U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 0-20259
ALPHA WIRELESS BROADBAND, INC.
------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation of organization)
33-0845463
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(I.R.S. Employer Identification No.)
10120 S. Easter Avenue, #200, Henderson, Nevada 89052
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(Address of principal executive offices)
(775) 588-2387
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(Issuer's telephone number)
2250 East Tropicana, Suite 19-309, Las Vegas, Nevada 89119
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(Former name, former address and former fiscal year, if changed since last
report)
Check mark whether the issuer (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) been subject to such filing requirements for the past 90
days. Yes [ X] No [ ].
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 2004, the Issuer
had 3,410,356,692 shares of common stock issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ ]
TABLE OF CONTENTS
PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER, 30 2004 AND JUNE 30,
2004
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
ITEM 3. CONTROLS AND PROCEDURES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Alpha Wireless Broadband, Inc. and
subsidiaries (collectively, the "Company"), included herein were prepared,
without audit, pursuant to rules and regulations of the Securities and Exchange
Commission. Because certain information and notes normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America were condensed or omitted pursuant to
such rules and regulations, these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
audited financial statements of the Company as included in the Company's Form
10-KSB for the year ended June 30, 2004.
3
ALPHA WIRELESS BROADBAND, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Assets September 30, 2004 June 30, 2004
----------------------------------------------------------------- -------------------- ---------------
Current Assets:
Cash $ 1,274 $ 5,469
-------------------- ---------------
Total current assets $ 1,274 $ 5,469
Property and equipment, net $ 25,261 $ 37,210
Intangible assets, net $ 487,339 $ 496,022
Investments $ 225,310 $ 107,780
-------------------- ---------------
Total other assets $ 737,910 $ 641,012
TOTAL ASSETS $ 739,184 $ 646,481
-------------------- ---------------
Liabilities and Stockholders' (Deficit)
----------------------------------------------------------------- -------------------- ---------------
Current Liabilities:
Accounts payable $ 723,418 $ 669,274
Accrued liabilities $ 397,590 $ 401,451
Judgments payable $ 445,888 $ 435,012
Other current liabilities $ 1,828,908 $ 1,787,871
Payable to officer $ 221,887 $ 170,572
Note payable related party $ 111,568 $ 117,568
Note Payable $ 206,774 $ 333,377
-------------------- ---------------
Total current liabilities $ 3,936,003 $ 3,915,125
Total Liabilities $ 3,936,033 $ 3,915,125
-------------------- ---------------
Stockholders' (deficit)
Preferred Stock, par value $.001 $ 750 $ 903
Authorized 10,000,000 Issued 750,000 and 902,639
At September 30 and June 30, 2004 respectively
Common stock, par value $.001 $ 3,410,357 $ 2,015,928
Authorized 10,000,000,000 Issued 3,410,356,692 and 2,015,926,692
At September 30 and June 30, 2004 respectively
Additional Paid in Capital $ 6,507,724 $ 6,617,602
Accumulated deficit $ (13,115,680) $ (11,903,077)
-------------------- ---------------
Total Stockholders' (Deficit) $ (3,196,849) $ (3,268,644)
-------------------- ---------------
Total Liabilities & Stockholders Deficit $ 739,184 $ 646,481
-------------------- ---------------
The accompanying notes are an integral part of these financial statements
4
ALPHA WIRELESS BROADBAND, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
3 Months Ended 3 Months Ended
September 30, September 30,
2004 2003
---------------- -------------
Revenues $ 0 $ 0
Cost and expenses:
Cost of revenues $ 0 $ 0
Selling, general and administration $ 313,657 $ 275,578
Depreciation and amortization $ 25,137 $ 378,817
---------------- -------------
Total costs and expenses $ 338,794 $ (654,395)
---------------- -------------
Net income (loss) from operations $ (338,794) $ (654,395)
Other income $ 620 $ 118,405
Other (expense) $ (874,428) $ (1,449,236)
---------------- -------------
Income (loss) before income taxes $ (1,212,602) $ (1,330,831)
---------------- -------------
Income taxes (benefit) $ 0 $ 0
Net income (loss) $ (1,212,602) $ (1,985,226)
---------------- -------------
Net income (loss) per common shares nil nil
Weighted average number of common
shares outstanding 2,228,365,608 224,940,603
The accompanying notes are an integral part of these financial statements
5
ALPHA WIRELESS BROADBAND, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
3 Months Ended
September 30,
----------------------------
2004 2003
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Cash Flows From Operating Activities
---------------------------------------------
Net income (loss) ($1,212,602) ($1,985,226)
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation and amortization 25,137 378,817
Write down of Investment
Issuance of stock for services 874,428 134,000
Adjustment for companies acquired
Changes in operating assets and liabilities:
Accounts payable 54,144 403,821
Accrued liabilities (3,861) 783,370
Judgments payable 10,876
Other current liabilities 41,037
Payable to officer 51,315
Note Payable Related Party ( 6,000)
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Net cash used in operating activities ($165,526) ($285,218)
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Cash Flows From Investing Activity
---------------------------------------------
Investment in GLDCC (7,530)
Purchase of intangible assets (4,506) 118,405
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Net cash used in investing activates ($12,036) $ 118,405
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Cash Flows From Financing Activates
---------------------------------------------
Net increase in credit lines 165,619
Net issuance of long-term debt 173,367
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Net cash provided by financing activates $ 173,367 $ 165,619
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Net increase (decrease) in cash (4,195) ( 1,194)
Cash, beginning of quarter 5,469 1,389
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Cash, end of quarter $ 1,274 $ 195
------------- -------------
The accompanying notes are an integral part of these financial statements
6
ALPHA WIRELESS BROADBAND, INC
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
(Unaudited)
3 Months Ended
September 30,
----------------
2004 2003
Interest Paid $ 8,500
Taxes Paid 0
Common stock issued for services $874,428
Common Stock issued for investment $110,000
The accompanying notes are an integral part of these financial statements
7
ALPHA WIRELESS BROADBAND, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Summary of Significant Accounting Policies
Description of Business and Change in Control
Prior to December 31, 1997, Alpha Wireless Broadband, Inc in September 2004
changed its name and was formerly known as Internet Business's International,
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 consist 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 fiscal year ended June 30, 2003. During the current fiscal year, the
Company started a new wireless operation through its wholly owned subsidiary
Skyy-Fi, Inc a Nevada Corporation, providing access to the Internet, by
installing equipment in locations such as hotels and coffee shops for use by
their patrons. These locations are commonly known as Wi-Fi Hotspots
After the end of the current fiscal year, the Company, through its wholly owned
subsidiary Skyy-Fi, Inc., began the installation of wireless Internet access
equipment at businesses allowing their patron's access to the Internet for a
fee. At the time of this report Skyy-Fi, Inc had 20 Wi-Fi locations installed.
