UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-20259
SEAMLESS WI-FI, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 33-0845463
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
800 N. Rainbow Blvd., Ste. 200, Las Vegas, NV 89109
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(Address of principal executive offices)
(775) 588-2387
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(Issuer's telephone number)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of November 15, 2007, the number of shares of common stock issued and
outstanding was 7,078,922,154
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Balance Sheet - September 30, 2007 3
Statements of Operations -
For the three and three months ended September 30, 2007 and 2006 4
Statements of Cash Flow -
For the three months ended September 30, 2007 and 2006 5
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits 19
SIGNATURES
-2-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2007
(unaudited)
ASSETS
Current assets
Cash $ 467
Accounts Receivable 111,133
Notes receivable-related parties, current portion 1,538,236
Accrued interest receivable 315,559
------------
Total current assets 1,965,395
Property and equipment (net of accumulated depreciation $52,063) 45,938
Technology 2,161,949
Notes receivable - related parties (net of allowance $334,703) 1,129,248
Security deposit 13,030
------------
TOTAL ASSETS $ 5,315,560
============
LIABILITIES AND STOCKHOLDERS' EQUITY/( DEFICIT)
Current liabilities
Accounts payable $ 227,582
Payroll taxes 81,706
Judgments payable 361,054
Other current liabilities 1,285
Payable to officer 1,981
Investment payable 50,000
------------
Total current liabilities 723,608
------------
Commitments and contingencies (See Note 7)
Stockholders' equity/(deficit)
Preferred A stock, par value $0.001, 10,000,000 shares authorized, 775
775,742 shares issued and outstanding
Preferred B stock, par value $0.001, 10,000,000 shares authorized, --
0 shares issued and outstanding
Preferred C stock, par value $1.00, 5,000,000 shares authorized, 300,000
300,000 shares issued and outstanding
Common stock, par value $0.001, 11,000,000,000 shares authorized,
7,078,922,154 shares issued and outstanding 7,078,921
Additional paid-in capital 15,560,048
Accumulated deficit (18,247,792)
------------
Total stockholders' equity/(deficit) 4,691,952
(Less:) Treasury stock at cost (100,000)
------------
Adjusted stockholders' equity/(deficit) 4,591,952
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT) $ 5,315,560
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-3-
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(unaudited)
2007 2006
---- ----
Revenues $ 7,014 $ 10,746
Cost of revenues 14,404 39,638
--------------- ---------------
Gross Income (Loss) (7,390) (28,892)
--------------- ---------------
Expenses:
Selling, general and admin. 238,607 144,462
Technology development costs -- 131,945
Consulting 70,066 242,914
Interest 6,864 123,521
Legal 93,717 9,569
Officer Payroll 63,000 141,000
Bad Debt Expense -- 17,000
Depreciation and amortization 7,970 7,937
--------------- ---------------
Total Expenses 480,224 818,348
--------------- ---------------
(Loss) from operations (487,614) (847,240)
Other income
Interest 79,427 27,567
Other 848,483 6,500
--------------- ---------------
Income (Loss) before income taxes 440,296 (813,173)
Income taxes (benefit) (note 6) -- --
--------------- ---------------
Net Income (Loss) $ 440,296 $ (813,173)
=============== ===============
Basic and Diluted income (loss) per common shares $ 0.00 $ (0.01)
=============== ===============
Weighted average basic and diluted common shares 5,933,386,719 133,750,923
=============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-4-
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(unaudited)
2007 2006
---- ----
Cash flows used in operating activities
Net income from continuing operations $ 440,296 $ (813,173)
Adjustments to reconcile net loss to
used by operating activities:
Depreciation and amortization 7,970 7,937
Cancellation of indebtedness (846,983)
Issuance of common stock for services 0 105,000
Interest expense 6,864
Bad debt expense 17,000
Payable to officer 23,739 (4,366)
Changes in operating assets and liabilities
Accounts receivable 12,944
Accrued interest receivable (79,427) (27,536)
Other Receivable --
Accounts payable (1,255) 4,337
Other current liabilities 20,268 27,110
Payroll taxes payable (15,000) --
Judgments payable -- (56,220)
Restricted cash - Escrow 75,000 --
Security deposits (6,430) --
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Net cash used by operating activities (362,014) (739,911)
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Cash flows used in investing activities:
Employee advance (630)
Technology (145,619)
