<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1999
Commission file number: 0-23598
NATIONAL WIRELESS HOLDINGS INC.
-------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3735316
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(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
249 ROYAL PALM WAY, SUITE 301, PALM BEACH, FLORIDA 33480
- -------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(561) 822-9933
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(Registrant's telephone number, including area code)
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 |X| No |_|
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value: 3,333,000 shares as of September
10, 1999.
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PART I - FINANCIAL INFORMATION
NATIONAL WIRELESS HOLDINGS INC.
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
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PAGE
Condensed Consolidated Balance Sheets as of July 31, 1999 and
October 31, 1998 2
Condensed Consolidated Statements of Operations for the three and nine
months ended July 31, 1999 and 1998 3
Condensed Consolidated Statements of Comprehensive Income for the three
and nine months ended July 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows for the nine months
ended July 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
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NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $22,075,248 $27,359,353
Marketable securities 35,500,981 32,541,020
Trade and other receivables, net 996,451 751,413
Refundable income taxes 1,056,870 --
Prepaid expenses and other current assets 848,208 136,085
Due from related party 191,872 --
----------- -----------
TOTAL CURRENT ASSETS 60,669,630 60,787,871
Wireless frequency license and acquisition costs, net of accumulated
amortization of $172,965 and $144,336, respectively 208,746 237,375
Transmission and related equipment, net of accumulated
depreciation of $697,048 and $526,385, respectively 854,196 932,169
Leasehold improvements, office equipment and service vehicles, net
of accumulated depreciation of $889,800 and $607,921, respectively 804,035 789,033
Intangible assets, net of accumulated amortization of $912,187 and
$686,920, respectively 3,882,348 3,594,215
Investments and other assets 243,243 287,687
----------- -----------
TOTAL ASSETS $66,662,198 $66,628,350
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,426,802 $ 4,819,901
Current portion of long-term debt 90,000 88,449
Current income taxes -- 3,900,000
Deferred income taxes 12,650,000 10,930,000
----------- -----------
TOTAL CURRENT LIABILITIES 19,166,802 19,738,350
Long-term debt 187,786 334,967
Note payable to related party 140,000 200,000
----------- -----------
TOTAL LIABILITIES 19,494,588 20,273,317
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Stockholders' equity:
Preferred stock, $.01 par value: 1,000,000 shares authorized;
no shares issued or outstanding -- --
Common stock, $.01 par value: 20,000,000 shares authorized;
3,283,000 shares issued and outstanding 32,830 32,830
Paid-in capital 22,647,372 22,647,372
Retained earnings 14,313,215 16,115,825
Unrealized gain on marketable securities, net 10,174,193 7,559,006
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 47,167,610 46,355,033
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $66,662,198 $66,628,350
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
2
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NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Services $ 1,456,135 $ 1,084,870 $ 3,682,396 $ 3,229,190
Interest income 267,269 529,181 774,380 1,437,786
Dividend income 138,518 116,452 449,852 409,723
----------- ----------- ----------- -----------
TOTAL REVENUE 1,861,922 1,730,503 4,906,628 6,455,733
----------- ----------- ----------- -----------
Expenses
Cost of services 473,892 521,204 1,193,039 1,271,716
Wireless market and technology development -- 204,000 -- 254,000
Professional fees 117,248 122,939 521,314 387,613
General and administrative 1,425,643 812,242 3,398,565 2,544,589
Depreciation and amortization 295,111 189,559 806,056 550,618
Interest 13,349 26,004 45,902 157,756
----------- ----------- ----------- -----------
TOTAL EXPENSES 2,325,243 1,875,948 5,964,876 5,166,292
----------- ----------- ----------- -----------
Loss from operations (463,321) (145,445) (1,058,248) (89,593)
Gain (loss) on securities transactions, net 1,024,746 674,252 (1,944,362) 1,379,034
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes 561,425 528,807 (3,002,610) 1,289,441
