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 and
Exchange Act of 1934
For the fiscal year ended: December 31, 1997
-----------------
or
[] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from: to
Commission file number: 33-5902-NY
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 22-2774460
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
210 South Main Street, Suite 900
Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 595-0104
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001
Class A Preferred Stock, Par Value $0.001
(Title of Each Class)
Indicate by check mark whether the registrant (1) has filed all reports 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 disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best or 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. [X]
The aggregate market value of voting stock held by non-affiliates of
the registrant on August 16, 1999 was $451,067 based on an average bid and ask
price of $0.28125.
The number of shares outstanding of the registrant's Common Stock on
August 16, 1999 was 2,952,229.
DOCUMENTS INCORPORATED BY REFERENCE
None
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INDEX
Page
Number
PART I.
Item 1. Business. 3
Item 2. Properties. 12
Item 3. Legal Proceedings. 12
Item 4. Submission of Matters to a Vote of Security Holders. 12
PART II.
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters. 13
Item 6. Selected Financial Data. 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 14
Item 8. Financial Statements and Supplementary Data. 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 16
PART III.
Item 10. Directors and Executive Officers of the Registrant. 17
Item 11. Executive Compensation. 17
Item 12. Security Ownership of Certain Beneficial Owners and Management. 17
Item 13. Certain Relationships and Related Transactions. 18
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 18
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PART I.
OUR ANNUAL REPORT ON FORM 10-KSB ("10-KSB") CONTAINS FORWARD-LOOKING STATEMENTS
MADE WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(THE "EXCHANGE ACT"). WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS,"
"PLANS," "BELIEVES," "SEEKS," "ESTIMATES," AND SIMILAR EXPRESSIONS IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES-- SUCH AS THOSE
DISCUSSED IN THE SECTION ENTITLED "FACTORS AFFECTING NETSCAPE'S FINANCES AND
BUSINESS PROSPECTS" BELOW--THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED OR FORECASTED. YOU SHOULD NOT RELY ON THESE FORWARD-LOOKING
STATEMENTS, WHICH REFLECT ONLY OUR OPINION AS OF THE DATE OF THIS 10-KSB. WE DO
NOT ASSUME ANY OBLIGATION TO REVISE FORWARD-LOOKING STATEMENTS. YOU SHOULD ALSO
CAREFULLY REVIEW THE RISK FACTORS SET FORTH IN OTHER REPORTS OR DOCUMENTS WE
FILE FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION, PARTICULARLY
THE QUARTERLY REPORTS ON FORM 10-QSB AND ANY CURRENT REPORTS ON FORM 8-K.
All statements contained herein that are not historical facts, including but not
limited to, statements regarding the Company's plans for future development and
operation of its business, are based on current expectations. These statements
are forward-looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that could cause actual
results to differ materially are the following: a lack of sufficient capital to
finance the Company's business plan on terms satisfactory to the Company;
pricing pressures which could affect demand for the Company's service; changes
in labor, equipment and capital costs; a failure by the Company to attract
strategic partners; general business and economic conditions; and the other risk
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission ("SEC"). The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which statements are made pursuant to the Private Securities Litigation Reform
Act of 1995, and as such, speak only as of the date made.
ITEM 1. BUSINESS
THE COMPANY
Superior Wireless Communications, Inc. (hereinafter referred to as the "Company"
or "Superior") had been engaged in the business of accumulating wireless cable
licenses. This business included the accumulation of certain Multipoint
Distribution Service (hereinafter referred to as "MDS"), Multichannel Multipoint
Distribution Service (hereinafter referred to as "MMDS"), Instructional
Television Fixed Service (hereinafter referred to as "ITFS") and Low-Power
Television Station (hereinafter referred to as "LPTV") rights (collectively MDS,
MMDS, ITFS and LPTV are sometimes hereinafter referred to as "Wireless Cable
Rights" or "Wireless Cable Channels"). The Company had obtained these rights
through purchases, leases and lease-purchase agreements. As of March 31, 1999,
the Company sold substantially all of its Wireless Cable Rights to assist it in
paying off certain debt and enabling the Company to pursue alternative ventures
in the Internet industry.
On August 1, 1999 in accordance with the terms and provisions of a certain
Purchase Agreement dated as of June 1, 1999 by and between the Company and Media
Rage of Utah, Inc., a Utah corporation ("Media Rage"), 325,000 post-reverse
split (See Item 5 below) shares of the Company's Common Stock, $.001 par
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value per share, were issued to the shareholders of Media Rage in consideration
of their sale, assignment and transfer to the Company of all stock outstanding
in Media Rage. As a consequence of the foregoing transaction, combined with the
issuance of 50,000 post-reverse split shares of the Company's Common Stock to a
third party for services rendered in connection with such transaction, the total
number of shares of Common Stock issued and outstanding, on a post-reverse split
basis, is 2,952,229 at August 16, 1999.
Media Rage provides customers with user friendly software solutions to design
and operate E-Commerce web sites, including shopping cart technology. Media Rage
also offers custom website design and valuable marketing information and support
for its clients.
The Company is currently exploring additional potential acquisitions of
companies within the Internet industry. These include companies that are
Internet Service Providers (ISPs), Web Hosting companies, e-commerce sites and
auction web sites. The Company believes that with a substantial amount of its
debt paid off, that it will be able to move forward with one or more of these
acquisitions.
Background
On December 12, 1991, Marrco Communications, Inc. (hereinafter referred to as
"Marrco") was founded for purposes of accumulating Wireless Cable Rights in
domestic markets.
On March 14, 1994 in accordance with the terms and provisions of a certain
Purchase Agreement dated as of March 14, 1994 by and between the Company and
Marrco, 6,500,000 shares of the Company's Common Stock, $.001 par value per
share, were issued to Marrco or its nominees in consideration of Marrco's sale,
assignment and transfer to the Company of all rights, title and interest of
Marrco in and to all inventory, contract rights, license rights, accounts,
furniture, equipment, goods, documents, instruments, money, marketable
securities and all intangible assets of every kind and description of Marrco,
without exception, subject to the assumption by the Company of all debts and
liabilities of Marrco. Pursuant to the Agreement, the business of the Company
that existed on March 13, 1994 was distributed to Monroe Arndt, the President
and a director of the Company, prior to his resignation on March 14, 1994.
On October 25, 1996 the name of the Company was changed to Superior Wireless
Communications, Inc. and each of the 6,004,836 shares of then issued and
outstanding common stock of the Corporation were exchanged for one share of
preferred stock designated as Class A Convertible Cumulative Preferred Stock
(the "Class A Preferred Stock"), par value of $.001 per share. The Class A
Preferred Stock carries a ten percent (10%) dividend, which could be paid in
common stock, and was convertible into Common Stock of the Company as of October
25, 1998 (the "Conversion Date"). Under the terms of the Class A Preferred
Stock, all shares outstanding as of October 16, 1998 automatically converted
into common stock at a rate of five shares of common stock for every one share
of Class A Preferred Stock. This resulted in the automatic conversion of
6,541,416 shares of Class A Preferred Stock into 32,707,080 shares of common
stock. The holders of the remaining shares of Class A Preferred Stock that were
issued after October 16, 1998, totaling 3,767,501 shares, agreed to convert at
the same rate of five shares of common stock for every one share of Class A
Preferred Stock. The latter conversion was effective simultaneous to the reverse
stock split described below.
In 1998, the Company issued approximately 530,000 shares of its Series A
Preferred stock to satisfy debts and liabilities in the amount of $385,000.
In the first two quarters of 1999, the Company sold certain wireless cable
licenses in exchange for stock in another company. This stock along with
2,914,954 shares of the Company's Series A Preferred stock were used to satisfy
notes and other obligations that totaled approximately $1,450,000.