Investments (2,750) --
Advances to related party (174,331) (415,223)
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Net cash used in investing activities (322,700) (415,853)
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Cash flows from financing activities
Proceeds for additional paid in capital 670,000 --
Increase in long term debt -- 1,210,245
Repayment of investment payable -- (25,000)
Repayment of related party advances -- (7,000)
----------- -----------
Net cash provided by financing activities 670,000 1,178,245
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Increase (decrease) in cash (14,714) 22,481
Cash at beginning of period 15,181 94,342
----------- -----------
Cash at end of period $ 467 $ 116,823
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-5-
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
(unaudited)
September 30,
-------------
2007 2006
---- ----
Cash paid for:
Interest $ -- $ --
Taxes $ -- $ --
Noncash investing, and financing activities
Common stock issued for services $ -- $ 81,000
Additional paid in capital recorded for services $ 64,592 $ --
Common stock issued for conversion of preferred stock
and settle operating expenses $ -- $ 24,000
Common stock issued for conversion of preferred stock $ 2,231,720 $ 2,392,991
Additional paid in capital reduced for conversion of preferred stock $(2,231,497) $ --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-6-
SEAMLESS WI-FI, INC.
F/K/A ALPHA WIRELESS BROADBAND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: ORGANIZATION AND OPERATIONS
Prior to December 31, 1997, Seamless Wi-Fi, Inc (the "Company"), formerly known
as Alpha Wireless Broadband, Inc., was in the food product manufacturing
business and formerly known as International Food and Beverage, Inc. In November
1998, new stockholders bought majority control from the previous Chief Executive
Officer through a private transaction. Immediately thereafter, the former CEO
resigned and the new stockholders assumed the executive management positions. In
December 1998, after new management was in place, a decision was made to change
the Company's principal line of business from manufacturing to technology. The
Company changed its name from International Food & Beverage, Inc. to Internet
Business's International, Inc., and reincorporated the Company on December 8,
1998 in the state of Nevada. During April of 1999, the Company announced the
opening of its first e-commerce site and engaged in the development, operation
and marketing of a number of commercial web sites. The Company's subsidiaries
consisted of: Lending on Line (providing real estate loans and equipment
leasing), Internet Service Provider (providing national Internet access dial-up
service, wireless high speed Internet, and Internet web design and hosting), E.
Commerce (providing Auction sites), and Direct Marketing (providing direct
marketing of long distance phone service, computers with Internet access, and
Internet web design hosting). The Company ceased operations during the fiscal
year ended June 30, 2003. During the fiscal year ended June 30, 2004, the
Company changed its name to Alpha Wireless Broadband, Inc, and started a new
wireless operation through its wholly owned subsidiary, Skyy-Fi, Inc., a Nevada
Corporation. Skyy-Fi began providing access to the Internet, by installing
equipment in locations such as hotels and coffee shops for use by their patrons
for a fee or free basis. These locations are commonly known as Wi-Fi Hotspots.
The Company has 36 Wi-Fi locations.
In January 2005, the Company acquired the assets of Seamless P2P, LLC and
contributed these assets to its 80% owned subsidiary, Seamless Peer to Peer,
Inc., which is a developer and provider of a patent pending software program,
Phenom Encryption Software, that encrypts Wi-Fi transmissions based upon RSA's
government certified 256 bit AES encryption coupled with RSA's Public Key
Infrastructure flexible telecom data and voice transport solutions.
In May 2005, the Company changed its name from Alpha Wireless Broadband, Inc. to
Seamless Wi-Fi, Inc., which was approved by the Board of Directors and changed
the name of its subsidiary from Skyy-Fi, Inc. to Seamless Skyy-Fi, Inc.
In December 2005, the Company started a hosting company, Alpha Internet,
offering Seamless clients a high-security hosting facility.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its wholly
owned subsidiaries and majority-owned subsidiary. They have been prepared in
conformity with (i) accounting principles generally accepted in the United
States of America; and (ii) the rules and regulations of the United States
Securities and Exchange Commission. All significant intercompany accounts and
transactions between the Company and its subsidiaries have been eliminated in
consolidation.
