U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Mark One)[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended June 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. f/k/a INTERNET BUSINESS'S INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
33-0845463
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(I.R.S. Employer Identification No.)
10120 S. Eastern Ave. Suite 200, Henderson, Nevada, 89052
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(Address of principal executive offices)
(775) 588-2387
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(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by referenced in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [ ]
Issuer's revenue for its most recent fiscal year: $0.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of August
31, 2004: $2,015,926
State the number of shares outstanding of each of the issuer's classes of common
equity, as of August 31, 2004: 2,015,926,692
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS
ITEM 2. DESCRIPTION OF PROPERTY
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEM 7. FINANCIAL STATEMENTS
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 8A. CONTROL AND PROCEDURES
ITEM 8B. OTHER INFORMATION
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. EXHIBITS
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
SIGNATURES
1
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
General
Alpha Wireless Broadband, Inc. formerly known as Internet Business's
International, 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). Transmission of radio frequency is regulated by the Federal
Communications Commission and has over the past 3 years become a growing form of
communications for access to the Internet. Radio equipment installed at a
location creating a POP (Point Of Presence) which is connected directly to the
Internet and maintained by an Internet Service Provider (ISP). This POP
broadcasts radio frequencies allowing two-way communications to the Internet. A
user's wireless modem equipped with an antenna and installed in a stationary
computer, a laptop computer or other wireless device, communicates with the POP
permitting the end user to transmit and receive data to the Internet.
Previous Operations
International Food and Beverage was listed on the Over The Counter Bulletin
Board in June 1988. This company operated in the food services industry until
late 1997, at which time it ceased operations. This firm remained dormant until
December of 1998. At that time new management was put in place, and a decision
was made to move the Company's focus to the Internet and change the Company's
name to Internet Business's International, Inc. In September 2004 the Company
changed its name to Alpha Wireless Broadband, Inc.
On January 1, 1999 the newly named company began to offer goods and services
over the Internet, starting with the development of an on-line B2C (business to
consumer) E-Retail site, AuctionWinner.com, The site was launched in April 1999.
In July 1999, the Company expanded their service offerings by acquiring an ISP
(Internet Service Provider) by the name of LA Internet. The Company changed its
domicile from Delaware to Nevada in the same year.
From January 2000 till April 2003 goods and services were offered by the
Company, over the Internet, including a national ISP and a local WISP in Las
Vegas, Nevada. These operations ceased in April of 2003.
From April 2003 till May 2004 the Company was not in operation.
In May 2004, the Company opened a dating web site for seniors. This is the first
business venture since the Company ceased its prior operations in April 2003.
In June 2004, the Company changed focus and incorporated Skyy-Fi, Inc. a Nevada
Corporation, a wholly owned subsidiary, and its related web site www.skyyfy.com,
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which is the Company's wireless Internet Service Provider. Skyy-Fi will
undertake to provide to consumers wireless high speed Internet access at
locations across the United States. Skyy-Fi executed agreements to fund the
business development for acquisition of Wi-Fi hot spots and deployment of the
equipment at the acquired locations.
In July 2004 the Company established, The Internet Business's International,
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Inc. Creditor Trust to pay the companies creditors and to allow the Company to
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continue to operate without interruption. KFG LLC accepted the appointment as
trustee, and is vested with the authority to settle outstanding matters with the
companies' creditors willing to accept shares of the Company's common stock for
settlement pursuant to the terms and conditions of the trust agreement
Current Operations
The Company is currently maintaining and operating the following web sites,
www.skyyfi.com, www.singlesenior.net , and its corporate site www.awbi.biz.
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The Company is concentrating on establishing Skyy-Fi "Wi-Fi Hotspots". The
Company's plan for its current and future Wi-Fi operations are based upon the
following business model which outlines the; "identifying", "acquiring" and
"approving" of Wi-Fi Hotspots and then the "installation" of equipment at the
Wi-Fi location.
2
"Identifying" Wi-Fi Hotspots
1) Wi-Fi Hotspot for a Single Location with Multi User
This service type would be deployed in locations, such as a coffee shop, car
wash, and /or restaurant, which meet minimum deployment requirements. Once
deployed the service then creates a Wi-Fi Hotspot. The Company installs an
individual Wi-Fi compatible radio and antenna at the location which will provide
coverage throughout the location. Once operating, the Hotspot permits multiple
users with compatible laptop computers and/or other wireless devices
simultaneous access to the Internet while patronizing that location. The access
to the Hot Spot maybe free if certain services are purchased and/or at cost if
these services are not purchased. The Company charges the owner of the business,
connection and services fees, which may be off set by the fees charged for
Internet service and/or from items purchased by the customer from the business.
The Internet customers can purchase the Internet service on a daily, weekly or
monthly basis.
