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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED MARCH 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
COMMISSION FILE NUMBER: 0-08507
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 75-1441442
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1301 AVENUE M
CISCO, TEXAS 76437
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(254) 442-3968
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(REGISTRANT'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $0.0125 NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [ ] NO [X]
INDICATE BY CHECK MARK IF THERE IS NO DISCLOSURE CONTAINED HEREIN OF DELINQUENT
FILERS IN RESPONSE TO ITEM 405 OF REGULATION S-B, AND WILL NOT BE CONTAINED, TO
THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY
AMENDMENT TO THIS FORM 10-KSB. [ ]
THE REGISTRANT'S REVENUES FOR ITS MOST RECENT FISCAL YEAR WERE $9,163.
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S COMMON STOCK, $0.0125 PAR VALUE,
HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF JULY 10, 2000 WAS $44,662,161
BASED ON THE CLOSING BID PRICE OF $0.62 PER SHARE ON THAT DATE AS REPORTED BY
THE OTC BULLETIN BOARD. AS OF JULY 10, 2000, 97,206,537 SHARES OF THE
REGISTRANT'S COMMON STOCK, $0.0125 PAR VALUE, WERE OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES [ ] NO [X]
THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE: NONE
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BROADBAND WIRELESS INTERNATIONAL CORPORATION
FORM 10-KSB
For the Fiscal Year Ended March 31, 2000
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Part I.
Item 1. Description of Business............................................................. 2
Item 2. Description of Property............................................................. 12
Item 3. Legal Proceedings................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................................. 14
Part II.
Item 5. Market for Common Equity and Related Stockholder Matters............................ 14
Item 6. Management's Discussion and Analysis or Plan of Operation........................... 16
Item 7. Financial Statements................................................................ 17
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.......................................................................... 17
Part III.
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With
Section 16(a) of the Exchange Act................................................... 17
Item 10. Executive Compensation.............................................................. 19
Item 11. Security Ownership of Certain Beneficial Owners and Management..................... 19
Item 12. Certain Relationships and Related Transactions...................................... 20
Item 13. Exhibits and Reports on Form 8-K.................................................... 21
Signatures .................................................................................... 23
</TABLE>
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-KSB and the information incorporated by
reference may include "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). In particular, we direct your attention to Item 1. Description of
Business, Item 2. Properties, Item 3. Legal Proceedings, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation, and
Item 8. Financial Statements and Supplementary Data. We intend the
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. All statements regarding our
expected financial position and operating results, our business strategy, our
financing plans and the outcome of any contingencies are forward-looking
statements. These statements can sometimes be identified by our use of
forward-looking words such as "may," "believe," "plan," "will," "anticipate,"
"estimate," "expect," "intend" and other phrases of similar meaning. Known and
unknown risks, uncertainties and other factors could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.
Although we believe that our expectations that are expressed in these
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be materially
different from our expectations.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL OVERVIEW
Broadband Wireless International Corporation (the "Company") was
organized under the laws of the State of Nevada under the name Black Giant Oil
Company on July 23, 1973. Although the Company was formed originally for the
general purpose of engaging in exploration for oil and gas, the Company had very
limited activity from 1986 to 1997 and, for all intents and purposes, was a
dormant "public shell," i.e., a company that is publicly traded but has no
operations.
In August 1997 a group of stockholders initiated a funding campaign in
an attempt to revive operations. The Company successfully raised $95,000 through
the issuance of 4,750,000 shares of common stock, and another $100,000 through
the issuance of convertible debt.
During the fiscal year ended March 31, 1998 the Company was involved in
drilling wells, acquiring producing and non-producing leases, and completing
wells. Declining oil prices caused most of the leases acquired to become either
marginal or non-economic. As a result of the decline of oil prices in 1998 and
1999, the Company's operating revenues decreased substantially, which had a very
negative impact on the Company's attempt to generate additional financing to
continue operations. During this period, the Company began searching for other
business opportunities, and solicited merger partners who might be interested in
acquiring a "public shell."
In November 1999, the Company executed an Agreement in Principle and
Letter of Understanding ("Letter of Understanding") with Broadcom Wireless
Communications Corporation ("Broadcom"), the culmination of months of
negotiations with an individual named Donald L. Knight ("Knight"). Pursuant to
the Letter of Understanding, the Company essentially agreed to be acquired by
Broadcom, inasmuch as Broadcom would be the controlling shareholder of the
Company upon the consummation of the stock issuances described in the Letter of
Understanding. Except for the issuance of 4.4 million shares of common stock for
$55,000 cash, each of the other stock issuances described in the Letter of
Understanding, totaling an aggregate 48,000,000 shares, were made based on the
representations of Broadcom and Knight that Broadcom either had valuable assets
to exchange for such stock, or had the rights to acquire such assets. Although
15,000,000 shares of the 48,000,000 shares remained in escrow with the Company
(and were ultimately cancelled in June 2000) pending receipt of documentation
that Broadcom had in fact acquired such assets, an aggregate 33,000,000 shares
of common stock were actually delivered to Broadcom under the Letter of
Understanding, for which the Company reported, in previous filings with the
Securities and Exchange Commission (the "SEC"), the receipt of various assets
and contract rights. See "-The Background of Broadcom's Acquisition Efforts-The
Letter of Understanding." Immediately after the stock issuances, Broadcom owned
of record approximately 64% of the outstanding common stock of the Company, and,
until May 2000, exerted control of the Company.
In April 2000, the Company received a subpoena from the Oklahoma
Department of Securities that requested, inter alia, the production of all
documents in the possession of the Company relating to transactions with
Broadcom, as well as the underlying transaction giving rise to the Broadcom
stock issuances. Shortly thereafter, the Company directed its outside counsel to
conduct an internal investigation into all matters surrounding the attempted
acquisition of control of the Company by Broadcom, Knight and others affiliated
with them (as defined elsewhere herein, the "Broadcom Group"). As a result of
the investigation to date, the Company believes that, not only was it the
subject of a scheme by the Broadcom Group to acquire control of a public
company, but that the Broadcom Group acted as statutory underwriters in
connection with the resale of the securities acquired by them from the Company,
all of which, if true, constitute violations of federal and state securities
laws, as more fully described below. See ""-The Background of Broadcom's
Acquisition Efforts-Acquisitions of Common Stock from Webb and-Resales of
Securities from the Broadcom Group."
As of the date of this Report, the Company has no significant assets,
other than certain oil and gas properties comprising the discontinued oil and
gas operations of the Company, and significant liabilities. See "Item 2.
Description of Properties." Without immediate outside funding, the Company will
be unable to implement the shift of its business focus to telecommunications, as
described in its Quarterly Report on Form 10-QSB for the
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quarterly period ended December 31, 1999. Although the Company is attempting to
implement this shift in business focus, primarily due to the reliance of
shareholders who may have acquired common stock of the Company based on press
releases and SEC filings disclosing the change in the Company's business, the
Company currently has no cash flow from operations and, in fact, has been able
to operate since May 2000 only because of advances made by Ivan Webb, the
President of the Company, totaling approximately $422,250 as of the date of this
Report.
As part of the effort to implement the shift in business focus reported
on June 24, 2000, the Board of Directors formed a special Advisory Committee to
assist the Board of Directors in strategic business planning and identification
of business opportunities that could provide shareholder value. The Company also
hired a telecommunications consultant to independently evaluate the business
opportunities presented. On July 2, 2000, the Company executed a letter of
intent with Jarvis Entertainment Group, Inc. (the "Jarvis Group") to form a
joint venture limited liability company (the "Jarvis Joint Venture") for the
purpose of deploying broadband wireless connectivity. The proposed joint
venture, which is subject to the execution of definitive joint venture
agreements, has an initial capitalization of approximately $1.35 million,
$450,000 of which is to be contributed by the Jarvis Group in cash and equipment
upon the execution of the definitive joint venture agreements, with the
remaining $900,000 to be contributed by the Company in two tranches upon the
successful completion of agreed joint venture milestones. On July 10, 2000, Mr.
Webb wrote a letter to the Advisory Committee advising it of (i) his inability
to further fund the operations of the Company, (ii) his intention to resign as
President and a director of the Company no later than August 1, 2000, (iii) the
necessity of identifying a qualified replacement chief executive officer,
replacement directors to occupy the vacancies created by Mr. Webb's resignation
and the anticipated resignation of the sole remaining director, Howard Siegel,
and (iv) the necessity of obtaining immediate funding for the Company, including
funding for the Company's portion of the Jarvis Joint Venture funding. Steven R.
Cox, a member of the Advisory Committee, has indicated to the Company his
willingness to replace Mr. Webb as President and Chief Executive Officer of the
Company, subject to negotiation of a compensation package, as well as the
availability of directors' and officers' insurance and the obtaining of funding
sufficient to adequately capitalize the Company during this strategic planning
phase.
As a result of the internal investigation begun after receiving notice
of ongoing regulatory investigations, the Company has instituted legal
proceedings against various individuals, and, as stated above, is exploring its
options with respect to the agreements it entered into with the Broadcom Group.
However, unless immediate outside financing is obtained by the Company, it
likely will be unable to pursue any or all of the pending or contemplated
actions. See "Item 6. Management's Discussion and Analysis or Plan of
Operation." The Company believes, however, that each of its pending actions is
meritorious and, if pursued to conclusion, would result in the recovery of
potentially significant judgments. However, collectibility of any judgment
obtained cannot be assured. A description of the events giving rise to such
proceedings is, at least in part, a description of the events surrounding the
Broadcom Group's efforts to acquire control of the Company, and the transactions
effected by them subsequent to such acquisition of control, and, accordingly, is
described in greater detail below.
BACKGROUND OF BROADCOM'S ACQUISITION EFFORTS
In or about July 1999, the Company was introduced to Knight by a
businessman who was acquainted with the President of the Company. Knight, who
was looking for a public shell to acquire, represented that he had significant
assets to bring into the Company that would enhance current shareholder value
and revive the Company. Between July 1999 and November 1999 Knight made several
proposals to the Company that involved various assets to be brought into the
Company in connection with a reverse merger. The first of such proposals was
made in August 1999, when Knight proposed that he acquire control of the Company
through the purchase of 32,000,000 shares of the Company's common stock for
$20,000 and the contribution to the Company of certain Kentucky gas properties
with a purported value in excess of $1,000,000 (the "Kentucky Gas Properties").
At the time of these discussions, the price of the Company's common stock, which
was only very thinly traded, if at all, hovered around $.02 per share. Based on
the results of the engineering report provided, Mr. Webb rejected the proposal.
While merger negotiations continued, Knight acquired 2,000,000 shares
of the Company's common stock through a stock purchase made directly from the
Company for a cash payment of $25,000, representing a purchase price per share
of $.0125. The shares were actually issued 100,000 shares to Knight and
1,900,000 shares to Black Giant Resources, Inc. ("Black Giant Resources), an
Oklahoma corporation believed by the Company to be owned by Knight and two other
individuals named Don Dickson ("Dickson") and Curtis Wilson ("Wilson"). On
September
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11, 1999, an agreement was signed between the Company and Black Giant Resources,
pursuant to which Black Giant Resources would acquire an additional 58,000,000
shares of the Company's common stock in exchange for 100% of the common stock
and assets of American Capital Corporation, a Nevada corporation, and 100% of
the common stock and assets of Mercury Insurance & Surety, Ltd., a St. Kitts,
B.W.I. corporation.
Shortly after execution of such agreement, the parties mutually agreed
that such agreement should be rescinded, and the parties continued their
discussions relating to various assets that might be contributed to the Company.
On October 14, 1999, Knight sent a memo to Mr. Webb in which he proposed
contributing a 50% interest in the Kentucky Gas Properties in exchange for
38,000,000 shares of the Company's common stock. The memorandum indicated that
Knight now wanted to put this single asset into the Company as a first step,
with other assets to follow. In a memorandum sent by Knight to the Company two
days later, he indicated that in addition to the Kentucky Gas Properties, he
also had some hotel property that he would like to bring into the Company. These
proposals were rejected by the Company, and in mid October, 1999, Mr. Webb sent
a letter to Knight indicating that unless a mutually acceptable merger agreement
was in place soon, the September 11, 1999 agreement would be considered null and
void. At that time, Mr. Webb advised Knight that the Company was not interested
in the Kentucky Gas Properties unless Knight could show that he had funding in
place to complete the projects associated with the properties. Later in the
month, Mr. Webb sent a letter to Knight indicating that he had yet to receive
any documentation on Knight's funding, and admonished Knight that the "deals"
had to be "real" before the parties could move forward; Mr. Webb then extended
the deadline for Mr. Knight to provide the documentation requested.
THE LETTER OF UNDERSTANDING
On November 1, 1999, the Letter of Understanding was executed, but
between the Company and a company called Broadcom Wireless Communications
Corporation ("Broadcom"), rather than Black Giant Resources. Broadcom is an
Oklahoma corporation incorporated on October 22, 1999, and is believed by the
Company to be owned by Knight, Dickson and Wilson.