-7-
UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of Seamless Wi-Fi,
Inc. and its Subsidiaries (the Company) have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information, pursuant to the rules and regulations of the
Securities and Exchange Commission. Pursuant to such rules and regulations,
certain financial information and footnote disclosures normally included in the
consolidated financial statements have been condensed or omitted. The results
for the periods indicated are unaudited, but reflect all adjustments (consisting
only of normally recurring adjustments) which management considers necessary for
a fair presentation of operating results.
The operating results for the three-month period ended September 30, 2007 are
not necessarily indicative of the results that may be expected for the year
ended June 30, 2008. These unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended June 30, 2007.
RECLASSIFICATIONS
Certain reclassifications have been made in the 2006 financial statements to
conform to the 2007 presentation. These reclassifications did not have any
effect on net income (loss) or shareholders' equity.
USE OF 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 and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates include allowances for doubtful accounts and notes and
mortgage loans receivable. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all short-term, highly liquid investments with an original
maturity date of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable are judged as to collectibility by management and an
allowance for bad debts is not established.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated using the straight-line
method over the estimated useful life of the assets, which is generally three to
five years for computers and computer related equipment and five to seven years
for furniture and other non-computer equipment. Leasehold improvements are
amortized using the straight-line method over the shorter of their estimated
useful lives or the term of the lease, ranging from one to five years.
-8-
INVESTMENTS
Investments are stated at the lower of cost or market value.
PROPRIETARY SOFTWARE IN DEVELOPMENT
In accordance with SFAS No. 86, accounting for the Cost of Computer Software to
be Sold, Leased, or Otherwise Marketed Software ("FAS 86"), the Company has
capitalized certain computer software development costs upon the establishment
of technological feasibility. Technological feasibility is considered to have
occurred upon completion of a detailed program design which has been confirmed
by documenting and tracing the detailed program design to product
specifications. Amortization is provided based on the greater of the ratios that
current gross revenues for a product bear to the total of current and
anticipated future gross revenues for that product. The estimated useful life
for the straight-line method is determined to be two to five years.
The unamortized computer software and computer software development costs were
$1,570,000 at September 30, 2005. During the quarter ended December 31, 2005 the
computer software development team failed to deliver the completed software
program as per agreement. The unamortized development cost was expensed and on
January 2006, a new computer software development team was contracted and the
costs related to the development will be expensed until the development of the
computer software program is completed. As of the quarter ended September 30,
2007, there were no software development expenses.
REVENUE RECOGNITION
For current Company operations, providing wireless Internet access, fees are
charged either to the proprietor of the Wi-Fi hotspot location or the customer
using the services. The fees paid by a proprietor for services provided on a
month-to-month basis are billed at the end of each month for which the service
is contracted. The fees paid by customers using the wireless Internet access are
paid at the time service is provided and therefore recorded as revenue at that
time.
ADVERTISING EXPENSE
All advertising costs are expensed when incurred. Advertising cost was $31,027
for the three months ended September 30, 2007.
CONCENTRATION OF CREDIT RISK
The Company is subject to credit risk through trade receivables. Monthly
internet access fees and web hosting are generally billed to the customer's
credit card, thus reducing the credit risk. The Company routinely assesses the
financial strength of significant customers and this assessment, combined with
the large number and geographic diversity of its customers, limits the Company's
concentration of risk with respect to trade accounts receivable.
INCOME TAXES
The Company accounts for income taxes under the asset and liability approach of
reporting for income taxes. Deferred taxes are recorded based upon the tax
impact of items affecting financial reporting and tax filings in different
periods. A valuation allowance is provided against net deferred tax assets where
the Company determines realization is not currently judged to be more likely
than not. The Company and its 80% of more owned U.S. subsidiaries file a
consolidated federal income tax return.
-9-
EARNINGS (LOSS) PER SHARE ("EPS")
Basic EPS is computed by dividing income (loss) by the weighted average number
of common shares outstanding for the period. Diluted EPS is computed giving
effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares consist of incremental shares issuable
upon conversion of preferred stock outstanding. At September 30, 2007, Series A
Preferred shares are convertible to 7,757,420,000 common shares and Series B
Preferred shares are convertible to 1,000,000,000 common shares. The Company's
convertible Preferred stocks have an anti-dilutive effect on net loss per share
and were not included in the computation of diluted earnings per share. There
were no differences between basic and diluted earnings per share.