2) Wi-Fi Hotspot for Single and/or Multi broadcast location with Multiple
Users
This service type would be deployed in a large single premise, such as a hotel,
and or multiple occupancy location by installing one or more integrated hotspots
within the premises that will create a wireless "Local Area Network" (LAN), by
providing radio frequency coverage throughout the premises. Depending on the
level of user demand, one or more of the integrated hotspots will be connected
directly to the Internet. Once operating, this type of hotspot network permits
numerous users' access to the Internet simultaneously, while patronizing the
host hotel in their room/ apartment/ office or other property. Users of this
type of hotspot network are able to purchase access to our network in the same
manner as those users accessing one of our hotspots located in a single,
discreet location.
3) Large Geographic Location with Multiple Wi-Fi Hotspot Services
Wi-Fi service for large geographical areas, such as a residential subdivision, a
commercial center or sections of a municipality and or the entire municipality,
would require the deployment of a large number of hotspots that effectively
"blanket" the target coverage area with radio frequencies. With this type of
Wi-Fi hotspot deployment the individual consumer and/or end user (based upon
agreed fee arrangements) has the ability to roam within the covered area and
have Internet access. The large geographical area covered would be solicited by
the Company offering Internet access to potential business and residential
customers in order to establish ongoing yearly or monthly fee paying accounts.
Occasional visitors within the Wi-Fi service area would be able to purchase
access to the network on a daily and/or weekly basis.
Wi-Fi service for large geographical areas will incur monthly charges to the
Company for the rental of broadcast radio and antenna locations. These costs
would be incorporated within the Internet access charges for the area. Access
charges will also vary depending on the type of access the end user wants within
the covered area.
"Acquiring" Wi-Fi Hotspots Locations
The Company plans on using a small in-house sales staff and several independent
salespersons. This allows the company to adjust sales activities as required.
The in-house sales staff also allows the Company to maintain continuity with the
sales training and presentations of the independent sales personal.
"Approving" of the Wi-Fi Location
The acquired location would then have to be verified for the availability of
high speed Internet access. The high speed Internet service could be obtained
from a DSL provider, a cable company provider, and/or bandwidth provider that
offer either a hard wired or wireless service. A Company or contract technician
would physically review the location to make sure that a Wi-Fi radio signal
would not be interrupted within the transmission area by other competing
signals. If the location has high speed Internet access available at a
reasonable cost, and it's verified that the end user is able to receive a clear
Wi-Fi signal, then the site would be approved for installation.
"Installation" of Equipment at Wi-Fi Hotspot Locations
Once the Wi-Fi Hotspot location has been approved for installation by the
Company's field representative and the contracts executed between the Company
and the location owner and /or manager, the location will schedule for
installation of equipment. The Company may use either company or qualified
contract installers to do the equipment installations.
3
Market and Competition
Market
The market for Internet services is highly competitive. There are no substantial
barriers for entry into the Wi-Fi market, based upon the advances of Internet
technology. Management expects competition to continue to grow and intensify.
This is especially true in the acquisition and installation of Wi-Fi hotspots.
Creating Wi-Fi hotspots is one of the fastest growing segments of the Internet
and both the private and public sector are becoming involved in the market.
Wi-Fi industry experts concur regarding the future growth of Wi-Fi Hot Spots and
consumer Wi-Fi use over the next decade. Wi-Fi was identified as integral to the
further expansion of mobile computing, and there are research reports that
predict there will be 700 million users of Wi-Fi by 2007.
Competition
Several companies such as Starbucks and T-Mobile have entered into the
competition with their own Wi-Fi locations. Toshiba one of the world's largest
cellular telephone manufacturers is attempting to organize a network of Wi-Fi
locations under its umbrella. Other Cellular Telephone Companies such as Sprint
are also offering Mobil Internet access through connection to their cellular
networks. McDonalds and other food chains and hotel are also contracting with
companies to deploy Wi-Fi at their locations.
Other factors that impact the Wi-Fi sector is that there are venues that are
offering free Wi-Fi. Management feels that free Wi-Fi will not work because
there are fixed costs for bandwidth that have to be paid by someone. Other costs
which are also not free nor can they be waived, are costs of the broadcast
radios, routers and antennas. Free Internet has been tried in the past, for
example Net Zero had to move away from that model due to the fact that revenue
from advertisers did not off set the hard cost of accessing the Internet.
Negative competitive developments could also have an adverse effect on the
Company's business such as the latest court rulings against the FCC regulations
regarding competitors' access to phone Company Central Office facilities;
thereby increasing the cost of the DSL services to Wi-Fi locations. The FCC has
required the telephone companies to lease network access to rivals at
government-set rates in order to promote competition for local service, but an
appeals court in March set aside those regulations.