Provision (benefit) for income taxes 225,000 300,000 (1,200,000) (600,000)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 336,425 $ 228,807 $(1,802,610) $ 689,441
=========== =========== =========== ===========
Net income (loss) per common share
Basic $ (0.10) $ 0.07 $ (0.55) $ 0.21
=========== =========== =========== ===========
Diluted $ (0.10) $ 0.07 $ (0.55) $ 0.21
=========== =========== =========== ===========
Weighted average number of common shares outstanding
Basic 3,283,000 3,283,000 3,283,000 3,283,000
=========== =========== =========== ===========
Diluted 3,283,000 3,283,000 3,283,000 3,283,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
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NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
------------------------------- ------------------------------
1999 1998 1999 1998
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net income (loss) $ 336,425 $ 228,807 $(1,802,610) $ 689,441
Other comprehensive income, net of tax:
Net holding gain on marketable securities
arising during the period 974,166 1,030,019 2,616,790 4,734,232
Reclassification adjustment for (gains) losses
recognized in net income (loss) (777,324) (2,145,094) (1,603) (3,042,916)
------------ ------------ ----------- ------------
196,842 (1,115,075) 2,615,187 1,691,316
------------ ------------ ----------- ------------
Comprehensive income $ 533,267 $ (886,268) $ 812,577 $ 2,380,757
============ ============ =========== ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
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NATIONAL WIRELESS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JULY 31,
-------------------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (1,802,610) 689,441
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 806,056 550,618
Loss (gain) on securities transactions, net 1,944,362 (1,379,034)
Deferred income taxes (550,000) (11,800,000)
Changes in assets and liabilities
Due from related parties -- 1,100,000
Trade and other receivables (245,038) 114,096
Refundable income taxes (1,056,870) --
Prepaid expenses and other current assets (712,123) (151,823)
Other assets (45,556) (158,376)
Accounts payable and accrued expenses (333,099) 2,098,785
Current income taxes payable (3,900,000) 5,600,000
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (5,894,878) (3,336,293)
------------ ------------
Cash flows from investing activities
Acquisition of transmission and related equipment (92,690) (272,866)
Acquisition of leasehold improvements, office equipment
and service vehicles (296,881) (224,191)
Acquisition of marketable securities (12,459,790) (16,901,277)
Proceeds of marketable securities 14,371,086 28,125,920
Proceeds of marketable securities - short sale -- 12,132,048
Investments (513,450) (19,000)
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,008,275 22,840,634
------------ ------------
Cash flows from financing activities
Proceeds of long-term debt 215,813 --
Principal payments of long-term debt (361,443) (195,461)
Advances to related party (251,872) --
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (397,502) (195,461)
------------ ------------
Net increase in cash and cash equivalents (5,284,105) 19,308,880
Cash and cash equivalents, beginning of year 27,359,353 21,256,356
------------ ------------
Cash and cash equivalents, end of year $ 22,075,248 $ 40,565,236
============ ============
Supplemental disclosure of cash flow information
Cash paid for interest $ 45,902 157,756
Cash paid for income taxes 4,306,870 4,500,000
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of National Wireless Holdings Inc. (the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting solely of normal recurring
accruals necessary for a fair presentation of the financial statements
for these interim periods, have been included. Operating results for
the interim period are not necessarily indicative of the results that
may be expected for a full year. For further information, refer to the
financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1998
(File No.
0-23598) as filed with the Securities and Exchange Commission.
2. EDSS
During fiscal 1999, the Company agreed to amend its loan agreement with
EDSS, a majority-owned subsidiary, to increase the limit to $1,800,000
and advanced an additional $1,000,000 under the loan agreement. The
Company has outstanding loans to EDSS of $1,638,000 as of July 31,
1999.
On July 15, 1999 the Company purchased for $513,450 from a shareholder
an additional 6.4% of the fully diluted common stock of EDSS, which
when considered with its existing share ownership represents
approximately 64% of the fully diluted common stock of EDSS,
constituting approximately 84% of the voting interests.
3. COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income" as of November 1, 1998 which
requires new standards for reporting and display of comprehensive
income and its components in the financial statements; however, it does
not affect net income (loss) or consolidated stockholders' equity. The
components of accumulated other comprehensive income are as follows:
Unrealized gain on marketable securities, net of
deferred income taxes of $4,130,000 at October 31, 1998 $ 7,559,006
Unrealized gain arising during the period 2,615,187
------------
Unrealized gain on marketable securities, net of
deferred income taxes of $6,400,000 at July 31, 1999 $ 10,174,193
============
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
National Wireless Holdings Inc. ("NWH" or the "Company") is a
communications company focussing primarily on acquisition and operation of
telecommunications and other high tech businesses. The Company currently owns
and operates Electronic Data Submission Systems, Inc. ("EDSS"), an electronic
data interchange company, providing links between healthcare providers and third
party payors. The Company also owns and operates a satellite programming uplink
facility and an educational programming distribution company. In addition to
these businesses, the Company continues its business of acquiring controlling
interests in telecommunications, media and other high tech areas. The Company
may acquire or invest in other businesses. In June 1997, the Company sold its
wireless cable assets in Miami, Florida in exchange for common stock of
BellSouth Corporation.
The Company was incorporated in Delaware on August 31, 1993. The
Company's fiscal year ends on October 31.
Certain statements contained in this Annual Report on Form 10-K
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. See the Financial Statements.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1999 AS COMPARED TO NINE MONTHS ENDED JULY 31, 1998:
Services Revenue:
Services revenue increased from $3,229,190 for the nine months ended July 31,
1998 to $3,682,396 for the nine months ended July 31, 1999, primarily reflecting
increased revenues of EDSS, a majority owned subsidiary and partially offset by
completion of a consulting agreement with a subsidiary of BellSouth Corporation.
Interest and Dividend Income:
Interest income decreased from $1,437,786 for the nine months ended July 31,
1998 to $774,380 for the nine months ended July 31, 1999 primarily as a result
of decreased cash, cash equivalents and treasury securities balances, and
dividend income increased from $409,723 for the nine months ended July 31, 1998
to $449,852 for the nine months ended July 31, 1999 due to higher dividends on
BellSouth common stock.
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Cost of Services:
Cost of services decreased from $1,271,716 for the nine months ended July 31,
1998 to $1,193,039 for the nine months ended July 31, 1999 as a result of
improved sales margins of EDSS.
Professional Fees:
Professional fees increased from $387,613 in the nine months ended July 31, 1998
to $521,314 in the nine months ended July 31, 1999 as a result of additional
activity relating to tax and corporate actions.
General and Administrative:
General and administrative expense increased from $2,544,589 in the nine months
ended July 31, 1998 to $3,398,565 in the nine months ended July 31, 1999
primarily as a result of increased business levels at EDSS.
Depreciation and Amortization:
Depreciation and amortization increased from $550,618 in the nine months ended
July 31, 1998 to $806,056 in the nine months ended July 31, 1999 primarily as a
result of additional equipment acquisitions at EDSS.
Interest Expense:
Interest expense decreased from $157,756 in the nine months ended July 31, 1998
to $45,902 in the nine months ended July 31, 1999 due to reductions in common
stock hedge positions and related charges.
Loss from Operations:
As a result of the foregoing events, loss from operations increased from a loss
of $89,593 in the nine months ended July 31, 1998 to a loss of $1,058,248 in the
nine months ended July 31, 1999.
Gain (Loss) on Securities Transactions:
Gain (loss) on securities transactions decreased from income of $1,379,034 for
the nine months ended July 31, 1998 to a loss of ($1,944,362) for the nine
months ended July 31, 1999 primarily as a result of closing hedge positions on
BellSouth common stock.
Net Income (Loss):
Net income decreased from income of $689,441 for the nine months ended July 31,
1998 to a loss of ($1,802,610) for the nine months ended July 31, 1999 as a
result of the foregoing events.
EDSS RESULTS OF OPERATIONS:
The Company's results of operations reflect EDSS operating losses of
approximately $805,000 on a cumulative basis since its acquisition, including a
loss of approximately $350,000 in the recent nine month period. Based upon
existing contracts with physicians and other healthcare providers and current
expense levels, management believes that EDSS would achieve positive cash flow
from operations for fiscal 2000 without the need to obtain additional
8
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financing. EDSS, however, may seek to obtain additional financing, and the
Company may provide additional funds, to accelerate EDSS' strategic business
plan.