STOCK BASED COMPENSATION
The Company has elected to early adoption of SFAS 123R which requires all share
based payments to officers, directors, and employees, including stock options to
be recognized as a cost in the financial statements based on their fair values.
The Company accounts for stock based grants issued to non-employees at fair
value in accordance with SFAS 123 and ETIF 96-18 "Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or In
Conjunction with Selling, Goods, or Services." There were no options granted
during the years ended September 30, 2007 and 2006, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 159, "Fair Value Option for Financial Assets and Financial
Liabilities." SFAS 159 permits all entities to choose to measure eligible items
at fair value at specified election dates. The Company is currently assessing
the impact of adopting SFAS 159 on its consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 157, "Fair Value Measurements," which establishes a framework for
reporting fair value and expands disclosures about fair value measurements. SFAS
No. 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The
Company is currently assessing the impact of the adoption of this standard on
its financial statements.
NOTE 3: GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company has experienced significant losses in
recent years. At September 30, 2007 working capital is $1,241,787.
The Company is actively pursuing additional financing through discussions with
investment bankers and private investors. There can be no assurance the Company
will be successful in its effort to secure additional financing. The Company's
ability to continue as a going concern is contingent upon its ability to secure
financing and attain profitable operations. The financial statements do not
include any adjustment to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the Company to
continue as a going concern.
-10-
NOTE 4: RELATED PARTY TRANSACTIONS
The Company has made the following loans and advances to related parties as of
September 30, 2007:
Allowance for
Loan/Advance for uncollectible Balance
Balance loans/advances Net
----------------- ------------------- ----------------
Accepted Sales (A) $ 338,033 $ 338,033
Carbon Jungle, Inc. (B) 236,543 $ 236,543 -
DK Corp. (C) 98,160 98,160 -
DLR Funding (D) 890,237 890,237
1st Global Financial Service (E,F) 1,439,214 1,439,214
----------------- ------------------- ----------------
Total: $ 3,002,187 $ 334,703 $ 2,667,484
================= =================== ================
The above interest at annual rates ranges from 6% to 12%. The net balance at
September 30, 2007 is $2,667,484 and it matures in the fiscal years ended
September 30 as follows:
2008 $ 1,538,236
2009 1,129,248
-----------
$ 2,667,484
===========
(A) Accepted Sales is a division of 1st Global Financial Services
noted below.
(B) The President of the Company is a Director of the Company; the
Secretary of the Company is an officer of this Company.
(C) DK Corp is a business held by David Karst.
(D) The President of the Company is a stockholder and director of
this Company. The Secretary of the Company is an officer and
stockholder of this Company.
(E) The President of the Company is a stockholder and director of
this Company. The Secretary of the Company is an officer and
stockholder of this Company. A director of 1st Global is paid
$10,000 per month by the Company, which is recorded as a loan
receivable by the Company.
(F) The President of the Company is an officer of this Company.
The Company has recorded interest income on the above for the quarter ended
September 30, 2007 in the amount of $79,427.
NOTE 5: STOCKHOLDER'S EQUITY
During the first quarter ended September 30, 2007, the following securities were
issued.
Ayuda Funding, LLC converted 130,000 shares of Series A Preferred Stock into
1,300,000,000 shares of common stock.
Alpha Blue converted 93,172 shares of Series A Preferred Stock into 931,720,000
shares of common stock.
NOTE 6: INCOME TAXES
No provision for income taxes has been recorded in the accompanying financial
statements as a result of the Company's net operating losses. The Company has
unused tax loss carry forwards of approximately $20,000,000 to offset future
taxable income. Such carry forwards expire in the years beginning 2021. The
deferred tax asset recorded by the Company as a result of these tax loss carry
-11-
forwards is approximately $7,000,000 for both years ended June 30, 2007 and
2006. The Company has reduced the deferred tax asset resulting from its tax loss
carry forwards by a valuation allowance of an equal amount as the realization of
the deferred tax asset is uncertain. There is no net change in the deferred tax
asset and valuation allowance from July 1, 2007 to September 30, 2007.