Competitors to the Company that have access to financial markets and cutting
edge technological resources will remain viable for growth and expansion. These
and other types of competitors for Internet access are expected to continue
making substantial expenditures to promote, expand and improve their on-line
properties.
With the continued growth of the tech sector and the increased competition for
the Wi-Fi Internet access business -there has been a corresponding increase in
the number of business failures which has negatively impacted availability of
funds for these developing businesses. These occurrences have also impacted the
availability of funds for the Company. The Company ceased its prior operations
due to lack of funding. It should also be noted competitors that were
significantly larger and/or better established than the Company also failed. The
Company has obtained funding for acquisition and deployment of its Wi-Fi Hotspot
Locations.
The following is a list of company competitors:
Direct Competition
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Company Name Public/Private Web-Site Stock Symbol
--------------- -------------- ------------------------ ------------
Axcess2go Private www.axcess2go.com N/A
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Caf .com Inc Private www.caf .com N/A
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Fat Port Private www.fatport.com N/A
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Net Near U Private www.nnu.com N/A
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Wayport, Inc Private www.wayport.net N/A
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4
Direct Competition
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Company Name Public/Private Web-Site Stock Symbol
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Wi-Fi Guys. LLC Private www.wi-figuys.com N/A
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Netopia, Inc Public www.netopia.com NTPAE
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T-Mobile Public www.t-mobile.com/hotspot DTLSF
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Toshiba Public www.toshibamyconnect.com TOSBF
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Verizon Public www.verizon.net/wifi VZ
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Several of the principal competitive factors which would determine success in
the targeted markets are:
- location;
- high speed bandwidth availability;
- customer base;
- fee arrangement i.e. location owner pays vs. end user pays;
- potential number of simultaneous users; and
- implementation costs
To acquire the locations the Company plans on using a small in-house sales staff
and several independent salespersons. This allows the company to adjust sales
activities as required. The in-house sales staff also allows the Company to
maintain continuity with the sales training and presentations of the independent
sales personal.
Marketing Plan
The Company will concentrate its marketing campaign within a given region first
to businesses within the chosen area that meet the criteria determined by
Management. The types of businesses that meet the criteria are coffee shops, car
washes, and/or hotels. Once a Wi-Fi hotspot location is established the Company
will advertise in order to inform the consumer of the availability of Wi-Fi
service at that location.
Once it establishes name recognition within the marketed region the Company will
refocus its marketing campaign to another region and/or business type.
The Company marketing campaign will use on-line services, web site placement and
advertising networks, as well as traditional off-line media such as radio and
direct mail print to convey to the business owner/ operator and the consumer the
services that are offered by the Company. The Company will also use direct
telemarketing and facsimile services to also inform the business owner/operator
and consumer of these services. Accordingly, the Company will incur increased
costs associated with advertising these services to business operators and
consumers
Proprietary Rights
The Company currently uses certain licensing agreements to provide proprietary
products and services. Management cannot guarantee that it would be able to
continue to license these products and services on reasonable terms.
Employees
As of the date of this filing, in addition to the corporate officers, the
Company has 5 employees.
The Company will use as required, independent contractors for sales personnel,
technical support and installations
Risk Factors
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below, the other information in this Form
10-KSB Annual Report and other information contained in our filings with the
United States Securities and Exchange Commission before investing in our shares
of common stock. If any of the following risks occur, our business, operating
results and financial condition could be seriously harmed. The trading price of
our common stock could decline due to any of these risks, and you may lose all
or part of your investment.
5
1. Regulation of the Company's Industry:
Regulation of the following areas could impact the Company's operations;
(a) Regulation of the Internet
To date there has been some regulation of content providers on the Internet and
this regulation may increase due to the increasing popularity and use of the
Internet by broad segments of the population. It is possible that new laws and
regulations may be passed and/or adopted with respect to the Internet pertaining
to access, content of Web sites, privacy, pricing, encryption standards,
consumer protection, electronic commerce, taxation, and copyright infringement
and other intellectual property issues. No one is able to predict the effect, if
any, what future regulatory changes or developments may have on the demand for
Internet services, access and/or other Internet-related activities. Changes in
the regulatory environment relating to the Internet access industry may include
the enactment of laws and/or regulations that directly or indirectly affect the
costs of telecommunications Internet access. These changes could increase
competition from national and/or regional telephone companies and other Internet
access providers. These changes could adversely affect the Company's business,
operating results and financial condition.
(b) Regulation of Internet Access
The Company provides Internet service, by using Internet access provided by
telecommunications carriers. Terms, conditions and prices for telecommunications
services are subject to economic regulation by state and federal agencies.