The Letter of Understanding described certain issuances of stock that
would be made in connection with cash payments by Broadcom or the contribution
by it of various assets or contract rights to the Company. Except for the
issuance of 4.4 million shares of common stock for $55,000 cash, each of the
other stock issuances described in the Letter of Understanding, totaling an
aggregate 48,000,000 shares, were made based on the representations of Broadcom
and Knight that Broadcom either had valuable assets to exchange for such stock,
or had the rights to acquire such assets. The assets or contract rights to be
contributed by Broadcom to the Company included the following:
o a 50% interest in mineral leases covering 4,300 acres in Larue
County, Kentucky, in exchange for 5,000,000 shares of the Company's
common stock. The leases were represented to have 9 recently
drilled, but uncompleted gas wells. An additional 13,000,000 shares
were to be issued and held in escrow upon completion of the wells
if it were shown that the wells could substantiate a value of
$2,000,000.
o a 40% interest in GetMore Wireless, a retail seller of wireless
cellular telephones and pagers represented to have at least 3
locations in Oklahoma, in exchange for 10,000,000 shares of the
Company's common stock. At the time, Broadcom claimed to have a
letter of intent with GetMore Wireless and Ron Baker & Associates
to acquire the 40% interest. The shares were to be released when
Broadcom delivered to the Company an executed contract showing that
the interest in GetMore Wireless had been fully paid.
o a 50% interest in GetMore Communications, a newly formed
corporation with plans to provide wireless internet access across
the United States, in exchange for 10,000,000 shares of the
Company's common stock. Broadcom represented that it had a letter
of intent to acquire the 50% interest in GetMore Communications in
exchange for providing funding to such company for transmitting
towers. The shares were to be held in escrow pending a definitive
agreement between Broadcom and GetMore Communications, and Broadcom
meeting the funding requirements associated with the venture. The
shares were to be released incrementally as each site was funded.
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o Broadcom's rights in a contract (the "Broadcom/Global Access
Agreement") it purported to have with Global Access ("Global
Access") for the sale of long distance minutes to Mexico, in
exchange for 10,000,000 shares of the Company's common stock. The
documents Broadcom provided to the Company indicated that it had an
agreement with Global Access, a Wyoming corporation owned and
controlled by Tommy K. Hill ("Hill"), for a one-third interest in
the net profits attributable to Global Access' interest in a joint
venture between it and iTell, Inc. ("iTell"), a Delaware
corporation owned and controlled by Sergio Ado ("Ado"). The Global
Access/iTell agreement was to provide long distance service to a
Mexican carrier under a two-year contract. The Broadcom/Global
Access Agreement, which purported to provide a revenue source of
not less than $140,000 per month, apparently was conditioned on
Broadcom furnishing, or funding the acquisition of, certain
telecommunications switches.
Although 15,000,000 shares of the 48,000,000 shares remained in escrow
with the Company (and were ultimately cancelled in June 2000) pending receipt of
documentation that Broadcom had in fact acquired such assets, an aggregate
33,000,000 shares of common stock were actually delivered to Broadcom under the
Letter of Understanding, for which the Company reported, in previous filings
with the SEC, the receipt of various assets and contract rights. As explained in
greater detail below, the Company currently is exploring its options with
respect to the Broadcom Group regarding the transactions that were the subject
of the Letter of Understanding.
The Kentucky Gas Properties Transaction
Subsequent to the execution of the Letter of Understanding, Mr. Webb
rejected the Kentucky Gas Properties as a suitable asset to be contributed to
the Company in exchange for shares, inasmuch as Broadcom could not convey clear
title to the properties. Accordingly, on December 30, 1999, the Company,
Broadcom, and Broadband Wireless Communications Corporation(1) ("BroadBand
Wireless-Oklahoma"), entered into an agreement (the "Modification Agreement")
modifying the Letter of Understanding and indicating that the Kentucky Gas
Properties no longer were a part of the agreement. On June 30, 2000, the Company
formally cancelled the issuance of the 5,000,000 shares that had been issued in
connection with this transaction and that had been held in escrow since their
issuance.
Under the Letter of Understanding, an additional 13,000,000 shares were
issued and held in escrow for release to Broadcom if, upon completion of the
wells attributable to the Kentucky Gas Properties, the wells had a value of
$2,000,000. Since the Kentucky Gas Properties were no longer a part of the
agreement, Broadcom negotiated with the Company to substitute other assets in
order that it might receive the 13,000,000 shares held in escrow. On January 20,
2000, BroadBand Wireless-Oklahoma entered into an agreement with Global Access
New Millennium, Inc. ("GANMI") "to effectuate the purchase, by Black Giant Oil
Company [referring to the Company] ... of [a one-third equity interest in the]
shares, interest and equity of Tryco, Inc. ["Tryco"] currently held by Global
Access New Millennium, Inc." Under the convoluted terms of the agreement,
Broadband Wireless-Oklahoma was to pay GANMI $50,000 within 30 days, which funds
were to be used to pay the expenses of yet another party, First Diversified
Financial Services ("FDFS"), the placement agent for a $25 million private
placement offering to be conducted by GANMI. Although the Company was not a
signatory to the agreement, the agreement also provided that the Company was to
immediately wire-transfer $10,000 to FDFS, which was to serve as a deposit for
GANMI's private placement fees, with an additional $90,000 to be paid to FDFS no
later than January 28, 2000. Finally, the agreement provided for the issuance to
GANMI of the Company's convertible debenture in the amount of $2,500,000. On
January 24, 2000, the 13,000,000 shares previously issued and held in escrow for
the Kentucky Gas Properties were released to Broadcom, in consideration for the
Tryco deal ostensibly brought to the Company by Broadcom.
It now appears that at the time the January 20 agreement was executed
between Broadband Wireless-Oklahoma and GANMI to acquire the one-third interest
in Tryco, GANMI did not own Tryco, as was represented in
---------------------------
(1) BroadBand Wireless Communications Corporation is an Oklahoma
corporation that was incorporated on January 3, 2000, after the date
that it purportedly executed the Modification Agreement. The
Modification Agreement makes clear that BroadBand Wireless-Oklahoma,
which the Company believes is owned by Knight, Dickson and Wilson, was
formed to be the assignee of Broadcom's contract rights under the
Letter of Understanding.
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the January 20 agreement. In fact, the Company discovered subsequently that
GANMI did not even enter into a contract to acquire Tryco until February 1,
2000. To the Company's knowledge, GANMI has never consummated its acquisition
agreement with Tryco and, thus, Tryco has never been conveyed to the Company.
The GetMore Wireless Transaction
On November 24, 1999 Broadcom entered into an agreement (the "GetMore
Wireless Agreement") with Ron Baker ("Baker") and Gary Duke ("Duke"), the
principals of GetMore Wireless, that memorialized the letter of intent
referenced in the Letter of Understanding regarding Broadcom's acquisition of a
40% interest in GetMore Wireless. The GetMore Wireless Agreement provided that
Broadcom was to assign to Baker and Duke 1,000,000 shares of the Company's
common stock in exchange for the 40% interest in the retail store operations. In
addition, Broadcom was to pay to Baker and Duke a total of $200,000 in four
installments of $25,000 each beginning December 15, 1999 and ending March 15,
2000. Broadcom was also to fund additional stores at the rate of $50,000 per
store and was to place $800,000 in escrow by January 17, 2000 to cover the
funding obligation. On December 28, 1999, an assignment was executed pursuant to
which Broadcom's rights in the GetMore Wireless Agreement was assigned to the
Company. The assignment acknowledged the transfer from Broadcom to Baker and
Duke of the 1,000,000 shares of common stock required under the GetMore Wireless
Agreement and the partial payment of the money due under the agreement. However,
the assignment reflected it was not intended to act as a release of any of the
other funding obligations of Broadcom under the agreement.
On December 30, 1999, the 10,000,000 shares from escrow previously
issued and held in escrow for the GetMore Wireless transaction were released to
Broadcom based upon its stated acquisition of the 40% interest and assignment of
such interest to the Company. Later, on March 3, 2000, Baker and Duke executed
an assignment transferring to Broadcom the remaining 60% interest in the GetMore
Wireless retail operation in exchange for 2,000,000 shares of the Company's
common stock. On the same day, Broadcom assigned to the Company, in exchange for
5,000,000 shares of the Company's common stock, the 60% interest that it had
purportedly just acquired from Baker and Duke. On June 30, 2000, Duke and Baker
filed an action against Broadcom alleging that Broadcom breached the contract
and committed fraud in connection with the November 24, 1999 agreement between
Broadcom, Baker and Duke. Accordingly, the Company currently is exploring its
options regarding Broadcom's March 3, 1999 assignment of the GetMore Wireless
operations to the Company, as well as its options with respect to Duke.
The GetMore Communications Transaction
Also on November 24, 1999, Broadcom entered into another agreement with
Baker and Duke (the "GetMore Communications Agreement") relating to the GetMore
Communications wireless internet venture referenced in the Letter of
Understanding. This agreement provided that Broadcom was to receive a 50%
interest in a joint venture between Broadcom and a Baker/Duke entity formed to
deploy wireless internet services. In consideration of the 50% interest,
Broadcom was committed to provide the joint venture with $2,000,000 in funding,
which was to be placed in escrow no later than January 17, 2000. Because of
Baker's actions, as described in "-Litigation Against Baker and Aarow
Environmental Group, Inc.," on June 30, 2000, the Company formally cancelled the
issuance of the 10,000,000 shares that had been issued in connection with this
transaction and that had been held in escrow since their issuance.
The Global Access Transaction
Pursuant to the December 30, 1999 Modification Agreement, Broadcom is
stated to have fulfilled its obligations under the Broadcom/Global Access
Agreement with cash and other consideration, rather than providing the switches
as contemplated in the original agreement. Based upon that representation, the
Company agreed to release the 10,000,000 shares held in escrow and further
agreed to issue an additional 5,000,000 shares to Broadcom if it were successful
in also acquiring the switches and obtaining an increased participation in the
revenues generated by the contracts of no less than an additional $140,000 per
month. The 10,000,000 shares relating to the conveyance of the Global Access
joint venture interest were released from escrow on or about January 11, 2000,
after the Company received an assignment signed by Hill indicating that Broadcom
had satisfied its performance obligations under the agreement. However, contrary
to the representations made to the Company, that appears not to have been the
case. On March 6, 2000, Broadcom and Global Access entered into yet another
agreement that
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made reference to previous agreements between the parties dated, variously,
October 22, 1999, January 5, 2000 and January 7, 2000, concerning the assignment
of one-third of the profits of 28,000,000 minutes to Mexico. The March 6
agreement indicated that Broadcom had yet to fund Global Access in that it
called for the payment by Broadcom of no less than $250,000 to activate the
network. When the Company became aware of this new agreement, Mr. Webb, on or
about March 13, 2000, advanced the Company $150,000 of his personal funds which
were sent to iTell, Global Access' joint venture partner, for the purpose of
activating the network so that the promised revenue stream could commence.
Additionally, Mr. Webb arranged for another party to advance $50,000 to iTell.
Knight also promised to send iTell an additional $100,000 at the request of Mr.
Webb (which were funds actually owed by Broadcom to Mr. Webb). Subsequently,
iTell advised the Company that the funds sent by the Company had not been used
by the joint venture to activate the network, but, instead, had been kept by Ado
as the cash portion of the consideration due for its acquisition of iTell. See
"-iTell Acquisition." The Company has never received any revenues from its
interest in the Broadcom/Global Access Agreement.
ACQUISITIONS OF COMMON STOCK FROM WEBB
As a part of Broadcom's attempt to gain control of the Company, Knight
negotiated with Mr. Webb to buy not only his shares in the Company but as many
of the other outstanding shares as possible. Accordingly, between September 11,
1999 and December 29, 1999, Black Giant Resouces or Broadcom entered into three
different stock purchase agreements with Mr. Webb and another stockholder to
acquire their shares. Only the final agreement was actually consummated as to
Mr. Webb's shares, resulting in the purchase by Broadcom of 1,000,000 shares at
a purchase price of $.15 per share. Subsequently, Mr. Webb sold another
1,000,000 shares to Black Giant Resources or Broadcom at $.35 per share and
300,000 shares for $1.00 per share,(2) for an aggregate sale by Mr. Webb of
2,300,000 shares (the "Webb Shares").
Inasmuch as the shares of common stock owned by Mr. Webb, an affiliate
of the Company, were sold by him in private transactions, all of the Webb Shares
were "restricted securities," as such term is defined in paragraph (a)(3) of
Rule 144 under the Securities Act ("Rule 144") and, accordingly, could only be
resold publicly pursuant to registration of such securities under the Securities
Act or, alternatively, pursuant to the provisions of Rule 144. Pursuant to Rule
144(k), the requirements of Rule 144 do not apply to restricted securities sold
"for the account of a person who is not an affiliate of the issuer at the time
of the sale and has not been an affiliate during the preceding three months,
provided a period of at least two years has elapsed since the later of the date
the securities were acquired from the issuer or from an affiliate of the
issuer.' Accordingly, had Mr. Webb not been an affiliate of the Company for at
least a 90-day period preceding the sale of his shares to Broadcom/Black Giant
Resouces, such shares would not have come within the definition of "restricted
securities,"(3) which was not the case.
