<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 April 30, 2000
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Commission file number: 0-23598
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NATIONAL WIRELESS HOLDINGS INC.
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(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
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(Address of principal executive offices) (Zip Code)
(561) 822-9933
--------------
(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 June 12, 2000.
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C>
Condensed Consolidated Balance Sheets as of April 30, 2000 and
October 31, 1999 3
Condensed Consolidated Statements of Operations for the three and six
Months ended April 30, 2000 and 1999 4
Condensed Consolidated Statements of Comprehensive Income for the three and six
Months ended April 30, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows for the six months
Ended April 30, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7 - 8
</TABLE>
2
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
2000 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,480,252 $24,754,663
Marketable securities 53,872,114 30,988,890
Trade and other receivables 1,596,011 1,921,497
Refundable income taxes 116,870 556,870
Prepaid expenses and other current assets 292,660 114,841
----------- -----------
TOTAL CURRENT ASSETS 65,357,907 58,336,761
Wireless frequency license and acquisition costs, net of accumulated
amortization of $201,593 and $182,507, respectively 180,118 199,204
Transmission and related equipment, net of accumulated
depreciation of $863,346 and $754,544, respectively 693,305 802,107
Leasehold improvements, office equipment and service vehicles, net
of accumulated depreciation of $1,150,339 and $970,099, respectively 989,054 1,022,693
Intangible assets, net of accumulated amortization of $1,146,172 and
$1,004,755,respectively 3,531,292 3,662,709
Investments and other assets 214,901 202,745
----------- -----------
TOTAL ASSETS $70,966,577 $64,226,219
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,378,681 $ 4,725,898
Current portion of long-term debt 73,120 79,472
Marketable securities-short sales 4,868,750 -
Deferred income taxes 11,650,000 11,750,000
----------- -----------
TOTAL CURRENT LIABILITIES 22,970,551 16,555,370
Long-term debt 188,201 202,646
Note payable to related party 140,000 140,000
----------- -----------
TOTAL LIABILITIES 23,298,752 16,898,016
----------- -----------
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;
3,333,000 shares issued and outstanding 33,330 33,330
Additional paid-in capital 23,071,872 23,071,872
Retained earnings 14,955,599 14,739,562
Accumulated other comprehensive income 9,607,024 9,483,439
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 47,667,825 47,328,203
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $70,966,577 $64,226,219
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
3
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED APRIL 30, ENDED APRIL 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenue:
Services $ 2,072,842 $ 1,155,929 $ 3,937,902 $ 2,226,261
Interest income 424,009 191,232 785,477 507,111
Dividend income 111,842 146,042 231,879 311,334
----------- ----------- ----------- -----------
TOTAL REVENUE 2,608,693 1,493,203 4,955,258 3,044,706
----------- ----------- ----------- -----------
Expenses:
Cost of services 1,277,732 372,003 2,303,071 719,147
Professional fees 129,171 266,670 270,508 404,066
General and administrative 1,428,548 1,032,299 2,605,658 1,972,922
Depreciation and amortization 229,878 259,126 449,546 510,945
Interest 48,276 20,582 64,853 32,553
----------- ----------- ----------- -----------
TOTAL EXPENSES 3,113,605 1,950,680 5,693,636 3,639,633
----------- ----------- ----------- -----------
Loss from operations (504,912) (457,477) (738,378) (594,927)
Gain (loss) on securities transactions, net 526,367 113,775 1,304,415 (2,969,108)
----------- ----------- ----------- -----------
Income (loss) before provision for
income taxes 21,455 (343,702) 566,037 (3,564,035)
Provision (benefit) for income taxes 115,000 (125,000) 350,000 (1,425,000)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (93,545) $ (218,702) $ 216,037 $(2,139,035)
=========== =========== =========== ===========
Net income (loss) per common share:
Basic $ (0.03) $ (0.07) $ 0.06 $ (0.65)
=========== =========== =========== ===========
Diluted $ (0.03) $ (0.07) $ 0.06 $ (0.65)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding:
Basic 3,333,000 3,283,000 3,333,000 3,283,000
=========== =========== =========== ===========
Diluted 3,355,816 3,283,000 3,371,889 3,283,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
4
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED APRIL 30, ENDED APRIL 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income (loss) $ (93,545) $(218,702) $ 216,037 $(2,139,035)
Other comprehensive income, net of tax:
Net holding gain on marketable securities
arising during the period 496,875 285,214 925,800 1,642,624
Reclassification adjustment for (gains) lossess
recognized in net income (loss) (323,716) (1,135) (802,215) 775,721
--------- --------- ----------- -----------
173,159 284,079 123,585 2,418,345
--------- --------- ----------- -----------
Comprehensive income $ 79,614 $ 65,377 $ 339,622 $ 279,310
========= ========= =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
5
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
APRIL 30, 2000 APRIL 30, 1999
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 216,037 $ (2,139,035)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 449,546 510,945
Accretion of interest income (38,731) -