During September 2004 the Company changed its name to Alpha Wireless Broadband,
Inc.
The Company has one office in the US and fewer than 5 employees.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. Significant inter-company balances and
transactions are eliminated in consolidation.
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.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year classification.
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.
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
8
for other non-computer furniture and 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.
Intangible Assets
Intangible assets consist primarily of acquired customer bases, long-term
marketing agreements, goodwill, and other items. Customer bases acquired
directly are valued at cost, which approximates fair value at the time of
purchase. When material intangible assets, such as customer bases and goodwill
are acquired in conjunction with the purchase of a company, the Company
undertakes a study by an independent third party to determine the allocation of
the total purchase price to the various assets acquired and the liabilities
assumed. The costs assigned to intangible assets are being amortized on a
straight-line basis over the estimated useful lives of the assets, which is
normally 36 months. Goodwill and other intangible assets are periodically
reviewed for impairment to ensure they are appropriately valued. Conditions
that may indicate an impairment issue exists include an economic downturn,
changes in the churn rate of subscribers or a change in the assessment of future
operation. In the event that a condition is identified that may indicate an
impairment issue exists, an assessment is performed using a variety of
methodologies, including cash flow analysis, estimates of sales proceeds and
independent appraisals.
Additional Paid-In Capital
Paid in Capital consists of stock issued for service, stock reverses, stock
issued to retire debt and private capital placement.
In September 2004, stock was issued for services and debt reduction.
In June 2004 495,000,000 shares were issued for the note that the Company owed
for prior year wages in the amount of $316,577.
In April 2003 the par value of the Company's stock was changed from $.01 per
share to $.001 per share. The net difference of $704,462 was included in paid-in
capital.
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.
Advertising Expense
All advertising costs are expensed when incurred.
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
where deferred income tax assets and liabilities reflect future tax
consequences, this is based on enacted tax laws, of the temporary differences
between financial and tax reporting at the balance sheet date.
Earnings (Loss) per Share
Basic earnings (loss) per share is based on the weighted effects of all common
shares issued and outstanding, and is calculated by dividing net income by the
weighted average shares outstanding during the period. Diluted earnings (loss)
9
per share is calculated by dividing net income by the weighted average number of
common shares used in the basic earnings per share calculation plus the number
of common shares that would be issued assuming conversion of all potentially
dilutive common shares outstanding. Dilutive earnings (loss) per share is not
presented since diluted securities have an anti-dilutive effect.
Recent Accounting Pronouncements
In December 2003, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104"). SAB 104
clarifies existing guidance regarding revenue recognition. The Company's
adoption of SAB 104 did not have an impact on its consolidated results of
operations, financial position or cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity," ("Statement
150"). Statement 150 establishes standards for issuer classification and
measurement of certain financial instruments with characteristics of both
liabilities and equity. In accordance with this standard, financial instruments
that embody obligations for the issuer are required to be classified as
liabilities. This statement is effective for all financial instruments entered
into or modified after May 31, 2003, with certain exceptions. The Company's
adoption of Statement 150 did not have an impact on results of operations,
financial position or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," that amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
This statement is effective for contracts and hedging relationships entered into
or modified after June 30, 2003, with certain exceptions. The Company's adoption
of SFAS No. 149 did not have an impact on financial position or results of
operations or cash flows.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities," ("FIN 46"). FIN 46 requires the consolidation of
variable interest entities in which an enterprise absorbs a majority of the
entity's expected losses, receives a majority of the entity's expected residual
returns, or both, as a result of ownership, contractual or other financial
interests in the entity. FIN 46 is effective for the first quarter of 2004. The
Company does not expect its adoption of FIN 46 to have an impact on consolidated
results of operations, financial position or cash flows
In December 2002, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," an amendment of SFAS No.
123. SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. This
statement is effective for financial statements for fiscal years ending after
December 15, 2002. SFAS No. 148 has not had any impact on the Company's
financial statements as management uses the fair value of goods and services
received to determine the number of shares to issue.
Note 2 Business Combinations
The Company's business combinations have been accounted for using the purchase
method and, accordingly, the total purchase price of each acquired company was
allocated to the tangible assets and liabilities and identifiable intangible
assets based on their estimated fair values as of the closing date of the
acquisition. The excess purchase price over the fair value is recorded as
goodwill. Results of operations for the acquired companies are included
prospectively from the date of acquisition.
In December 2003 the Company acquired the assets of Debit Card Marketing Company
Enterprises, Inc for 60,000,000 shares of Global Debit Cash Card, Inc. a
subsidiary of the Company, which included reduction of the note owed by the
Company to $515,000 that was transferred as an asset to Global Debit Cash Card,
Inc.
In August 2003 the Company acquired Alpha Tooling, Inc. with 190,000 shares of
DCM Enterprises, Inc stock, as per the agreement with DCM Enterprises, Inc. The
Company then transferred Alpha Tooling, Inc to DCM Enterprises, Inc for credit
towards the debit it had with DCM Enterprises, Inc. After October 1st 2003 the
transaction was changed by agreement to an Asset assignment. The Company
assigned certain assets of Alpha Tooling for credit of $311,639 which reduced
the debt owed to DCM Enterprises, Inc from $760,000 to $448,361. The Company
retained the Alpha Tooling Corporation which had assets of $42,050 (which were
not assigned to DCM Enterprises, Inc.), and debt of $351,306.
10
In June 2002 the Company announced the sale of Ace Optics, a subsidiary of
Guarantee Capital Group, to CRT Corporation for $2,000,000 worth of CRT
restricted stock (2,000,000 shares).
In June 2002 the Company announced plans to divest itself of the Guarantee
Capital Group subsidiary, and in anticipation of that occurrence ceased
operations of the on-line mortgage lending group.
In February 2002 the Company announced plans to spin-off Global Construction
Buying Group to its shareholders by the year end. This transaction was never
completed.