In spite of the status of the Webb Shares as restricted securities,
Broadcom, Black Giant Resouces and BroadBand Wireless-Oklahoma (together with
their affiliates, including Knight, Dickson and Wilson, collectively, the
"Broadcom Group") resold to the public all of the Webb Shares, in apparent
violation of the registration provisions of the Securities Act. In making such
sales, the Broadcom Group made written representations to the purchasers that
the shares would become freely tradable within a very short period of time after
the sale, typically within 90 days. It is the Company's understanding, from
discussions with many of these purchasers, that they were told the securities
purchased would become "free-trading" within 90 days of Mr. Webb's departure
from the Company, when he would no longer be considered an affiliate under Rule
144. However, as discussed above, the provisions of Rule 144(k) do not apply to
one who purchases the securities of a person who is an affiliate at the time of
the sale. Since the Webb Shares were sold to Broadcom and then resold by
Broadcom to third parties, Rule 144(k) could not apply. Accordingly, the Company
believes that such purchasers were misled by the Broadcom Group in connection
with their purchases of the Webb Shares.
RESALES OF SECURITIES BY THE BROADCOM GROUP
In addition to the resales of the Webb Shares, the Broadcom Group
immediately resold large amounts of the common stock received by it pursuant to
the Letter of Understanding and otherwise. In fact, of the 61,400,000
-------------------------
(2) Of such 1,300,000 shares, Mr. Webb only received payment for 1,000,000
shares. Broadcom has never paid for the remaining 300,000 shares.
(3) All of the Webb Shares had been held by Mr. Webb for more than two
years preceding the sale.
7
<PAGE> 10
shares actually received by the Broadcom Group pursuant to the Letter of
Understanding or in connection with other issuances by the Company, at July 10,
2000, the Broadcom Group held of record only 18,129,617 shares, excluding shares
held in the individual names of various Broadcom Group affiliates. The Company
believes that sales of these securities were made to numerous individuals, in
apparent violation of the registration provisions of the Securities Act, and
that the Broadcom Group acted as statutory "underwriters" in connection with the
distribution of such securities. Moreover, the Company believes that many of
these purchasers, whose shares were not part of the Webb Shares but were
redistributions of securities acquired directly from the Company, were told in
writing by the Broadcom Group that their shares would be "freely tradable"
within a 90-day window from their purchase, similar to the representations made
by the Broadcom Group to the purchasers of the Webb Shares. In fact, all of the
securities acquired directly from the Company by the Broadcom Group were
"restricted securities"(4) and, as such, could not be sold without registration
or compliance with the exemptive requirements of the Securities Act, such as
Rule 144. The Company also believes that there are many shareholders who
purchased the Company's common stock from Broadcom, who have not received their
shares. Many of these purchasers believed that they were acquiring their shares
directly from the Company and that the funds were being deposited with the
Company, when such was not the case.
THE S-8 REGISTRATION
In April 2000, the Company filed a registration statement on Form S-8,
ostensibly registering an aggregate of 8,000,000 shares issuable in connection
with the Company's 2000 Stock Option Plan. In fact, the Company now believes
that, among other things, (i) the substantial majority of the 7,250,000 shares
issued pursuant to the Form S-8 filing (the "S-8 Shares"), much of which has
been publicly resold, have not been registered under Section 5(a) of the
Securities Act and that it was unlawful to sell such shares in interstate
commerce; and (ii) many of the persons who received and sold the S-8 Shares were
not persons entitled to receive the same pursuant to the Instructions to the use
of Form S-8.
The Company believes that the issuance of many of the S-8 Shares fits
squarely within the kind of abuses of the use of Form S-8 highlighted by the SEC
in Release No. 33-7646 (the "Release"). In the Release, the SEC pointed out that
some issuers and promoters have misused Form S-8 as a means to distribute
securities to the public without the protections of registration under Section 5
of the Securities Act. For example, an issuer might register on Form S-8
securities nominally offered and sold to employees or, more commonly, to
so-called "consultants." These persons then resell the securities in the public
markets, at the direction of the issuer or a promoter. In some cases, the
consultants or employees perform limited or no additional services for the
issuer. The consultants or employees then either remit to the issuer the
proceeds from these resales, or apply those proceeds to pay expenses of the
issuer that are not related to any service provided by the consultants or
employees. The Release makes clear that, in such situations, registration of the
shares on Form S-8 does not accomplish Section 5 registration of these public
sales:
The transaction that takes place (a capital-raising transaction with
the public) is a different transaction from the transaction registered
on Form S-8 (a compensatory transaction with employees, including
consultants). Although the issuer purports to sell securities to
employees, the securities instead are sold to the public. The
"employees" act as conduits by selling the securities to the public and
distributing the proceeds (or their economic benefit) to the issuer.
This public sale of securities by the issuer has not been registered,
although the Securities Act requires registration. The failure to
register this sale of securities deprives public investors of the
protections afforded by the Securities Act.(5)
In the case of the Company's S-8, certain of the "consultants" who
received S-8 Shares immediately distributed them to persons believed by the
Company to have purchased restricted securities from the Broadcom Group, but who
had been promised "free-trading" shares. As stated above, many of these
purchasers contacted the
--------------------------
(4) Excluding shares issued to individual members of the Broadcom Group
under the Company's registration statement on Form S-8, filed in April
2000, which the Company believes to have been part of a scheme to evade
the registration requirements of the Securities Act. See "-The S-8
Registration."
(5) Registration of Securities on Form S-8, Securities Act Release No.
33-7646, [1999 Transfer Binder] Fed. Sec. L. Rep. (CCH) Section 86,116
(Feb. 25, 1999).
8
<PAGE> 11
Company to demand the receipt of their "free-trading" shares, indicating that
they had been told by the Broadcom Group that the securities purchased would
become "free-trading" within 90 days of Mr. Webb's departure from the Company,
when he would no longer be considered an affiliate under Rule 144. However, as
previously discussed, the provisions of Rule 144(k) do not apply to one who
purchases the securities of a person who is an affiliate at the time of the
sale. The Broadcom Group has stated to the Company that it relied on the
representations of Mr. Webb in making such promises and, although Mr. Webb has
stated that he made no such representations to the Broadcom Group, he has
informed the Company that he participated in the preparation of the S-8
registration in the belief that it was necessary to protect the purchasers of
the Webb Shares, who were told that they would receive freely tradable shares
within 90 days of Mr. Webb's departure from the Company. It was only subsequent
to the S-8 registration that Mr. Webb discovered that there were far more of the
S-8 Shares that were redistributed than there were Webb Shares, and it is the
Company's belief that the Broadcom Group utilized the S-8 registration as a
conduit to get freely tradable shares of the Company's common stock into the
hands of persons to whom they had sold shares bearing a legend restricting
transferability. As discussed previously (see "-Resales of Securities by the
Broadcom Group," above), the Company believes that many of the purchasers whose
shares were redistributions of securities acquired by the Broadcom Group
directly from the Company were told by the Broadcom Group that their shares
would be "freely tradable" within a 90-day window from their purchase, when in
fact all of the securities acquired directly from the Company by the Broadcom
Group were "restricted securities" and, as such, could not be sold without
registration or compliance with the exemptive requirements of the Securities
Act, such as Rule 144.
OTHER TRANSACTIONS AND EVENTS SUBSEQUENT TO DECEMBER 31, 1999
SUPPORT24
On February 25, 2000, Baker was named President of the Company.
Contemporaneous with such appointment, Baker executed an agreement with
Support24 and its shareholders to acquire 100% of Support24 in exchange for the
issuance of 700,000 shares of the Company's common stock and the issuance of
$500,000.00 worth of the Company's debentures to be sold by Support24, which was
to retain 80% of the proceeds. Baker issued a press release announcing the
acquisition on February 29, 2000. Baker issued a second press release referring
to the 100% acquisition of Support24 on March 3, 2000. However, in a letter to
the Company dated April 28, 2000 from Steve Zabel of Support24, Mr. Zabel
declared the February 25, 2000 agreement for the acquisition of Support24 null
and void for failure of the Company to issue the 700,000 shares or provide the
$400,000 in working capital contemplated in the parties' agreement. Thus,
although the Company issued Broadcom 5,000,000 shares on March 17, 2000 in
connection with Broadcom's role in bringing the acquisition to the Company, the
shares were cancelled on April 7, 2000.
CISCO LINE OF CREDIT
In March 2000, BroadCom was issued 5,000,000 shares of common stock for
its role in negotiating a $1.6 million line of credit for the Company with Cisco
Systems, Inc. (Nasdaq: CSCO). The Company intended to utilize the line of credit
in connection with the Getmore Communications transaction, for the purchase of
equipment for the installation, implementation and operation of high-speed
wireless internet networks.
LITIGATION AGAINST BAKER AND AAROW ENVIRONMENTAL GROUP, INC.
On March 20, 2000, Baker tendered his resignation as President of the
Company. In the letter of resignation, Mr. Baker specifically stated that he was
not resigning his position as a director of the Company or as its Chief
Operating Officer. Approximately six weeks later, on May 3, 2000, Mr. Baker
tendered his resignation as a member of the Board of Directors of the Company,
as well as from all other offices he held with the Company. In the interim, on
May 1, 2000, Aarow Environmental Group, Inc. ("Aarow") announced the acquisition
of Global Wireless Technologies, Inc. an Oklahoma corporation of which Baker was
the President and controlling stockholder. As a result of the acquisition, Baker
became the President of Aarow, a publicly held company, as well as its largest
stockholder. In connection with the acquisition, Aarow announced that its new
subsidiary, renamed "aaro Broadband Wireless Communications Corporation," would
focus its efforts on fixed wireless broadband communications services throughout
the central, western and southwestern United States. Aarow also announced that
its national headquarters was in the Oklahoma Tower, 210 Park Ave, Suite 2100,
Oklahoma City, OK 73102, which was the location of office space that Baker had
leased while President of and on behalf of the Company.
9
<PAGE> 12
On May 24, 2000, the Company filed a petition in Oklahoma County,
Oklahoma against Baker and Aarow. The petition, which seeks injunctive relief
and asserts claims for conversion, fraud and misrepresentations, seeks damages
in excess of $10,000.
iTELL ACQUISITION
On March 1, 2000, Hill, as President of the International Division of
the Company, entered into a Letter of Agreement with Ado to acquire 100% of
iTell, the joint venture partner of Global Access. See "-The Letter of
Understanding-The Global Access Transaction." The purchase price for iTell was
2,000,000 shares of the Company's common stock and $200,000 in cash, the final
portion of which iTELL acknowledged receipt on March 27, 2000. The Company
additionally agreed to assist in securing financing for iTELL's operations by
providing up to 10,000,000 shares of the Company's common stock for use as
collateral in securing project financing. In connection with the transaction,
the Company issued 1,000,000 shares of its common stock to Global Access and
1,000,000 shares of common stock to Broadcom.
In the Form 8-K reporting the iTell acquisition, the Company reported,
based on information provided by Hill, that:
"iTELL is an international telecommunications carrier with current
assets totaling $2,860,000 consisting of carrier deposits and cash in
bank; iTELL has fixed assets of $12,654,016 with debt service of
$2,999,254. Fixed assets include, but not limited to, hardware
telecommunications switches 60 Hudson, New York, NY, earth stations,
teleports in Malaga, Spain, vehicles, an ocean going vessel, and
residential and commercial real property, located in the United States,
Spain, Venezuela. In addition, iTELL has various accounts receivable,
some of which are delinquent, which are not reflected in the previous
figures.
iTELL has domestic and international carrier contracts with eight
individual carriers, the value of which are now being established by
independent auditors, which are to be reported in subsequent filings.
iTELL has fully executed and operational contracts with four wholesale
providers of telecommunications services. These one year renewable
contracts represent the transmission of a total of 212,000,000 minutes
per month of voice and data traffic being originated from within the
United States with termination within all of Mexico. Currently,
68,000,000 minutes have been activated with facilities now on order to
complete the network necessary to carry the balance of the contracted
traffic. This contractual obligation with rated and credit worthy
companies represent a total estimated gross monthly revenue to iTELL of
$17,384,000. Projected net monthly income is $2,120,000, contingent
upon actual network usage and percentages of completions realized in
network connectivity as well as other operational variables."
None of the representations made by Hill in the 8-K could be
substantiated by the Company. Commencing in May 2000, in preparation for the
Company's 10-KSB, the Company began pressing for documentation of the
information reported in the 8-K, as well as in several press releases. The due
diligence request sought information in nine major categories and ninety-three
subcategories. Major areas of due diligence information requested: (1) corporate
records; (2) general information; (3) legal and financial; (4) property; (5)
management and employees; (6) litigation; (7) insurance; (8) legal matters and
filings; and (9) miscellaneous information. Although the Company sent its
counsel to the offices of iTell on May 31, 2000 to obtain the requested
documentation, Ado (who on May 10, 2000 had become a director of Broadband),
refused to release any documentation.
