS
Investments available for sale 1,161,885 36,885
Deferred Charges 7,640 21,984
Deposits 51,524 36,197
--------- ---------
Total Other Assets 1,221,049 95,066
--------- ---------
TOTAL ASSETS $ 5,381,769 $ 1,490,899
========= =========
</TABLE>
Worldwide Wireless Networks, Inc.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 2000 December 31, 1999
(Unaudited)
CURRENT LIABILITIES
Accounts Payable $ 2,999,357 $ 655,485
Accrued Expenses 277,381 83,933
Lines of Credit 79,266 89,323
Unearned Revenue 35,417 102,356
Customer Deposits 56,109 -
Current Portion of Long Term Liabilities 1,285,151 665,355
--------- ---------
Total Current Liabilities 4,732,681 1,596,452
--------- ---------
LONG TERM LIABILITIES
Notes Payable 2,194,370 562,245
Notes Payable - Related Party 75,000 75,000
Capital Lease Payable 15,781 30,340
Less Current Portion (1,285,151) (665,355)
--------- ---------
Total Long Term Liabilities 1,000,000 2,230
--------- ---------
TOTAL LIABILITIES 5,732,681 1,598,682
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock, 50,000,000 shares of $.001 par value
authorized, 12,844,060 and 11,799,988 shares
issued and outstanding 12,844 11,800
Additional Paid In Capital
5,255,828 2,415,345
Accumulated Comprehensive Income (75,000) -
Retained Earnings (5,544,584) (2,534,928)
Total Stockholders' Equity (350,912) (107,783)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,381,769 $ 1,490,899
</TABLE>
Worldwide Wireless Networks, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Nine Months
Ended Ended
September 30 September 30,
2000 1999 2000 1999
SALES $ 1,046,146 $ 571,072 $ 2,757,520 $ 1,228,457
COST OF GOODS SOLD 804,875 252,788 1,835,716 513,073
--------- ------- --------- ---------
GROSS PROFIT 241,271 318,284 921,804 715,384
--------- ------- --------- ---------
OPERATING EXPENSES
General And Administrative
Expenses 972,520 398,203 3,248,688 1,060,983
Sales 366,868 183,145 574,966 357,573
--------- ------- --------- ---------
TOTAL OPERATING EXPENSES 1,339,388 581,348 3,823,654 1,418,556
--------- ------- --------- ---------
OPERATING INCOME (LOSS) (1,098,117) (263,064) (2,901,850) (703,172)
--------- ------- --------- ---------
OTHER INCOME AND (EXPENSE)
Interest Expense (49,322) (10,745) (107,806) (26,484)
Miscellaneous Income 3,690 4,714 - 16,666
--------- ------- --------- ---------
(45,632) (6,031) (107,806) (9,818)
--------- ------- --------- ---------
NET INCOME (LOSS) ($1,143,749) ($269,095) ($3,009,656) ($712,990)
========= ======== ========= =========
NET INCOME (LOSS) PER SHARE $ (0.089) $ (0.023) $ (0.241) $ (0.070)
--------- -------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 12,833,214 11,599,988 12,511,135 10,122,214
========== ========== ========== ==========
</TABLE>
Worldwide Wireless Networks, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended September 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($3,009,656) ($712,990)
Net Cash Used in Operating Activities:
Depreciation and Amortization 401,322 207,001
Bad Debt (7,505) -
Shares Issued for Services 545,407 -
Shares Issued for Insurance Policy 33,000 -
(Increase) Decrease in:
Accounts Receivable (226,051) (161,545)
Other Current Assets (14,237) (1,451)
Inventory (2,027,707) (34,459)
Prepaid Expenses (26,755) (27,136)
Deferred Charges - (16,338)
Increase (Decrease) in:
Bank Overdraft - (4,092)
Accounts Payable and Accrued Expenses 2,537,318 31,905
Customer Deposits 56,109 -
Lines of Credit (10,057) (6,542)
Unearned Revenue (66,938) 83,024
Net Cash Provided (Used) by Operating Activities (1,815,750) (642,623)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (819,441) (785,796)
Cash Paid for Deposits (15,327) (11,287)
Cash paid for Investments - (50,000)
Cash from Deferred Charges 7,803 -
Net Cash Provided (Used) by Investing Activities (826,965) (847,083)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Debt Financing 1,775,000 550,000
Principal Payments on Debt Financing (57,434) (77,985)
Cash Received in Merger with Worldwide - 1,000,000
Cash Paid for Registration Fees (6,879) -
Shares Issued for Cash 970,000 100,000
Net Cash Provided (Used) by Financing Activities 2,680,687 1,572,015
Net Increase (Decrease) in Cash and Cash Equivalents 37,972 82,309
Cash & Cash Equivalents - Beginning 136,311 -
Cash & Cash Equivalents - Ending $ 174,283 $ 82,309
Supplemental Cash Flow Information
Cash paid for interest $ 12,422 $ 26,484
Cash paid for income taxes $ - $ -
Non-cash financing transactions
Investment acquired by issuing stock $ 1,200,000 $ -
Stock issued for notes payable $ 100,000 $ -
</TABLE>
Worldwide Wireless Networks, Inc.