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Effective August 16, 1999, the Company effectuated a reverse stock split at a
rate of twenty-to-one. This resulted in 2,577,229 shares of common stock being
outstanding as of that date and no preferred shares are outstanding. The Company
is obligated to issue up to 375,000 shares of its post reverse-split common
stock for the acquisition of Media Rage of Utah, Inc. (See PART II- Other
Information). This results in 2,952,229 shares of common stock outstanding as of
August 16, 1999.
Overview
The Company had originally targeted small to mid-size markets with significant
numbers of line-of-sight households that do not have access to traditional
hard-wire cable. It was the Company's intention to construct wireless cable
systems within those markets. Financing of the development of wireless cable
proved to be impossible. Indeed, the wireless cable industry has evaporated with
several of the largest wireless cable companies in the country declaring
bankruptcy. The Company decided to sell its wireless cable assets to assist it
in repaying debt and financing the entrance into the Internet industry.
In 1999, the Company began exploring business opportunities associated with the
Internet. On August 1, 1999 in accordance with the terms and provisions of a
certain Purchase Agreement dated as of June 1, 1999 by and between the Company
and Media Rage of Utah, Inc., a Utah corporation ("Media Rage"), 325,000
post-reverse split (See Item 5 below) shares of the Company's Common Stock,
$.001 par value per share, were issued to the shareholders of Media Rage in
consideration of their sale, assignment and transfer to the Company of all stock
outstanding in Media Rage. As a consequence of the foregoing transaction,
combined with the issuance of 50,000 post-reverse split shares of the Company's
Common Stock to a third party for services rendered in connection with such
transaction, the total number of shares of Common Stock issued and outstanding,
on a post-reverse split basis, is 2,952,229 at August 16, 1999.
Media Rage provides customers with user friendly software solutions to design
and operate E-Commerce web sites, including shopping cart technology. Media Rage
also offers custom website design and valuable marketing information and support
for its clients.
INDUSTRY OVERVIEW
Industry Overview
The Internet, a network of hundreds of interconnected, separately administered
public and commercial networks, has emerged as a global communications medium
enabling millions of people to share information and conduct business
electronically. During the past few years, the number of Internet users,
advertisers and content developers and businesses online has grown dramatically.
With readily available, low-cost Internet access, consumers and businesses are
making increased use of Web browsers, electronic mail, corporate intranets,
telecommuting, online advertising and electronic commerce.
The Company is specifically targeting E-Commerce as its industry within the
Internet. Through the Media Rage acquisition, the Company believes that it can
position itself to provide inexpensive E-Commerce solutions to businesses.
According to Forrester Research, within the next five years, online commerce
will exceed $340 billion. The Company believes that this growth in the number of
users will drive more substantial increases in Internet advertising, which
International Data Corporation ("IDC") estimates will grow to $2.9 billion in
2000.
Internet usage continues to be stimulated by a number of factors, including the
emergence of the World Wide Web, the increasing sophistication of Internet
browsers and Web-enabled software, the availability of low-cost, flat-rate
pricing for Internet access and online services, and the wealth of increasingly
useful information published on the Internet. Increased Internet usage and the
availability of powerful new tools
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for the development and distribution of Internet content have led to a
proliferation of Internet-based services, such as advertising, online magazines,
specialized news feeds, interactive games and educational and entertainment
applications, that are increasingly incorporating multimedia information such as
video and near-CD-quality audio clips. The Internet has the potential to become
a platform through which consumers and businesses easily access rich multimedia
information and entertainment, creating new sources of revenue for advertisers,
content providers and businesses. The growth of Internet advertising and
commerce depends, in part, on the ability of advertisers and online merchants to
deliver a compelling multimedia message to attract viewers and potential
customers.
It is estimated that approximately 45% of US households have personal computers
and that 70% of businesses already have Internet access.
The Company believes that through the acquisition of Media Rage and other
potential acquisition targets, it can exploit the growth of the Internet, and
specifically that of commerce conducted online.
Competition
The markets for consumer and business Internet services are extremely
competitive, and the Company expects that competition will intensify in the
future.
Content aggregators seek to provide a "one-stop" shop for Internet and online
users. Their success depends on capturing audience flow, providing ease-of-use
and offering a range of content that appeals to a broad audience. Their business
models are predicated on attracting and retaining an audience for their set of
offerings. Leading companies in this area include America Online, CompuServe,
Excite, Inc. ("Excite"), Microsoft and Yahoo! Inc.("Yahoo!"). In this market,
competition occurs in acquiring both content providers and subscribers. The
principal bases of competition in attracting content providers include quality
of demographics, audience size, cost- effectiveness of the medium and ability to
create differentiated experiences using aggregator tools. The principal bases of
competition in attracting subscribers include richness and variety of content
and ease of access to the desired content. The proprietary online services such
as America Online, CompuServe and MSN have the advantage of a large customer
base, industry experience, many content partnerships and significant resources.
Many of the Company's competitors and potential competitors have substantially
greater financial, technical and marketing resources, larger subscriber bases,
longer operating histories, greater name recognition and more established
relationships with advertisers and content and application providers than the
Company. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and devote substantially more
resources to developing Internet services or online content than the Company.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect the Company's business, operating
results or financial condition. Further, as a strategic response to changes in
the competitive environment, the Company may make certain pricing, service or
marketing decisions or enter into acquisitions or new ventures that could have a
material adverse effect on the Company's business, operating results or
financial condition.
Regulatory Environment
The Federal Government or the state governments generally have not heavily
regulated business on the Internet, as a whole. There has been talk of new
legislation, on both a Federal and state level, to increase regulation of the
Internet and potentially exploit new taxation revenue sources. The Company
cannot predict the impact, if any, that future regulation or regulatory changes
might have on its business.
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In the United States, the Company is not currently subject to direct regulation
other than pursuant to laws applicable to businesses generally. Adverse changes
in the legal or regulatory environment relating to the interactive online
services and Internet industry in the United States, Europe, Japan or elsewhere
could have a material adverse effect on the Company's business, financial
condition and operating results. A number of legislative and regulatory
proposals from various international bodies and foreign and domestic governments
in the areas of telecommunication regulation, access charges, encryption
standards, content regulation, consumer protection, advertising, intellectual
property, privacy, electronic commerce, and taxation, among others, are now
under consideration. The Company is unable at this time to predict which, if
any, of such proposals may be adopted and, if adopted, whether such proposals
would have an adverse effect on the Company's business, financial condition and
operating results.
Business Strategy
YEAR 2000 IMPLICATIONS
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. The Company is in the
process of assessing the Year 2000 issue. The Company believes that it can
protect itself from the Year 2000 issue by purchasing only certified "Y2K"
compliant hardware and software. The Company has not incurred material costs to
date in this process, and currently does not believe that the cost of additional
actions will have a material effect on its results of operations or financial
condition. Although the Company currently believes that its systems are Year
2000 compliant in all material respects, its current systems and products may
contain undetected errors or defects with Year 2000 date functions that may
result in material costs. Although the Company is not aware of any material
operational issues or costs associated with preparing its internal systems for
the Year 2000, the Company may experience serious unanticipated negative
consequences (such as significant downtime for one or more of its media
properties) or material costs caused by undetected errors or defects in the
technology used in its internal systems. In addition, the Company utilizes
third-party equipment, software and content, including non-information
technology systems ("non-IT systems"), such as its security system, building
equipment and non-IT systems embedded micro controllers that may not be Year
2000 compliant. The Company is in the process of developing a plan to assess
whether these third parties are adequately addressing the Year 2000 issue and
whether any of its non-IT systems have material Year 2000 compliance problems.
Failure of such third-party equipment, software or content to operate properly
with regard to the year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on its business, results of operations, and financial condition.