The failure to provide the requested documentation made it impossible
to verify the veracity of the statements made regarding iTell. Hill, who had
negotiated the iTell acquisition agreement on behalf of the Company, and, in
fact, had received (through Global Access, the company owned by him) 1,000,000
shares of common stock in connection with the transaction, had repeatedly
assured the Company that the necessary documentation was forthcoming, and
specifically, that an audit of iTell , which was necessary to supplement the 8-K
disclosure of the acquisition, was in progress.
After being informed of Ado's refusal to provide the requested
documentation, Mr. Webb called a special meeting of the Board of Directors,
which was held on June 6, 2000. During that meeting, Hill and Ado resigned
10
<PAGE> 13
from the Board. On June 7, 2000, Ado delivered a memorandum outlining the
conditions necessary "for the inclusion of iTell as a wholloy owned subsidiary
of BBAN." The memorandum was a clear indication that Ado had repudiated the
March 1 agreement and that iTell's position was that it was not a wholly owned
subsidiary of the Company. Mr. Webb subsequently sent a letter to Hill and Ado
concerning the repudiation of the acquisition and advising them that a stop
transfer had been placed on the securities issued to them in connection with the
transaction and demanding the immediate return of the shares. The Company has
since filed suit against Hill, Ado and iTell, seeking to recover the monies paid
in connection with the transaction, the return of the shares and for damages
caused to the Company.
ACQUISITION OF JARVIS ENTERTAINMENT GROUP, INC.
On April 4, 2000, Broadcom, in a letter signed by Knight, entered into
a letter of intent with the Jarvis Group in which he stated that as the largest
shareholder of the Company he intended to facilitate the Company's purchase of
the Jarvis Group. Based on the representations of Knight regarding the Jarvis
Group, two days later, on April 6, 2000 a letter of intent was entered into
between the Company and the Jarvis Group to acquire 100% of the Jarvis Group in
exchange for $50,000,000 worth of the Company's restricted stock and cash or
cash equivalents of $5,000,000, 500,000 shares of the Company's common stock,
which would be registered, and 5,000,000 shares of restricted stock which was to
be used for funding purposes. On April 7, 2000, Knight sent a letter to the
Jarvis Group which stated that the Company had agreed to register 500,000 shares
in an S-8 registration so that John Jarvis, the President of the Jarvis Group,
would have free trading shares, and that Broadcom would, if necessary, exchange
500,000 of its own free trading shares for any shares Jarvis might receive from
the Company in connection with the transaction. Knight later signed an agreement
with the Jarvis Group on behalf of Black Giant Resources, in which Black Giant
Resources agreed to provide the Jarvis Group with an agreement ratified by the
Company for the purchase of the Jarvis Group by May 2, 2000. In the agreement
between Black Giant Resoureces and the Jarvis Group, the Jarvis Group agreed to
sell its assets for 500,000 non-restricted shares of the Company's common stock,
the payment of $1,000,000 in cash within 45 days of the stock issuance and cash
of $35,000,000 within 18 months, payable in quarterly increments of no less than
$5,000,000. An agreement with the Jarvis Group has never been consummated under
the terms of the April 6 letter of intent, and the Company has determined not to
proceed with the proposed transaction under the terms outlined in such letter of
intent.
On June 9, 2000, the Company and the Jarvis Group entered into an
"Expression of Mutual Interest," pursuant to which the Company expressed its
desire to continue discussions with the Jarvis Group regarding an ultimate
merger or other similar transaction, but stating that any such transaction would
be subject to the completion of satisfactory due diligence, the receipt by the
Company of an opinion of an independent financial advisor that any merger
consideration is fair to the shareholders of the Company, and the negotiation
and execution of definitive transaction documents. The Expression of Mutual
Interest also indicated the Company's interest in pursuing a joint venture with
the Jarvis Group for the purpose of deploying wireless connectivity in up to
three cities. On July 2, 2000, the Company and the Jarvis Group executed another
letter of intent with respect to the proposed joint venture. See "-General
Overview."
INTERNAL INVESTIGATION
As previously stated, the Company's outside counsel, at the direction
of the Board of Directors, has been conducting an internal investigation since
May 2000. Such counsel was charged to examine all transactions by the Company
since the execution of the Letter of Understanding, and to identify possible
violations of law by the Company and/or others. As a result of counsel's interim
findings, the Company has instituted legal proceedings against various
individuals and entities, and expects to institute additional legal proceedings
against other parties upon the conclusion of its investigation, which is
expected to occur in the near future. In addition to the litigation previously
reported by the Company or disclosed above, the Company has been advised that
various current and former officers, directors and 10% stockholders may have
liability under Section 16(b) of the Exchange Act, which imposes liability on
officers and directors of an issuer for short-swing trading in equity securities
if the issuer has a class of equity securities registered under Section 12 of
the Exchange Act, and on the beneficial owner of 10 percent or more of a class
of equity securities registered by such an issuer under Section 12. Section
16(b) is designed to permit the corporation or a security holder bringing an
action upon behalf of the corporation to recover for the benefit of the
corporation short-swing profits arising from the purchase and sale or sale and
purchase by insiders within any six-month period of equity securities of the
company. Liability under the statute is absolute and without
11
<PAGE> 14
regard to intent. Among the persons who are believed to have liability to the
Company for technical violations of Section 16(b) is Ivan Webb, who acquired
675,000 shares of common stock on August 19, 1999 as officers' and directors'
compensation (see "Item 10. Executive Compensation"), and sold 1,000,000 shares
of common stock to Broadcom on January 26, 2000. The difference between the sale
price of $.15 per share and the deemed purchase price of $.02 per share, an
aggregate $87,750, has been disgorged to the Company by Mr. Webb through the
set-off of amounts otherwise payable to him by the Company. See "Item 12.
Certain Transactions." The Company is currently reviewing all transactions in
the Company's common stock by the Company's current and former officers and
directors, as well as 10% stockholders, to determine if other violations of
Section 16(b) have occurred.
In addition, the Company believes that trading in its common stock was
the subject of a market manipulation scheme, a part of which at least involved
the improper disclosure of inside information. The Company has become aware that
an individual or individuals were posting information on an Internet bulletin
board (the "poster" or the "posters") making references to anticipated news
releases and disclosing what was thought would be included in those press
releases prior to the actual press release being made public. For example, in
early February one poster sent a message on a Friday evening stating "News
should of come pout [sic] today, but with the amount of activity it was not
necessary, look for Monday about noonish to pump stock higher." The following
Monday, in the late morning, the Company issued a news release. Later, in April
2000 another poster released information relating to the office space in Dallas
the Company had plans to occupy, prior to the Company disclosing that
information to the public. There were numerous other messages on the Internet
message board from these posters and others making predictions and
representations some of which became true and others of which were misleading.
The Company believes that these posts were intended to manipulate the market and
create artificial demand for the Company's securities. Further, as a result of
the Company's internal investigation it believes that another individual
conspired with a group of brokers to artificially inflate the trading price of
the Company's securities.
STATUS OF THE COMPANY AT JULY 14, 2000
As a result of the events described above, the Company believes that it
has been severely damaged, as well as its stockholders. Although the Company has
instituted legal proceedings against various individuals and entities, no
assurance can be made as to the amount of any recovery ultimately realized by
the Company. The Company needs immediate outside funding to survive.
Alternatively, it will seek to enter into a business combination with one or
more as yet privately held businesses. Management believes that, because of its
large shareholder base, the Company could still be attractive to privately held
companies interested in becoming publicly traded by means of a business
combination with the Company, without offering their own securities to the
public.
The Company believes that the recently formed Advisory Committee has
rendered, and will continue to render, invaluable assistance to the Board of
Directors in strategic business planning and identification of business
opportunities that could provide shareholder value.
EMPLOYEES
As of the date of this Report, the Company has no paid employees. In
June 2000, the Company engaged the services of a technology consultant to assist
it in reviewing various business opportunities and developing a strategic
business plan.
ITEM 2. DESCRIPTION OF PROPERTY
PRINCIPAL OFFICES
The Company currently is headquartered in facilities located in Cisco,
Texas, which are personally leased by Mr. Webb and for which he pays all lease
payments without reimbursement. The Company is not obligated to pay the lease
payments regarding such facility.
OKLAHOMA OFFICES
After entering into the Letter of Understanding with the Broadcom
Group, a Company office was opened in Oklahoma City from which the Broadcom
Group operated. Shortly after the resignation of Baker and discovery of
12
<PAGE> 15
the on-going regulatory inquiries, the Company notified Broadcom to cease any
operations on behalf of the Company from the Oklahoma City office, discharged
certain officers of the Company installed at the insistence of the Broadcom
Group and consolidated operations in the original Cisco, Texas location.
On March 3, 2000 Baker signed a lease and a sublease agreement for
office space in the Oklahoma Tower located in Oklahoma City, Oklahoma. Baker
later executed an amendment to the lease agreement on April 5, 2000. These
agreements (the "Leases") bound the company to a 10-year lease obligation for
the space covered by the Leases and an associated liability of in excess of $1.8
million over the term of the Leases. Subsequent to Baker's resignation from the
Company and the beginning of his new Aarow venture, the Company successfully
negotiated a release with the landlord of the premises from the obligations
associated with the Leases and further obtained $81,384.90 from Aarow in
connection with that release.
TEXAS FACILITY
On April 20, 2000, the Company announced finalization of arrangements
to occupy office space in Dallas, Texas, where it intended to establish a new
headquarters beginning May 1, 2000. The Company, however, never occupied the
space. The date the Company was to begin occupying the space was the same date
Baker announced his new venture. See "Item 1. Description of Business-"Other
Transactions and Events Subsequent to December 31, 1999-Litigation Against Baker
and Aarow Environmental Group, Inc.." Thereafter it was determined that it would
not be in the best interest of the Company to occupy the space at that time, and
the Company did not renew its lease for the space.
PROPERTIES ATTRIBUTABLE TO DISCONTINUED OPERATIONS
The following is a description of each of the properties owned by the
Company but that are associated with the Company's discontinued operations as of
March 31, 2000:
Mobil Fee #4 - The Company has a .06% working interest in a deep gas
well located in Duval County, Texas.
Troell Leases - On October 17, 1997 the Company entered into an
agreement to acquire 50% working interest in an oil and gas lease in
Atascosa County, Texas for $58,000 in cash plus 136,000 shares of the
Company's common stock. The Company acquired the remaining 50% working
interest in this lease in February, 2000.
Spires Lease - On October 20, 1997 the Company entered into an
agreement to acquire 40% working interest in oil and gas wells in Nolan
County, Texas for $15,000 plus 250,000 shares of common stock and the
settlement of certain account payables related to the lease. The
Company acquired the remaining 60% working interest in this lease in
February, 2000.
The February, 2000 Troell and Spires working interests were acquired
through the transfer of 20,000 shares of the Company's Common Stock.
ITEM 3. LEGAL PROCEEDINGS
On June 22, 2000, the SEC issued an order directing a private
investigation of the Company involving potential violations of Sections 5(a),
5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(a) of the
Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-11 and 13a-13
thereunder. The Company has been producing documents in response to the SEC's
subpoena and is cooperating with the investigation. The Company cannot estimate
the extent of penalties, if any, the SEC may seek to impose if it determines
from its investigation to take action against the Company.
On April 13, 2000, the Company received an administrative subpoena from
the Oklahoma Department of Securities ("ODS") in connection with an ongoing
investigation of the Company, however, the ODS has not advised the Company of
the scope of its investigation. The Company has been informed by the ODS that
the Company and
13
<PAGE> 16
Ivan W. Webb are not currently targets of its investigation. However, there can
be no assurance that the Company or Mr. Webb will not become a target of the
investigation in the future.
On May 31, 2000, Aarow filed a petition in the District Court of
Oklahoma County State of Oklahoma naming the Company, Broadband Wireless
Communications, Inc., Broadcom Wireless Corporation and Cisco Systems, Inc. as
parties to an interpleader suit in which Aarow tendered certain computer
equipment in its possession to the court to make a determination of who has the
right to the equipment. Aarow seeks the recovery for its costs and fees
incurred in connection with the suit; no money damages are sought.
On June 13, 2000, Frank L. Klaus, Jr., filed a petition in the
District Court of Oklahoma County State of Oklahoma against the Company,
Broadcom Wireless Communications Corporation, Black Giant Resources
Corporation, Don Knight and Ivan Webb. The petition alleges fraud and
misrepresentations, breach of contract and various violations of the Oklahoma
Securities Act. The petition seeks damages in excess of $10,000 plus exemplary
damages, attorney fees and costs.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 8, 2000, a special meeting of the Board of Directors was
duly held, at which there was present a quorum of the Board of Directors with
representation of a majority of the shares of the Company, to amend Article I
of the Articles of Incorporation and change the name of the Company from Black
Giant Oil Company to BroadBand Wireless International Corporation. At the
special meeting there were present, either by proxy or in person, 44,994,436
shares of the 71,356,537 shares of the Company's outstanding Common Stock and
all 44,994,436 shares present adopted the amendment to Article I of the
Articles of Incorporation. The shareholders of the Company that were not
present by proxy or in person were not given notice of the special meeting.