Notes to the Financial Statements
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
Worldwide Wireless Networks, Inc. (the "Company") has elected to omit
subsantially all footnotes to the financial statements for the nine
months ended September 30, 2000, since there have been no material
changes (other than indicated in other footnotes) to the information
previously reported by the Company in their Annual Report filed on
Form 10-KSB for the Fiscal year ended December 31, 1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records
of the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to
properly reflect the results of the period presented and are of a
normal and recurring nature. The information presented is not
necessarily indicative of the results from operations expected for
the full fiscal year.
MERGER WITH TARRAB CAPITAL GROUP
On February 10, 2000, the Company issued 5,000 shares of restricted
common stock valued at $20,000 for all of the outstanding shares of
Tarrab Capital Group(TCG), a Nevada Corporation. At the date of the
merger, TCG had no assets or liabilities and ceased to exist.
In connection with the merger, the Company issued 200,000 shares of
restricted common stock for legal fees valued at $400,000.
INVESTMENTS AVAILABLE FOR SALE
Management determines the appropriate classification of marketable
equity security investments at the time of purchase and reevaluates
such designation as of each balance sheet date. Unrestricted and
restricted marketable equity securities have been classified as
available for sale. Available for sale securities are carried at fair
value, with the unrealized gains and losses, net of tax, reported as a
net amount in accumulated comprehensive income. Realized gains and
losses and declines in value judged to be other-than-temporary on
available for sale securities are included in investment income. The
cost of securities sold is based on the specific identification method.
Interest and dividends on securities classified as available for sale
are included in investment income.
On June 28, 2000, the Company issued 300,000 shares of common stock
valued at $1,200,000 to Bridge Technology, Inc.(Bridge) in exchange for
150,000 shares of Bridge stock valued at $1,200,000. The fair value of
this security was determined by the quoted stock price on the market at
the time of purchase.
During the nine months ended September 30, 2000, the Company recorded
$75,000 of unrecognized losses on securities available for sale in
accumulated comprehensive income in equity. The aggregate fair value of
the securities available for sale at September 30, 2000 is $1,161,885.
No securities were sold during the nine months ended September 30, 2000,
therefore no gains or losses have been realized in the statement of
operations.
INVENTORY
In November 1999, the Company entered into a purchase agreement with
Adaptive Broadband Corporation. The Company has agreed to purchase
wireless telecommunications equipment from Adaptive Broadband
Corporation.
Details of the agreement are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Unit Prices
-----------
Subscriber Access
Time Frame Quantity Commitment Units Points
----------------- ---------------------- ---------- ----------
0-12 months after 2,624 units $1,675,000 $2,075,000
effective date
13-24 months after additional 5,120 units $1,250,000 $1,650,000
effective date
25-36 months after additional 7,760 units $1,000,000 $1,400,000
</TABLE>
As of September 30, 2000, $1,750,000 of inventory consists of purchases
from Adaptive Broadband Corporation.
WARRANTS
On June 19, 2000, the Company entered into a Private Equity Line of Credit
Agreement with Whitsend Investments Ltd(Whitsend). Pursuant to this agree-
ment, Whitsend has committed up to $20,000,000 for the purchase of
the Company's common stock over a 36 month period. Once every 15 days,
the Company may borrow up to $500,000 from Whitsend. The Company is
not bligated to draw on any of the available funds. In lieu of providing
Whitsend with a minimum aggregate draw down commitment, the Company has
issued 125,000 warrants for the purchase of its shares of common stock at
$4.69 per share. These warrants expire on June 19, 2003.
On June 30, 2000, the Company entered into a Convertible Debenture and
Warrants Purchase Agreement with several investors. Pursuant to this
agreement, the Company converted $1,000,000 of its notes payable to
$1,000,000 in convertible debentures and issued 100,000 warrants. The
exercise price per share under these warrants will be 120% of the closing
price on the trading day immediately preceeding the closing date. These
warrants expire on June 30, 2003.
CONVERTIBLE DEBENTURES
On June 30, 2000, the Company entered into a Convertible Debenture
and Warrant Purchase Agreement having an aggregate principal amount of
$1,000,000. The convertible debentures mature on June 30, 2003 and bear
interest at 7% per annum until the earlier of conversion into the Company's
common stock or maturity. Interest is payable quarterly in arrears on
September 1, October 1, January 1 and June 1 of each year commencing on
September 1, 2000.
The convertible debentures are convertible by the holder at any time prior
to the close of business on June 30, 2003. The conversion price is equal
to the lesser of $3.66 per share or 80% of the market price as of the date
on which the holder of the debenture gives notice of their intention to
convert the debentures. If the conversion price is not less than $7.00
per share, the Company may redeem the debentures for cash at 150% of the
unpaid principal and accrued interest.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report for the nine months
ended September 30, 2000, dated November 1, 2000, in the Form 10-Q for
Worldwide Wireless Network, Inc.