Finally, the Company is also subject to external forces that might generally
affect industry and commerce, such as utility or transportation company Year
2000 compliance failures and related service interruptions. Furthermore, the
purchasing patterns of advertisers may be affected by Year 2000 issues as
companies expend significant resources to correct their current systems for Year
2000 compliance.
Web Development, Design, and Hosting
Web sites are business tools that can dramatically improve customer service,
expand marketing efforts, and reduce marketing and support cost. It is a
relatively low maintenance and profitable business.
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Product and Services
The Company offers an instant e-commerce solution for existing or new Web sites
through a system that allows businesses to build and maintain complete
e-commerce Web sites. The systems allows simple point- and-click site creation,
catalog deployment and interfacing merchant accounts.
Superior will develop and enhance the current systems appealing to that large
number of new businesses that want a Web presence, yet prefer to develop and
maintain that site themselves.
Objectives
Through its marketing plan, the Company is focused on attracting a high volume
of relatively low-end E- commerce Web sites. The target market is small
businesses that may otherwise not have E-commerce Web sites or shopping carts.
By making the process simple, including effective marketing tools for business
subscribers to use and through strategic alliances with trade groups such as the
National Association of the Self-employed, the Company can tap into a new group
of E-commerce businesses.
More rapid growth will be achieved through the acquisition of additional small
profitable Internet businesses, primarily those involved in Web site hosting.
Market Analysis
It is the Company's belief that small businesses are the last business sector to
tap into the explosive Internet industry with e-commerce. This sector is now the
fastest growing in business. Currently, less than 10% of all small businesses
have a Web site. This fastest growing business segment in the country is
virtually an untapped market ready to be brought on to the Internet.
Nearly all existing Web sites do not have an effective marketing plan to drive
traffic to their Web site. Small businesses that do set up a Web site, generally
have a Web site designed for a large up-front fee with very little additional
support and no marketing support. Small business is starving for information on
how to market their site and make money on the Internet.
Target Market
The Company will target this explosive industry of small and home-based
businesses. With a small budget and an eagerness to capitalize on the Internet
boom, this segment of the market is in desperate need of a low-cost, simple
e-commerce solution.
Competition
The primary competitors include Yahoo Store, Shopbuilder and Shopsite, which was
recently bought by Gateway. Though all have a larger customer base than the
Company's, the products are limited in functionality as compared to the
Company's product. At the time of this writing, none of the competitor products
were sold with a comprehensive, online marketing tutorial system.
Product Description
The Company's product, offered through Media Rage, is a self-automated, build it
yourself e-commerce Web site. A user simply calls up a URL (internet address)
that has been assigned, and by a simple, fill in the blank procedure, builds Web
pages with color backgrounds, images, titles, text and forms, product
descriptions, pricing.
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The e-commerce shopping cart module can be added to any Web site within minutes.
The e-commerce shopping cart module gives small businesses control over product
inventory, tax information, shipping, product options, and pricing. Company
control is achieved because changes can be made easily from any Web browser. The
"fill in the blank" technology makes updates and changes as simple as filling
out a questionnaire. This makes the Company's e-commerce solution possibly the
most advanced and simple product to set up an online store. The features of the
e-commerce system are as follows:
o Unlimited product inventory capabilities
o Secure ordering and order retrieval
o Complete customizable tax and shipping data base
o Ability to accept thousands of orders daily
o Add, Delete, or Modify any product from browser 24 hours a day
o E-mail notification of all orders
o Real time credit card processing available
o Java scripted up sale on each order to related products
o Self generating product index that changes instantly on all product updates
o Template or custom HTML display of products
o Option capability for quantity, size, color, etc.
o Help sections throughout the entire system
Related Products
Company Owned Web Site Replication
Media Rage has also developed a self replicating Web site creation system that
allows customers to easily provide Web pages to their customers or independent
representatives. These sites can be owned and operated independently or can be
used as a storefront to a central store. The individually owned sites promote
their own products or services. Each individual Web page has its own backroom or
Web site administration section. The site's backroom can only be accessed
through the hosting company's main page driving repeat traffic to the Company's
Web site.
Having many Web sites or storefronts linked to a central store or site is a
model that is used by the most successful companies on the Internet. Companies
like Amazon.com and Geocities.com have used this model to attract millions of
customers to their sites. Any traffic generated from a storefront to the central
store is electronically tracked for use in affiliate programs or in providing
valuable knowledge about Web traffic.
Revenues to the Company are collected in several ways: set up fees, hosting
fees, and custom work. The Company takes care of the setup, and hosting. We also
assist in the customer service and custom design work. The revenues generated in
these areas are shared with the Company. Pricing and revenue splits for the
independent pages is negotiated and adjusted to meet the goals and level of
service required by each company.
Merchant Accounts
The Company is set up as a re-seller of merchant account leases provided to
business owners to facilitate their e-commerce transactions. The Company
collects revenues from reselling merchant accounts in the form of direct
payments from banks, fees based on each transaction and a percentage of total
sales generated by the merchant account.
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Unique Selling Advantage
Most companies that sell shopping carts are not teaching their customers how to
use the cart to make money. Sites that teach marketing generally do not have or
own the technology to help their customers implement the education. We believe
the technology and education working together will be extremely powerful and
automated and are the Company's most unique selling advantage.
Many small businesses have tried placing their products and services on the
Internet with the belief that by simply having a Web site, they will sell
product. The fact is that users must be driven to the site as well. Our online
courses allow the small and home based business owner to learn and implement
proven methods of online marketing providing success to their online venture.
Marketing Tactics
Outside Sales Representatives
Outside sales representatives will be used to sell to large trade organizations.
Thousands of small business groups exist across the nation that are targeted by
the sales reps. The trade organization receives a portion of the revenues
derived from its members creating a "win-win' for both the organization and its
members.
Company Newsletter
The Company will build an E-zine of 10's of thousands of subscribers in a very
short time. This newsletter will include helpful marketing and e-commerce
information every week. The subscriber list will give us an opportunity to offer
new services, upgrades, or related products that all generate predictable
monthly revenues for our company. The newsletter will also develop an ongoing
relationship with thousands of potential customers.
Free Web pages and 10 day trials of our shopping cart system.
This is another service that will give us a large database of potential paying
customers whom are using and testing our technology. The newsletter will be used
for personal calls, education courses and autoresponders to encourage the free
users to take advantage of our fee based upgrades and services.
Channels of Distribution
The Company will focus on large organizations such as trade organizations,
chambers of commerce, mortgage and real estate brokers, and network marketing
companies. Relationships within these organizations will allow us to penetrate a
large group of small businesses with fewer points of sale.
Pricing
The pricing structure below allows easy entry for the masses but limits the
ability of the customer to "exit" the relationship short term as each customer
will sign a 12 month, exclusive hosting and development contract.
The e-com sites will be sold at $120 each payable in $10 increments over a
12-month period. Secure hosting for the Web sites will be charged at $39.95
monthly for 100 items or less. An additional $20 is billed monthly for each 100
additional items added, i.e., 120 items would cost $59.95 monthly. Each site,
even if paid in full upfront, comes with a minimum 12-month contract for
exclusive hosting and Web development for the site.
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The Company will also charge a .5-2% volume fee on all commerce passing through
any sites it sells.
Advertising
The Company will incorporate the following 6 avenues to drive traffic to its
site:
1. Submit articles for publication to e-zines. This method has
consistently proven to be one of the most effective methods of driving
qualified visitors to Web sites.
2. Run classified ads in targeted e-zines. Once again e-zine advertising
offers the best bang for the buck on the Internet. The cost to
advertise in most e-zines is 20 to 50 dollars per week and the Company
can reach several hundred thousand potential customers at a very low
cost.
3. Search engine optimization and doorway pages. The search engines can
still reach thousand of customers quickly and inexpensively. Pages
need to be optimized to target certain keywords and the Company will
create specialized pages that will rank high in the different search
engines under different keyword phrases.