In September 2001 the Company started Guarantee Capital Group, which acquired
the computer, furniture and processing equipment from the new owner of Atlas
Capital Corporation for $30,000. In November 2001 Guarantee Capital Group had
exceeded the capacity of its mortgage banking line. This prevented the funding
of the balance of its processed loans and resulted in most of the employees
being laid off. The Company ceased the operation of Guarantee in June 2002.
In September 2001 the Company started a new marketing subsidiary 1st2 Market
Incorporated and ceased operating its predecessor, Allstates Communications Inc.
The new subsidiary only markets the Company's products whereas Allstates
marketed cell phones for cellular phone companies.
In March 2001, the Company ceased to operate Global GPP Corporation and closed
its corresponding operation in Europe. The Company started a new corporation,
Global Construction Buying Group, a wholly owned subsidiary, whose main asset is
the equipment acquired from Global GPP Corporation.
In October 2000, the Company signed an acquisition agreement with
Auction-Sales.Com. The Company invested $180,000 in Auction-Sales.Com and in
December 2000 rescinded the acquisition due to undisclosed debts. The Company
sued for the return of the funds and the case was remanded to arbitration. The
Company lost the arbitration and wrote off the $180,000 investment.
In October 2000, the Company acquired the auction website operations of the
Sonic Auction Company for a purchase price of approximately $5,000. With this
acquisition the Company acquired a database and a functioning web auction site.
The Company issued 500,000 shares of restricted common stock to acquire Sonic
Auction Company. This site ceased operations in March of 2001.
In April 2000, the Company acquired all the outstanding stock of Atlas Capital
Corporation, a mortgage-banking company, for 600,000 shares of restricted common
stock valued at $6,000. In connection with the acquisition, the Company acquired
assets of approximately $3,183,000 and assumed liabilities of approximately
$3,179,000. The difference of $260,000 was recorded as intangible assets
related to acquisition of trade names, websites, and workforce-in-place and is
being amortized over 5 years. In August 2001 the company sold Atlas Capital
Corporation with its assets and liabilities.
In March 2000, the Company acquired the assets and assumed certain liabilities
of Internet 2xtreme, an Internet Service Provider based in northern California.
The total purchase price was $735,000, which consisted of $17,635 cash and
124,589 shares of restricted common stock valued at $186,888. In connection with
the acquisition, the Company recorded intangible assets of approximately
$666,000, which consisted of approximately 4,800 customer accounts, website and
workforce-in-place, which are being amortized over 5 years.
In March 2000, the Company acquired 80% of the outstanding shares of Global GPP
for $500,000. Global GPP owns a business-to-business website, equipment and has
strategic agreements with IBM Hungary to market business-to-business services in
Eastern Europe.
In February 2000, the Company acquired the assets and assumed certain
liabilities of Direct Communications, Inc., a wireless communications company.
In addition to assuming certain liabilities, the Company paid $80,000 cash and
issued 30,000 shares of restricted company stock valued at $300. Intangible
assets purchased totaled $265,000, consisting of customer lists, website and
workforce-in-place and is being amortized over 5 years. These assets and
liabilities were transferred to the newly formed and wholly owned subsidiary of
the Company, Allstates Communications Inc.
In December 1999 the Company entered into a service agreement to market its
services on the Internet for 6,000,000 shares of common stock valued at $60,000.
11
In November 1999, the Company acquired an E Commerce website Optical Brigade, an
on-line sunglass distribution website, for 50,500 shares of restricted common
stock valued at $50,500.
In August 1999, the Company acquired the website, Net 2 Loan, an on-line loan
processing website, for 400,000 shares of restricted common stock valued at
$4,000.
In July 1999 the Company acquired MBM Capital Group for $72,000 and 112,667
shares of restricted common stock valued at $1,127. MBM was sold during the
fiscal year of acquisition for a $150,000 note. After the sale MBM ceased
operations and the Company considers the note valueless.
In June 1999, the Company acquired the assets of L.A. Internet, a southern
California-based Internet Service Provider, which included customer accounts,
trade name, websites, etc. for $545,000 in exchange for a reduction of the Note
Receivable from Iron Horse Holdings, Inc. (see Preferred Stock Note 6).
Note 3 Certain Financial Statement Information
June 30, Sept. 30
2004 2004
----------------- ----------
Investment:
Stock of PMCC/GNVN $ 107,692 $ 107,692
Stock of DCM Enterprises 88 88
Stock of Global 7,530
Stock of Save the World 110,000
----------------- ----------
Total Long Term Investments $ 107,780 $ 225,310
================= ==========
Property and equipment:
Office furniture and equipment $ 146,683 $ 146,683
Machinery and computer equipment 12,809 12,809
Less: accumulated depreciation (122,282) (134,231)
----------------- ----------
Property and equipment, net $ 37,210 $ 25,261
================= ==========
Intangible assets:
Web Sites 3,000 3,000
Computer Programs 3,772 8,277
Purchase of Territory Marketing Agreement 515,000 515,000
Less: accumulated amortization (25,750) (38,938)
----------------- ----------
Intangible assets, net $ 496,022 $ 487,339
================= ==========
Note 4. Note Payable
Note payable as of September 30, 2004 consists of the following: Note payable
Windsor Professional Plaza LLC.
Note Payable - Windsor Professional Plaza LLC $ 206,744
--------------------------------------------------- ----------
Total $ 206,744
----- ----------
The note payable bears interest at prime plus 4% and is due May 14, 2006.
Interest is payable quarterly. The note is secured by series A convertible
preferred stock. See note 7 Preferred Stock. This note is currently in default
which per legal counsel allows the note holder to convert the preferred stock to
common stock.
Note 5. 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. As
of September 30, 2004 the current liabilities exceed current assets by
$3,934,759. As shown in the financial statements, the Company incurred a net
loss of $1,212,602 for the first quarter of fiscal year ended June 30, 2005.
The future success of the Company is dependent on its ability to obtain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. The Company has obtained
12
financing for the expansion of its current operations through Blue Bear Funding
formerly 1st American Factoring, LLC, and has a funding line though Windsor
Plaza Funding LLC and KFG LLC and the Company has also established a Creditor
Trust to pay off debts from the previous operations.
Note 6 - Related Party Transactions
The Company entered into several transactions with David Karst, a shareholder,
and several companies he owns as follows:
During July 2004 the Company established a Creditor Trust to try to work out the
Company's debts. Management intends to fund the Trust with 1,500,000.000 shares
of the Company's common stock during November 2004. However, the Trust is
authorized to accept assets of $1,500,000 or approximately 4,500,000,000 shares.