Internet access providers are not currently subject to direct economic
regulation by the FCC or any state regulatory body, other than the type and
scope of regulation that is applicable to businesses generally. In April 1998,
the FCC reaffirmed that Internet access providers should be classified as
unregulated "information service providers" rather than regulated
"telecommunications providers" under the terms of the Federal Telecommunications
Act of 1996. Currently the Company is not subject to federal regulations
applicable to telephone companies and similar carriers because the Internet
access services offered are provided by third-party telecommunications
providers. To date, no state has attempted to exercise economic regulation over
Internet service providers.
(c) Regulation of Wireless Access
Wi-Fi Internet access products operate in unregulated frequencies that broadcast
between 900 MHz and 2400 MHz. Due to growth of Wi-Fi and the corresponding
increased use within this bandwidth, there maybe regulation in the near future.
The regulation could impact broadcast range and use within given locations;
however, at present the broadcast frequency remains unregulated.
2. Company's Results of Operation:
In addition to the other information in this section, the following risk factors
may impact the operation of the Company under its current business plan, which
are:
(a) Limited Operating History:
The Company began operations as a Wireless Internet Service Provider in June of
2004. The Company; therefore, has a limited operating history, and its prospects
are subject to the risks, expenses and uncertainties frequently encountered by
start-up companies that operate exclusively in the new and rapidly evolving
markets for Internet services and products.
(b) Revenue Results Fluctuate
The Company expects to derive the majority of its revenue by providing
Wireless Internet Access at a variety of Wi-Fi locations within the United
States. The cost of providing Wi-Fi service to a location is fixed; however, the
revenue from actual usage by the consumer is difficult to forecast accurately
due to the limited operating history of this type of service.
(c) Because our stock is penny stock, shareholders will be limited in their
ability to sell the stock.
Our shares qualify as penny stocks and are covered by Section 15(g) of the
Securities Exchange Act of 1934 which imposes additional sales practice
requirements on broker/dealers who sell our securities in the aftermarket. For
sales of our securities, the broker/dealer must make a special suitability
determination and receive from you a written agreement prior to making a sale to
you. Because of the imposition of the foregoing additional sales practices, it
is possible that brokers will not want to make a market in our shares. This
could prevent you from reselling your shares and may cause the price of the
shares to decline.
Due to these factors and the current trading price of the Company's stock,
future success is dependent on the Companies ability to attain additional
financing in order to implement its proposed Wi-Fi service. The Company did
obtain financing for the installation of its Wi-Fi locations; this ability to
obtain additional financing does not guarantee that the Company will ultimately
have the ability to attain a profit from its operations.
It should also be noted that the Company's prior business which ceased
operations during fiscal year ended June 30, 2003 resulted in significant losses
for the Company.
6
ITEM 2. DESCRIPTION PROPERTIES
The following locations are the principal places of business of the Company:
10120 S. Eastern Avenue, Suite 200, 2050 Russett Way, Suite 338,
Henderson, Nevada 89052 Carson City, Nevada 89703
The Company leases each location on a month-to-month basis for approximately
$100 per month.
The Company, through its Alpha Tooling Inc. subsidiary has entered into lease
agreements for additional office space that expires in June 2007. Remaining
commitments under the leases are as follows:
Fiscal Year
Ending June 30 Amount
---------------- --------
2005 $38,640
2006 40,572
2007 34,734
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$113,946
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to the following legal proceedings:
Globalist v. Internet Business's International, Inc. et al. In this matter,
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Globalist sued the Company and was awarded a judgment in the amount of $300,960.
The Company has appealed the courts decision and the award.
Ronald Friedman, Robert Friedman, the Ronald Friedman 1997 Grantor Retained
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Annuity Trust v. Internet Business International, Inc. et al. In April 2001,
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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 suit 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, wherein the Company sued the trust
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for recession and the return of $1,006,857. This case has been dismissed.
Community Bank of Nevada v. Internet Business's International, Inc. et al. On
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December 20, 2000, Community Bank of Nevada filed a lawsuit in District Court,
Clark County against Internet Business's International 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.
Louis Cherry v. Internet Business's International, Inc. On June 4, 2004, Mr.
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Cherry filed a lawsuit in California Superior Court, Orange County. Mr. Cherry
alleges breach of an employment contract and is seeking an unspecified amount in
money damages. At the time of this filing, this matter is still pending.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to our security holders, through the
solicitation of proxies or otherwise, during the quarter ended June 30, 2004.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
The common stock of the Company is traded on the Over the Counter Bulletin Board
under the symbol "AWBI" and the range of closing bid prices shown below is as
reported by the this market place. The quotations shown reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
For the Fiscal Year Ended June 30, Per Share Common Stock Bid Prices by Quarter
2003 2004
High Low High Low
1st Quarter 09-30 0.010 0.002 0.0027 0.001
2nd Quarter 12-31 0.004 0.001 0.0014 0.001
3rd Quarter 03-31 0.002 0.001 0.0009 0.0001
4th Quarter 06-30 0.004 0.001 0.0008 0.0001
(b) Holders of Common Equity
As of June 30, 2004 there were 607 shareholders of record of the Company's
Common Stock.