(Gain) loss on securities transactions, net (1,304,415) 2,969,108
Deferred income taxes (100,000) (550,000)
Changes in assets and liabilities:
Trade and other receivables 325,486 (166,195)
Refundable income taxes 440,000 (1,225,000)
Prepaid expenses and other current assets (177,819) 885,117
Other assets (12,156) (65,937)
Accounts payable and accrued expenses 79,956 43,132
Current income taxes payable - (3,900,000
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NET CASH USED IN OPERATING ACTIVITIES (122,096) (5,408,091)
------------ ------------
Cash flows from investing activities:
Acquisition of transmission and related equipment - (72,627)
Acquisition of leasehold improvements, office equipment
and service vehicles (146,602) (129,608)
Acquisition of marketable equity securities (5,622,875) (9,762,592)
Proceeds of marketable equity securities 6,916,131 10,261,734
Proceeds of marketable equity securities - short sale 4,602,578 -
Acquisition of marketable debt securities (20,870,750) -
Other investments (10,000) -
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (15,131,518) 296,907
------------ ------------
Cash flows from financing activities:
Proceeds of long-term debt - 215,813
Principal payments of long-term debt (20,797) (271,274)
Advances to related parties - (155,000)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (20,797) (210,461)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (15,274,411) (5,321,653)
Cash and cash equivalents, beginning of period 24,754,663 27,359,353
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,480,252 $ 22,037,700
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 64,853 $ 32,553
Cash paid for income taxes $ 10,000 $ 4,250,000
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
6
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
National Wireless Holdings Inc. (the "Company") have been prepared in
accordance with accounting principles generally accepted in the United
States 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, 1999 (File No. 0-23598) as filed with the
Securities and Exchange Commission.
2. EDSS
During the quarter ended April 30, 2000, the Company increased the loan to
EDSS by $850,000 to $2,988,000 and increased EDSS' line of credit to
$3,800,000. The Company may invest additional amounts in EDSS to finance
sales growth.
3. COMPREHENSIVE INCOME
The components of accumulated other comprehensive income are as follows:
<TABLE>
<S> <C>
Unrealized gain on marketable securities, net of
deferred income taxes of $6,000,000 at October 31, 1999 $ 9,483,439
Net unrealized gain arising during the period 123,585
-----------
Unrealized gain on marketable securities, net of
deferred income taxes of $6,000,000 at April 30, 2000 $ 9,607,024
===========
</TABLE>
4. MARKETABLE SECURITIES
Components of the available-for-sale marketable securities as of April 30,
2000 are as follows:
<TABLE>
<CAPTION>
GROSS
UNREALIZED
FAIR VALUE HOLDING GAINS
<S> <C> <C>
Bell South common stock $ 33,041,383 $ 17,504,700
Federal Home Loan debt
securities, maturing August 15, 2001 19,830,731 -
Other 1,000,000 -
-------------- -------------
$ 53,872,114 $ 17,504,700
============== =============
</TABLE>
7
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
5. NET INCOME (LOSS) PER SHARE DATA
Diluted weighted average common shares outstanding for the six months
ended April 30, 2000 reflects the dilutive effect of stock options
(38,889 shares).
6. SEGMENT INFORMATION
The Company currently operates in two operating segments: the holding
company, including certain investments which are not currently
material; and its investment in EDSS.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
APRIL 30, 2000 APRIL 30, 2000
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues (internal):
NWH and other $ 637,728 $ 481,803 $ 1,240,513 $ 1,108,804
EDSS 2,022,965 1,031,400 3,804,745 1,971,902
------------ ----------- ----------- ------------
Total internal revenues 2,660,693 1,513,203 5,045,258 3,080,706
------------ ----------- ----------- ------------
Intersegment Revenues:
NWH and other (52,000) (20,000) (90,000) (36,000)
EDSS - - - -
------------ ----------- ----------- ------------
Total intersegment Revenues (52,000) (20,000) (90,000) (36,000)
------------ ----------- ----------- ------------
Revenues (external):
NWH and other 585,728 461,803 1,150,513 1,072,804
EDSS 2,022,965 1,031,400 3,804,745 1,971,902
------------ ----------- ----------- ------------
Total external revenues 2,608,693 1,493,203 4,955,258 3,044,706
------------ ----------- ----------- ------------
Operating Income (loss):
NWH and other (120,723) (367,922) (114,680) (463,116)
EDSS (384,189) (89,555) (623,698) (131,811)
------------ ----------- ----------- ------------
(504,912) (457,477) (738,378) (594,927)
------------ ----------- ----------- ------------
Gain (loss) on securities transaction, net 526,367 113,775 1,304,415 (2,969,108)
------------ ----------- ----------- ------------
Income before taxes $ 21,455 $ (343,702) $ 566,037 $ (3,564,035)
============ =========== =========== ============
Total Assets (April 30, 2000):
NWH and other $ 65,129,314
EDSS 5,837,263
------------
$ 70,966,577
============
</TABLE>
8
<PAGE>
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"), a
business-to-business healthcare e-commerce data interchange company, providing
links between healthcare Providers and third party Payers. In addition, the
Company owns and operates a satellite programming uplink facility and other
early stage businesses. 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 Quarterly Report on Form 10-Q 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 "Special Note Regarding Forward-Looking
Statements" and the Financial Statements.