4. Private label our services to be offered through high traffic sites
with established customer base
5. Online press releases
6. Classified advertising and banners.
These marketing methods will provide the most exposure for the least amount of
money. The methods are proven and are used by some of the most successful sites
on the Internet. The back end education will position us as a leader in the
e-commerce movement. The ongoing support is what is most needed by small
businesses today.
The Market
The Internet and Internet Access. The growth of the Internet is well documented
and perhaps the greatest growth industry in the history of the World.
o Growth in the Internet is about 10% per month.
o Every two seconds the Internet has a new subscriber.
o Use of the Internet file search and retrieving tool is currently growing at
1,000 percent annually.
o There are more than 10 million host computer systems connected to the
Internet.
o Transactional commerce on the Internet is estimated at $8 billion today,
and by the year 2002 wiil be at $300 billion.
o User population of the Internet is approaching over 100 million people.
Business Integration in a World of Wireless E-Commerce. Global villages, virtual
communities, information superhighways, and gigabit networks have been used to
describe the world where teleconferencing, interactive television, traditional
on-line information services, and public telephone systems converge. The U.S.
information services market is huge, and its shift toward digital media is a
change of monumental proportions. Today's communication networks are not ready
to meet the demands being placed upon them. The trend towards digital delivery
will require improvements to the underlying communication infrastructure.
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The World Wide Web. The World Wide Web is the multimedia part of the Internet.
It is the primary system used on the Internet to find and transfer information.
It has, moreover, become (with the exception of e-mail) the most popular and the
most promising and active source for business use.
The Web offers incredible diversity for business, education, communication, and
entertainment. Web pages are available on the Internet in tens of thousands of
styles and subjects, with almost as many reasons for posting them on the Web.
For example, there are thousands of sites in each of these subject areas:
o Commercial, Shareware, Freeware software
o Business, marketing, commerce
o Finance, stock market, corporate information
o K-12 education
o Online books
o Online magazines
o Government sites and information
o Legal information
o Health and medical information
o Daily and categorized news
o Travel/booking/ticketing information and purchase
o Reference books
o Scientific sites covering archeology through zoology
o History
o Museums and libraries
Virtually all knowledge in the history of mankind may someday soon be on the
Web. For example, the Vatican has started to download images of 150,000 original
documents dating from as early as the second century A.D. on the Internet. The
Securities and Exchange Commission maintains free Internet access to its library
of corporate records.
Employees
The Company currently has only one employee.
ITEM 2. PROPERTIES
The Company currently rents approximately 300 square feet of office space for
its corporate offices, under a rental arrangement with the Company's President.
The rent has been accrued at a rate of $500 per month and was converted into
stock of the Company in July of 1999.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is trading on the Over-the-Counter Bulletin Board
under the symbol "SUWL". As of August 16, 1999, the Company had 748 holders of
record. The following table sets forth, on a per share basis for the period
shown, the high and low prices of the Common Stock and the Preferred Series A
Stock as reported on the OTC Bulletin Board.
Closing Price
High Low
Fiscal Year Ended December 31, 1995
First Quarter............................$ 1.75 $ 0.75
Second Quarter........................... 1.75 0.75
Third Quarter............................ 1.75 0.50
Fourth Quarter........................... 1.75 0.25
Fiscal Year Ended December 31, 1996
First Quarter............................$ 1.75 $ 0.375
Second Quarter........................... 1.00 0.375
Third Quarter............................ 0.75 0.25
Fourth Quarter........................... 0.75 0.25
Fiscal Year Ended December 31, 1997
First Quarter............................$ 0.50 $ 0.0625
Second Quarter........................... 0.25 0.0625
Third Quarter............................ 0.25 0.0625
Fourth Quarter........................... 0.25 0.03125
Fiscal Year Ended December 31, 1998
First Quarter............................$ 0.50 $ 0.03125
Second Quarter........................... 0.25 0.03125
Third Quarter............................ 0.25 0.03125
Fourth Quarter........................... 0.25 0.03125
Fiscal Year Ended December 31, 1999
First Quarter............................$ 0.05 $ 0.03125
Second Quarter........................... 0.25 0.05
Third Quarter (through August 16, 1999).. 0.281 0.187
The Company has never declared or paid any cash dividends on the Common Stock
and does not presently intend to pay cash dividends on the Common Stock in the
foreseeable future. The Company intends to retain any future earnings for
reinvestment in its business.
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data presented below as of December 31, 1996
and 1997 and for the years ended December 31, 1996 and 1997 were derived from
the consolidated financial statements of the Company, which were audited by
Smith & Company, independent certified public accountants, and which are
included elsewhere in this Form 10-KSB. This selected consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's consolidated
financial statements (including the notes thereto) included elsewhere in this
Form 10-KSB.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company was incorporated on July 24, 1984 in Nevada as Diversified Ventures,
Ltd. On March 27, 1987 the name was changed to M.V.I.D. International
Corporation. On April 6, 1994 the name was changed to Micro-Lite Television.
Prior to March 14, 1994 the Company sold an automobile anti-theft protection
system to customers through an arrangement with dealerships, principally in New
Jersey. On March 16, 1994 the Company acquired the assets and liabilities of
Marrco Communications, Inc. ("Marrco") and continued the business activities of
Marrco. Prior business operations were assumed by the former President of the
Company. Marrco was founded on December 12, 1991 for purposes of accumulating
Wireless Cable Rights in domestic markets.
On October 25, 1996 the name of the Company was changed to Superior Wireless
Communications, Inc. and each of the 6,004,836 shares of then issued and
outstanding common stock of the Corporation were exchanged for one share of
preferred stock designated as Class A Convertible Cumulative Preferred Stock
(the "Class A Preferred Stock"), par value of $.001 per share. The Class A
Preferred Stock carried a ten percent (10%) dividend, which could be paid in
common stock, and was convertible into Common Stock of the Company as of October
25, 1998 (the "Conversion Date"). Under the terms of the Class A Preferred
Stock, all shares outstanding as of October 16, 1998 automatically converted
into common stock at a rate of five shares of common stock for every one share
of Class A Preferred Stock. This resulted in the automatic conversion of
6,541,416 shares of Class A Preferred Stock into 32,707,080 shares of common
stock. The holders of the remaining shares of Class A Preferred Stock that were
issued after October 16, 1998, totaling 3,767,501 shares, agreed to convert at
the same rate of five shares of common stock for every one share of Class A
Preferred Stock. The latter conversion was effective simultaneous to the reverse
stock split described below.
Effective August 16, 1999, the Company effectuated a reverse stock split at a
rate of twenty-to-one. This resulted in 2,577,229 shares of common stock being
outstanding as of that date and no preferred shares are outstanding. The Company
was obligated to issue 375,000 shares of its post reverse-split common stock for
the acquisition of Media Rage of Utah, Inc. (See PART II- Other Information).
This resulted in 2,952,229 shares of common stock outstanding.
Results of Operations for the Two Years Ended December 31, 1997
Revenues
The Company currently does not have any ordinary and significant source of
revenues. However, the Company occasionally sells some of its wireless cable
channels rights. The Company recorded revenues of $64,000 for the year ended
December 31, 1997, compared with sales of $300,000 for the year ended December
31, 1996. The current year revenue was derived from the sale of certain fixed
assets to a related party. The 1996 revenue was derived from one sale to
Wireless One, Inc. The Company also had miscellaneous revenues of $11,516 in the
current year. This included $3,582 in forgiveness of indebtedness income.
Cost of Sales
The cost of the fixed assets sold for the period ended December 31, 1997 was
equal to $45,341 that represented the book value of the assets sold in the year.
This is compared to cost of sales of $107,394 in the year ended December 31,
1996.