(c) Dividends
The Company declared the following dividend during the fiscal year ended June
30, 2003:
7
On June 17, 2002, the Company announced the sale of Aces Optics to CRT Corp. for
2,000,000 shares of CRT restricted stock valued at $1.00 a share, and the
dividend was based on one share of CRT Corp. per 100 shares of post reverse
split shares of the Company. Shareholders of the Company were to receive one
share of CRT Corp. for every 100 shares of IBII shares held by each shareholder.
The record date was July 17, 2002 and the distribution date was August 30, 2002.
(d) Securities authorized for issuance under equity compensation plans.
Number of securities
remaining available for
Number of securities to be future issuance under
issued upon exercise of Weighted-average price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
-------------------------- -------------------------- ------------------------- --------------------------
Equity compensation plans
approved by security
holders None None None
-------------------------- -------------------------- ------------------------- --------------------------
Equity compensation plans
not approved by security
holders:
--------------------------
2003 Stock Compensation
Plan III(1) 30,000,000 .0020 0
-------------------------- -------------------------- ------------------------- --------------------------
2003 Employee and
Consultant Plan (2) 50,000,000 .0010 0
-------------------------- -------------------------- ------------------------- --------------------------
2003 Employee and
Consultant Plan(3) 40,000,000 .0020 0
-------------------------- -------------------------- ------------------------- --------------------------
2003 Employee and
Consultant Plan(4) 80,000,000 .0015 0
-------------------------- -------------------------- ------------------------- --------------------------
2004 Stock Plan(5) 80,000,000 .0016 0
-------------------------- -------------------------- ------------------------- --------------------------
2004 Employee and
Consultant Plan(6) 80,000,000 .0011 0
-------------------------- -------------------------- ------------------------- --------------------------
(1-6) The Plans provide to directors and key employees selected for
participation in the Plan with added incentives to continue in the service of
AWBI; to create in such directors and employees a more direct interest in the
success of the operations of AWBI by relating compensation to the
achievement of long-term corporate economic objectives; to attract and
retain directors and key employees by providing an opportunity for investment in
AWBI; to obtain services for AWBI from independent contractors, for
services, at reduced compensation or at rates and/or on terms which are
otherwise negotiated favorably to AWBI, by paying their retainer or fees in the
form of shares of the Company's common stock, $0.001 par value per
share. The Board of Directors of the Company administers the plans.
Before the end of the quarter September 30, 2004 an additional 1,026,390,000
shares of common stock were issued upon conversion of preferred stock into
common, pursuant to the agreement with Windsor Professional Plaza, LLC.
For the fourth quarter for fiscal year period ended June 30, 2004, the following
stock was issued:
495,000,000 were issued for payment in full on note owed by the Company for past
due wages the note amount was credited to Paid in Capital in the amount of
$316,577 which had an original balance of $315,000
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.
During the third quarter ended March 31, 2004 of fiscal year ended June 30, 2004
the following stock was issued;
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
8
156,390,807 shares of restricted common stock were issued to Global Debit Cash
Card pursuant to the Territory Marketing Agreement, as amended on March 15,
2004, 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.
During the second quarter ended December 31, 2003 of fiscal year ended June 30,
2004 the following stock was issued;
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 as per agreement to
repurchase of 200,000 shares of DCM.
During the first quarter ended September 30, 2003 of fiscal year ended June 30,
2004 the following stock was issued;
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 to
repurchase of 80,000 shares of DCM.
The company complies with the provisions of Emerging Issues Task Force ("EITF")
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.
ITEM 6. 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
9
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. formerly known as Internet Business's
International, Inc. ("Company") is currently a start up business that is
concentrating on providing "Wireless Internet" (see "Wireless Internet" in
Section 1, for more information) access at business locations. This service is
referred to as Wi-Fi (see "Wireless Fidelity" in Section 1, for more
information). The Company has had prior experience as a dial-up Internet
Service Provider (ISP) and as a broadband Wireless Internet Service Provider
(WISP). These operations ceased April 2003.
Analysis of Selected Financial Data
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 years ended June 30, 2004, 2003, are derived
from the audited 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".
