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 December 31, 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.
--------------------
(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
---------------------------------------------------
(Address of principal executive offices)
(775) 588-2387
--------------
(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 February 6, 2008, the number of shares of common stock issued and
outstanding was 9,510,802,154
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet - December 31, 2007 3
Statements of Operations -
For the three and six months ended December 31, 2007 and 2006 4
Statements of Cash Flow -
For the six months ended December 31, 2007 and 2006 5-6
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 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits 20
SIGNATURES 21
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2007
(unaudited)
ASSETS
Current assets
Accounts Receivable $ 111,142
Notes receivable-related parties, current portion 1,535,697
Accrued interest receivable 395,679
------------
Total current assets 2,042,518
Property and equipment (net of accumulated depreciation $60,098) 37,902
Technology 2,181,949
Notes receivable - related parties (net of allowance $334,703) 1,126,487
Security deposit 21,561
------------
TOTAL ASSETS $ 5,410,417
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 3,793
Accounts payable 237,972
Payroll taxes 81,706
Judgments payable 361,054
Other current liabilities 800
Payable to officer 38,731
Investment payable 50,000
------------
Total current liabilities 774,056
------------
Commitments and contingencies (See Note 7)
Stockholders' equity
Preferred A stock, par value $0.001, 10,000,000 shares authorized, 641
641,168 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, 2,100,000
2,100,000 shares issued and outstanding
Common stock, par value $0.001,11,000,000 shares authorized
9,349,662 shares issued and outstanding 9,350
Additional paid-in capital 22,122,186
Deferred compensation (120,000)
Stock subscription receivable (200,000)
Accumulated deficit (19,175,816)
------------
Total stockholders' equity 4,736,361
Less: Treasury stock at cost (100,000)
------------
Adjusted stockholders' equity 4,636,361
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,410,417
============
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 AND SIX MONTHS ENDED DECEMBER 31,
(unaudited)
3 Months 6 Months
-------- --------
2007 2006 2007 2006
-------------- ------------ -------------- ------------
Revenues $ 4,537 $ 10,894 $ 11,551 $ 21,640
Cost of revenues 973 20,946 15,377 60,584
-------------- ------------ -------------- ------------
Gross Income (Loss) 3,564 (10,052) (3,826) (38,944)
-------------- ------------ -------------- ------------
Expenses:
Selling, general and admin. 170,832 150,978 409,439 295,440
Software development costs - - - -
Technology development costs - - - -
Consulting 47,540 113,937 117,606 356,851
Interest - 80,616 6,864 204,137
Legal 34,359 166,724 128,076 176,293
Officer Payroll 263,000 136,531 326,000 277,531
Finance - 90,000 - 90,000
Bad Debt Expense - 41,410 - 58,410
Depreciation and amortization 8,035 7,938 16,005 15,875
-------------- ------------ -------------- ------------
Total Expenses 523,766 788,134 1,003,990 1,474,537
-------------- ------------ -------------- ------------
(Loss) from operations (520,202) (798,186) (1,007,816) (1,513,481)
Other income
Cancellation of indebtedness 12,119 215,283 859,102 215,283
Interest 80,121 5,506 159,548 33,073
Other (60) (6,500) 1,440 -
-------------- ------------ -------------- ------------
Income (Loss) before income taxes (428,022) (583,897) 12,274 (1,265,125)
Income taxes (benefit) (note 6) - - - -
-------------- ------------ -------------- ------------
Net Income (Loss) $ (428,022) $ (583,897) $ 12,274 $(1,265,125)
============== ============ ============== ============
Preferred C stock dividends-deemed (500,000) - (500,000) -
-------------- ------------ -------------- ------------
Net loss available to
common stockholders $ (928,022) $ (583,897) $ (487,726) $ (1,265,125)
============== ============ ============== ============
Basic and Diluted income (loss)
per common shares $ (0.12) $ (4.37) $ (0.07) $ (9.46)
============== ============ ============== ============
Weighted average basic and
diluted common shares 7,962,803 133,751 6,948,095 133,751
============== ============ ============== ============
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 SIX MONTHS ENDED DECEMBER 31,
(unaudited)
2007 2006
------------ ------------
Cash flows used in operating activities
Net income (loss) from continuing operations $ 12,274 $(1,265,125)
Adjustments to reconcile net loss to
used by operating activities:
Depreciation and amortization 16,005 15,874
Cancellation of indebtedness (859,102) (215,283)
Issuance of common stock for services 218,750 184,050
Issuance of common stock for payment of
financing costs 90,000
Issuance of preferred C stock for payment
of expense 2,485
Interest expense 6,864
Bad debt expense 58,410
Prepaid legal (5,000)
Changes in operating assets and liabilities
Accounts receivable 12,936
Accrued interest receivable (159,547) (33,021)
Security deposits (14,961)
Accounts payable 21,254 (213,697)