14
<PAGE>
Selling, General and Administrative Expenses
The Company incurred total selling, general and administrative expenses ("SG&A")
of $144,501 for the year ended December 31, 1997. This represents a decrease of
81% of SG&A from the period ended December 31, 1996 of $759,775. Throughout most
of 1997, the Company was virtually inactive. There was only one employee who
accrued a salary of $72,000, none of which was paid.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 1997 was equal to
$101,195, a decrease from the previous period's depreciation and amortization of
$146,008. This decrease is attributable to the sale of some of the Company's
fixed assets during the current fiscal year.
Interest Expense
The Company incurred interest expense of $188,428 in the year ended December 31,
1997. This is an increase of 99% from the interest expense of $94,452 in the
year ended December 31, 1996. The Company continues to accrue interest on all
notes payable and amounts due to related parties.
Income Tax Benefit
The Company currently has net operating loss carryforwards equal to
approximately $4,400,000. Approximately $1,000,000 of this net operating loss
was carried forward from the business of Marrco and is limited under Internal
Revenue Code Section 381. This limits the use of this portion of the Company's
net operating loss carryforward to approximately $70,000 per year. The Company
has not recognized any of this tax benefit as an asset due to uncertainty of
future income.
Net Loss
During 1997, the Company recorded a net loss of $(596,551). For the year ended
December 31, 1996, the Company posted a net loss of $(1,216,364).
Liquidity and Capital Resources
The Company had a working capital deficit of $(2,765,519) as of December 31,
1997 compared to a working capital deficit of $2,508,822 as of December 31,
1996. Approximately $1,032,680 of the current liabilities represent amounts owed
to related parties, in particular to the largest shareholder of the Company, the
Company's current President, another director of the Company and wholly owned
corporation of the Company's largest shareholder. The Company currently has few
sources of working capital other than related parties and asset sales.
Certain Indebtedness
Convertible Notes. In 1994, the Company began a private placement of certain
Convertible Notes that entitled the purchasers to convert the notes into stock
of the Company at various terms. As of December 31, 1994, the Company had
received gross proceeds of $51,000 from one individual. During the first quarter
of 1995, the Company received an additional $150,000. During 1996, the Company
received additional proceeds of $566,100. All of these notes, included interest
accrued thereon were converted into Preferred Series A stock in the Company in
1999.
15
<PAGE>
Income Tax Matters
The Company has had no material state or Federal income tax since its inception.
As of December 31, 1997, the Company had approximately $4.4 million in net
operating loss carryforwards for tax purposes, expiring in years 2006 through
2012. The Internal Revenue Code of 1986, as amended (the "Code"), limits the
amount of loss carryforwards that a company can use to offset future income upon
the occurrence of certain changes in ownership. As a result of the purchase of
Marrco and the subsequent issuance of shares of the Company's common stock, the
Company has undergone more than a 50% change in ownership and will therefore be
limited in its utilization of its tax loss carryforwards. About $1 million of
the net operating loss carryforward is subject to this limitation.
Inflation
The Company's Management does not believe that inflation has had or is likely to
have any significant impact on the Company's operations. Management believes
that the Company will be able to increase subscriber rates after its wireless
systems are launched, if necessary, to keep pace with inflationary increases in
costs.
Other
The Company does not provide post-retirement or post-employment benefits
requiring charges under Statements of Financial Accounting Standards Nos. 106
and 112.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
Page
Independent Auditors Report...............................................F-1
Balance Sheet as of December 31, 1997.....................................F-2
Statements of Operations for the years ended December 31, 1997 and 1996...F-3
Statements of Changes in Stockholders Equity (Deficit) for the years
ended December 31, 1997 and 1996.................................F-4
Statements of Cash Flows for the years ended December 31, 1997 and 1996...F-5
Notes to the Financial Statements.........................................F-6
General and Administrative Expenses for the years ended
December 31, 1997 and 1996......................................F-10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
Jon R. Marple 32 Interim Chairman and President.
Vice President, Chief Financial Officer
and Director since October 16, 1996.
Brooks M. Freeman 55 Director since October 16, 1996.
Dr. Charles Bartell 75 Director since March 14, 1994. Director
of Marrco since its inception in 1991.
ITEM 11. EXECUTIVE COMPENSATION
All
Annual Other
Name and Principal Position Compensation Compensation
Jon Richard Marple $ 72,000 (1) $ 6,000 (2)
(1) All of this annual compensation was accrued and not paid as of December
31, 1997. This compensation and all other amounts owed to Mr. Marple
were converted into Preferred Series A Stock in the Company in July of
1999.
(2) Represents charges for rent in home office that is currently the
principle office of the Company. This entire amount was accrued and
unpaid as of December 31, 1997. This compensation and all other amounts
owed to Mr. Marple were converted into Preferred Series A Stock in the
Company in July of 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners as of August 16, 1999
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owners Beneficial Ownership of Class
<S> <C> <C> <C>
Common Jon H. Marple & Mary E. Blake
3419 Via Lido, Suite 619
Newport Beach, CA 92663 855,554 29.0%
Security Ownership of Management
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owners Beneficial Ownership of Class
Common Jon Richard Marple
9 Mesa Lane
Colorado Springs, CO 80906 392,664 13.3%
</TABLE>
17
<PAGE>
Security Ownership of Management (continued)
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owners Beneficial Ownership of Class
<S> <C> <C> <C>
Common Brooks M. Freeman
3440 Purdue
Dallas, TX 75225 100,192 3.4%
Common Charles Bartell
43 Canyon Drive
Newport Beach, CA 92663 7,000 0.2%
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of the Report
1. Financial Statements
The following financial statements are filed as part of this Form 10-K:
Page
Independent Auditors Report................................................F-1
Balance Sheet as of December 31, 1997......................................F-2
Statements of Operations for the years ended December 31, 1997 and 1996....F-3
Statements of Changes in Stockholders Equity (Deficit) for the years
ended December 31, 1997 and 1996..................................F-4
Statements of Cash Flows for the years ended December 31, 1997 and 1996....F-5
Notes to the Financial Statements..........................................F-6
General and Administrative Expenses for the years ended
December 31, 1997 and 1996.......................................F-10
2. Financial Statement Schedules
None
3. Exhibits
None
(b) Reports on Form 8-K
None
18
<PAGE>
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, on the 16th day of August,
1999.
Superior Wireless Communications, Inc.
By:
Jon Richard Marple
Vice President,
Chief Financial Officer,
Treasurer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on the 16th day of August 1999, by the following persons in the
capacities indicated:
Signature Title
Chairman of the Board,
Jon Richard Marple Director and President
(Principal Executive Officer
and Principal Financial Officer)
Director
Brooks M. Freeman
Director
Charles Bartell
19
<PAGE>
Smith
&
Company
A Professional Corporation of Certified Public Accountants
Board of Directors
Superior Wireless Communications, Inc.