The Trustee KFG LLC. is owned by a shareholder of the Company and is related to
the long-term note holder and will receive a Trustee fee of the lesser of
$10,000 or 10% of the amount paid out by the Trust each month. Additionally,
during November 2004 Financial Services LLC. was appointed as the Trust
Protector. Financial Services LLC. is owned by the Trustee.
During August and September 2004, Windsor Professional Plaza LLC. (the
Noteholder) converted 100,000 shares of convertible preferred stock for
1,026,390,000 shares of common stock which was then used to pay operating
expenses of the company.
David Karst on behalf of Windsor Professional Plaza LLC controlled 1,029,231
shares of convertible preferred stock. The stock is convertible into
10,292,310,000 shares of common stock which would give David Karst control of
the Company if all the shares were converted.
During May and June 2004 54,626shares of preferred stock were converted into
546,260,000 common shares and used to pay expenses of the Company.
During June 2004, the Company cancelled 71,966 shares of preferred stock because
they would have converted into an amount of shares in excess of those
authorized.
The Company borrowed $333,377 from Windsor Professional Plaza, LLC, during June
2004.
The Company issued $300,000 worth of common stock to Windsor Professional Plaza
LLC during the first quarter of Fiscal year ending June 30, 2005 as payment for
$300,000 worth of debt.
During the same quarter, the Company borrowed an additional $173,367 from
Windsor to pay off debts. (See Note 4).
The Company appointed KFG LLC as the Trustee for the Creditor Trust - (See Note
13.)
The Company appointed Financial Services LLC as the Creditor Trust - Trust
Protector - ( See Note 13).
Subsequent to June 30, 2004, Skyy Fi entered into a factoring and Security
Agreement with 1st American Factoring a/k/a Blue Bear Funding, a sister Company
of Financial Services LLC.
The Company has entered into various transactions with entities affiliated with
its President as follows:
The President of the Company is also the CEO and Director of DCM Enterprises,
Inc. See Note 11 for details of the various transactions between the Company
and DCM Enterprises.
The President of the Company is an officer of Global Debit Cash Card, Inc.
("GDCC"). The Company during 2004 acquired marketing rights from GDCC for cash
and stock consideration valued at $515,000.
During 2004 the Company issued 13,000,000 common shares to children of its
president for consulting services rendered.
13
Note 7. Stockholders' Equity
Authorized Shares
On September 30, 2004 the Company amended its Certificate of Incorporation and
authorized 5,000,000 shares of Series C Preferred stock, $0.01 par value,
convertible, with a stated value of $1.00 per share for conversion purposes.
The C Preferred stock is convertible at the option of the holder into common
shares of the Company at the end of 12 months from the date of its issuance
based upon the ten day average trading price of the common stock just prior to
the end of the 12 month holding period. The conversion ratio will be adjusted
for any stock splits, dividends or distributions.
During April 2003 the board of directors amended the articles of incorporation
to increase the authorized to 10,000,000,000 shares of which 9,990,000,000 are
common shares and 10,000,000 are preferred. The shares were initially increased
in April 2003 to 2,000,000, and the balance was issued in April 2004. The
Company does not have enough Authorized shares to issue in the event of the
conversion of all of its preferred stock outstanding.
Stock Issuance
During first quarter of fiscal year ended June 30, 2005 the following stock was
issued:
$300,000 worth of common stock to Windsor Professional Plaza LLC as payment for
$300,000 worth of debt.
220,000,000 shares were issued to acquire 22,000 shares of Save the World valued
at $5.00 per share.
874,430,000 shares were issued for services.
During fiscal year ended June 30, 2004, the following stock was issued:
495,000,000 shares were issued for payment in full on a note owed by the Company
for past due wages.
546,260,000 shares of common stock were issued per the conversion of preferred
stock into common, pursuant to the agreement with Windsor Professional Plaza,
LLC.
136,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
156,390,807 shares of restricted common stock were issued to Global Debit Cash
Card pursuant to the Territory Marketing Agreement, as amended, in exchange for
the limited exclusive marketing rights to sell the debit cards in the states of
Colorado and Utah for a period of ten (10) years.
170,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
200,000,000 shares of restricted common stock were issued to repurchase 200,000
shares of DCM.
54,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
80,000,000 shares of restricted common stock were issued as per agreement for
the repurchase of 80,000 shares of DCM.
The company complies with the provisions of Emerging Issues Task Force Issue No.
96-18, Accounting for Equity Instruments Issued to Other Than Employees for
Acquiring, or in Conjunction with, Selling Goods or Services ("EITF 96-18"),
with respect to stock issuances to such non-employees, whereby the value of the
services was determined as a reliable measurement of fair value.
Stock Issuance for Acquisitions
Refer to Note 2-Business Combinations
14
Preferred Stock
In May 2004 Mercatus, with the consent of the Company, assigned 1,029,231,
preferred shares to Windsor Professional Plaza, LLC. During the first quarter
of fiscal year ended June 30, 2005 the Company cancelled 35,186 shares in order
to reduce preferred stock outstanding because they would have converted into an
amount of common shares in excess of those authorized. Windsor Professional
converted 117,453 shares of preferred stock.
Note 8 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 $12,500,000 to offset future
taxable income. Such carryforwards expire in the years beginning 2021. The
deferred tax asset recorded by the Company as a result of these tax loss
carryforwards is approximately $4,000,000 and $2,400,000 June 30, 2004 and 2003
respectively. The Company has reduced the deferred tax asset resulting from its
tax loss carryforwards 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 from July 1, 2003 to June 30, 2004
was an increase of approximately $1,600,000.
Note 9 Commitments
The Company, through its Alpha Tooling Inc. subsidiary has entered into lease
agreements for office space that expire through June, 2007. The Company rents
additional office space in Nevada, on a month to month basis. Remaining
commitments under the operating leases are as follows:
Fiscal Year Ending June 30 Amount
-------------------------- --------
2005 $38,640
2006 40,572
2007 34,734
--------
$113,946
Note 10 Segment Information
In accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," management has determined that there were three reportable
segments based on the customers served by each segment: Full service internet
service provider (ISP). 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. Even though
all operations ceased before the previous year end of June 30, 2003 there were
ongoing expenses related to the closing of the respective operations.
The Company is currently a start up business that is concentrating on providing
"Wireless Internet" access at business locations. The Company was a full service
Internet service provider that served customers requiring Internet access in the
western United States through dial-up, and high-speed wireless; web hosting and
web design (which ceased operations as of June 30, 2003).