On February 29, 2000, a special meeting of the Board of Directors was
duly held, at which there was present a quorum of the Board of Directors with
representation of a majority of the shares of the Company, to amend Article IV
of the Articles of Incorporation to provide that the Company shall have the
authority to issue an aggregate of 250,000,000 shares of Common Stock having a
par value of $0.0125 per share and 25,000,000 shares of Preferred Stock having
a par value of $0.10 per share. At the special meeting there were present,
either by proxy or in person, 40,484,707 shares of the 71,356,537 shares of the
Company's outstanding Common Stock and all 40,484,707 shares present adopted
the amendment to Article IV of the Articles of Incorporation. The shareholders
of the Company that were not present by proxy or in person were not given
notice of the special meeting.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 31, 2000, the Company's common stock was traded on the OTC
Bulletin Board under the ticker symbol BBAN.
NUMBER OF STOCKHOLDERS
The number of beneficial holders of record of the common stock of the
Company as of the close of business on July 10, 2000, was approximately 2,100.
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its common
stock, and does not expect to pay cash dividends in the next term.
RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth certain information regarding recent sales of
the Company's securities, which were not registered under the Securities Act.
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<PAGE> 17
<TABLE>
<CAPTION>
AMOUNT OF DATE OF
SHAREHOLDER SHARES ISSUANCE CONSIDERATION
----------- ------ -------- -------------
<S> <C> <C> <C>
William R. Miertschin 711,000 5/03/99 Services valued at $8,887
Oklahoma Energy Partners 1,200,000 5/03/99 Acquisition of assets valued at $48,000
Glen Deitiker 200,000 5/03/99 Private placement for $5,000
Edgar Campbell 50,000 5/03/99 Private placement for $1,250
Ivan W. Webb 675,000 8/19/99 Services valued at $13,500
Elizabeth Webb 150,000 8/19/99 Services valued at $3,000
Amber G. Smith 60,000 8/19/99 Services valued at $1,200
Karen Lee 11,500 8/19/99 Services valued at $230
Richard M. Hewitt 75,000 8/19/99 Services valued at $1,500
Gifford Dieterle 75,000 8/19/99 Services valued at $1,500
Osage Hills Energy Company 100,000 8/31/99 Private placement for $10,000
Black Giant Resources, Inc. 2,000,000 10/13/99 Private placement for $25,000
Broadcom Wireless Communications 52,400,000 11/06/99 Acquisitions valued at $655,000(1)
Corporation
Wolas Family Limited Partnership 2,610,000 1/05/00 Conversion of debt and interest valued
at $32,625
Wolas Family Limited Partnership 1,200,000 1/25/00 Conversion of debt valued at $15,000
Wolas Family Limited Partnership 536,560 2/02/00 Conversion of debt and interest valued
at $6,707
Broadcom Wireless Communications 15,000,000 3/18/00 Acquisitions valued at $30,000,000 (2)
Corporation
ASF, Ltd. 2,000,000 4/08/00 Acquisition of iTell (3)
Englands Tea & Coffee Exchange, Ltd. 1,000,000 4/08/00 Acquisition of iTell (3)
Global Access New Millenium, Inc. 1,000,000 4/08/00 Acquisition of iTell (3)
Tommy K. Hill, as nominee 10,000,000 4/08/00 Collateral for financings (3)(4)
Stephen M. Grosberg 500,000 4/11/00 Exercise of warrants valued at $25,000
Tommy K. Hill, as nominee 30,000,000 5/12/00 Collateral for financings (3)(5)
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
AMOUNT OF DATE OF
SHAREHOLDER SHARES ISSUANCE CONSIDERATION
----------- ------ -------- -------------
<S> <C> <C> <C>
Wolas Family Limited Partnership 4,100,000 6/30/00 Conversion of debt valued at $51,250
</TABLE>
----------
(1) 15,000,000 of the 53,400,000 shares were being held in escrow by the
Company and have recently been cancelled, for the reason that the
transactions pursuant to which Broadcom was to receive such shares as
consideration were never consummated.
(2) 5,000,000 of the 15,000,000 shares were cancelled by the Company, for
the reason that the transactions pursuant to which Broadcom was to
receive such shares as consideration were never consummated.
(3) The value associated with these shares was not stated.
(4) All 10,000,000 shares were cancelled by the Company, for the reason
that new shares were subsequently issued as collateral for financings.
(5) All 30,000,000 shares were cancelled by the Company, for the reason
that it was no longer necessary for the Company to use these shares as
collateral for financing purposes.
No sales commissions were paid in connection with the above stock
issuances. The securities were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act. However, the
Company believes that certain of the above holders may have acted as statutory
underwriters in connection with the public distribution of the shares acquired
by them. See "Item 1. Description of Business-Background of Broadcom's
Acquisition Efforts- Resales of Securities by the Broadcom Group."
From February 2000 through April 2000, the Company sold an aggregate
of $700,000 of its 12% one-year convertible debentures to a total of 21
persons. The Company planned to use 80% of the proceeds from the convertible
debentures for purposes relating to the proposed operations of GetMore
Communications. However, of the $700,000 in debentures sold, only $450,000 were
deposited into the Company's bank account. The Company believes that the
remaining proceeds, $250,000, were deposited in accounts controlled by the
Broadcom Group. Moreover, the Company never realized the benefits of the
majority of the monies it did receive, inasmuch as the Company believes such
monies inured to the benefit of Aarow, the company to which Baker moved the
Company's wireless operations. See "Item 1. Description of Business-"Other
Transactions and Events Subsequent to December 31, 1999-Litigation Against
Baker and Aarow Environmental Group, Inc.."
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
During the fiscal year the Company did not realize revenues of any
significance. To date, none of the transactions underlying the Letter of
Understanding, or the other transactions brought to the Company by the Broadcom
Group, have resulted in any revenues to the Company. Moreover, the Company has
significant liabilities and no significant assets, other than (i) its
investments in certain ventures the ultimate value of which is speculative and
uncertain, and (ii) the oil and gas properties comprising the discontinued oil
and gas operations of the Company. See "Item 1-Description of Business" and
"Item 2. Description of Properties."
During the fiscal year ended March 31, 2000, the Company sold an
aggregate of $700,000 of its 12% one-year convertible debentures to a total of
21 persons. However, of the $700,000 in debentures sold, only $450,000 was
deposited into the Company's bank account. The Company believes that the
remaining proceeds, $250,000, were deposited in accounts controlled by the
Broadcom Group. Other than the $80,000 received from the sale of its stock to
Broadcom and Black Giant Rescources, the Company received no other funds from
the sale of its common stock during the year. Although the Broadcom Group sold
significant amounts of the shares of the Company's common stock acquired from
the Company in connection with the transactions described in "Item 1.
Description of Business," none of the proceeds of such sales were received by
the Company.
Unless the Company obtains immediate outside funding, the Company will
be unable to implement the shift of its business focus to telecommunications,
as described in its Quarterly Report on Form 10-QSB for the quarterly period
ended December 31, 1999. Although the Company is attempting to implement this
shift in business focus, primarily due to the reliance of shareholders who may
have acquired common stock of the Company based on
16
<PAGE> 19
press releases and SEC filings disclosing the change in the Company's business,
the Company currently has no cash flow from operations and has been able to
operate since May 2000 only by virtue of advances made by its President, Ivan
Webb (which advances totaled approximately $510,000 for the period from March
2000 through the date of this Report). However, Mr. Webb has advised the
Company of his inability to further fund the operations of the Company. See
"Item 1. Description of Business-General Overview."
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the year 2000 issue.
Subsequent to entering the year 2000, the Company has tested its key computer
systems and to date, it has not encountered any material Y2K related
disruptions or failures of its systems or services, nor has it been notified of
any disruptions or failures in the systems of any of its third parties with
whom it deals. The Company believes that all of its software and computer
equipment is year 2000 compliant and that this issue will not pose any
significant operational problems for it.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are incorporated by reference from
pages F-1 through F-15 of the attached Appendix, and include the following:
Financial Statements of Broadband Wireless International Corporation
(1) Reports of Independent Auditors
(2) Balance Sheets as of March 31, 2000 and 1999
(3) Statements of Operations for Years Ended March 31, 2000
and 1999
(4) Statements of Changes in Stockholders' Equity for Years
Ended March 31, 2000 and 1999
(5) Statements of Cash Flows for Years Ended March 31, 2000
and 1999
(6) Notes to Financial Statements for Years Ended March 31,
2000 and 1999
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On June 28, 2000, the Company's Board of Directors approved the
engagement of the accounting firm of Clyde Bailey, P.C. as its independent
certifying accountants for the Company's fiscal year ending March 31, 2000 to
replace the accounting firm of Jackson & Rhodes, P.C., who resigned on June 24,
2000. Jackson & Rhodes' reports on the financial statements of the Company for
the past two fiscal years ended March 31, 1999 and March 31, 1998 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. During the two most
recent fiscal years and the interim periods subsequent to the Company's fiscal
year ended March 31, 1999, there have been no disagreements with Jackson &
Rhodes on any matter of accounting principles or practices, financial statement
disclosure, auditing scope or procedure, or any reportable events as defined in
Item 304 (a) (1) (iv) of Regulation S-B.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following information is furnished for each person who serves as
an executive officer or director of the Company as of July 10, 2000. The Board
of Directors currently consists of two members, although the Company intends to
increase the size of the Board in the near future. On May 10, 2000, the Board
of Directors of the Company approved, accepted and adopted First Amended and
Restated Bylaws (the "Amended Bylaws") which provide for three classes of
directors serving staggered three-year terms, with each class to be as nearly
equal in number as possible. The term of office for the Class 1 directors will
expire at the 2001 annual meeting of stockholders. The term of office for the
Class 2 directors will expire at the 2002 annual meeting of stockholders. The
term of office for the Class 3 directors will expire at the 2003 annual meeting
of stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors
17
<PAGE> 20
whose terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election or until their
death, resignation or removal from office. The executive officers of the
Company hold office until their successors are chosen and qualified by the
Board of Directors or until their death, resignation or removal by the Board of
Directors. There are no family relationships between any of the directors and
executive officers, other than between Ivan W. Webb and Elizabeth Webb, who are
husband and wife. In addition, there was no arrangement or understanding
between any executive officer and any other person pursuant to which any person
was selected as an executive officer.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Ivan W. Webb................................. 49 President, Chief Executive Officer and Director
Elizabeth Webb............................... 51 Secretary and Treasurer
Howard Siegel................................ 57 Director
</TABLE>
Ivan W. Webb has been a director of the Company since 1973 and has
been President of the Company since 1979. Mr. Webb was elected to the office of
Chief Executive Officer on May 10, 2000. Mr. Webb has extensive experience in
the oil and gas industry. He is currently Chief Financial Officer of Ness
Energy International, Inc. Mr. Webb received his Bachelor of Business Degree in
Business Administration from Tarleton State University (Texas A&M Branch) in
1978.
Howard Siegel has been a director of the Company since 1999. Mr.
Siegel is a practicing attorney in Houston, Texas, and serves as a director of
Golden Triangle Industries, Inc. Mr. Siegel was formerly an attorney for The
Superior Oil Company, of Houston, Texas. He previously served as Vice
President, General Counsel, and a director of Tenneco Inc. Federal Credit Union
and also previously served as a director of Signature Motorcars, Inc. From July
1974 to August 1989, Mr. Siegel was employed as an attorney with the law firm
of Bracewell & Patterson of Houston, Texas and from August 1989, until January,
1991, he was employed with the law firm of Hurt, Richardson, Garner, Todd &
Cadenhead of Atlanta, Georgia. Mr. Siegel received his Bachelor of Business
Administration Degree from the University of Oklahoma in 1966. He received a
Doctor of Jurisprudence Degree from St. Mary's University School of Law in
1969.
On February 25, 2000, the Board of Directors elected Tommy K. Hill as
Chief Financial Officer and Ron Baker as President of the Company. On March 20,
2000, Mr. Baker tendered his resignation as President of the Company. In the
letter of resignation, Mr. Baker specifically stated that he was not resigning
his position as a director of the Company or as its Chief Operating Officer.
Approximately six weeks later, on May 3, 2000, Mr. Baker tendered his
resignation as a member of the Board of Directors of the Company, as well as
from all other offices he held with the Company. On May 10, 2000, the Board of
Directors of the Company appointed Sergio Ado and Tommy K. Hill as additional
directors of the Company in order to fill vacancies created by the increase in
the number of directors pursuant to the Amended Bylaws. On May 10, 2000, the
Board of Directors also elected Ivan W. Webb as Chief Executive Officer and
Tommy K. Hill as Chief Operating Officer. On June 6, 2000, Tommy K. Hill and
Sergio Ado resigned as directors of the Company and Mr. Hill was subsequently
terminated from all offices held by him with the Company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT, BENEFICIAL OWNERSHIP
REPORTING REQUIREMENTS
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and any persons who own
more than 10% of a registered class of the Company's equity securities to file
with the SEC and each exchange on which the Company's securities are listed
reports of ownership and subsequent changes in ownership of common stock and
other securities of the Company. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on review of the copies of
such reports furnished to the Company or written representations that no other
reports were required, the Company believes that during the fiscal year ending
March 31, 2000, all filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were met, except for the late filing of
Form 4 for Ivan W. Webb regarding 675,000 shares of the Company's Common
18
<PAGE> 21
Stock received as compensation and to the Company's knowledge no Form 4 has
been filed for Gifford A. Dieterle, a director of the Company who resigned in
May 2000, or Howard Siegel regarding their respective receipt of 75,000 shares
of the Company's Common Stock as compensation and to the Company's knowledge,
no Form 3s or Form 4s have been filed by Knight, Dickson, Wilson, and Broadcom.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth, for the last three fiscal years, the
cash compensation paid by the Company to the President and Chief Executive
Officer (the "Named Executive Officer"). No other executive officers earned in
excess of $100,000 during the fiscal year ending March 31, 2000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ----------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
--------------------------- ---- ------ ----- ----------- ------------
<S> <C> <C> <C>
2000 $9,000 -- -- $12,000(01)
Ivan W. Webb
President and Chief Executive Officer 1999 -- -- -- --
1998 $13,695 -- -- --
</TABLE>
---------------
(1) Represents 600,000 shares of Common Stock of the Company issued to Mr.