Accrued expense 261,959
Payroll taxes payable (15,000) (62,826)
Other current liabilities 19,783 45,374
Payable to officer 60,488 (19,491)
Restricted cash - Escrow 75,000
Interest payable 132,598
------------ ------------
Net cash used by operating activities (602,771) (1,026,178)
------------ ------------
Cash flows used in investing activities:
Intangible assets (559,125)
Employee advance (932)
Technology (165,619)
Investments (2,750) 88
Advances to related party (161,584) (802,059)
------------ ------------
Net cash used in investing activities (329,953) (1,362,028)
------------ ------------
Cash flows from financing activities
Proceeds for additional paid in capital 23,750 -
Net proceeds from preferred C stock issuance 890,000
Increase in long term debt 2,540,000
Repayment of investment payable (50,000)
Repayment of related party advances (14,000)
Bank overdraft 3,793
------------ ------------
Net cash provided by financing activities 917,543 2,476,000
------------ ------------
Increase (decrease) in cash (15,181) 87,794
Cash at beginning of period 15,181 94,342
------------ ------------
Cash at end of period $ - $ 182,136
============ ============
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
FOR THE SIX MONTHS ENDED DECEMBER 31,
(unaudited)
2007 2006
------------ ------------
Cash paid for:
Interest $ - $ -
Taxes $ - $ -
Noncash investing, and financing activities
Common stock issued for services $ - $ 160,050
Preferred C stock issued for officer's compensation $ 200,000
Preferred C stock issued for deemed dividend $ 500,000
Preferred C stock issued for stock subscription receivable $ 200,000
Additional paid in capital recorded for third party payments $ 64,592
Common stock issued for employees' services $ 18,750
Common stock issued for deferred compensation $ 120,000
Common stock issued for conversion of preferred A stock
and settle operating expenses $ 24,000
Common stock issued for conversion of preferred A stock $ 1,416,206 $ 2,392,991
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. "the Company" 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 high 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 it's 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 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.
In March 2006, the Company the company acquired all the rights and patents to
the mini computer device ED developed by Vercel Development, Inc.
7
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.
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 six-month period ended December 31, 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 has not been established.
8
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.
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 2 to 5 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 December 31, 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 costs were $41,684
and $21,704 for the six months ended December 31, 2007 and December 31, 2006,
respectively.
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.
9
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.
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 December 31, 2007, Series A
Preferred shares are convertible to 6,411,680 common shares and Series C
Preferred shares are convertible to 10,500,000 common shares. Because the
convertible Preferred shares have an anti-dilutive effect, there is no
difference 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 December 31, 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 December 31, 2007 the Company had an accumulated deficit of
$19,175,816.
The Company is actively pursuing additional equity 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 equity 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
December 31, 2007:
Allowance for
Loan/Advance for uncollectible Balance
Balance loans/advances Net
------------ ----------------- ------------
Accepted Sales (A) $ 338,033 $ 338,033
Carbon Jungle, Inc. (B) 243,332 $ 236,543 6,789
DK Corp. (C) 98,160 98,160 -
DLR Funding (D) 886,422 886,422
1st Global Financial Service (E,F) 1,430,940 1,430,940
------------ ----------------- ------------
Total: $ 2,996,887 $ 334,703 $ 2,662,184
============ ================= ============
The above interest at annual rates ranges from 6% to 12%. The net balance at
December 31, 2007 is $2,662,184 and it matures in the years ended December 31 as
follows:
2008 $ 1,535,697
2009 1,126,487
-----------
$ 2,662,184
===========
(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 six-months ended
December 31, 2007 in the amount of $ 159,548.
NOTE 5: STOCKHOLDER'S EQUITY
During the first quarter ended September 30, 2007, the following stocks were
issued.
Ayuda Funding LLC converted 130,000 shares of Series A Preferred Stock into
1,300,000 shares of common stock.
Alpha Blue converted 93,172 shares of Series A Preferred Stock into 931,720
shares of common stock.
During the second quarter ended December 31, 2007 the following shares were
issued.
11
1,200,000 shares of Series C Preferred Stock were issued jointly to Ayuda
Funding, LLC and DLR Funding Inc for $900,000. The shares are convertible to
common stock worth $1,200,000 and $300,000 was recorded as deemed dividend for
beneficiary conversion feature.