Year End
Statement of Operations Data Year End June 30
---------------------------- --------------------------------
2004 2003
--------------- ---------------
Revenues $ 0 $ 778,784
Cost of revenues $ 0 $ 45,000
Sales, General & Admin. Exp. $ 827,229 $ 2,629,324
Depreciation & Amortization Exp. $ 1,745,090 $ 1,919,823
Net operation income (loss) $ (2,575,319) $ (3,815,363)
Net other income 19,005
Net other expense $ (2,619,166) $ (902,935)
Net income (loss) $ (5,175,480) $ (4,718,298)
Net income (loss) per share Nil -0.05
Weighted average shares
outstanding 1,433,197,844 103,273,603
10
Balance Sheet Data
---------------------------- --------------------------------
2004 2003
--------------- ---------------
Current assets $ 5,469 $ 1,389
Other assets $ 1,196,038 $ 2,646,954
Total assets $ 1,201,507 $ 2,648,343
Current liabilities $ 1,407,787 $ 1,302,621
Long-term debt $ 2,095,083 $ 976,469
Shareholders equity (deficiency) $ (2,301,363) $ 369,253
Total liabilities and equity $ 1,201,507 $ 2,648,343
The Company paid a dividend in the 2nd Quarter of Fiscal Year ended June 2003.
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
(a) Comparison of Year to Year
(1) Fiscal 2004 Compared To Fiscal 2003
The Company received $19,005 from a returned deposit that was written off in a
financial report for the year ended June 2002. Therefore the $19,005 was booked
as other income for the twelve-month period ended June 30, 2004, the Company
operations ceased in the third quarter of fiscal year ended June 30, 2003 which
had revenue of $778,784 for that fiscal year.
The resulting loss for the twelve-month period ended June 30, 2004 of
($5,175,480) was comparable to the losses of ($4,718,298) reported for the year
ended June 30, 2003.
(2) Fiscal 2003 Compared To Fiscal 2002
The Company's revenues for the twelve-month period ended June 30, 2003 of
$778,784 decreased approximately 132.1% when compared with revenues $5,895,586
of in the prior year. The decrease in revenue is due to the following reasons;
ISP loss of revenue from the dial-up, due to attrition and the Company not
actively seeking additional dial-up accounts, hosting and web design account due
to a vast number of clients either going out of business and or reducing it's
expenditures for internet related activities. Due to these reasons the Company
closed these operations to reduce the losses. The mortgage loan division ceased
operation in December 2001 and therefore did not generate revenue during this
fiscal year. The direct marketing division continues to lose money and the
associated cost of corporate operations produced the net loss for the fiscal
year, therefore this operation was also closed. The only other source of revenue
for the Company was from the sale of a depreciated asset that occurred in the
second quarter of this fiscal year.
The resulting loss for the twelve-month period ended June 30, 2003 of
($4,718,298) was a significant increase when compared to the losses of
($426,221) reported for the year ended June 30, 2002. One major contributor to
the increased losses that have occurred was due to the closing down of
operations and the increase costs associated with those closures.
(b) Comparison by Segment
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), mortgage banking business (which ceased
operation during the fiscal year ended June 2002), and 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).
11
Information on reportable segments is as follows:
FISCAL YEAR ENDED
---------------------------------
June 30, 2004 June 30, 2003
---------------- ---------------
FULL-SERVICE ISP
NET SALES $ 0 $ 657,096
OPERATING INCOME $ (786,753) $ (2,093,562)
---------------- ---------------
MARKETING (B-TO-B/C)
NET SALES $ 0 $ 1,688
OPERATING INCOME $ 0 $ (71,355)
---------------- ---------------
OTHER $ 19.005
NET SALES $ 0 $ 120,000
OPERATING INCOME $ (4,388,727) $ (2,553,381)
---------------- ---------------
TOTAL
NET SALES $ 19,005 $ 778,784
OPERATING INCOME $ (5,175,480) $ (4,718,298)
---------------- ---------------
(1) ISP: The resultant loss for the ISP segment for the fiscal year ended
June 2004 was ($786,753) this 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) Marketing: This segment was closed by the fiscal year ended June 30,
2003 a segmented comparison would be meaningless.
(3) Other: For the fiscal year ended June 2004 this segment received
$19,005 in revenue from a returned deposit that was written off for fiscal year
ended June 30, 2002. The revenue for the fiscal year ended June 2003 was from
the sale of a depreciated asset, the $120,000 was the net profit from that sale.
The losses of ($4,388,727) for the fiscal year ended June 2004 were due to the
closing of operations and relocation of offices and equipment. The losses for
the prior fiscal year ended June 2003 were also due to the closing down of
operations combined with operational losses.
Liquidity and Capital Resources
Net cash provided by operations of $5,469 twelve-month period ended June 30,
2004 was an increase in cash when compared to the cash balance of $1,389 for the
twelve-month period ended June 30, 2003. The Company increase in cash was from
additional paid in Capital. 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 Blue Bear Funding LLC formerly 1st
American Factoring LLC which provides capital to expand the Companies current
operations.
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.
12
Off Balance sheet
The Company has not entered into any off balance sheet arrangements that have or
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.