Webb in August 1999, in lieu of cash compensation, based on a value of
$0.02 per share on the date of grant.
STOCK OPTIONS GRANTED
As of March 31. 2000, the Company did not have a written stock option
plan and no options were granted to the Named Executive Officer. On April 17,
2000, the Board of Directors approved and adopted the Company's 2000 Stock
Option Plan and reserved 8,000,000 shares of the Company's Common Stock to be
allocated under the Plan. As of the date of this annual report, no options have
been granted under the 2000 Stock Option Plan to the Named Executive Officer,
although an aggregate 7,250,000 shares have been issued under the plan to
various other persons. See "Item 1. "Description of Business- Background of
Broadcom's Acquisition Efforts-The S-8 Registration.
DIRECTOR COMPENSATION
In August 1999, each of the then directors of the Company received
75,000 shares of common stock of the Company, in lieu of $1,500 cash
compensation for serving as director. No directors' compensation has been
awarded to the directors for the current fiscal year.
EMPLOYMENT AGREEMENTS
The Company has no employment contracts with the Named Executive
Officer.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP
The following table sets forth information as of July 10, 2000,
concerning the beneficial ownership of Common Stock by each of the Company's
directors, each executive officer named in the table under the heading "Item 9.
Directors and Executive Officers, Promoters and Control Persons" and all
directors and executive officers of the Company as a group, and by each person
who is known by the Company to own more than 5% of the outstanding shares of
Common Stock. Unless otherwise indicated, the beneficial owner has sole voting
and investment power with respect to such stock.
19
<PAGE> 22
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS(1)
---------------- ----------- ----------
<S> <C> <C>
Ivan W. Webb*(2)(3) 476,176 .49%
Howard Siegel*(2) 75,000 .08%
Hardin County Investment and Development (4) 5,000,000 5.14%
Herbert Wolas (5) 5,171,560 5.32%
Donald L. Knight (6) 24,404,617 25.11%
Curt Wilson, Sr. (7) 20,169,617 20.75%
Don Dickson (8) 20,029,617 20.61%
Broadcom Wireless Communications Corporation (9) 18,129,617 18.65%
All executive officers and directors as a group (2 persons) 551,176 .57%
</TABLE>
--------------------------
* Director
(1) Percent of class for any stockholder listed is calculated without
regard to shares of common stock issuable to others upon exercise of
outstanding stock options. Any shares a stockholder is deemed to own
by having the right to acquire by exercise of an option or warrant are
considered to be outstanding solely for the purpose of calculating
that stockholder's ownership percentage. The Company computed the
percentage ownership amounts in accordance with the provisions of Rule
13d-3(d), which includes as beneficially owned all shares of common
stock which the person or group has the right to acquire within the
next 60 days.
(2) Address is c/o 1301 Avenue M, Cisco, Texas 76437.
(3) Includes 150,000 shares held by Elizabeth Webb, the wife of Ivan W.
Webb and 30,000 shares of which Ivan W. Webb is the custodian for Bode
Webb UGMA TX. Mr. Webb disclaims beneficial ownership of the shares
held in the name of Elizabeth Webb.
(4) The principal equity holders of Hardin may be deemed to be the
beneficial owners of the shares of the Company held by Hardin. Address
is 2503 N. 10th Street, Ste. B-111, McAllen, Texas 78501.
(5) Includes 4,771,560 shares held by The Wolas Family Limited
Partnership, 200,000 shares held by Claudine Wolas and 200,000 shares
held by Cherise Wolas. Address is 1875 Century Park East, # 2000, Los
Angeles, California 90067.
(6) Includes 18,129,617 shares held by Broadcom, 1,900,000 shares held by
Black Giant Resources, 250,000 shares held by the Donald L. Knight
Family Trust, 100,000 shares of which Mr. Knight is the custodian for
Devin L. Knight UGMA OK, and 50,000 shares held by Kimberly Knight.
Address is 1003 St. Andrews Dr., Edmond, Oklahoma 73003.
(7) Includes 18,129,617 shares held by Broadcom and 1,900,000 shares held
by Black Giant Resources. Address is 1845 Woodall Rogers Freeway, Ste.
1200, Dallas, Texas 75201.
(8) Includes 18,129,617 shares held by Broadcom and 1,900,000 shares held
by Black Giant Resources. Address is 1845 Woodall Rogers Freeway, Ste.
1200, Dallas, Texas 75201.
(9) Address is 1845 Woodall Rogers Freeway, Ste. 1200, Dallas, Texas
75201.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2000, the Company issued and executed a promissory note to
Ivan W. Webb in the principal amount of $150,000 bearing interest at an annual
rate of 10% and payable on demand, to evidence cash advances totaling $150,000
made by Mr. Webb on behalf of the Company prior to March 27, 2000. In July
2000, the Company issued and executed a promissory note to Ivan W. Webb in the
principal amount of $360,000 bearing interest at an annual rate of 10% and
payable on demand, to evidence cash advances totaling $360,000 made by Mr. Webb
on behalf of the Company from March 27, 2000 through July 10, 2000. Subsequent
to July 10, 2000, the Company set off an aggregate $87,750 against amounts
otherwise payable to Mr. Webb under the promissory notes,
20
<PAGE> 23
in recovery of certain short-swing profit liability incurred by Mr. Webb. See
"Item 1. Description of Business- Other Transactions and Events Subsequent to
December 31, 1999-Internal Investigation."
In August 1999, the Company acknowledged that it owed Ivan W. Webb
$15,000 regarding the advancement of funds made by Mr. Webb on behalf of the
Company. In the month of November 1999, the Company paid Mr. Webb $15,000
regarding this debt.
See "Item 1. Description of Business" with respect to transactions
between the Company and the members of the Broadcom Group.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements are attached hereto as Appendix A and
included herein on pages F-1 through F-15.
(2) The exhibits set forth on the following Exhibit Index are
filed with this Report or are incorporated by reference as set
forth therein.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page
------ ------- ----
<S> <C> <C>
3.1 Articles of Incorporation, (filed as Exhibit 4.1 to the Company's
Registration Statement on Form 8-A, dated June 13, 1977 and
incorporated herein by reference)..........................................
*3.2 Amendments to the Articles of
Incorporation..............................................................
3.3 First Amended and Restated Bylaws (filed as Exhibit 99.1 to the
Company's Form 8-K dated June 21, 2000 and incorporated herein by
reference).................................................................
*4.1 Specimen Certificate of the Company's Common Stock.........................
4.2 See the Certificate of Incorporation, Articles IV and VIII (filed as
Exhibit 4.1 to the Company's Registration Statement on Form 8-A, dated
June 13, 1977 and incorporated herein by reference) and the Amendments
to the Certificate of Incorporation (filed as Exhibit 3.2 herewith)
and Article II of the Company's First Amended and Restated Bylaws
(filed as Exhibit 99.1 to the Company's Form 8-K dated June 21, 2000
and incorporated herein by # reference)....................................
4.3 Convertible Subordinated Non-dilutable Debenture Agreement dated
February 8, 2000 (filed as Exhibit 4 to the Company's Quarterly Report
on Form 10-QSB for the Quarter ended December 31, 1999 and
incorporated herein by reference)..........................................
4.4 2000 Stock Option Plan Of BroadBand Wireless International Corporation
(filed as Exhibit 4.1 to the Company's Registration Statement on Form
S-8, file number 333-35440 and incorporated herein by reference)...........
10.1 Agreement in Principle and Letter of Understanding dated November 1,
1999, by and between Broadcom Wireless Communications Corporation and
Black Giant Oil Company (filed as Exhibit 4 to the Company's Quarterly
Report on Form 10-QSB for the Quarter ended December 31, 1999 and
incorporated herein by reference)..........................................
10.2 March 3, 2000 Assignment by and between BroadBand Wireless
International Corporation, Ron Baker and Gary Duke (filed as Exhibit
10.1 to the Company's Form 8-K dated April 6, 2000 and incorporated
herein by reference).......................................................
*10.3 Agreement in Principal and Letter of Understanding, dated December 30,
1999, by and between Broadcom Wireless Communications Corporation,
BroadBand Wireless Communications Corporation and Black Giant Oil
Company which amends the Agreement in Principle and Letter of
Understanding dated November 1, 1999.......................................
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page
------ ------- ----
<S> <C> <C>
16.1 Letter on change in certifying accountant (filed as Exhibit 16.1 to
the Company's Form 8-K dated June 29, 2000 and incorporated herein by
reference).................................................................
*27.1 Financial Data Schedule....................................................
</TABLE>
----------
# Incorporated by reference.
* Filed herewith.
(b) Reports on Form 8-K
The Company did not file a Form 8-K during the last quarter of the
period covered by this annual report.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT:
BROADBAND WIRELESS INTERNATIONAL CORPORATION
Date: July 14, 2000 By: /s/ IVAN W. WEBB
----------------
Ivan W. Webb
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: July 14, 2000 By: /s/ IVAN W. WEBB
----------------
Ivan W. Webb, Chief Financial Officer,
Chief Accounting Officer and Director
Date: July 14, 2000 By: /s/ HOWARD SIEGEL
-----------------
Howard Siegel, Director
23
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation, (filed as Exhibit 4.1 to the Company's
Registration Statement on Form 8-A, dated June 13, 1977 and
incorporated herein by reference)..........................................
*3.2 Amendments to the Articles of
Incorporation..............................................................
3.3 First Amended and Restated Bylaws (filed as Exhibit 99.1 to the
Company's Form 8-K dated June 21, 2000 and incorporated herein by
reference).................................................................
*4.1 Specimen Certificate of the Company's Common Stock.........................
4.2 See the Certificate of Incorporation, Articles IV and VIII (filed as
Exhibit 4.1 to the Company's Registration Statement on Form 8-A, dated
June 13, 1977 and incorporated herein by reference) and the Amendments
to the Certificate of Incorporation (filed as Exhibit 3.2 herewith)
and Article II of the Company's First Amended and Restated Bylaws
(filed as Exhibit 99.1 to the Company's Form 8-K dated June 21, 2000
and incorporated herein by # reference)....................................
4.3 Convertible Subordinated Non-dilutable Debenture Agreement dated
February 8, 2000 (filed as Exhibit 4 to the Company's Quarterly Report
on Form 10-QSB for the Quarter ended December 31, 1999 and
incorporated herein by reference)..........................................
4.4 2000 Stock Option Plan Of BroadBand Wireless International Corporation
(filed as Exhibit 4.1 to the Company's Registration Statement on Form
S-8, file number 333-35440 and incorporated herein by reference)...........
10.1 Agreement in Principle and Letter of Understanding dated November 1,
1999, by and between Broadcom Wireless Communications Corporation and
Black Giant Oil Company (filed as Exhibit 4 to the Company's Quarterly
Report on Form 10-QSB for the Quarter ended December 31, 1999 and
incorporated herein by reference)..........................................
10.2 March 3, 2000 Assignment by and between BroadBand Wireless
International Corporation, Ron Baker and Gary Duke (filed as Exhibit
10.1 to the Company's Form 8-K dated April 6, 2000 and incorporated
herein by reference).......................................................
*10.3 Agreement in Principal and Letter of Understanding, dated December 30,
1999, by and between Broadcom Wireless Communications Corporation,
BroadBand Wireless Communications Corporation and Black Giant Oil
Company which amends the Agreement in Principle and Letter of
Understanding dated November 1, 1999.......................................
16.1 Letter on change in certifying accountant (filed as Exhibit 16.1 to
the Company's Form 8-K dated June 29, 2000 and incorporated herein by
reference).................................................................
*27.1 Financial Data Schedule....................................................
</TABLE>
----------
# Incorporated by reference.
* Filed herewith.
<PAGE> 27
BROADBAND WIRELESS INTERNATIONAL
CORPORATION
AUDITED FINANCIAL INFORMATION
MARCH 31, 2000
Clyde Bailey, P.C.