200,000 shares of Series C Preferred Stock were issued for $200,000 as officer's
compensation.
400,000 shares of Series C Preferred Stock were issued to Adobe Oil Development
Corp. for $200,000 that is scheduled to be received in the third quarter. The
shares are convertible to common stock worth $400,000 and $200,000 was recorded
as deemed dividend for beneficiary conversion feature.
125,000 common stock shares were issued to employees for $18,750 as payroll
expenses.
800,000 common stock shares were issued for $120,000 as deferred compensation.
135,084 shares of Series A Preferred Stock were converted to 1,350,840 common
stock shares.
5,100 common stock shares were converted to 510 shares of Series A Preferred
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
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 December 31, 2007.
NOTE 7: COMMITMENTS AND CONTINGENCIES
LEASE
The Company has entered into lease agreements for an office space which expires
on August 31, 2010. The Company rents additional office space in Nevada, on a
month to month basis. Rent expense under these leases for the six months ended
December 31, 2007 and 2006 were $23,766 and $13,200, respectively. The minimum
future lease payments required under the Company's operating leases at December
31, 2007 are as follows.
2008 $ 50,340
2009 50,340
2010 33,560
--------
Total $134,240
========
LEGAL PROCEEDINGS
The Company is a party to the following legal proceedings:
12
GLOBALIST V. INTERNET BUSINESS'S INTERNATIONAL, INC. ET AL
In July 2003, Globalist sued the Company and was awarded a judgment plus
interest in the amount of approximately $301,000. The Company appealed the
Court's decision and the award amount. In February 2005 the Company reached a
settlement agreement with Globalist. However, Globalist later rejected the
settlement agreement and an appeal was filed this quarter with the appellate
court by the Company seeking confirmation of the settlement agreement.
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.
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.
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:
Six Months ended December 31,
2007 2006
------------ ------------
Wi-Fi ISP net sales $ 11,551 $ 21,640
Cost of Wi-Fi sales (15,377) (60,584)
Cost and expenses (1,003,990) (1,474,537)
Other net income 1,020,090 248,356
------------ ------------
Net loss $ 12,274 $ (1,265,125)
============ ============
NOTE 9: SUBSEQUENT EVENTS
On February 1, 2008, with shareholders' approval, the Company filed a
Certificate of Amendment to its Articles of Incorporation with the Secretary of
State of Nevada (the "Amendment"), providing for each one thousand (1,000)
shares of the Company's common stock, par value $0.001 per share, issued and
outstanding shall, automatically and without any action on the part of the
respective holders thereof, be combined, converted, and changed into one (1)
share of common stock, par value $0.001 per share of the Company, provided,
however, that the Company shall issue no fractions shares of common stock, and
fractional shares resulting from the reverse split will be rounded up to the
nearest whole share.
The Amendment states that the effective date of the Reverse Split was February
8, 2008. On February 14, 2008, the Company was informed by NASDAQ that the
Reverse Split effective date is February 15, 2008, and the Company's new symbol
is SMWF.
Due to the reverse split, one share of Preferred A Stock converts into 10 shares
of common stock. There is no change to Preferred C Stock conversion into common
stock.
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
Seamless Wi-Fi, Inc has operating subsidiaries: (1) Seamless Skyy-Fi, Inc. which
provides wireless Internet access (commonly known as "Wi-Fi") at 30 business
locations and is the developer of a Seamless Secure Internet Browser (S-SIB)
software program which creates a virtual private network for the Internet user ;
(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; 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:
---------------------------------------- ------------------- -------------------
Six Months Ended Six Months Ended
December 31, 2007 December 31, 2006
(unaudited)
(unaudited)
---------------------------------------- ------------------- -------------------
Revenues $ 11,551 $ 21,640
---------------------------------------- ------------------- -------------------
Cost of Revenues 15,377 60,584
---------------------------------------- ------------------- -------------------
(Gross Loss) (3,826) (38,944)
---------------------------------------- ------------------- -------------------
Expenses 1,003,990 1,474,537
---------------------------------------- ------------------- -------------------
(Net Loss from Operations) (1,007,816) (1,513,481)
---------------------------------------- ------------------- -------------------
Other Income 1,020,090 248,356
---------------------------------------- ------------------- -------------------
(Loss) $ 12,274 $ (1,265,125)
---------------------------------------- ------------------- -------------------
Deemed Dividend on Preferred
Shares (500,000) 0
---------------------------------------- ------------------- -------------------
(Net Loss) $ (487,726) $ (1,265,125)
---------------------------------------- ------------------- -------------------
(Net Loss) Per Share $ (.07) $ (9.46)
---------------------------------------- ------------------- -------------------
Weighted Average Common
Shares Outstanding 6,948,095 133,750
---------------------------------------- ------------------- -------------------
14
SIX MONTHS ENDED DECEMBER 31, 2007 (UNAUDITED) COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 2006 (UNAUDITED)
REVENUES
Revenues for the six months ended December 31, 2007 were $11,551 compared to
$21,640 for the same period in 2006, a decrease of 53 %. This decrease in
revenue was the result of eliminating locations that were not profitable thereby
decreasing our Cost of Revenue at our Skyy-Fi locations.