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.
13
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.
Net Operating Loss Carry forwards
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 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 $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 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 from July 1, 2003 to June 30, 2004
was an increase of approximately $1,600,000.
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."
Quantitative and Qualitative Disclosures about Market Risk
Market risk generally represents the risk of loss that may result from the
potential change in the value of a financial instrument due to fluctuations in
interest rates. Market risk is inherent to both derivative and non-derivative
financial instruments, and accordingly, the scope of the Company's market risk
management includes all market risk sensitive financial instruments.
The Company uses several tools and risk management strategies to monitor and
address interest rate risk. Such tools allow the Company to monitor and
evaluate its exposure to these risks and to manage the risk profile of its
residual interest portfolio in response to changes in the market risk.
The Company measured the sensitivity of the current value of cost of funds
(Prime Rate plus 1.5%) to changes in the mortgage interest rate (bond market
plus 1.5%) that the Company charges on funded loans, which is reflected with
changes in interest rates. The difference in the cost of funds versus the rate
the Company funded the mortgage loans could have benefited the company because
the cost of funds was less then the mortgage interest rate, or the Company could
lose money if the cost of funds was more than the mortgage interest rate.
The following table summarizes the sensitivity analysis of change in the fair
value of our cost of funds as compared to the residual interests as of June
30, 2002 and June 30, 2001:
14
Change In Fair Value As of:
June30, 2002 June 30, 2001
------------ -------------
Prime Rate 4.750% 6.750%
Our Cost of Funds 1.500% 1.500%
------------ -------------
Total 6.250% 8.250%
Bond Market 4.800% 5.331%
Consumer Cost of Funds 1.500% 1.500%
------------ -------------
Total 6.300% 6.831%
Net Impact Benefit (Loss) 0.050% (1.419)%
ITEM 7. FINANCIAL STATEMENTS
Financial statements as of and for the fiscal years ended June 30, 2004, 2003,
and 2002 (restated) are presented in a separate section of this report following
Signatures.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the Registrant's two most recent fiscal years and the first two quarters
of the fiscal year ended June 30, 2004, Henry Schiffer CPA, who was engaged to
audit and or review these financial statements was dismissed. There were no
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure. In
addition, there were no "reportable events" as described in Item
304(a)(1)(iv)(B)1 through 3 of Regulation S-B that occurred within the
Registrant's most recent fiscal year and the subsequent interim period
preceding the former accountant's dismissal.
ITEM 8A. 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 its 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.
ITEM 8B. OTHER INFORMATION
None
15
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; PROMOTORS AND CONTROL PERSONS;
COMPLICANE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors and Executive Officers
The names, ages, and respective positions of the directors and executive
officers of the Company are set forth below. The Directors named below will
serve until the next annual meeting of the Company's stockholders or until their
successors are duly elected and have qualified. Directors are elected for a
one-year term at the annual stockholders' meeting. Officers will hold their
positions at the will of the board of directors, absent any employment
agreement, of which none currently exist or are contemplated. There are no
arrangements, agreements or understandings between non-management shareholders
and management under which non-management shareholders may directly or
indirectly participate in or influence the management of the Company's affairs.
There are no legal proceedings involving the officers and directors of the
Company.
(a) Albert R. Reda, Chief Executive Officer/Director.
Mr. Reda, age 58, was appointed a Director and Chief Executive Officer, of the
Company in November 1998. From 1996 to 1998, he was employed with CRT
Corporation as Vice President in charge of production for manufacturing frozen
food products. For the period of 1994 to 1995, Mr. Reda was self-employed in
the financial lending area, buying and selling loans between individuals and
institutions. Mr. Reda received his Bachelor of Science Degree from California
State University, Long Beach, with a major in engineering.
Mr. Reda is also Treasurer and a director of DCM Enterprises, Inc. and Secretary
and Director of Global Debit Cash Card, Inc.
(b) Mildred Carroll, Secretary.
Ms. Carroll, age 61 is Secretary to the Company and has worked for the Company
and one or more of its subsidiary since April 1999. Prior to that time Ms.
Carroll was self employed.
Involvement in Certain Legal Proceedings
To our knowledge, during the past five years, no present or former director or
executive officer of our company: (1) filed a petition under the federal
bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or
similar officer appointed by a court for the business or present of such a
person, or any partnership in which he was a general partner at or within two
yeas before the time of such filing, or any corporation or business association
of which he was an executive officer within two years before the time of such
filing; (2) was convicted in a criminal proceeding or named subject of a pending
criminal proceeding (excluding traffic violations and other minor offenses); (3)
was the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from or otherwise limiting the following activities:
(i) acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, associated person of any of the foregoing, or as an investment
advisor, underwriter, broker or dealer in securities, or as an affiliated
person, director of any investment company, or engaging in or continuing any
conduct or practice in connection with such activity; (ii) engaging in any type
of business practice; (iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal commodity laws; (4) was
the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any federal or state authority barring, suspending or
otherwise limiting for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be associated with persons
engaged in any such activity; (5) was found by a court of competent jurisdiction
in a civil action or by the Securities and Exchange Commission to have violated
any federal or state securities law and the judgment in subsequently reversed,
suspended or vacate; (6) was found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
Family Relationships
There is no family relationship between any director, executive officer or
person nominated or chosen by us to become a director or executive officer of
our company.