Certified Public Accountant
10924 Vance Jackson #404
San Antonio, Texas 78230
<PAGE> 28
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report 1
Balance Sheets for the years ended 2
March 31, 2000 and 1999
Statements of Operations for the years ended 3
March 31, 2000 and 1999
Statements of Changes in Stockholders' Equity 4
for the years ended March 31, 2000 and 1999
Statements of Cash Flows for the years ended 5
March 31, 2000 and 1999
Notes to Financial Statements 6
</TABLE>
<PAGE> 29
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Broadband Wireless International Corporation
(Formerly Black Giant Oil Company)
We have audited the accompanying balance sheets of Black Giant Oil Company as of
March 31, 2000 and the related statements of operations, changes in
stockholders' equity, and cash flows for the year ended March 31, 2000. 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 audit. The financial statements of the Company were audited by other
auditors whose report dated August 27, 1999 expressed an unqualified opinion on
those statements.
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 Broadband Wireless
International Corporation as of March 31, 2000 and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company's significant operating losses and its working
capital deficit raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Clyde Bailey P.C.
San Antonio, Texas
June 28, 2000
<PAGE> 30
BROADBAND WIRELESS INTERNATIONAL CORPORATION
BALANCE SHEETS
MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 246,355 $ 119
Prepaids -- 5,000
------------ ------------
Total Current Assets 246,355 5,119
Investments 372,500 --
Other Assets:
Net assets of discontinued operations (Note 6) 230,844 157,593
------------ ------------
230,844 157,593
Total Assets $ 849,699 $ 162,712
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and accrued liabilities $ 32,477 $ 18,860
Convertible Subordinated Debentures 700,000 --
Convertible Debt 50,000 100,010
Notes Payable 112,250 --
Advances from officer 4,925 13,325
------------ ------------
Total Current Liabilities 899,652 132,195
Commitments and Contigencies -- --
Stockholders' Equity
Preferred Stock, $.10 par value, 25,000,000 shares -- --
authorized; none issued and outstanding
Common stock, $.0125 par value, 250,000,000 shares 729,707 278,532
authorized; 58,376,537 and 22,262,477
shares issued and outstanding
Additional paid-in capital 1,346,663 1,314,497
Stock to be issued -- 16,250
Accumulated deficit (2,124,923) (1,537,362)
------------ ------------
(48,553) 71,917
Less Treasury stock (14,184 and 20,700 shares) (1,400) (41,400)
------------ ------------
Total Stockholders' Equity (49,953) 30,517
------------ ------------
Total Liabilities and Stockholders' Equity $ 849,699 $ 162,712
============ ============
</TABLE>
See accompanying notes to Financial Statements.
2
<PAGE> 31
BROADBAND WIRELESS INTERNATIONAL CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Revenues:
Oil & Gas Revenue $ 6,173 $ --
Miscellaneous Income 2,990 80
------------ ------------
Total revenues 9,163 80
Operating Expenses:
Salaries $ 34,955 $ --
Rent 9,418 --
Consulting 41,977 --
General and Administrative 41,436 36,640
------------ ------------
127,786 36,640
------------ ------------
Loss from operations (118,623) (36,560)
------------ ------------
Other income (expense)
Interest income 1,022 --
Short Swing Income 87,750 --
Other Expense (62,500) --
Interest expense (26,815) (13,600)
------------ ------------
Total other expense (543) (13,600)
------------ ------------
Loss from continuing operations (119,166) (50,160)
Extraordinary Items (249,500) --
Discontinued operations (218,895) 13,068
------------ ------------
Net Loss $ (587,561) $ (37,092)
============ ============
Loss per common share:
From continuing operations $ (0.003) $ (0.002)
============ ============
Net Loss $ (0.017) $ (0.002)
============ ============
Weighted average common shares outstanding 34,661,612 21,276,144
============ ============
</TABLE>
See accompanying notes to Financial Statements.
3
<PAGE> 32
BROADBAND WIRELESS INTERNATIONAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
Common Stock Additional Shares
---------------------------- Paid-In to be Accumulated
Shares Amount Capital Issued (Deficit)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1998 19,751,477 $ 246,893 $ 1,290,397 $ 33,046 $ (1,500,270)
Shares issued for services 100,000 1,250 7,392 -- --
Shares issued for cash 750,000 9,375 5,625 -- --
Shares issued for interest 445,000 5,563 3,237 -- --
Shares issued for purchase of property 1,216,000 15,200 7,846 (23,046) --
Shares sold but not issued -- -- -- 6,250 --
Net Loss -- -- -- -- (37,092)
------------ ------------ ------------ ------------ ------------
Balance, March 31, 1999 22,262,477 278,281 1,314,497 16,250 (1,537,362)
Shares issued for services 8,622,500 107,781 10,961
Shares issued for cash 6,750,000 84,375 11,875 (16,250)
Shares issued for interest 521,560 6,520 (1,395)
Shares issues for convertible debt 4,000,000 50,000 --
Shares issued for purchase of assets 44,220,000 552,750 10,725
Net Loss (587,561)
Shares cancelled subsequent to year end (28,000,000) (350,000)
------------ ------------ ------------ ------------ ------------
Balance, March 31, 2000 58,376,537 $ 729,707 $ 1,346,663 $ -- $ (2,124,923)
============ ============ ============ ============ ============
<CAPTION>
Treasury
Total Total
------------ ------------
<S> <C> <C>
Balance, March 31, 1998 $ (41,400) $ 28,666
Shares issued for services -- 8,642
Shares issued for cash -- 15,000
Shares issued for interest -- 8,800
Shares issued for purchase of property -- --
Shares sold but not issued -- 6,250
Net Loss -- (37,092)
------------ ------------
Balance, March 31, 1999 (41,400) 30,266
Shares issued for services 118,742
Shares issued for cash 80,000
Shares issued for interest 5,125
Shares issues for convertible debt 50,000
Shares issued for purchase of assets 40,000 603,475
Net Loss (587,561)
Shares cancelled subsequent to year end (350,000)
------------ ------------
--
Balance, March 31, 2000 $ (1,400) $ (49,953)
============ ============
--
--
</TABLE>
See accompanying notes to Financial Statements.
4
<PAGE> 33
BROADBAND WIRELESS INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities: $ (587,561) $ (37,092)
Net Loss
Adjustments to Reconcile net loss to net cash provided
by (used in) operating activities:
Shares issued for services 119,329 8,642
Shares issued for interest 5,125 15,000
Changes in operating assets and liabilities:
Prepaid expenses 5,000 (5,000)
Accounts payable and accrued liabilities 13,617 12,065
Net assets of discontinues operations (24,364) (4,250)
------------ ------------
Net Cash provided by (used in) Operating Activities $ (468,854) $ (10,635)
Cash Flows from Investing Activities:
Investments (185,000) --
------------ ------------
Net Cash provided by (used in) Investing Activities $ (185,000) $ --
Cash Flows from Financing Activities:
Issuance of common stock 96,250 --
Advances from officer (8,400) 4,325
Note Payable 112,250
Proceeds from stock to be issued -- 6,250
Convertible Debt (10)
Proceeds from debentures 700,000 --
------------ ------------
Net Cash provided by (used in) Financing Activities $ 900,090 $ 10,575
Net Increase (Decrease) in cash and cash equivalents 246,236 (60)
Cash at beginning of year $ 118 $ 179
============ ============
Cash at end of year $ 246,355 $ 119
============ ============
Supplemental disclosure:
Total interest paid $ 6,300 $ --
============ ============
Non-cash transactions: (See Statement of Stockholders' Equity)
Shares Issued for Assets 16,220,000 445,000
Shares Issued for Services 8,622,500 100,000
Shares Issued for Convertible Debt 4,000,000 --
Shares Issues for Interest 521,560 750,000
</TABLE>
See accompanying notes to Financial Statements.
5
<PAGE> 34
1
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Broadband Wireless International Corporation (the "Company") was incorporated in
Nevada on July 23, 1973 under the name of Black Giant Oil Company. The Company
was formed for the general purpose of engaging in exploration for oil and gas.
More recently, the Company has shifted its activities to acquiring working
interest, royalties, and overriding royalties in oil and gas properties within
the United States and in foreign countries.
During the year ended March 31, 1998, the Company began acquiring oil and gas
properties with the intention of developing the properties and becoming an oil
and gas producer. However, with the drop in oil prices during the period, the
Company has decided to discontinue those operations. Accordingly, the oil and
gas operations are reported as discontinued in the accompanying statement of
operations and the net oil and gas assets are reported in the accompanying
balance sheet as net assets of discontinued operations (see Note 8). The Company
intends to distribute these net assets to a newly formed subsidiary and spin-off
the subsidiary's shares to the Company's shareholders in the near future. The
Company has had nominal revenues from oil and gas activities.
Although the Company in November of 1999 executed an Agreement in Principle and
Letter of Understanding with Broadcom Wireless Communications Corporation
("Broadcom"), no viable operations resulted in this transaction.
The Company held a shareholders' meeting in February 2000 to change the name
from Black Giant Oil Company to Broadband Wireless International Corporation.
Also, the Company's shareholders agreed to increase the authorized common shares
to 250,000,000 from 100,000,000 and the authorized preferred stock to 25,000,000
from 10,000,000. At March 31, 2000, there was 58,376,537 shares of common stock
(as adjusted for subsequent cancellations) and no preferred stock is
outstanding.
BASIS OF PRESENTATION
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The Company has suffered continuing net losses from operations and has a deficit
in working capital as of March 31, 2000. As explained above, without a merger
partner, the Company has nominal operations. The Company is dependent on a
merger partner or raising additional funds in order to provide capital for the
Company to continue as a going concern.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
6
<PAGE> 35
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER COMMON SHARE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 provides a different method of calculating earnings per share than was
formerly used in APB Opinion 15. SFAS 128 provides for the calculation of basic
and diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Dilutive
earnings per share reflects the potential dilution of securities that could
share in the earnings of the Company. The Company was required to adopt this
standard in the fourth quarter of calendar 1997. Because the Company has no
potential dilutive securities, the accompanying presentation is only of basic
loss per share.
STATEMENT OF CASH FLOWS
For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 utilizes the asset and liability method of computing deferred income taxes.
The objective of the asset and liability method is to establish deferred tax
assets and liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
NOTE 2 - CONVERTIBLE DEBT AND RELATED PARTY TRANSACTIONS
The Company has issued convertible debt to a shareholder with an original date
of September 22, 1997, and matures September 22, 2000. Interest is at 10%
payable quarterly. The debt is convertible to equity at $.02 per share. For the
years ended March 31, 2000 and 1999, the Company has issued common stock at $.02
per share as payment for interest. The shareholder also holds a warrant to
acquire 1,000,000 shares at $.025 per share. The warrant expires in September
2002.
During the years ended March 31, 2000 and 1999, the Company's president has
advanced certain funds interest free to the Company. As of March 31 2000 and
1999, the Company owed $4,925 and $13,325, respectively as a result of these
transactions. Also, the Company's president loaned the Company $150,000 to fund
the portion of a merger in March of 2000. That amount has been reduced because
of a "short-swing profit" of $87,750 described further in these notes.
7
<PAGE> 36
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - STOCK ISSUED FOR SERVICES
During 2000 and 1999, the Company issued common stock to certain related
parties, valued at estimated fair market value, for services performed on behalf
of the Company. The shares issued and value of those shares are as follows for
the years ended March 31:
<TABLE>
<CAPTION>
Shares Issued Value
------------- ----------
<S> <C> <C>
2000 8,622,500 $ 118,742
1999 100,000 8,642
</TABLE>
NOTE 4 - INCOME TAXES
At March 31, 2000, the Company had net operating loss carryforwards totaling
approximately $817,660 available to reduce future taxable income through the
year 2015. Due to changes in control of the Company, these carryforwards are
limited on an annual basis.
The Company has deferred tax assets amounting to approximately $277,500 and
$237,000 at March 31, 2000 and 1999, respectively, related to the net operating
loss carryforwards. The realization of the benefits from these deferred tax
assets appears uncertain due to going concern questions. Accordingly, a
valuation allowance has been recorded which offsets the deferred tax assets at
the end of each period.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
The Company invests its cash and certificates of deposit primarily in deposits
with major banks. The Company has not incurred losses related to its cash.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies.
The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents, accounts payable and
convertible debt approximate carrying value due to the short-term maturity of
the instruments.
8
<PAGE> 37
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
impact the Company's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 issue affecting the
Company will be fully resolved.
NOTE 6 - DISCONTINUED OPERATIONS
As explained in Note 1, the net oil and gas assets of the discontinued
operations are reported in the accompanying balance sheet as net assets of
discontinued operations as of March, 2000 and 1999. Following is a summary of
these net assets:
<TABLE>
<CAPTION>
1999 1999
--------- ---------
<S> <C> <C>
ASSETS:
Troell lease $ 110,571 $ 70,271
Spires wells 29,483 29,482
Stormco lease -0- 20,750
Starr lease 7,500 7,500
Hill Country Exploration 56,590 56,590
Other 26,700 2,700
--------- ---------
Total assets $ 230,844 $ 187,593
LIABILITIES:
Note payable to an individual -0- (30,000)
--------- ---------
NET ASSETS $ 230,844 $ 157,593
========= =========
</TABLE>
The $30,000 note payable to an individual was due on May 15, 1998 and accrues
interest at 12%. The note was extended to December 31, 1999 and paid with the
accrued interest of $6,300 in December 1999.