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. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note 1).
Information on reportable segments is as follows:
15
FIRST QUARTER OF FISCAL YEAR ENDED 2005 AND 2004
--------------------------------------------------
September 30, 2004 September 30, 2003
W-Fi ISP, FULL-SERVICE ISP
NET SALES $ 0 $ 0
OPERATING INCOME $ (5,917) $ (645,395)
OTHER
NET INCOME $ 620 $ 118,405
OPERATING INCOME $ (1,206,685) $ (1,449,236)
TOTAL
NET INCOME $ 0 $ 118,405
OPERATING INCOME $ (1,212,602) $ (1,985,226)
Note 11 Other Events
a. Company Acquisition
In December 2003 the Company acquired the assets of Debit Card Marketing Company
Enterprises, Inc for 60,000,000 shares of Global Debit Cash Card, Inc. (a
subsidiary of the Company) which included reduction of the note owed by the
Company to $515,000. That debit transferred as an asset to Global Debit Cash
Card, Inc.
In June 2002, DCM Enterprises, Inc. ("DCM") entered into an asset purchase
agreement with the Company for the purchase of assets consisting of equipment,
inventory, and proprietary information used in the sale of sunglasses
(hereinafter referred to as "Ace Optics"). The purchase price consisted of
2,000,000 restricted shares of DCM's common stock valued at $1,000,000 or $0.50
per share. However, due to a disagreement with the Company's former officer and
director, the Company was unable to take control of Ace Optics. Therefore, the
transaction was rescinded. On August 22, 2003, DCM and the Company entered into
an agreement to compensate DCM for the rescinded Ace Optics agreement. Pursuant
to the Compensation Agreement, IBII has agreed to compensate the DCM
approximately $768,000 in either cash, stock, or in other assets mutually agreed
upon since the Company has received approximately $141,000 in equipment,
$269,000 in cash, $150,000 in land and $65,060 in deposit related to real
property purchase. The amount owed under this agreement carries a 5% annual
interest rate. The entire amount is owed and due on February 22, 2005. Albert
Reda, the Company's CEO, also serves as DCM's CEO.
In September 2003 the Company through its wholly owned subsidiary Global Debit
Cash Card, Inc, a Nevada Corporation (GLCD), agreed to purchase from DCM the
Colorado and Utah territories for marketing the CARDS as per the USA Territory
Marketing Representative Agreement. Pursuant to the terms of the agreement GLCD
operates as the Territory Marketing Representative in Colorado and Utah and
license resellers of the CARDS. The Licensed Activated Resellers (LAR) will be
licensed through GLCD, the Territory Marketing Representative.
In August 2003 the Company acquired Alpha Tooling, Inc. with 190,000 shares of
DCM Enterprises, Inc stock. As per the agreement with DCM Enterprises, Inc the
Company transferred Alpha Tooling, Inc to DCM Enterprises, Inc for credit
towards the debit it has with DCM Enterprises, Inc. After October 1st 2003 the
transaction was changed by agreement to an Asset assignment.
b. Marketing Agreement
The USA Territory Marketing Representative Agreement previously entered into
between the Company and Global Debit Cash Card, Inc. was amended on March 15,
2004, to reflect the receipt of 156,390,807 shares of common stock as payment in
full in exchange for the limited exclusive right to market and sell debit cards
in the states of Colorado and Utah for a period of 10 years.
c. Stock Repurchase
In December 2003 the Company reacquired 200,000 shares of DCME for 200,000,000
restricted shares of the Company.
The stock repurchase agreement was modified allowing an additional 200,000
shares of DCME to be repurchased by the Company.
16
In September 2003 the Company agreed to reacquire the 149,283 shares previously
sold to the investor. The agreement provides for the issuance of 560,000 shares
of DCM Enterprises ("DCME") common stock in addition to 40,000,000 shares of
restricted common stock of the Company. The agreement also allows the Company to
purchase from the investor 200,000 shares of the 560,000 shares of DCME based
upon the following terms per quarter. 40,000 shares of DCME for 40,000,000
shares of restricted common stock of the Company. This agreement to purchase the
200,000 shares of DCME is only in effect until such time that DCME begins
trading.
d. Agreement between the company and DCM Enterprise,
March 18 2004 DCM filed the following information on form 8K as further
agreement to the original agreement between the Company and DCM:
In August 2003 the Company agreed to provide the Buyer of Ace Optics an
alternative company or return the Buyer's stock since Ace Optics ceased
operations immediately after the acquisition. In lieu of an alternative Company
the Buyer and Seller agreed that the balance of the DCME stock received by the
Seller will be returned to the Buyer. Subsequently the Company acquired and then
sold Alpha Tooling to DCM.
In August 2003 The Company acquired Alpha Tooling, Inc. with 190,000 shares of
DCM Enterprises, Inc stock. As per an agreement with DCM Enterprises, Inc the
Company initially transferred Alpha Tooling, Inc to DCM Enterprises, Inc, in
exchange for a reduction of the debit it had with DCM Enterprises, Inc. During
October 2003 the transaction was changed by agreement to an Asset assignment.
The Company assigned certain assets of Alpha Tooling for credit of $311,639
which reduced the debt owed to DCM Enterprises, Inc. from $760,000 to $448,361.
Note 12 - Legal Proceedings
Globalist v. Internet Business's International, Inc. et al
-----------------------------------------------------------------
In this matter Globalist sued the Company and was awarded a judgment plus
interest in the amount of approximately $301,000. The Company has appealed the
court's decision and the award.
Ronald Friedman, Robert Friedman, the Ronald Friedman 1997 Grantor Retained
--------------------------------------------------------------------------------
Annuity Trust v. Internet Business's International, Inc. et al and Internet
--------------------------------------------------------------------------------
Business's International. Inc. v Ronald Friedman 1997 Grantor Retained Annuity
--------------------------------------------------------------------------------
Trust
-----
In April 2001 Ronald Friedman and the Ronald Friedman 1997 Grantor Retained
Annuity Trust sued the Company for, among other things, breach of contract, in
the United States District Court, Southern District of New York. The case was
transferred to the United States District Court, Central District of California,
Southern Division, to be consolidated with Internet Business's International.
Inc. v Ronald Friedman 1997 Grantor Retained Annuity Trust. At that time the
Company filed a cross-complaint against the Trust for rescission and the return
of $1,006,857. This case has been dismissed by the judge.