COST OF REVENUES
The cost of revenues for the six months ended December 31, 2007 was $15,377
compared to $60,584 for the six months ended December 31, 2006, a decrease of
75%. The decrease in cost of revenue was the result of eliminating locations
that were not profitable thereby decreasing our Cost of Revenue at our Skyy-Fi
locations.
OPERATING EXPENSES
Operating expenses decreased by approximately 33.4% from $1,513,481 for the six
months ended December 31, 2006 compared to $1,007,816 for the six months ended
December 31, 2007. This decrease in operating expenses was a result of a
reduction in the consulting and development cost related to our new product and
software programs that occurred during the previous corresponding period.
OTHER INCOME
Other income for the six months ended December 31, 2007 was $1,020,090 an
increas of 410 % compared to the other income of $248,356 for the same period in
2006. Other income consists of a write-off of old outstanding accounts payable
that have not been claimed.
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 $19,175,816 to offset future taxable income.
Such carry forwards expire in the years beginning 2022.
NET INCOME/LOSS
We experienced a reduction in the net loss from operations of $(487,726) for the
six months ended December 31, 2007 as compared to a net loss of $(1,265,125) for
the six months ended December 31, 2006. The reduction in net loss is primarily
from reduced expenses and an increase in the other income for the Quarter. The
net loss 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.
15
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $2,042,518 and $828,286 for December 31, 2007
and 2006, respectively. Net cash used by operations was $(602,771) for the
period ended December 31, 2007 compared to net cash used by operations of
$(1,026,178) for the comparable period ended December 31, 2006.
As a result of our decreases in net operation losses, we have working capital of
$1,268,462. We have funded our losses through an equity line of credit secured
by preferred stock. Repayments of certain loans occurred by the lender taking
possession of the collateral. We anticipate these losses to continue through
2008.
We have a working capital surplus of $1,268,462 as of December 31, 2007 compared
to a working capital deficit of $(1,771,052) as of December 31, 2006. This is a
increase in the working capital and as compared to the working capital deficit
from the previous year and we expect these this trend to continue as a decrease
as product development costs continue and income increases by the sales of our
products.
As shown in the accompanying financial statements, we have incurred an
accumulated deficit of $(19,175,816) and a working capital of $1,268,462 as of
December 31, 2007. Our ability to continue as a going concern is dependent on
obtaining additional capital, 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.
16
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 $(19,175,816) to offset future taxable income.
Such carry forwards expire in the years beginning 2022.
The deferred tax asset we recorded as a result of these tax loss carry forwards
is approximately $(19,175,816) as of December 31, 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 December 31, 2007 was a decrease
of approximately $488,288.
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.
17
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.
18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 2003, Globalist sued the Company and was awarded a judgment plus
interest in the amount of approximately $301,000. The Company appealed the
Court's decision and the award amount. In February 2005 the Company reached a
settlement agreement with Globalist. However, Globalist later rejected the
settlement agreement and an appeal was filed this quarter with the appellate
court by the Company seeking confirmation of the settlement agreement.
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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On February 1, 2008, after shareholder approval the Company filed a Certificate
of Amendment to its Articles of Incorporation with the Secretary of State of
Nevada (the "Amendment"), providing for each one thousand (1,000) shares of the
Company's common stock, par value $0.001 per share, issued and outstanding
shall, automatically and without any action on the part of the respective
holders thereof, be combined, converted, and changed into one (1) share of
common stock, par value $0.001 per share of the Company, provided, however, that
the Company shall issue no fractions shares of common stock, and fractional
shares resulting from the reverse split will be rounded up to the nearest whole
share.
The Amendment states that the effective date of the Reverse Split was February
8, 2008. On February 14, 2008, the Company was informed by NASDAQ that the
Reverse Split effective date is February 15, 2008, and the Company's new symbol
is SMWF.
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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
20
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, duly authorized.
DATED: February 15, 2008 SEAMLESS WI-FI, INC.
By: /s/ Albert Reda
---------------
Albert Reda
Its: Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
21