Salt Lake City, Utah
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Superior Wireless
Communications, Inc. (a development stage company) as of December 31, 1997, and
the related statements of operations, changes in stockholders' equity (deficit),
and cash flows for the years ended December 31, 1997 and 1996, and for the
period of April 1, 1994 (date Company re-entered development stage) to December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 Superior Wireless
Communications, Inc. as of December 31, 1997, and the results of its operations,
changes in stockholders' equity (deficit), and its cash flows for the years
ended December 31, 1997 and 1996, and for the period of April 1, 1994 (date
Company re-entered development stage) to December 31, 1997 in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The information in Schedule 1 is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
August 6, 1999, except Note 14
which is dated August 16, 1999
10 West 100 South, Suite 700 o Salt Lake City, Utah 84101-1554
Telephone: (801) 575-8297 o Facsimile: (801) 575-8306
E-mail: [email protected]
Members: American Institute of Certified Public Accountants
Utah Association of Certified Public Accountants
F-1
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31,
1997
----------------
CURRENT ASSETS
<S> <C>
Cash in bank $ 943
----------------
TOTAL CURRENT ASSETS 943
PROPERTY AND EQUIPMENT (Notes 1 and 6) 31,548
OTHER ASSETS
Notes receivable - other (Note 7) 0
Licenses and other (Note 10) 978,239
----------------
TOTAL OTHER ASSETS 978,239
----------------
$ 1,010,730
================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 120,642
Accrued liabilities 820,131
Notes payable (Note 11) 917,943
Income taxes payable 900
Payable - related parties (Note 4) 906,846
----------------
TOTAL CURRENT LIABILITIES 2,766,462
Contingent liabilities (Note 12) 0
----------------
TOTAL LIABILITIES 2,766,462
Minority interest in subsidiaries (Note 5) 0
STOCKHOLDERS' DEFICIT (Notes 3 and 14)
Common stock, $.001 par value;
Authorized 50,000,000 shares;
Issued and outstanding 1,498,815 shares 1,499
Class A Convertible Cumulative Preferred Stock,
$.001 par value:
Authorized 15,000,000 shares;
Issued and outstanding 0 shares 0
Additional paid-in capital 2,106,181
Retained earnings (deficit) (3,863,412)
----------------
TOTAL STOCKHOLDERS' EQUITY (1,755,732)
----------------
$ 1,010,730
================
</TABLE>
See Notes to the Financial Statements.
F-2
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
Years ended December 31, 4-1-94 (A) to
1997 1996 12-31-97
------------- -------------- -------------
<S> <C> <C> <C>
Sales $ 64,000 $ 300,600 $ 924,521
Cost of sales 45,341 107,394 171,494
------------- -------------- -------------
GROSS PROFIT 18,659 193,206 753,027
Costs associated with abandoned projects 179,986 273,849 751,560
Loss on investments 0 0 125,689
Bad debt (Note 7) 0 133,686 267,858
General and administrative expenses (Schedule 1) 144,501 759,775 2,547,186
Depreciation and amortization (Notes 6 and 10) 101,195 146,008 525,102
Interest and bank charges (net of interest income) 188,428 94,452 397,043
------------- -------------- -------------
614,110 1,407,770 4,614,438
------------- -------------- -------------
Net income (loss) before other income taxes (595,451) (1,214,564) (3,861,411)
Income tax expense (benefit) (Note 9) 1,100 1,800 (23,100)
------------- -------------- -------------
Net (loss) before minority interest (596,551) (1,216,364) (3,838,311)
Minority interest in partnership losses (Note 5) 0 0 110,000
------------- -------------- -------------
NET (LOSS) $ (596,551) $ (1,216,364) $ (3,728,311)
============= ============== =============
EARNINGS (LOSS) PER COMMON SHARE
(Loss) before other items $ (.40) $ (.82)
Income from discontinued operations .00 .00
Minority interest in losses .00 .00
------------- --------------
Net (loss) $ (.40) $ (.82)
============= ==============
Weighted average number of common shares used to
compute net income (loss) per weighted average share 1,498,815 1,483,782
============= ==============
</TABLE>
A Date company re-entered the development stage.
See Notes to the Financial Statements.
F-3
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
December 31, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock Additional Retained
Par Value $.001 Paid-in earnings
Shares Amount Capital (deficit)
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Balances at 12/31/93 (Note 3) 268,952 $ 269 $ 79,731 $ (106,670)
Net liabilities assumed by former officer 11,650
Issuance of common stock for new business at $1.05
per share 1,008,327 1,008 1,104,888 (43,451)
Issuance of common stock to settle debt at $16.00
per share 25,000 25 399,975
Issuance of common stock for services at $.004 per share 11,250 11 34
Sale of common stock at $8.00 per share 54,191 54 433,472
Issuance of common stock for stock subscription
$7.76 per share 250,000 250 1,939,750
Issuance of common stock for prepaid expense
$5.71 per share 17,500 18 99,982
Minority interest transactions 2,844,259
Net partnership distributions (3,134,180)
Stock canceled (267,500) (267) (2,039,733)
Stock canceled (14,615) (15) (79,818)
Net loss for year (1,195,064)
------------- ------------- -------------- -------------
Balances at 12/31/94 1,353,105 1,353 1,660,010 (1,345,185)
Stock canceled (1,688) (2) (4,277)
Issuance of common stock for expenses at $.037 per share 18,891 19 681
Issuance of common stock to settle debt at $4.75 per share 83,798 84 397,989
Minority interest transactions 200,000
Net partnership distributions (199,921)
Net loss for year (705,312)
------------- ------------- -------------- -------------
Balances at 12/31/95 1,454,106 1,454 2,054,482 (2,050,497)
Correction to number of shares issued
in 1994 for new business 16,009 16 (16)
Issuance of common stock for services at $.12 per share 18,750 19 2,231
Issuance of common stock for assets at $3.00 per share 6,333 6 18,994
Issuance of common stock for assets at $3.00 per share 1,667 2 4,999
Issuance of common stock for assets at $8.00 per share 4,343 4 34,739
Net loss for year (1,216,364)
------------- ------------- -------------- -------------
Balances at 12/31/96 1,501,208 1,501 2,115,429 (3,266,861)
Stock retired (2,393) (2) (9,248)
Net loss for year (596,551)
------------- ------------- -------------- -------------
Balances at 12/31/97 1,498,815 $ 1,499 $ 2,106,181 $ (3,863,412)
============= ============= ============== =============
</TABLE>
See Notes to the Financial Statements.
F-4
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Years ended December 31, 4-1-94 (A) to
1997 1996 12-31-97
------------- -------------- -------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (596,551) $ (1,216,364) $ (3,728,311)
Adjustments to reconcile net (loss) to net cash
(required) by operating activities:
Stock issued for expenses 0 2,200 2,945
Stock issued to retire partnership debt 0 0 198,920
Deferred tax (decrease) 0 0 (19,600)
Bad debt 0 133,686 267,858
Depreciation and amortization 101,195 146,008 525,102
Book value of abandoned assets 175,000 0 265,025
Minority interest items 213 0 (109,708)
Changes in assets and liabilities:
Prepaid expenses 417 (83) 2,430
Accounts receivable 0 500 0
Notes receivable - other 0 0 12,047
Related party receivables 0 0 344,142
Deposits 2,825 4,999 9,586
Accounts payable (31,777) 67,549 84,226
Accrued liabilities 5,139 46,230 456,754
Income taxes (900) 1,000 (4,700)
------------- -------------- -------------
NET CASH (REQUIRED) BY
OPERATING ACTIVITIES (344,439) (814,275) (1,693,284)
INVESTING ACTIVITIES
Purchase of securities 0 0 (207,625)
Sale of securities 0 906 207,625
Sale (Acquisition) of licenses 24,986 0 (30,111)
Disposition of property, plant and equipment 44,885 38,193 1,162
------------- -------------- -------------
NET CASH PROVIDED (REQUIRED) BY
INVESTING ACTIVITIES 69,871 39,099 (28,949)
FINANCING ACTIVITIES
Loans - other 10,143 731,800 957,943
Loans - related parties 285,048 50,238 1,203,266
Loan repayments - other (11,627) (12,684) (86,109)
Loan repayments - related parties 0 0 (416,643)
Sale of common stock 0 0 25,247
Cash of business acquired 0 0 121,135
Net partnership distributions 0 0 (72,413)
Retirement of common stock (9,250) 0 (9,250)
------------- -------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 274,314 769,354 1,723,176
------------- -------------- -------------
(DECREASE) IN CASH AND
CASH EQUIVALENTS (254) (5,822) 943
Cash and cash equivalents at beginning of year 1,197 7,019 0
------------- -------------- -------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 943 $ 1,197 $ 943
============= ============== =============
A Date Company re-entered development stage
Supplemental Disclosures of Cash Flow Information Cash paid during the year for:
Interest $ 155,333 $ 79,778 $ 329,637
Income taxes 2,000 800 7,600
</TABLE>
Noncash Investing and Financing Activities
During 1993, Marrco acquired equipment under capital leases in the amount of
$50,737 and acquired channel licenses by issuing a note payable for $400,000.
