<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 JANUARY 31, 2000
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
--------------
(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 March 9,
2000.
<PAGE>
PART I - FINANCIAL INFORMATION
NATIONAL WIRELESS HOLDINGS INC. 2
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FIANCIAL STATEMENTS
CONTENTS
- --------------------------------------------------------------------------------
PAGE
Condensed Consolidated Balance Sheets as of January 31, 2000 and
October 31, 1999 3
Condensed Consolidated Statements of Operations for the three
months ended January 31, 2000 and 1999 4
Condensed Consolidated Statements of Comprehensive Income for the three
months ended January 31, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows for the three months
ended January 31, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7 - 8
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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<TABLE>
<CAPTION>
January 31, October 31,
2000 1999
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,112,748 $24,754,663
Marketable securities 52,070,300 30,988,890
Trade and other receivables 1,203,230 1,921,497
Refundable income taxes 281,870 556,870
Prepaid expenses and other current assets 113,050 114,841
----------- -----------
Total current assets 60,781,198 58,336,761
Wireless frequency license and acquisition costs, net of accumulated
amortization of $192,050 and $182,507, respectively 189,661 199,204
Transmission and related equipment, net of accumulated
depreciation of $808,944 and 754,544, respectively 747,707 802,107
Leasehold improvements, office equipment and service vehicles, net
of accumulated depreciation of $1,055,114 and $970,099, respectively 976,215 1,022,693
Intangible assets, net of accumulated amortization of $1,075,464 and
$1,004,755, respectively 3,592,000 3,662,709
Investments and other assets 216,596 202,745
----------- -----------
Total assets $66,503,377 $64,226,219
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 4,143,087 $ 4,725,898
Current portion of long-term debt 72,332 79,472
Marketable securities - short sales 2,673,750 --
Deferred income taxes 11,700,000 11,750,000
----------- -----------
Total current liabilities 18,589,169 16,555,370
Long-term debt 185,997 202,646
Note payable to related party 140,000 140,000
----------- -----------
Total liabilities 18,915,166 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
Paid-in capital 23,071,872 23,071,872
Retained earnings 15,049,144 14,739,562
Accumulated other comprehensive income 9,433,865 9,483,439
----------- -----------
Total stockholders' equity 47,588,211 47,328,203
----------- -----------
Total liabilities and stockholders' equity $66,503,377 $64,226,219
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE>
NATIONAL WIRELESS HOLDINGS INC. 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
Revenue:
Services $ 1,865,060 $ 1,070,332
Interest income 361,468 315,879
Dividend income 120,037 165,292
----------- -----------
Total revenue 2,346,565 1,551,503
----------- -----------
Expenses:
Cost of services 1,025,339 347,144
Professional fees 141,337 137,396
General and administrative 1,177,110 940,623
Depreciation and amortization 219,668 251,819
Interest 16,577 11,971
----------- -----------
Total expenses 2,580,031 1,688,953
----------- -----------
Loss from operations (233,466) (137,450)
Gain (loss) on securities transactions, net 778,048 (3,082,883)
----------- -----------
Income (loss) before provision for income taxes 544,582 (3,220,333)
Provision (benefit) for income taxes 235,000 (1,300,000)
----------- -----------
Net income (loss) $ 309,582 ($1,920,333)
=========== ===========
Net income (loss) per common share:
Basic $ 0.09 ($ 0.58)
=========== ===========
Diluted $ 0.09 ($ 0.58)
=========== ===========
Weighted average number of common shares outstanding:
Basic 3,333,000 3,283,000
=========== ===========
Diluted 3,355,816 3,283,000
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE>
NATIONAL WIRELESS HOLDINGS INC. 5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
Net income (loss) $ 309,582 ($1,920,333)
Other comprehensive income, net of tax:
Net holding gain on marketable securities
arising during the period, net of income
taxes of $299,596 and $867,853, resepctively 428,876 1,357,410
Reclassification adjustment for (gains) losses
recognized in net income (loss), net of income
taxes of $299,598 and $496,679, resepctively (478,450) 776,856
----------- -----------
(49,574) 2,134,266
----------- -----------
Comprehensive income $ 260,008 $ 213,933
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE>
NATIONAL WIRELESS HOLDINGS INC. 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 309,582 ($ 1,920,333)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 219,668 251,819
Accretion of interst income (6,455) --
Gain (loss) on securities transactions, net (778,048) 3,082,883
Deferred income taxes (50,000) (550,000)
Changes in assets and liabilities:
Trade and other receivables 718,267 (77,329)