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its operations with the net proceeds from its initial
public offering in 1994 of 2,000,000 shares of Common Stock aggregating, after
payment of offering costs, approximately $22,000,000 and the June 1997 sale of
its South Florida wireless cable subsidiary for $48 million in BellSouth common
stock. The proceeds have been used for, and are currently reserved to fund
acquisitions of, EDI (electronic data interchange) investments,
telecommunications assets, media businesses, development of the Company's other
businesses and development and acquisition of new technologies and businesses in
other areas. Such amount, with interest thereon, is expected to be sufficient to
implement this business plan through October 2000, or for a shorter period if
the Company determines to invest a substantial portion of its assets in major
acquisitions or equity investments.
As of July 31, 1999, the Company had approximately $57.6 million in
cash and marketable BellSouth common stock, as well as its interest in EDSS, its
full-service teleport and satellite uplink facility in Miami, an educational
video programming distributor and investments in other early stage companies.
In the quarter ended July 31, 1999, the Company closed portions of its
hedge position in BellSouth common stock. While the Company continues to review
its position in BellSouth common stock and from time to time has sold and
purchased shares and options on the position, it has not yet determined whether
it will sell or hedge its remaining BellSouth securities in the near future or
how it will invest the proceeds of any such sale.
On July 15, 1999, the Company purchased for $513,450 from a stockholder
an additional 6.4% of the fully diluted common stock of Electronic Data
Submission Systems, Inc. ("EDSS"), which when combined with its existing share
ownership represents 64% of the fully diluted common stock control of EDSS.
During 1999 the Company advanced an additional $850,000 to EDSS pursuant to the
Amended and Restated Loan Agreement, dated as of April 20, 1999, between EDSS
and the Company, for a total outstanding loan of $1,638,000. The outstanding
balance under this loan agreement has been eliminated from the balance sheet in
consolidation. The Company may invest additional amounts in EDSS to finance its
sales growth. Operating overhead costs of EDSS have increased in order to
support its continued growth. The Company anticipates related increased revenues
at EDSS in the next three to nine months.
Following completion of the sale of its South Florida wireless cable
assets, the Company has allocated its capital to development of its other
businesses and to acquisitions; and the Company actively seeks to acquire or
invest in other businesses in telecommunications, media or in unrelated areas.
The Company has no specific arrangements with respect to any such acquisitions
or investments at the present time. There can be no assurance that any such
acquisitions or investments will be made.
9
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YEAR 2000 ISSUES
1. Introduction
Many existing computer systems and software products use only two
digits to represent a year. Time/date-sensitive software or hardware written or
developed in this fashion may not be able to distinguish between 1900 and 2000,
and programs written in this manner that perform arithmetic operations,
comparisons or sorting of date fields may yield incorrect results when
processing a Year 2000 ("Year 2K") date.
2. The Company's State of Readiness
The Company has analyzed Year 2K issues in four areas: (i) financial
and information technology ("IT") systems, (ii) non-IT network systems, (iii)
third party vendors and suppliers, and (iv) EDSS' proprietary software products.
The Company believes that its financial and information technology systems and
its non-IT systems are Year 2K compliant. In addition, the Company believes that
EDSS' proprietary software products are Year 2K compliant.
The Company's survey is also assessing the Company's vulnerability to
the Year 2K problems of third-party service suppliers. The Company relies on
third-party suppliers to deliver fiber telecommunications links, Internet
access, banking services, payroll services and electricity. The Company also
intends to develop new relationships with several providers of fiber-optic
telecommunications service, Internet service providers, telecommunications
resellers, and other companies in the telecommunications industry. The Company
intends to continuously identify and prioritize critical suppliers and
communicate with them about their plans and progress in addressing the Year 2K
problem.