/s/ Chisholm & Associates
---------------------
Chisholm & Associates
Salt Lake City, Utah
November 13, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This quarterly report may contain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, certain of which
are beyond the Company's control. Actual results could differ materially
from these forward-looking statements as a result of such risks and
uncertainties, including, among others, general economic conditions,
governmental regulation and competitive factors, and, more specifically,
interest rate levels availability of financing, consumer confidence and
preferences, the effectiveness of the Company's competitors, and costs of
materials and labor. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this
quarterly report will in fact occur. Forward-looking statements may be
identified by use of forward-looking terminology such as "believe,'
"intends," "may," "will," "expects," "estimate," "anticipate," "continue,"
or similar terms, variations of those terms or the negative of those terms.
Overview.
We are a networking solutions company which provides high speed Internet
acess using our own wireless network, dial-up Internet access, data center
services and network consulting. Since April 1999 we have had 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. In March of 2000, we 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 tems to continue to fund such expansion
efforts (as further described below). If we were unable to obtain capital
for expansion, then the Company 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 in such an event, and this plan would allow the Company to
operate profitably, with no expansion or growth.
Revenues. We generate revenues primarily through the sale of annuity-
like service contracts with customers, the sale and installation of wireless
networks, network consulting, and sales of network equipment. We recognize
revenues when services are completed. 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. Cost of sales 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. We do not
currently anticipate that inflation will have a material impact on our
results of operations.
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. 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. 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.
Results of Operations.
Please refer to the Consolidated Financial Statements for Worldwide
Wireless Networks, Inc. which have been included earlier in this Report.
Nine Months Ended September 30, 2000 and 1999
Total revenues increased 124% or $1,529,063 to $2,757,520 for the nine
months ended September 30, 2000 compared to revenues of $1,228,457 for
the nine months ended September 30, 1999. The increase in revenue was
attributable to an increase in sales personnel, further expansion of our
existing market, and the utilization of equipment purchasing contracts.
Costs of sales increased 258% or $1,322,643 to $1,835,716 for the nine
months ended September 30, 2000 compared to cost of sales of $513,073
for the nine months ended September 30, 1999. The increase was primarily
attributable to increased third party network service expense related to
the growth in our customer base, as well as an increase in our level of
equipment purchased for resale.
General and administrative expenses increased 206% or $2,187,705 to
$3,248,688 for the nine months ended September 30, 2000 compared to
$1,060,983 for the nine months ended September 30, 1999. The increase
was primarily due to costs associated with the Tarrab Capital Group merger,
the hiring of additional administrative, technical support, management
personnel and outside professional services.
Selling expenses increased 61% or $217,393 to $574,966 for the nine
months ended September 30, 2000 compared to $357,573 for the nine months
ended September 30, 1999. The increase was primarily due to the hiring of
additional sales personnel, and related salaries and commission expense.
Interest expense consists primarily of interest accrued for notes payable.
Interest expense increased 307% or $81,322 to $107,806 for the nine months
ended September 30, 2000 compared to interest expense of $26,484 for the
nine months ended September 30, 1999. The increase is primarily attribu-
table to the interest accrued on notes payable of which funds were used
to continue expansion and increase the customer base in our existing market.
We incurred a net loss of $3,009,656 or $.241 per share for the nine
months ended September 30, 2000, compared to $712,990 or $.070 per share
for the nine months ended September 30, 1999. As discussed above the nine
months ended September 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.
Liquidity and Capital Resources.
Since World Wide Wireless Networks, Inc.'s inception, we have posted
operating losses and have financed our operations primarily through the
private placement of equity securities, loans, leasing arrangements, and
cash-flow from operations. As of September 30, 2000 cash reserves totaled
$176,633 with total current assets of $2,799,943.
As of September 30, 2000, our long-term debt was $1,000,000.
Our current liabilities for that same date were $4,732,681, of which
$1,285,151 accounts for the current portion of, our long-term liabilities
discussed above, and $2,999,357 is attributable to current accounts payable.
We anticipate a reduction of approximately $17,567 in October 2000, due to
the expiration of certain capital lease obligations. We have paid interest
rates ranging from 15.5% to 32.5%, or an average of 21.7%, on such
obligations as a new company without a credit history.
As of September 30, 2000, our principal commitments consisted of
office, roof-rights payments, and equipment leases. Future minimum
principal payments on notes payable were approximately $158,791. 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.
The consolidated cash flows show net cash used for our operating
activities for the nine months ended September 30, 2000 was $1,815,750.
Net cash used for operating activities consisted primarily of net operating
losses and network asset purchases. Net cash provided by our financing
activities was $2,680,687 during the same period. Net cash provided by
financing activities was principally attributable to the sale of securities,
short-term promissory notes, and long-term promissory notes.
We expect to continue to incur significant capital expenditures
in the future in our current market of Orange County and Los Angeles,
including additions and enhancements to our server and network infra-
structure, software licenses, 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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned - thereunto duly authorized.
WORLDWIDE WIRELESS NETWORK, INC.
Date: November 13, 2000
/s/ Jack Tortorice
--------------
Jack Tortorice
Chairman of the Board
Chief Executive Officer