Refundable income taxes 275,000 (1,100,000)
Prepaid expenses and other current assets 1,791 (787,777)
Other assets 1,850 --
Accounts payable and accrued expenses (24,606) 17,471
Current income taxes payable -- (3,900,000)
------------ ------------
Net cash provided by (used in) operating activities 667,049 (4,983,266)
------------ ------------
Cash flows from investing activities:
Acquisition of transmission and related equipment -- (33,505)
Acquisition of leasehold improvements, office equipment
and service vehicles (38,536) --
Acquisition of marketable equity securities (2,825,000) (6,450,102)
Proceeds of marketable equity securities 3,146,500 6,004,134
Proceeds of marketable equity securities - short sale 2,823,798 --
Acquisition of marketable debt securities (21,376,236) --
Other investments (15,701) (99,222)
------------ ------------
Net cash used in investing activities (18,285,175) (578,695)
------------ ------------
Cash flows from financing activities:
Proceeds of long-term debt -- 215,813
Principal payments of long-term debt (23,789) (234,070)
------------ ------------
Net cash used in financing activities (23,789) (18,257)
------------ ------------
Net increase in cash and cash equivalents (17,641,915) (5,580,218)
Cash and cash equivalents, beginning of year 24,754,663 27,359,353
------------ ------------
Cash and cash equivalents, end of year $ 7,112,748 $ 21,779,135
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 31,577 $ 11,971
Cash paid for income taxes $ 10,000 $ 4,250,000
</TABLE>
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE>
NATIONAL WIRELESS HOLDINGS INC. 7
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, 1999
(File No. 0-23598) as filed with the Securities and Exchange
Commission.
2. EDSS
On January 18, 2000, the Company increased the loan to EDSS by $350,000
to $2,138,000 and increased EDSS' line of credit to $2,800,000. The
Company may invest additional amounts in EDSS to finance sales growth.
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
Unrealized gain arising during the period (49,574)
-----------
Unrealized gain on marketable securities, net of
deferred income taxes of $6,000,000 at January 31, 2000 $ 9,433,865
===========
</TABLE>
4. MARKETABLE SECURITIES
Components of the available-for-sale marketable securities as of
January 31, 2000 are as follows:
<TABLE>
<CAPTION>
GROSS
UNREALIZED
FAIR VALUE HOLDING GAINS
<S> <C> <C>
Bell South common stock $30,687,609 $14,922,011
Federal Home Loan debt
securities, maturing August 15, 2001 20,382,691 --
Other 1,000,000 --
----------- -----------
$52,070,300 $14,922,011
=========== ===========
</TABLE>
<PAGE>
NATIONAL WIRELESS HOLDINGS INC. 8
5. NET INCOME (LOSS) PER SHARE DATA
Diluted weighted average common shares outstanding for the three months
ended January 31, 2000 reflects the dilutive effect of stock options
(22,816 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 THREE
MONTHS ENDED MONTHS ENDED
JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
Revenues (internal):
NWH and other $ 602,785 $ 627,001
EDSS 1,781,780 940,502
------------ ------------
Total internal revenues 2,384,565 1,567,503
------------ ------------
Intersegment Revenues:
NWH and other (38,000) (16,000)
EDSS -- --
------------ ------------
Total Intersegment Revenues (38,000) (16,000)
------------ ------------
Revenues (external):
NWH and other 564,785 611,001
EDSS 1,781,780 940,502
------------ ------------
Total external revenues $ 2,346,565 $ 1,551,503
============ ============
Operating Income (loss):
NWH and other $ 6,043 $ (95,194)
EDSS (239,509) (42,256)
------------ ------------
(233,466) (137,450)
Gain (loss) on securities transaction, net 778,048 (3,082,883)
------------ ------------
Income before taxes $ 544,582 $ (3,220,333)
============ ============
Total Assets (January 31, 2000):
NWH and other $ 61,285,587
EDSS 5,217,790
------------
$ 66,503,377
============
</TABLE>
<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 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
THREE MONTHS ENDED JANUARY 31, 1999 AS COMPARED TO THREE MONTHS ENDED JANUARY
31, 2000:
Services Revenue:
Services revenue increased from $1,070,332 for the three months ended January
31, 1999 to $1,865,060 for the three months ended January 31, 2000, primarily
due to increased revenues of EDSS.
Interest and Dividend Income:
Interest income increased from $315,879 for the three months ended January 31,
1999 to $361,468 for the three months ended January 31, 2000 primarily as a
result of increased cash, cash equivalents and treasury securities balances.
Dividend income decreased from $165,292 for the three months ended January 31,
1999 to $120,037 for the three months ended January 31, 2000 reflecting sales of
BellSouth common stock acquired in June 1997 and consequent reduction of
dividends.
2
<PAGE>
Cost of Services:
Cost of services increased from $347,144 for the three months ended January 31,
1999 to $1,025,339 for the three months ended January 31, 2000 as a result of
increased levels of business at EDSS.