3. The Company's Year 2K Risk
GENERAL
The Company currently believes that its systems and those of its
subsidiaries are Year 2K compliant. However, there can be no assurance that all
potential Year 2K problems will be successfully identified, or that the
necessary corrective actions will be completed in a timely manner. Failure to
successfully identify and remediate such Year 2K problems in a timely manner
could have a material adverse effect on the Company's results of operations,
financial position or cash flow.
In addition, the Company believes that there is a risk relating to
significant service suppliers' failure to remediate their Year 2K issues in a
timely manner. Although the Company is communicating with its suppliers
regarding the Year 2K problem, the Company does not know whether these
suppliers' systems will be Year 2K compliant in a timely manner. If one or more
significant suppliers are not Year 2K compliant, this could have a material
adverse effect on the Company's results of operations, financial position or
cash flow. In considering acquisitions, the Company reviews Year 2K compliance
of its targets.
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EDSS
EDSS faces Year 2K risks in addition to and of a greater magnitude than
those discussed generally above.
Although the Company believes that EDSS' proprietary software products
are Year 2K compliant, EDSS believes that it is impossible to predict with
complete certainty that all potential Year 2K problems that may affect such
products have been identified due to the complexity of the products and the fact
that these products interact with other third party vendor products and operate
on computer systems that are not under EDSS' control.
In addition, EDSS is communicating with certain of its customers,
including major payors and vendors, and suppliers as to their progress in
identifying and addressing problems that their computers will face in correctly
processing date information as the Year 2K approaches and is reached. Because of
the complexity of the Year 2K issue and the differing stages of readiness of
these third parties EDSS expects these discussions to continue throughout 1999.
Furthermore, because of the nature of EDSS' business, the success of EDSS'
efforts may depend on the success of third party payors, healthcare providers,
vendors and other third parties in dealing with the Year 2K issue. Failure to
address appropriately the Year 2K issue by a major customer or supplier or a
material percentage of EDSS' smaller customers could have a material adverse
impact on the financial condition and results of operations of EDSS.
EDSS' business is heavily reliant upon external suppliers to provide
certain operating elements of its business. Some of these suppliers include
telecommunications providers, data processing service providers, utility
companies, key vendors and certain governmental agencies. EDSS also depends on
the operations of its customers, healthcare providers and third party payors.
EDSS exerts no control over the efforts of these companies to become Year 2K
compliant. The services provided by these parties are critical to the operations
of EDSS and EDSS is heavily reliant upon these parties to successfully address
the Year 2K issue. Therefore, if any of these parties fail to provide EDSS with
services, EDSS' ability to conduct business could be materially impacted. The
result of such impact may have a material adverse effect on the financial
condition and results of operations of EDSS.
Worst case scenarios could be as insignificant as a minor interruption
in EDSS's ability to conduct business resulting from unanticipated problems
encountered in the IT and non-IT systems of EDSS or could be significant to the
extent any of the significant third parties such as third party payors with whom
EDSS does business suffer major business interruption. The pervasiveness of the
Year 2K issue makes it likely that previously unidentified issues will require
remediation during the normal course of business. On the other hand, a worst
case Year 2K scenario could be as catastrophic as a complete, and long-term,
loss of telecommunications, data processing and utility services. In this
connection, an extended loss of telecommunication, data processing and utility
services could have a material adverse effect on the financial condition and
results of the operations of EDSS.
Although EDSS believes its Year 2K compliance efforts will address all
of the Year 2K issues for which EDSS is responsible, to the extent these efforts
are not successful, additional
11
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compliance efforts would be necessary together with additional customer service
efforts and expenditures. If third parties fail in their compliance efforts,
EDSS also could be impacted and required to provide additional customer service
efforts. In such an event, EDSS could incur additional costs and experience a
negative impact on its financial condition and results of operations.
4. The Company's Contingency Plans
The Company has not created a formal contingency plan for Year 2K
problems. The Company intends to take appropriate actions to mitigate the
effects of third parties' failures to remediate their Year 2K issues and for
unexpected failures in its own systems. Such actions may include having
arrangements for alternate suppliers and using manual intervention where
necessary. If it becomes necessary for the Company to take these corrective
actions, it is uncertain whether this would result in significant interruptions
in service or delays in business operations or whether it would have a material
adverse effect on the Company's results of operations, financial position or
cash flow.