NOTE 7: COMMITMENTS AND CONTINGENCIES
LEASE
The Company has entered into lease agreements for office space and an automobile
which expire on August 31, 2010 and October 8, 2007, respectively. The Company
rents additional office space in Nevada, on a month to month basis. Rent expense
under these leases for the quarters ended September 30, 2007 and 2006 was
$13,375 and $9,646, respectively. Remaining commitments under the operating
leases are as follows:
Quarter ending September 30:
2008 $ 51,624
2009 50,340
2010 46,145
LEGAL PROCEEDINGS
The Company is a party to the following legal proceedings:
GLOBALIST V. INTERNET BUSINESS'S INTERNATIONAL, INC. ET AL
----------------------------------------------------------
On March 30, 2006, the Superior Court of the State of California, County of
Orange, entered a judgment against the Company and other defendants, jointly and
severally, in the total amount of $452,714.79 in the matter of Globalist
Internet Technologies, Inc. vs. Iron Horse Holdings, Inc., et al.
EMPLOYMENT CONTRACT
The Company has an employment contract with their Chief Executive Officer,
Albert Reda that calls for a base salary of $240,000 for the year ended June 30,
2007 and thereafter, a base salary of $25,000 a month from July 2007 until its
expiration date in June 2012. In the event that the company becomes profitable
according to generally accepted accounting principles, the employee's monthly
salary shall be increased to $30,000 for the remainder of the employment term.
In addition, the contract includes a bonus that will be determined by the
Company's Board of Directors. The Employment Agreement provides for severance of
the entire remaining compensation payable for the remainder of any term of the
Agreement in the event of termination without cause.
NOTE 8: SEGMENT INFORMATION
In accordance with SFAS No. 131 "Disclosure about Segments of an Enterprise and
Related Information," management has determined that there are three reportable
segments based on the customers served by each segment: Such determination was
based on the level at which executive management reviews the results of
operations in order to make decisions regarding performance assessment and
resource allocation.
-12-
The Company is currently a start up business that is providing "Wireless
Internet" access at business locations and a developer and provider of a patent
pending software. In December 2005, the Company started a hosting company, Alpha
Internet, offering Seamless clients a high-security hosting facility (See Note
1: Organization and Operations.)
Certain general expenses related to advertising and marketing, information
systems, finance and administrative groups are not allocated to the operating
segments and are included in "other" in the reconciliation of operating income
reported below.
Information on reportable segments is as follows:
Quarter ended September 30,
2007 2006
--------- ---------
Wi-Fi ISP net sales $ 7,014 $ 10,746
Cost of Wi-Fi sales (14,404) (39,638)
Cost and expenses (480,224) (818,348)
Other net income 927,910 34,067
--------- ---------
Net loss $ 440,296 $(813,173)
========= =========
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our
financial statements, including the notes thereto, appearing elsewhere in this
Report.
FORWARD-LOOKING STATEMENTS
The following information contains certain forward-looking statements.
Forward-looking statements are statements that estimate the happening of future
events and are not based on historical fact. Forward-looking statements may be
identified by the use of forward-looking terminology, such as "may," "could,"
"expect," "estimate," "anticipate," "plan," "predict," "probable," "possible,"
"should," "continue," or similar terms, variations of those terms or the
negative of those terms. The forward-looking statements specified in the
following information have been compiled by our management on the basis of
assumptions made by management and considered by management to be reasonable.
Our future operating results, however, are impossible to predict and no
representation, guaranty, or warranty is to be inferred from those
forward-looking statements.