During 1994, the note was paid by issuing 25,000 shares of the Company's
common stock and 6,250 warrants to purchase the Company's common stock at
$16.00 per share. During 1994, the Company acquired $600,000 of channel
rights by issuing a note payable to a related party. During 1995, the Company
issued 15,625 shares of its restricted common stock to retire a liability
associated with the acquisition of $125,000 of licenses. The Company also
acquired an additional $319,850 of licenses and other assets by incurring
accrued liabilities of the same amount. The Company expects to retire most of
the $319,850 of liabilities with common stock (See Note 14).
See Notes to the Financial Statements.
F-5
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity:
The Company was incorporated on July 24, 1984 in Nevada as Ventures
Diversified, Ltd. On March 27, 1987 the name was changed to
M.V.I.D. International Corporation. On April 6, 1994 the name was
changed to Micro-Lite Television. Prior to March 14, 1994 the
Company sold an automobile anti-theft protection system to
customers through an arrangement with dealerships, principally in
New Jersey. On March 16, 1994 the Company acquired the assets and
liabilities of Marrco Communications, Inc. ("Marrco") and is
continuing the business activities of Marrco. Prior business
operations were assumed by the former President of the Company.
Since Marrco is a development stage company, the Company is once
again in the development stage effective April 1, 1994 when it
began continuing the operations of Marrco. On October 25, 1996 the
name was changed to Superior Wireless Communications, Inc.
Accounting Methods:
The Company recognizes income and expenses based on the accrual
method of accounting.
Revenue Recognition:
Revenue is recognized when cash or other value is actually
received. In the case of revenue recognition on the sale of
licenses or leases, revenue is recognized when the FCC grants
licenses and the Company has the right to receive the revenue.
Until the FCC approval is received, the Company reflects the
transaction as deferred revenue.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are calculated based on the
weighted average number of shares outstanding during the periods.
Organization costs:
Organization costs were amortized over a five year period.
Property and Equipment
Property and equipment are depreciated over their estimated useful
lives. Assets financed under capital leases are amortized over
their estimated useful lives, or the lease term, whichever is
shorter. Depreciation and amortization are computed using
straight-line methods over an estimated life of five to seven
years.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or
less when purchased to be cash equivalents.
Income Taxes:
The Company records the income tax effect of transactions in the
same year that the transactions enter into the determination of
income, regardless of when the transactions are recognized for tax
purposes.
Tax credits are recorded in the year realized.
The Company utilizes the liability method of accounting for income
taxes as set forth in Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109). Under the
liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not
that such tax benefits will not be realized.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, and expenses during the reporting
period. Estimates also affect the disclosure of contingent assets
and liabilities at the date of the financial statements. Actual
results could differ from these estimates.
NOTE 2: DEVELOPMENT STAGE COMPANY - MANAGEMENT'S PLANS
The Company has been in the development stage since the acquisition
of Marrco as described above. The Company intends, subject to
adequate financing, to engage primarily in the Internet industry.
Management feels that sales of the wireless cable and LPTV licenses
and rights, and loans from related parties and others will provide
sufficient working capital to enable the Company to continue as a
going concern and develop its intended operations. See Note 14
regarding subsequent events that have or will improve the Company's
working capital position.
F-6
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE 3: CAPITALIZATION
On March 16, 1994 the Company effected a 1 share for 30 share
reverse stock split. The split reduced outstanding shares from
32,272,000 to 1,075,807. At May 31, 1994 the Company was owed
$2,000,000 for 1,000,000 shares of its common stock. An investment
certificate bearing interest at 5 and 3/4% due in April, 1999 had
been received to pay for the stock. The certificate was treated as
a stock subscription.
The stock subscription was canceled prior to December 31, 1994.
The Company is negotiating for the return of the 1,000,000 shares.
The 1,000,000 shares have been treated as canceled for accounting
purposes as of December 31, 1994. The Company recovered 650,000 of
the 1,000,000 shares and is prepared to take legal action if
necessary to recover the other 350,000 shares.
On October 25, 1996, each of the 6,004,836 shares of then issued
and outstanding common stock of the Corporation were exchanged for
one share of preferred stock designated as Class A Convertible
Cumulative Preferred Stock, par value $.001 per share, 10%
dividend, which may be paid in common stock.
On October 26, 1998, all outstanding shares of Class A Convertible
Cumulative Preferred Stock were redeemed for Common Stock at a 5 to
1 conversion factor.
On July 12, 1999 the Board of Directors and a majority of the
shareholders approved a 1 to 20 reverse stock split, effective
August 16, 1999. These financial statements have been adjusted to
reflect these stock changes as if they had been effective as of the
earliest date reported therein.
NOTE 4: RELATED PARTY TRANSACTIONS
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in
other business opportunities. If a specific business opportunity
becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
At December 31, 1997 the Company owed $882,899 to related parties
($621,798 at December 31, 1996) for loans and sales to and payments
made on behalf of the Company and accrued salaries.
NOTE 5: MINORITY INTEREST IN SUBSIDIARIES
The Company was the general partner in several limited
partnerships, one of which was still active as of December 31,
1994. The ownership interests vary. As general partner, the Company
controlled the partnerships. All partnerships were dissolved prior
to December 31, 1995. The Company is still a limited partner in
Micro-Lite Television of Beaumont, LLC.
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1997 and December 31,
1996 are summarized as follows:
<TABLE>
<CAPTION>
Net Book Value
Cost Depreciation 1997 1996
---------- ---------------- ---------- ----------
<S> <C> <C> <C> <C>
Furniture $ 0 $ 0 $ 0 $ 13,450
Equipment 3,736 3,541 195 22,838
Vehicles 0 0 0 12,152
Other 0 0 0 13,103
Transmission Equipment 76,240 44,887 31,353 44,260
---------- ---------------- ---------- ----------
$ 79,976 $ 48,428 $ 31,548 $ 105,803
========== ================ ========== ==========
</TABLE>
Depreciation expense for the period ended December 31, 1997 was
$29,370 ($44,511 in 1996).
NOTE 7: NOTES RECEIVABLE - OTHER
At December 31, 1994, the Company was owed $860,000 for the sale of
the MMDS (wireless cable) licenses and the assignment of ITFS
leases for Baton Rouge, Louisiana. Deferred revenue associated with
this receivable was $725,828 at December 31, 1994. The collection
of this note is contingent upon certain action by the Federal
Communications Commission ("FCC"). During 1995, the FCC did not
take the necessary action required for collection of the note. The
receivable and deferred revenue were charged to operations in 1995
as a bad debt. The Company will recognize revenue if the receivable
is collected in future years.
F-7
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE 8: SALES CONCENTRATION AND REVENUE
During 1997, sales of assets to one entity accounted for 100% of
total sales (99% in 1996).
NOTE 9: INCOME TAXES
Income tax expense was $1,100 for the year ended December 31, 1997
($1,800 for 1996). Such amounts differ from the amounts computed by
applying the United States Federal income tax rate of 34% to loss
before income taxes as a result of the following:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Computed "expected" tax benefit $ (202,453) $ (412,952)
Decrease (increase) in income tax benefit
resulting from:
Change in valuation allowance for
deferred federal, state, and local
income tax assets 251,221 423,718
State income taxes and other, net (47,668) (8,966)
------------- -------------
$ 1,100 $ 1,800
============= =============
</TABLE>
The tax effects of temporary differences that give rise to a
substantial portion of the deferred income tax assets are
presented below:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Accrued officers' compensation and
related costs $ 89,554 $ 42,333
Net operating loss carryforwards 1,496,000 1,292,000
------------- -------------
Total gross deferred tax assets 1,585,554 1,334,333
Less valuation allowance (1,585,554) (1,334,333)
------------- -------------
Net deferred tax assets $ 0 $ 0
============= =============
</TABLE>
During the years ended December 31, 1997 and 1996, the Company
made no Federal income tax payments.