Community Bank of Nevada v Internet Business's International, Inc. et al
--------------------------------------------------------------------------------
On December 20, 2000, the Community Bank of Nevada filed a lawsuit in District
Court, Clark County against Internet Business's International. Inc., seeking the
return of equipment. The Company was not aware of the lawsuit and a default
judgment was entered against the Company in the amount of $134,052. The
Company's attorney is currently in negotiations to settle this matter.
Louis Cherry v. Internet Business's International, Inc.
------------------------------------------------------------
On June 4, 2004 Mr. Cherry filed a lawsuit in California Superior Court, Orange
County. Mr. Cherry alleges breach of an employment contract and is seeking an
unspecified amount of money in damages. At the time of this filing the matter is
still pending.
Management of the Company believes that due to its current financial condition,
any unfavorable outcome in the above matters will have a materially adverse
effect on the financial condition, results of operations and cash flows of the
Company.
17
Note 13- Subsequent Events
In September 2004 the Company entered into a binding Letter of Intent to acquire
Seamless P2P LLC for preferred and common stock of the Company with a value of
$1,000,000 subject to adjustments as defined in the agreement.
On November 2, 2004 the Company filed an 8K which included an update on the
Letter of Intent (LOI) entered between a subsidiary of the Company, Seamless
Peer to Peer, Inc and Seamless P2P, LLC. Which stated; As of the date of this
report, the parties to the LOI had not entered into a definitive agreement.
Notwithstanding, the parties thereto and the LOI contemplate the transaction
closing on or before December 31, 2004.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion and analysis of the Company's financial condition and
results of operations should be read with the consolidated financial statements
and related notes included elsewhere in this Report.
When the words used in this Report, such as; "expects," "anticipates,"
"believes," "plans," "will" and similar expressions are intended to identify
forward-looking statements. These are statements that relate to future periods
and include, but are not limited to statements; as to statements regarding our
critical accounting policies, adequacy of cash, expectations regarding net
losses and cash flow, statements regarding growth and profitability, need for
future financing, dependence on personnel, operating expenses, ability to
respond to rapid technological change and statements regarding the issuance of
common stock to the Company's executive officers. Forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. These risks and uncertainties include,
but are not limited to, those discussed below, as well as risks related to our
ability to develop and timely introduce products that address market demand, the
impact of alternative technological advances and competitive products, market
fluctuations, the Company's ability to obtain future financing, and the risks
set forth below under "Factors That May Affect the Company's Results." These
forward-looking statements speak only as of the date hereof. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
Overview
Alpha Wireless Broadband, Inc. ("Company") is currently a start up business that
is concentrating on providing "Wireless Internet" access at business locations.
This service is referred to as Wireless Fidelity or Wi-Fi, for short. Wi-Fi
also refers to wireless equipment that meets published 802.11(x) standards.
Wi-Fi equipment operates in 2.4 and 5.8 GHz which are unlicensed frequencies.
There are many wireless Internet systems available but they all have universal
compatibility. The Wi-Fi POP is commonly referred to as a "Wi-Fi Hotspot".
Wireless Internet refers to radio frequencies that may either be licensed (which
is above 5.8 GHz "gigahertz") and or unlicensed frequency (which is between 2.4
to 5.8 GHz).
(A) PLAN OF OPERATION
The Company is currently a start up operation. As of September 30, 2004 the
company had acquired 80 contracts for the installation of Wi-Fi Service. Of
which 20 were viable for the installation of W-Fi service and Wi-Fi services
were installed at those locations. The balance of the contracts were canceled.
The Company currently has less then 5 employees and leases office space in
Henderson, Nevada.
(B) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
With the Company starting up a business it is important to note that the
following discussion and analysis of the Companies financial condition and
results of operations should be read with the consolidated financial statements
and related notes included elsewhere in this Report.
The selected financial data for the first Quarter of Fiscal years ended June 30,
2004, 2003, are derived from the financial statements of the Company and should
be read in conjunction with the audited financial statements included herein.
These are restated based upon the change in revenue recognition. See Note 2 of
the footnotes to the financial statements titled "Change in Revenue
Recognition". The change only impacted the stated "Revenues" and not the "Net
income".
Analysis of Financial Condition
There was no revenue for the three month periods ended September 30, 2004 and
September 30, 2003. The Company ceased operations during fiscal year ended
June 30, 2003. The Company's current operations started effective July 2004.
19
Selling, general and administrative expenses for the three months periods ended
September 30, 2004 and 2003 respectively, were $313,657 and $275, 578. The
respective expensive were due to the Company currently being in a startup phase
and during the same period for 2003 the Company had just ceased operations June
30, 2003.
"Other Income" is either extraordinary income from payment in full on debt for
a reduced amount (with the difference represented as income) and from the sale
of fully or partially depreciated equipment where the income from the sale is
greater than the amount depreciated. Since there are no expectations that
furthers sales will occur and that the revenues from previous operations are
dissimilar there will be no comparison of the quarters.
Other (expenses) for the three month ended September 30,2004 and 2003
respectively of ($874,428) and ($1,449,236), are primarily due the Company
currently being is a startup phase during 2004 and due to the closing of the
Company during 2003 which includes and the write-off of the amounts due
from each segment.
FIRST QUARTER OF FISCAL YEAR ENDED 2005 AND 2004
--------------------------------------------------
September 30, 2004 September 30, 2003
W-Fi ISP, FULL-SERVICE ISP
NET SALES $ 0 $ 0
OPERATING INCOME $ (5,917) $ (654,395)
OTHER
NET INCOME $ 620 $ 118,405
OPERATING INCOME $ (1,206,685) $ (1,449,236)
TOTAL
NET INCOME $ 0 $ 118,405
OPERATING INCOME $ (1,212,602) $ (1,985,226)
The following discussion should be read in conjunction with the financial
statements of the Company and notes thereto contained elsewhere in this report.
Results of Operations
In accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," management had determined that there were three reportable
segments, (all of which have ceased operations in the fourth quarter for fiscal
year ended June 2003), based on the customers served by each segment: Full
service internet service provider (ISP),which ceased operation during the fiscal
year ended June 2003. The current wireless internet service
business-to-consumer ("B2C") provider primarily consisted direct marketing of
the Companies services and products. 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.
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. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies ( Note 1).