As risks are identified, contingency plans will be established and
additional steps will be taken to further minimize the risks associated with the
Year 2K issue. Those plans will focus on matters that appear to be the Company's
most likely Year 2K risks, such as possible additional customer support efforts
by the Company that would be necessary if customers, such as, in the case of
EDSS, Providers or Payors, or vendors are not Year 2K compliant, or if a Year 2K
issue should not be timely detected in the Company's own compliance efforts. In
the event that the Company's systems do not function as a result of a most
reasonably likely worst case scenario, the Company would make reasonable efforts
to enter into temporary alternative arrangements with third parties to service
the Company's customers, including routing transactions to the Company's
competitors. In addition, in the case of EDSS, in the event EDSS could not
process transactions electronically, either as a result of the failure of its
own systems or a loss of telecommunications, data processing or utility services
generally, EDSS or its customers could print transactions normally processed
electronically to paper for manual processing until such time as the Company's
systems are functional.
5. Costs of Year 2K Remediation
As of July 31, 1999, the Company has not incurred material costs
related to the Year 2K problem, and does not expect to incur material costs in
the future. The Company has not deferred other information technology projects
due to Year 2K expenses, and does not expect to defer such projects in the
future. However, due to the complexity and pervasiveness of the Year 2K issue,
and in particular the uncertainty regarding the compliance efforts of third
parties, there can be no assurance that the costs associated with the Year 2K
problem will not be greater than anticipated.
The Company has not yet estimated Year 2K costs for periods after 1999,
which may include costs of customer service efforts resulting from the failure
of third parties to be Year 2K compliant or other unforeseen problems.
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Readers are cautioned that forward-looking statements contained in the
Year 2K Disclosure should be read in conjunction with the Company's disclosures
under the heading "Special Note Regarding Forward-Looking Statements" below.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q,
including, without limitation, statements containing the words "believes,"
"anticipates," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: the limited nature of the Company's operations and
its history of losses; the uncertain acceptance of electronic data interchange
services; competition; the risk of the Company's failure to acquire additional
businesses; existing government regulations and changes in, or the failure to
comply with, government regulations; the ability of the Company to sustain,
manage or forecast its growth; dependence on significant suppliers and marketers
and the potential loss thereof; the ability to attract and retain qualified
personnel; retention of earnings; and other factors referenced in this Quarterly
Report on Form 10-Q. Certain of these factors are discussed in more detail
elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties,
undue reliance should not be placed on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained or incorporated by reference herein to reflect future events or
developments.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
13
<PAGE>
At its Annual Meeting of Stockholders held on July 19, 1999,
the Company's stockholders approved and ratified the following actions:
1. Election of Directors:
The following individuals were elected as Class II directors of the
Corporation:
Number of Number of
Votes For Votes Withheld
Michael J. Specchio 2,799,580 10,850
Michael A. McManus, Jr. 2,799,580 10,850
to serve until the 2002 Annual Meeting of Stockholders and until their
respective successors have been elected and qualified.
2. 2,810,130 shares of all shares entitled to vote were voted in favor of, and
300 votes were withheld for, the appointment of PricewaterhouseCoopers L.L.P. as
independent auditors of the Corporation until the next Annual Meeting of
Stockholders.
Item 5. Other Information.
On July 15, 1999, the Company purchased for $513,450 from Joseph D.
Truscelli, 815 shares of EDSS common stock (an additional 6.4% of EDSS' fully
diluted common stock), which when combined with the Company's previous share
ownership represents approximately 64% of the fully diluted common stock of EDSS
and constitutes approximately 84% of the vote. Mr. Truscelli has an option,
expiring February 15, 2000, to purchase 190 shares of EDSS common stock from the
Company for $129,700.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: September 13, 1999
NATIONAL WIRELESS HOLDINGS INC.
(Registrant)
By: /s/ TERRENCE S. CASSIDY
------------------------------
Terrence S. Cassidy, President and Principal
Accounting Officer
15
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