OVERVIEW
We have three operating subsidiaries: (1) Seamless Skyy-Fi, Inc. which provides
wireless Internet access (commonly known as "Wi-Fi") at 30 business locations;
(2) Seamless Peer 2 Peer, Inc. which develops and provides a patent pending
software program called Phenom(R) that encrypts Internet communications and
provides flexible telecom data and voice transport solutions, including its
Freek2Freek social network; and (3) Seamless Internet, Inc. which offers high
security hosting services for customers of Seamless Peer 2 Peer, Inc. and
Seamless Skyy-Fi, Inc. and which is also manufacturing and marketing an ultra
mobile personal computer named the S-XGen.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our selected
financial information:
Three Months Ended Three Months Ended
September 30, 2007 September 30, 2006
--------------- ---------------
(unaudited) (unaudited)
Revenues $ 7,014 $ 10,746
Cost of Revenues 14,404 39,638
--------------- ---------------
(Gross Loss) (7,390) (28,892)
Expenses 480,224 818,348
(Net Loss from Operations) (487,614) (847,240)
Other Income 927,910 (34,067)
Net Income (Loss) $ 440,296 $ (813,173)
(Net Loss) Per Share $ (0.00) $ (0.01)
Weighted Average Common Shares Outstanding 5,933,366,719 133,750,923
-14-
THREE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2006 (UNAUDITED)
REVENUES
Revenues for the three months ended September 30, 2007 were $7,014 compared to
$10,746 for the same period in 2006, a decrease of 35 %. This increase in
revenue was the result of further enhancement of Wi-Fi services at our Skyy-Fi
locations.
COST OF REVENUES
The cost of revenues for the three months ended September 30, 2007 was $14,404
compared to $39,638 for the three months ended September 30, 2006, a decrease of
64%. The decrease in cost of revenue is due to improvement in efficiency of our
services offered at our Skyy-Fi hot spots.
OPERATING EXPENSES
Operating expenses decreased by approximately 58% from $480,224 for the three
months ended September 30, 2006 compared to $818,348 for the three months ended
September 30, 2007. This decrease in operating expenses was a result of a
reduction in the consulting and development costs related to our new product and
software programs that occurred during the previous corresponding period.
OTHER INCOME
Other income for the three months ended September 30, 2007 was $927,910 compared
to a loss of $(34,067) for the same period in 2006. Other income consists
primarily of debt forgiveness from prior operations due to the fact that certain
debts were not paid within the prescribed time as required by law and we now
have to report that debt as income. During the corresponding period ended
September 2006, the debt forgiveness of $6,500 was offset by the increase in
write-offs of $(17,000).
INCOME TAX
No provision for income taxes has been recorded in the accompanying financial
statements as a result of our net operating losses. We have unused tax loss
carry forwards of approximately $18,247,792 to offset future taxable income.
Such carry forwards expire in the years beginning 2021.
NET INCOME/LOSS
We experienced net income from operations of $440,296 for the three months ended
September 30, 2007 as compared to a net loss of $(813,173) for the three months
ended September 30, 2006. The net income is primarily from reduced expenses and
an increase in the amount of the debt reductions for the quarter, as compared to
the previous corresponding quarter that did not have a corresponding
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reduction in debt and also had increased developmental costs for our products.
The net income had a negligible impact on the weighted average shares because of
the corresponding increase in the number of the weighed average shares issued
and outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1,965,395 and $666,409 at September 30, 2007
and 2006, respectively. Net cash used by operations was $(362,014) for the
period ended September 30, 2007 compared to net cash used by operations of
$(739,911) for the comparable period ended September 30, 2006.
As a result of our continuing losses, our working capital deficiency has
increased. We have funded our losses through an equity line of credit secured by
preferred stock. We have defaulted on repayment of certain loan amounts advanced
from the credit line and the lender took possession of the collateral. We
anticipate these losses will continue through 2007.
We have a working capital surplus of $1,241,789 as of September 30, 2007
compared to a working capital deficit of $(1,928,952) as of September 30, 2006.
This is an increase in the working capital surplus as compared to the working
capital deficit from the previous year and we expect this trend to continue as
decreases in product development costs continue and income increases from
revenue generated by sales of our products.
As shown in the accompanying financial statements, we have incurred an
accumulated deficit of $(18,247,792) and a working capital surplus of
approximately $1,241,789 as of September 30, 2007. Our ability to continue as a
going concern is dependent on obtaining additional capital and financing and
operating at a profitable level. We intend to seek additional capital either
through debt or equity offerings and to increase sales volume and operating
margins to achieve profitability.