The balance of the Troell lease was acquired in February 2000 for 20,000 shares
of common stock out of the Treasury. The Company had intended to form a
subsidiary to sell these oil and gas properties, but did not finish the
transaction as of March 31, 2000. The Company still intends to complete this
transaction.
9
<PAGE> 38
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS
SFAS 129
Statement of Financial Accounting Standards No. 129, Disclosure of Information
about Capital Structure ("SFAS 129"), effective for periods ending after
December 15, 1997, establishes standards for disclosing information about an
entity's capital structure. SFAS 129 requires disclosure of the pertinent rights
and privileges of various securities outstanding (stock, options, warrants,
preferred stock, debt and participating rights) including dividend and
liquidation preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. Adoption of SFAS 129 has had no
effect on the Company as it currently discloses the information specified.
SFAS 130
In June 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position are unaffected by
implementation of these new standard Statement of Financial Accounting Standards
(SFAS) 130, "Reporting Comprehensive Income", establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that all items that are required to
be recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.
SFAS 131
SFAS 131, "Disclosure about Segments of a Business Enterprise", establishes
standards for the way that public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. This accounting pronouncement has had no effect on the Company's
financial statements for the periods presented.
SFAS 132
Statement of Financial Accounting Standards (SFAS) 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits," revises standards for
disclosures regarding pensions and other postretirement benefits. It also
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis. This statement
does not change the measurement or recognition of the pension and other
postretirement plans. The financial statements are unaffected by implementation
of this new standard.
10
<PAGE> 39
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS 133
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for sale security, or a foreign-currency-denominated forecasted
transaction. Because the Company has no derivatives, this accounting
pronouncement has no effect on the Company's financial statements.
NOTE 8 - MERGERS AND ACQUISITIONS
LETTER OF UNDERSTANDING
On November 1, 1999, the Letter of Understanding was executed, but between the
Company and a company called Broadcom Wireless Communications Corporation
("Broadcom") Broadcom is an Oklahoma corporation incorporated on October 22,
1999, and is believed by the Company to be owned by Knight, Dickson and Wilson.
The Letter of Understanding described certain issuances of stock that would be
made in connection with cash payments by Broadcom or the contribution by it of
various assets or contract rights to the Company. Except for the issuance of 4.4
million shares of common stock for $55,000 cash, each of the other stock
issuances described in the Letter of Understanding, totaling an aggregate
48,000,000 shares, were made based on the representations of Broadcom and Knight
that Broadcom either had valuable assets to exchange for such stock, or had the
rights to acquire such assets. The assets or contract rights to be contributed
by Broadcom to the Company included the following:
o a 50% interest in mineral leases covering 4,300 acres in Larue
County, Kentucky, in exchange for 5,000,000 shares of the Company's
common stock. The leases were represented to have 9 recently
drilled, but uncompleted gas wells. An additional 13,000,000 shares
were to be issued and held in escrow upon completion of the wells if
it were shown that the wells could substantiate a value of
$2,000,000.
o a 40% interest in GetMore Wireless, a retail seller of wireless
cellular telephones and pagers represented to have at least 3
locations in Oklahoma, in exchange for 10,000,000 shares of the
Company's common stock. At the time, Broadcom claimed to have a
letter of intent with GetMore Wireless and Ron Baker & Associates to
acquire the 40% interest. The shares were to be released when
Broadcom delivered to the Company an executed contract showing that
the interest in GetMore Wireless had been fully paid.
11
<PAGE> 40
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - MERGERS AND ACQUISITIONS (CONTINUED)
LETTER OF UNDERSTANDING (CONTINUED)
o a 50% interest in GetMore Communications, a newly formed corporation
with plans to provide wireless internet access across the United
States, in exchange for 10,000,000 shares of the Company's common
stock. Broadcom represented that it had a letter of intent to
acquire the 50% interest in GetMore Communications in exchange for
providing funding to such company for transmitting towers. The
shares were to be held in escrow pending a definitive agreement
between Broadcom and GetMore Communications, and Broadcom meeting
the funding requirements associated with the venture. The shares
were to be released incrementally as each site was funded.
o Broadcom's rights in a contract (the "Broadcom/Global Access
Agreement") it purported to have with Global Access ("Global
Access") for the sale of long distance minutes to Mexico, in
exchange for 10,000,000 shares of the Company's common stock. The
documents Broadcom provided to the Company indicated that it had an
agreement with Global Access, a Wyoming corporation owned and
controlled by Tommy K. Hill ("Hill"), for a one-third interest in
the net profits attributable to Global Access' interest in a joint
venture between it and iTell, Inc. ("iTell"), a Delaware corporation
owned and controlled by Sergio Ado ("Ado"). The Global Access/iTell
agreement was to provide long distance service to a Mexican carrier
under a two-year contract. The Broadcom/Global Access Agreement,
which purported to provide a revenue source of not less than
$140,000 per month, apparently was conditioned on Broadcom
furnishing, or funding the acquisition of, certain
telecommunications switches.
Although 15,000,000 shares of the 48,000,000 shares remained in escrow with the
Company (and were ultimately cancelled in June 2000) pending receipt of
documentation that Broadcom had in fact acquired such assets, an aggregate
33,000,000 shares of common stock were actually delivered to Broadcom under the
Letter of Understanding, for which the Company reported, in previous filings
with the SEC, the receipt of various assets and contract rights. The Company
currently is exploring its options with respect to the Broadcom Group regarding
the transactions that were the subject of the Letter of Understanding.
THE KENTUCKY GAS PROPERTIES TRANSACTION
Subsequent to the execution of the Letter of Understanding, Mr. Webb rejected
the Kentucky Gas Properties as a suitable asset to be contributed to the Company
in exchange for shares, inasmuch as Broadcom could not convey clear title to the
properties. Accordingly, on December 30, 1999, the Company, Broadcom, and
Broadband Wireless Communications Corporation ("BroadBand Wireless-Oklahoma"),
entered into an agreement (the "Modification Agreement") modifying the Letter of
Understanding and indicating that the Kentucky Gas Properties no longer were a
part of the agreement. On June 30, 2000, the Company formally cancelled the
issuance of the 5,000,000 shares that had been issued in connection with this
transaction and that had been held in escrow since their issuance.
12
<PAGE> 41
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - MERGERS AND ACQUISITIONS (CONTINUED)
THE KENTUCKY GAS PROPERTIES TRANSACTION (CONTINUED)
Under the Letter of Understanding, an additional 13,000,000 shares were issued
and held in escrow for release to Broadcom if, upon completion of the wells
attributable to the Kentucky Gas Properties, the wells had a value of
$2,000,000. Since the Kentucky Gas Properties were no longer a part of the
agreement, Broadcom negotiated with the Company to substitute other assets in
order that it might receive the 13,000,000 shares held in escrow. On January 20,
2000, BroadBand Wireless-Oklahoma entered into an agreement with Global Access
New Millennium, Inc. ("GANMI") "to effectuate the purchase, by Black Giant Oil
Company [referring to the Company] ... of [a one-third equity interest in the]
shares, interest and equity of Tryco, Inc. ["Tryco"] currently held by Global
Access New Millennium, Inc." Under the convoluted terms of the agreement,
Broadband Wireless-Oklahoma was to pay GANMI $50,000 within 30 days, which funds
were to be used to pay the expenses of yet another party, First Diversified
Financial Services ("FDFS"), the placement agent for a $25 million private
placement offering to be conducted by GANMI. Although the Company was not a
signatory to the agreement, the agreement also provided that the Company was to
immediately wire-transfer $10,000 to FDFS, which was to serve as a deposit for
GANMI's private placement fees, with an additional $90,000 to be paid to FDFS no
later than January 28, 2000. Finally, the agreement provided for the issuance to
GANMI of the Company's convertible debenture in the amount of $2,500,000. On
January 24, 2000, the 13,000,000 shares previously issued and held in escrow for
the Kentucky Gas Properties were released to Broadcom, in consideration for the
Tryco deal ostensibly brought to the Company by Broadcom. In July 0f 2000, the
13,000,000 shares were cancelled by the Company.
To summarize the transaction, a total of 20,000,000 ultimately remained
outstanding after recording the common shares cancelled subsequent to year-end.
The shares issued for 100% of Getmore Wireless is being recorded at par value
because lack of financial statements received from Getmore Wireless. The
investment is being recorded at cost because the investment is in dispute and
the likelihood of continuing is in doubt.
CISCO LINE OF CREDIT
In March 2000, BroadCom was issued 5,000,000 shares of common stock for its role
in negotiating a $1.6 million line of credit for the Company with Cisco Systems,
Inc. (Nasdaq: CSCO). The Company intended to utilize the line of credit in
connection with the Getmore Communications transaction, for the purchase of
equipment for the installation, implementation and operation of high-speed
wireless internet networks.
The common stock has been valued at par value ($.0125) for a total of $62,500
and expensed as other expense in the Statement of Operations.
13
<PAGE> 42
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - SHORT SWING INCOME
The Company has been advised by legal counsel that various current and former
officers, directors and 10% stockholders may have liability under Section 16(b)
of the Exchange Act, which imposes liability on officers and directors of an
issuer for short-swing trading in equity securities if the issuer has a class of
equity securities registered under Section 12 of the Exchange Act, and on the
beneficial owner of 10 percent or more of a class of equity securities
registered by such an issuer under Section 12. Section 16(b) is designed to
permit the corporation or a security holder bringing an action upon behalf of
the corporation to recover for the benefit of the corporation short-swing
profits arising from the purchase and sale or sale and purchase by insiders
within any six-month period of equity securities of the company. Among the
persons who are believed to have liability to the Company for violation of
Section 16(b) is Ivan Webb, who acquired 675,000 shares of common stock on
August 19, 1999 as officers' and directors' compensation (see "Item 10.
Executive Compensation"), and sold 1,000,000 shares of common stock to Broadcom
on January 26, 2000. The difference between the sale price of $.15 per share and
the deemed purchase price of $.02 per share, an aggregate $87,750, has been
disgorged to the Company by Mr. Webb through the set-off of amounts otherwise
payable to him by the Company.
NOTE 10 - CONVERTIBLE SUBORDINATED NON-DILUTIVE DEBENTURES
In February, the Company issued approximately $700,000 in Convertible
Non-Dilative Debentures ( "debentures") due in February 15, 2001 carrying a 12%
interest rate to be converted into common stock at 65% of the per share market
price on February 4, 2000 at any time prior to the maturity date. As of March
31, 2000, none of the debentures had been converted. The Company planned to use
80% of the proceeds for purposes relating to the proposed operations of GetMore
Communications.
Of the amount recorded as being issued only $450,000 was actually received by
the Company. Management and legal counsel has been performing an investigation
to determine if this is the total outstanding. Confirmation was received by the
firm who sold the debentures and interest was paid in May 2000 on the first
quarter interest payment. Current management believes that if there were other
debentures outstanding the holders would have contacted the Company by the date
of this report.
NOTE 11 - GOING CONCERN
The Company has sustained a net loss of $587,561 and a loss from operations of
$119,166, and has a negative Stockholders' Equity (Deficit) of ($49,953). These
losses, deterioration of its financial condition and the problems associated
with the merger raise substantial doubt about the Company's ability to continue
as a going concern. Further, although the Company has a large cash balance as of
March 31, 2000 this balance was extinguished during the month of April 2000.
14
<PAGE> 43
BROADBAND WIRELESS INTERNATIONAL CORPORATION
(Formerly Black Giant Oil Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - EXTRAORDINARY ITEM
As discussed in Note 9, all of the funds raised from the debentures was not
received by the Company. A total of $249,500 is being recorded as an
extraordinary loss. The Company is obligated to the debenture holders for these
funds, and the Company is still investigating where these funds went and who is
responsible.
NOTE 13 - LITIGATION
As discussed in Item 3 of the Form 10KSB, the Company is involved in several
legal matters relating to the various mergers and transactions performed during
the year. Of the legal matters against the Company, no prediction can be made at
this time as to the outcome of such proceedings.
The Company also has filed several legal actions against former officers and
directors for the actions performed in the Company's behalf. The Company is
unsure of the outcome at this time.
NOTE 14 - SUBSEQUENT EVENTS
Several actions by the Company were performed as part of it's internal
investigation. The Board of Directors approved the cancellation of 28,000,000
shares of common stock that was part of the November 1, 1999 Letter of
Understanding with BroadCom. These shares are being shown as cancelled effective
March 31, 2000 because of the materiality of the transactions.
In April 2000, the Company filed a registration statement on Form S-8,
registering an aggregate of 8,000,000 shares issuable in connection with the
Company's 2000 Stock Option Plan. In fact, the Company now believes that, among
other things, the substantial majority of the 7,250,000 shares issued pursuant
to the Form S-8 filing (the "S-8 Shares"), much of which has been publicly
resold, have not been registered under Section 5(a) of the Securities Act and
that it was unlawful to sell such shares in interstate commerce; and many of the
persons who received and sold the S-8 Shares were not persons entitled to
receive the same pursuant to the Instructions to the use of Form S-8.
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