RESULTS OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 2000 AS COMPARED TO SIX MONTHS ENDED APRIL 30, 1999:
Services Revenue:
Services revenue increased from $2,226,261 for the six months ended April 30,
1999 to $3,937,902 for the six months ended April 30, 2000, primarily reflecting
increased revenues of EDSS, a majority owned subsidiary.
Interest and Dividend Income:
Interest income increased from $507,111 for the six months ended April 30, 1999
to $785,477 for the six months ended April 30, 2000, primarily as a result of
increased cash, cash equivalents and debt securities balances and higher
interest rates. Dividend income decreased from $311,334 for the six months ended
April 30, 1999 to $231,879 for the six months ended April 30, 2000, due to lower
dividends received on BellSouth common stock.
Cost of Services:
Cost of services increased from $719,147 for the six months ended April 30, 1999
to $2,303,071 for the six months ended April 30, 2000 as a result of increased
business levels of EDSS.
Professional Fees:
9
<PAGE>
Professional fees decreased from $404,066 in the six months ended April 30, 1999
to $270,508 in the six months ended April 30, 2000 as a result of lower activity
relating to tax and corporate actions.
General and Administrative:
General and administrative expense increased from $1,972,921 in the six months
ended April 30, 1999 to $2,605,658 in the six months ended April 30, 2000,
primarily as a result of increased business levels at EDSS.
Depreciation and Amortization:
Depreciation and amortization decreased from $510,945 in the six months ended
April 30, 1999 to $449,546 in the six months ended April 30, 2000, primarily
because assets of the Company's satellite programming uplink facility were fully
depreciated and have not been replaced.
Interest Expense:
Interest expense increased from $32,553 in the six months ended April 30, 1999
to $64,853 in the six months ended April 30, 2000, due to higher debt of EDSS
and miscellaneous tax charges.
(Loss) from Operations:
As a result of the foregoing events, loss from operations increased from a loss
of ($594,927) in the six months ended April 30, 1999 to a loss of ($738,378) in
the six months ended April 30, 2000.
Gain (Loss) on Securities Transactions:
Gain (loss) on securities transactions increased from a loss of ($2,969,108) for
the six months ended April 30, 1999 to income of $1,304,415 for the six months
ended April 30, 2000, primarily as a result of closing hedge positions on, and
sale of, BellSouth common stock.
Income (loss) before provision for income taxes:
The Company realized income before provision for income taxes of $566,037 for
the six months ended April 30, 2000, as compared to a loss before provision for
income taxes of ($3,564,035) for the six months ended April 30, 1999, primarily
as a result of increased gain on securities transactions.
Provision (benefit) for income taxes:
Provision for income taxes was $350,000 for the six months ended April 30, 2000,
as compared to a benefit for income taxes of ($1,425,000) for the six months
ended April 30, 1999.
Net Income (Loss):
Net income increased from a net loss of ($2,139,035) for the six months ended
April 30, 1999 to a net income of $216,037 for the six months ended April 30,
2000, as a result of the foregoing events.
EDSS RESULTS OF OPERATIONS:
EDSS, on a stand-alone basis, has incurred operating losses of ($4,267,467) on a
cumulative basis through March 31, 2000, including ($593,698) of loss in the six
months ended March 31, 2000, and ($37,811) of loss in the six months ended March
31, 1999. Such losses have been financed principally through $2,988,000 of loans
from the Company pursuant to a loan agreement, which provides for a line of
credit of up to $3,800,000. Based upon existing contracts with physicians, other
Providers, Payers and management companies and current expense levels,
management believes that EDSS would achieve positive cash flow from operations
for fiscal 2000 without the need to obtain additional financing. EDSS, however,
currently plans to obtain additional financing, and the Company may provide
additional funds, to accelerate EDSS' strategic business plan.
10
<PAGE>
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, healthcare e-commerce 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 April 2001, 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 April 30, 2000, the Company had approximately $63 million in cash
and marketable securities, 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 April 30, 2000, the Company closed portions of its
hedge position in BellSouth common stock and sold shares of 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.
In July 1999 the Company purchased from another stockholder additional shares of
Common Stock of Electronic Data Submission Systems, Inc. ("EDSS"), which when
combined with its existing share ownership represents 64% of the outstanding
diluted common stock and, with additional voting rights, 85% control of EDSS.
The Company paid for such securities with $513,450 in cash. In the April, 2000
quarter the Company advanced an additional $850,000 to EDSS, for a total
outstanding loan of $2,988,000. 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
11
<PAGE>
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 3.1(d) - Amendment to Bylaws, dated June
2, 2000. Exhibit 4(a) - Amendment to Rights
Agreement, dated as of December 12, 1996, between
National Wireless Holdings Inc. and Continental
Stock Transfer and Trust Company
(b) Reports on Form 8-K:
None.
12
<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: June 13, 2000
NATIONAL WIRELESS HOLDINGS INC.
-------------------------------
(Registrant)
By: /s/ Terrence S. Cassidy
---------------------------------------
Terrence S. Cassidy, President and Principal
Accounting Officer
13