Information on reportable segments is as follows:
(1) ISP: The resultant loss for the Wi-Fi ISP segment for first quarter of
fiscal year ended June 30, 2005 was ($5,917) which were expenses
related to the startup of this operation. The resultant loss for the
first quarter of fiscal year June 30, 2004 of ($654,395) was due to
write offs of this segments assets and other cost due to relocating
assets and since this segment ceased operations in the third quarter
of fiscal year ended June 2003, a segmented comparison would be
meaningless.
(2) Other: For the first quarter of the fiscal years ended June 30, 2004
and 2004 respectively received $620 in revenue from a returned deposit
20
that was written off for fiscal year ended June 30, 2002. The revenue
of $118,405 from the sale of a depreciated asset for more then its
book value and was the net profit from that sale. The losses of
($874,428) and ($1,449,236) for the same respective periods stated
above were due to the starting up of one operations and the closing of
prior operations and relocation of offices and equipment.
Liquidity and Capital Resources
Net cash used in operating activites at the end of the first quarter of fiscal
year ended June 30, 2005, decreased to ($165,526) when compared to the results
for the same perioded ended 2004 of ($285,218). The Company has alternative
sources of capital so the Company can expand its new Internet operations of
establishing wireless Internet locations commonly referred to as Wi-Fi hotspots.
This is being provide by two sources; Windsor Professional Plaza LLC which is
providing capital to resolve previous Company debts, and through 1st American
Factoring LLC which provides capital to expand the Companies current operations.
Capital Expenditures
Other than as set forth below, no material capital expenditures were made
during the first quarter ended September 30, 2004.
Acquisitions
In August 2003 the Company acquired Alpha Tooling, Inc. with 190,000 shares of
DCM Enterprises, Inc. stock, as per an agreement with DCM Enterprises, Inc. The
Company then transferred Alpha Tooling, Inc. to DCM Enterprises, Inc. for credit
towards the debit it had with DCM Enterprises, Inc. After October 1, 2003 the
transaction was changed by agreement to an Asset Assignment. The Company
assigned certain assets of Alpha Tooling for credit of $311,639 which reduced
the debt owed to DCM Enterprises, Inc. from $760,000 to $448,361. The Company
retained the Alpha Tooling Corporation which had assets of $42,050 (which
were not assigned to DCM Enterprises, Inc.), and debt of $351,306.
In September 2003 the Company, through its wholly owned subsidiary Global
Debit Cash Card, Inc., a Nevada Corporation ("GLCD") agreed to purchase from
DCM the Colorado and Utah territories for marketing the CARDS as per the USA
Territory Marketing Representative Agreement. Pursuant to the terms of the
agreement GLCD will operate as the Territory Marketing Representative ("TMR") in
Colorado and Utah and license resellers of the CARDS. The Licensed Activated
Resellers ("LAR") will be licensed through GLCD, the TMR.
In December 2003 GLCD acquired the assets of DCM for 60,000,000 shares of GLCD
which included reduction of the note owed by the Company to $515,000, which
was transferred as an asset to GLCD. GLCD is traded over the counter (OTC)
on the Pink Sheets LLC quotation service under the symbol "GLCD".
Critical Accounting Policies
The Securities and Exchange Commission issued Financial Reporting Release No.
60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies,"
or FRR 60, suggesting that companies provide additional disclosure and
commentary on their most critical accounting policies. The most critical
accounting policies are the ones that are most important to the portrayal of a
company's financial condition and operating results, and require management to
make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. The Company believes
that of the significant accounting policies used in the preparation of the
consolidated financial statements (see Note B to the Financial Statements), the
following are critical accounting policies, which may involve a higher degree of
judgment, complexity and estimates. The methods, estimates and judgments The
Company uses in applying these most critical accounting policies have a
significant impact on the results reported in the Company's financial
statements.
Off Balance sheet
The Company has 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.
21
Use of Estimates
The preparation of the consolidated financial statements are in conformity
with United States generally accepted accounting principles 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
The Company issues 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 is 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.
Recently Issued Accounting Pronouncements
In December 2003, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 104, "Revenue Recognition" (SAB 104). SAB 104 clarifies
existing guidance regarding revenue recognition. The Company's adoption of SAB
104 did not have an impact on its consolidated results of operations, financial
position or cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity," or Statement
150. Statement 150 establishes standards for issuer classification and
measurement of certain financial instruments with characteristics of both
liabilities and equity. In accordance with this standard, financial instruments
that embody obligations for the issuer are required to be classified as
liabilities. This statement is effective for all financial instruments entered
into or modified after May 31, 2003, with certain exceptions. Our adoption of
Statement 150 did not have an impact on our results of operations, financial
position or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," that amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
This statement is effective for contracts and hedging relationships entered into
or modified after June 30, 2003, with certain exceptions. Our adoption of SFAS
No. 149 did not have an impact on our financial position or results of
operations or cash flows.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities," or FIN 46. FIN 46 requires the consolidation of
variable interest entities in which an enterprise absorbs a majority of the
entity's expected losses, receives a majority of the entity's expected residual
returns, or both, as a result of ownership, contractual or other financial
interests in the entity. FIN 46 is effective for the first quarter of 2004. We
do not expect the adoption of FIN 46 to have an impact on our consolidated
results of operations, financial position or cash flows.
In December 2002, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," an amendment of SFAS No.
123. SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. This
statement is effective for financial statements for fiscal years ending after
December 15, 2002. SFAS No. 148 has not had any impact on our financial
statements as management uses the fair value of goods and services received to
determine the number of shares to issue.
Inflation
The moderate rate of inflation over the past few years has had an insignificant
impact on the Company's sales and results of operations during the period.
Capital Expenditures
There were no capital expenditures during the 2004 fiscal year.
22
Net Operating Loss Carry forwards
For the fiscal year ended June 30, 2004, the Company had net operating loss
carry forwards for federal and state purposes of approximately $5,117,636 and
$3,070,582 respectively. These carry forwards begin to expire in 2016 and 2006
respectively.
Forward Looking Statements
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations contains "forward looking statements" within the meaning
of Rule 175 under the Securities Act of 1933, as amended, and Rule 3b-6 under
the Securities Act of 1934, as amended, including statements regarding, among
other items, the Company's business strategies, continued growth in the
Company's markets, projections, and anticipated trends in the Company's business
and the industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar expressions identify
forward-looking statements. These forward-looking statements are based largely
on the Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. The Company
cautions that these statements are further qualified by important factors that
could cause actual results to differ materially from those in the forward
looking statements, including, among others, the following: reduced or lack of
increase in demand for the Company's products, competitive pricing pressures,
changes in the market price of ingredients used in the Company's products and
the level of expenses incurred in the Company's operations. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire or prove to be accurate.