We will consider both the public and private sale of securities and/or debt
instruments for expansion of our operations if such expansion would benefit our
overall growth and income objectives. Should sales growth not materialize, we
may look to these public and private sources of financing. There can be no
assurance, however, that we can obtain sufficient capital on acceptable terms,
if at all. Under such conditions, failure to obtain such capital likely would at
a minimum negatively impact our ability to timely meet our business objectives.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States requires our management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. As such, in accordance with the use of
accounting principles generally accepted in the United States, our actual
realized results may differ from management's initial estimates as reported. A
summary of our significant accounting policies appears in the notes to the
financial statements which are an integral component of this Report.
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USE OF ESTIMATES
The preparation of our consolidated financial statements are in conformity with
United States generally accepted accounting principles which require us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
STOCK-BASED COMPENSATION ARRANGEMENTS
We issue shares of common stock to various individuals and entities for certain
management, legal, consulting and marketing services. These issuances are valued
at the fair market value of the service provided and the number of shares issued
as determined, based upon the closing price of our common stock on the date of
each respective transaction. These transactions are reflected as a component of
general and administrative expenses in the accompanying statement of operations.
INFLATION
The moderate rate of inflation over the past few years has had an insignificant
impact on our sales and results of operations during the period.
NET OPERATING LOSS CARRY FORWARD
No provision for income taxes has been recorded in the accompanying financial
statements as a result of our net operating losses. We have unused tax loss
carry forwards of approximately $(18,247,792) to offset future taxable income.
Such carry forwards expire in the years beginning 2021.
The deferred tax asset we recorded as a result of these tax loss carry forwards
is approximately $(18,247,792) as of September 30, 2007. We have reduced the
deferred tax asset resulting from our tax loss carry forwards by a valuation
allowance of an equal amount as the realization of the deferred tax asset is
uncertain. The net change in the deferred tax asset and valuation allowance
which was $(18,687,528) as of June 30, 2007 to September 30, 2007 was a decrease
of approximately $439,736.
OFF BALANCE SHEET ARRANGEMENTS
We have not entered into any off balance sheet arrangements that have, or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, result of operations,
liquidity, capital expenditure, or capital resources which would be considered
material to investors.
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ITEM 3. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer (the "Certifying
Officers") are responsible for establishing and maintaining disclosure controls
and procedures for the Company. The Certifying Officers have designed such
disclosure controls and procedures to ensure that material information is made
known to them, particularly during the period in which this report was prepared.
The Certifying Officers have evaluated the effectiveness of the Company's
disclosure controls and procedures within 90 days of the date of this report and
believe that the Company's disclosure controls and procedures are effective
based on the required evaluation. There have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 30, 2006, the Superior Court of the State of California, County of
Orange, entered a judgment against us and other defendants, jointly and
severally, in the total amount of $452,714.79 in the matter of Globalist
Internet Technologies, Inc. vs. Iron Horse Holdings, Inc., et al.
To the best knowledge of management, there are no other legal proceedings
pending or threatened against us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarter ended September 30, 2007, Ayuda Funding, LLC converted
130,000 shares of Series A Preferred Stock into 1,300,000,000 shares of common
stock. We relied on the exemption from registration relating to offerings that
do not involve any public offering pursuant to Section 4(2) under the Securities
Act of 1933 (the "Act") and/or Rule 506 of Regulation D promulgated pursuant
thereto. We believe that Ayuda Funding, LLC is an "accredited investor" under
Rule 501 under Regulation D of the Act and had adequate access to information
about us through its relationship with us.
During the quarter ended September 30, 2007, Alpha Blue converted 93,172 shares
of Series A Preferred Stock into 931,720,000 shares of common stock. We relied
on the exemption from registration relating to offerings that do not involve any
public offering pursuant to Section 4(2) under the Act and/or Rule 506 of
Regulation D promulgated pursuant thereto. We believe that Alpha Blue is an
"accredited investor" under Rule 501 under Regulation D of the Act and had
adequate access to information about us through its relationship with us.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following Exhibits are filed herein:
No. Title
--- -----
31.1 Certification of Chief Executive Officer Pursuant to the
Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
31.2 Certification of Chief Financial Officer Pursuant to the
Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
In accordance with the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, duly authorized.
DATED: November 15, 2007 SEAMLESS WI-FI, INC.
/s/ Albert Reda
---------------
By: Albert Reda
Its: Chief Executive Officer and Chief
Financial Officer (Principal Executive
Officer, Principal Financial Officer and
Principal Accounting Officer)
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