Professional Fees:
Professional fees increased from $137,396 in the three months ended January 31,
1999 to $141,337 in the three months ended January 31, 2000 as a result of
additional activity relating to subsidiaries and corporate actions.
General and Administrative:
General and administrative expense increased from $940,623 in the three months
ended January 31, 1999 to $1,177,110 in the three months ended January 31, 2000
primarily as a result of increased business levels at EDSS.
Depreciation and Amortization:
Depreciation and amortization decreased from $251,819 in the three months ended
January 31, 1999 to $219,668 in the three months ended January 31, 2000
primarily as a result of certain assets having become fully amortized.
Interest Expense:
Interest expense increased from $11,971 in the three months ended January 31,
1999 to $16,577 in the three months ended January 31, 2000.
Loss from Operations:
As a result of the foregoing events, loss from operations increased from a loss
of ($137,450) in the three months ended January 31, 1999 to a loss of ($233,466)
in the three months ended January 31, 2000.
Gain (Loss) on Securities Transactions, Net:
The Company realized a net gain on securities transactions of $778,048 for the
three months ended January 31, 2000 as compared to a net loss of ($3,082,883)
for the three months ended January 31, 1999. The effect of unrealized gains on
marketable securities as reflected in Other Comprehensive Income amounts to a
loss of ($49,574) net of related income taxes, for the three months ended
January 31, 2000 and a gain of $2,134,266 for the three months ended January 31,
1999.
Income (loss) before provision for income taxes:
The Company realized income before provision for income taxes of $544,582 for
the three months ended January 31, 2000, as compared to a loss before provision
for income taxes of ($3,220,333) for the three months ended January 31, 1999,
primarily as a result of increased gain on securities transactions.
Provision (benefit) for income taxes:
Provision for income taxes was $235,000 for the three months ended January 31,
2000, as compared to a benefit for income taxes of ($1,300,000) for the three
months ended January 31,
3
<PAGE>
1999, primarily as a result of increased gain on securities transactions.
Net Income (Loss):
Net income increased from a loss of ($1,920,333) for the three months ended
January 31, 1999 to income of $309,582 for the three months ended January 31,
2000 as a result of the foregoing events.
EDSS RESULTS OF OPERATIONS:
EDSS, on a stand-alone basis, has incurred operating losses of
($3,891,278) on a cumulative basis through December 31, 1999, including
($217,509) of loss in the three months ended December 31, 1999, and ($70,624) of
loss in the three months ended December 31,1998. Such losses have been financed
principally through a $2,138,000 line of credit from the Company pursuant to a
loan agreement, which provides for a line of credit of up to $2,800,000. Based
upon existing contracts with physicians and other 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 financing.
EDSS, however, currently plans 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 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 January 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 January 31, 2000, the Company had approximately $59.2 million in
cash and marketable securities, as well as its interest in EDSS, its
full-service teleport and satellite uplink facility in Miami and investments in
other early stage companies.
During the quarter ended January 31, 2000, the Company sold portions of
its 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.
In July 1999 the Company purchased 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
4
<PAGE>
rights, 85% control of EDSS. The Company paid for such securities with $513,450
in cash. On January 18, 2000, the Company increased EDSS' line of credit to
$2,800,000. At January 31, 2000, the Company had outstanding loans to EDSS of
$2,138,000. The outstanding balance under this loan agreement was eliminated
from the balance sheet in consolidation. The Company may invest additional
amounts in EDSS to finance 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.
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 healthcare e-commerce;
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. 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.
5
<PAGE>
Not applicable.
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:
None.
(b) Reports on Form 8-K:
None.
6
<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: March 9, 2000
NATIONAL WIRELESS HOLDINGS INC.
-------------------------------
(Registrant)
By: /s/ TERRENCE S. CASSIDY
-----------------------
Terrence S. Cassidy, President and Principal
Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 7,112,748
<SECURITIES> 52,070,300
<RECEIVABLES> 1,203,230
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60,781,198
<PP&E> 3,587,980
<DEPRECIATION> (1,864,058)
<TOTAL-ASSETS> 66,503,377
<CURRENT-LIABILITIES> 18,589,169
<BONDS> 0
0
0
<COMMON> 33,330
<OTHER-SE> 47,588,211
<TOTAL-LIABILITY-AND-EQUITY> 66,503,377
<SALES> 1,865,060
<TOTAL-REVENUES> 2,346,565
<CGS> 1,025,339
<TOTAL-COSTS> 2,563,454
<OTHER-EXPENSES> 778,048
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,577
<INCOME-PRETAX> 544,582
<INCOME-TAX> 235,000
<INCOME-CONTINUING> 309,582
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 309,582
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