The Company disclaims any intent or obligation to update "forward looking
statements."
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. We maintain "disclosure
controls and procedures," as such term is defined in Rule 13a-14(c) under the
Securities Exchange Act of 1934, or the Exchange Act, that are designed to
ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in Securities and Exchange Commission
rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Treasurer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management
recognized that disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Additionally, in
designing disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible disclosure controls and procedures. The design of any disclosure
controls and procedures also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving it's our stated goals under all potential future
conditions. The evaluation revealed certain weaknesses in disclosure controls
and procedures. Based on their evaluation as of a date within 90 days prior to
the filing date of this Annual Report, our Chief Executive Officer and Treasurer
have concluded that, subject to the limitations noted above, and except for the
weaknesses noted above, our disclosure controls and procedures were effective to
ensure that material information relating to us, including our consolidated
subsidiaries, is made known to them by others within those entities,
particularly during the period in which this Annual Report was being prepared.
(b) Changes in internal controls. We plan to institute greater controls by
adding additional staff to allow for greater third person review and
verification of all transactions thereby enhancing the accuracy of all records.
We are also looking to implement many of the new requirements required under the
Sarbanes-Oxley Act of 2002 during the coming year. However, we believe that
there were are no significant changes in our internal controls or, to our
knowledge, in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Globalist v. Internet Business's International, Inc. et al
-----------------------------------------------------------------
In this matter Globalist sued the Company and was awarded a judgment plus
interest in the amount of approximately $301,000. The Company has appealed the
court's decision and the award.
23
Ronald Friedman, Robert Friedman, the Ronald Friedman 1997 Grantor Retained
--------------------------------------------------------------------------------
Annuity Trust v. Internet Business's International, Inc. et al and Internet
--------------------------------------------------------------------------------
Business's International. Inc. v Ronald Friedman 1997 Grantor Retained Annuity
--------------------------------------------------------------------------------
Trust
-----
In April 2001 Ronald Friedman and the Ronald Friedman 1997 Grantor Retained
Annuity Trust sued the Company for, among other things, breach of contract, in
the United States District Court, Southern District of New York. The case was
transferred to the United States District Court, Central District of California,
Southern Division, to be consolidated with Internet Business's International.
Inc. v Ronald Friedman 1997 Grantor Retained Annuity Trust. At that time the
Company filed a cross-complaint against the Trust for rescission and the return
of $1,006,857. This case has been dismissed by the judge.
Community Bank of Nevada v Internet Business's International, Inc. et al
--------------------------------------------------------------------------------
On December 20, 2000, the Community Bank of Nevada filed a lawsuit in District
Court, Clark County against Internet Business's International. Inc., seeking the
return of equipment. The Company was not aware of the lawsuit and a default
judgment was entered against the Company in the amount of $134,052. The
Company's attorney is currently in negotiations to settle this matter.
Louis Cherry v. Internet Business's International, Inc.
-------------------------------------------------------------
On June 4, 2004 Mr. Cherry filed a lawsuit in California Superior Court, Orange
County. Mr. Cherry alleges breach of an employment contract and is seeking an
unspecified amount of money in damages. At the time of this filing the matter is
still pending.
Management of the Company believes that due to its current financial condition,
any unfavorable outcome in the above matters will have a materially adverse
effect on the financial condition, results of operations and cash flows of the
Company.
ITEM 2. CHANGES IN SECURITIES
Authorized Shares
------------------
During April 2003 the board of directors amended the articles of incorporation
to increase the authorized to 10,000,000,000 shares of which 9,990,000,000 are
common shares and 10,000,000 are preferred. The shares were initially increased
in April 2003 to 2,000,000, and the balance was issued in April 2004. The
Company does not have enough Authorized shares to issue in the event of the
conversion of all of its preferred stock outstanding.
Stock Issuance
During first quarter of fiscal year ended June 30, 2005 the following stock
was issued:
$300,000 worth of common stock to Windsor Professional Plaza LLC as payment for
$300,000 worth of debt.
220,000,000 shares were issued to acquire 22,000 shares of Save the World valued
at $5.00 per share.
874,430,000 shares were issued for services.
During fiscal year ended June 30, 2004, the following stock was issued:
495,000,000 shares were issued for payment in full on a note owed by the Company
for past due wages.
546,260,000 shares of common stock were issued per the conversion of preferred
stock into common, pursuant to the agreement with Windsor Professional Plaza,
LLC.
136,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
24
156,390,807 shares of restricted common stock were issued to Global Debit Cash
Card pursuant to the Territory Marketing Agreement, as amended, in exchange for
the limited exclusive marketing rights to sell the debit cards in the states of
Colorado and Utah for a period of ten (10) years.
170,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
200,000,000 shares of restricted common stock were issued to repurchase 200,000
shares of DCM.
54,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
80,000,000 shares of restricted common stock were issued as per agreement for
the repurchase of 80,000 shares of DCM.
The company complies with the provisions of Emerging Issues Task Force Issue No.
96-18, Accounting for Equity Instruments Issued to Other Than Employees for
Acquiring, or in Conjunction with, Selling Goods or Services ("EITF 96-18"),
with respect to stock issuances to such non-employees, whereby the value of the
services was determined as a reliable measurement of fair value.
Stock Issuance for Acquisitions
Refer to Note 2-Business Combinations
Preferred Stock
In May 2004 Mercatus, with the consent of the Company, assigned 1,029,231,
preferred shares to Windsor Professional Plaza, LLC. During the first quarter
of fiscal year ended June 30, 2005 the Company cancelled 35,186 shares in order
to reduce preferred stock outstanding because they would have converted into an
amount of common shares in excess of those authorized. Windsor Professional
converted 117,453 shares of preferred stock.
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 AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibits included or incorporated by reference herein are set forth in the
Exhibit Index following the signatures.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter covered by this
Form 10-QSB.
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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.
ALPHA WIRELESS BROADBAND, INC.
Date: November 22, 2004
/s/ Albert R. Reda
---------------------
Albert R. Reda
Chief Executive Officer, Secretary
EXHIBIT INDEX
Number Description
--------------------------------------------------------------------------------
31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(filed herewith).
32 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
26