At December 31, 1997, the Company has approximately $4,400,000
available in net operating loss carryforwards for income tax
purposes. These carryforwards expire in 2006 through 2012. Due to
a change in control and business activity, the net operating loss
carryforwards will most likely never be realized.
NOTE 10: LICENSES AND OTHER
The Company owns and leases various MMDS, ITFS and LPTV (wireless
cable) licenses to operate in various cities. A summary is as
follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
License acquisition costs $ 310,867 $ 397,053
Engineering costs 4,950 4,950
Commercial channel licenses 243,320 253,945
ITFS licenses 19,315 19,315
LPTV rights and licenses 575,000 575,000
------------- -------------
$ 1,153,452 $ 1,250,263
============= =============
</TABLE>
The above amounts are net of amortization of $71,825 ($178,452 for
1996).
NOTE 11: NOTES PAYABLE
At December 31, 1997, the Company owed several individuals a total
of $917,943. The notes bear interest at 12% per year. The Company
is in arrears on the repayment terms. See Note 14 regarding
subsequent events relating to these notes.
F-8
<PAGE>
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE 12: CONTINGENT LIABILITIES
Marrco, since the acquisition of its assets and liabilities by the
Company, had a judgment levied against it for a total sum of
approximately $34,000. The Company has not accrued any liability
with respect to this judgment as it disclaims any responsibility to
this judgment since it was levied after the purchase of the assets
and liabilities of Marrco. The Company may have some exposure to
this liability should it be pursued to pay this judgment.
As mentioned in Note 3, the Company may have to take legal action
to recover 350,000 shares of its common stock. A shareholder has
threatened to initiate legal action to retain the 350,000 shares.
The Company believes the action has no merit since the transaction
did not provide any benefit to the Company as represented.
NOTE 13: STOCK OPTION PLAN AND WARRANTS
At December 31, 1996, the Company set aside 2,500,000 shares of its
common stock for an incentive stock option plan established by
Marrco in 1993. These options were fully vested as of the date of
the Company's acquisition of Marrco. The exercise price is $.88 per
share. None of the stock options have been exercised. The options
expired December 28, 1998. There were also outstanding 300,000
redeemable Class "B" common stock purchase warrants to purchase
common stock at a price of $2.00 per share and 25,000 redeemable
Class "C" common stock purchase warrants with a price of $4.00 per
share. These warrants expired March 31, 1999 and couldn't be
exercised prior to June 16, 1994.
NOTE 14: SUBSEQUENT EVENTS
Under the terms of the Class A Preferred Stock (See Note 3), all
shares outstanding as of October 16, 1998 automatically converted
into common stock at a rate of five shares of common stock for
every one share of Class A Preferred Stock. This resulted in the
automatic conversion of 6,541,416 shares of Class A Preferred Stock
into 32,707,080 shares of common stock. The holders of the
remaining shares of Class A Preferred Stock that were issued after
October 16, 1998, totaling 3,767,501 shares, agreed to convert at
the same rate of five shares of common stock for every one share of
Class A Preferred Stock. The latter conversion wasl be effective
simultaneous to the reverse stock split described below.
In 1998, the Company issued approximately 132,500 shares of its
Series A Preferred stock to satisfy debts and liabilities in the
amount of $385,000.
In the first two quarters of 1999, the Company sold certain
wireless cable licenses with book value at December 31, 1997 of
approximately $513,000 in exchange for stock in another company
valued at $500,000. This stock along with 728,738 shares of the
Company's Series A Preferred stock were used to satisfy notes and
other obligations that totaled approximately $1,450,000.
On August 1, 1999 in accordance with the terms and provisions of a
certain Purchase Agreement dated as of June 1, 1999 by and between
the Company and Media Rage of Utah, Inc., a Utah corporation
("Media Rage"), 325,000 post-reverse split (See Note 3) shares of
the Company's Common Stock, $.001 par value per share, were issued
to the shareholders of Media Rage in consideration of their sale,
assignment and transfer to the Company of all stock outstanding in
Media Rage. As a consequence of the foregoing transaction, combined
with the issuance of 50,000 post-reverse split shares of the
Company's Common Stock to a third party for services rendered in
connection with such transaction, the total number of shares of
Common Stock issued and outstanding, on a post-reverse split basis,
is 2,952,229 at August 16, 1999.
Media Rage provides customers with user friendly software solutions
to design and operate E-Commerce web sites, including shopping cart
technology. Media Rage also offers custom website design and
valuable marketing information and support for its clients.
The Company is currently exploring additional potential
acquisitions of companies within the Internet industry. These
include companies that are Internet Service Providers (ISPs), Web
Hosting companies, e-commerce sites and auction web sites. The
Company believes that with a substantial amount of its debt paid
off, it will be able to move forward with one or more of these
acquisitions.
Concurrent with the acquisition of Media Rage, the Company also
changed its name to JustWebit.com, Inc.
F-9
<PAGE>
SCHEDULE 1
SUPERIOR WIRELESS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
Years ended Period from
December 31, 4-1-94 (A) to
1997 1996 12-31-97
------------------ ----------------- -----------------
<S> <C> <C> <C>
Accounting $ 7,523 $ 16,792 $ 59,558
Automobile expense 13,400 5,156 32,907
Bad debts 0 0 9,527
Debt forgiveness - related party (3,582) 0 (28,582)
Dues and subscriptions 3,309 3,764 13,444
Fees and commissions 7,781 19,829 77,924
Insurance 728 7,443 21,262
Legal 9,210 119,590 280,313
Marketing and advertising 662 2,704 20,543
Meals and entertainment 326 3,008 8,834
Office expense 1,065 10,918 40,792
Outside services 0 3,842 15,137
Payroll taxes and benefits 2,376 25,010 127,187
Postage 1,263 17,417 56,200
Professional 14,502 65,300 150,177
Relocation expense 0 0 19,091
Rent expense 4,060 85,580 210,425
Repairs and maintenance 0 411 5,086
Salaries 72,000 382,317 1,251,525
Taxes and licenses 457 2,015 9,058
Telephone 5,070 39,297 114,946
Travel 12,285 47,506 154,018
Miscellaneous 0 1,876 5,748
Overhead reimbursement (7,934) (100,000) (107,934)
------------------ ----------------- -----------------
$ 144,501 $ 759,775 $ 2,547,186
================== ================= =================
</TABLE>
A Date Company re-entered the development stage.
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Superior Wireless, Inc. December 31, 1997 financial
statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000793986
<NAME> Superior Wireless Communications, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 943
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 943
<PP&E> 79,976
<DEPRECIATION> (48,428)
<TOTAL-ASSETS> 1,010,730
<CURRENT-LIABILITIES> 2,766,462
<BONDS> 0
0
0
<COMMON> 1,499
<OTHER-SE> (1,757,231)
<TOTAL-LIABILITY-AND-EQUITY> (1,010,730)
<SALES> 64,000
<TOTAL-REVENUES> 64,000
<CGS> 45,341
<TOTAL-COSTS> 614,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,428
<INCOME-PRETAX> (595,451)
<INCOME-TAX> 1,100
<INCOME-CONTINUING> (596,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (596,551)
<EPS-BASIC> (.40)
<EPS-DILUTED> (.40)
</TABLE>