16
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Registrant's directors, certain
officers and persons holding 10% or more of the Registrant's common stock to
file reports regarding their ownership and regarding their acquisitions and
dispositions of the Registrant's common stock with the SEC. Such persons are
required by SEC regulations to furnish the Registrant with copies of all Section
16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(d) during fiscal 2003 with respect to fiscal
2003, and certain written representations from executive officers and directors,
the Registrant is unaware that any other required reports were not timely filed.
Audit Committee and Charter
We do not have a separately-designated audit committee of the Board or any other
Board-designated committee. Audit committee functions are performed by our board
of directors. None of our directors are deemed independent. All directors also
hold positions as our officers. Our audit committee is responsible for: (1)
selection and oversight of our independent accountant; (2) establishing
procedures for the receipt, retention and treatment of complaints regarding
accounting, internal controls and auditing matters; (3) establishing procedures
for the confidential, anonymous submission by our employees of concerns
regarding accounting and auditing matters; (4) engaging outside advisors; and,
(5) funding for the outside auditory and any outside advisors engagement by the
audit committee. A copy of our audit committee charter is filed as an exhibit to
this report.
Audit Committee Financial Expert
None of our directors or officers have the qualifications or experience to be
considered a financial expert. We believe the cost related to retaining a
financial expert at this time is prohibitive, although the Company intends to
conduct a search in the near future to identify an individual qualified to serve
as audit committee financial expert.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is
reasonably designed to deter wrongdoing and promote honest and ethical conduct;
provide full, fair, accurate, timely and understandable disclosure in public
reports; comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code.
Disclosure Committee and Charter
We have a disclosure committee and disclosure committee charter. Our disclosure
committee is comprised of all of our officers and directors. The purpose of the
committee is to provide assistance to the Chief Executive Officer and the Chief
Financial Officer in fulfilling their responsibilities regarding the
identification and disclosure of material information about us and the accuracy,
completeness and timeliness of our financial reports.
ITEM 10. EXECUTIVE COMPENSATION
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ------------------------------------------------
AWARDS PAYOUTS
---------------------- ----------
NAME AND FISCAL SALARY BONUS OTHER RESTRICTED SECURITIES LTIP ALL OTHER
PRINCIPAL YEAR ($) ($) ANNUAL STOCK UNDERLYING PAYOUTS COMPENSATION
POSITION COMPENSATION AWARD(S) OPTIONS/ ($) ($)
($) ($) SARS
(#)
------------------ ---------------- --------- ---------- ------------- ----------- ----------- ---------- ------------
Albert Reda,
Chief Executive 2004 $240,000 0 0 0 0 0 0
Officer/Secretary 2003 $180,000 0 0 0 0 0 0
(1)
(1) In July of 2002 the company issued a note to Mr. Reda for the
wages due to currently and for the fiscal year ended June 2003. A new note was
executed for the wages of fiscal years of June 2004. At present the note
including the end of September 2003 is for $315,000. This covers January of 2002
through September 2003. Before the end of June 2004 Mr. Reda received shares for
the note canceled and the monies owed was credited to Paid in Capital.
17
Other Compensation
There are no annuity, pension or retirement benefits to be paid to officers,
directors, or employees of the Company in the event of retirement at normal
retirement date, as there is no existing plan provided for or contributed to by
the Company.
No remuneration is to be paid in the future directly or indirectly by the
Company to any officer or director since no existing plan that provides for such
payment, including a stock option plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of
shares of the Company's common stock as of August 31, 2004 2,015,926,692 shares
were issued and outstanding, of which 751,337,998 are restricted by (i) all
stockholders known to the Company to be beneficial owners of more than 5% of the
outstanding Common Stock; (ii) each director; and (iii) all directors and
executive officers of the Company individually and as a group (each person has
sole voting power and sole dispositive power as to all of the shares shown as
beneficially owned by them):
Name and Address of Beneficial Amount of
Title of Class Owner Beneficial Ownership Percent of Class
-------------- --------------------------------- -------------------- -----------------
Mildred Carroll (1)
Common Stock P.O. Box 6957
Stateline, NV 89449 101,614,222 5.040%
-------------- --------------------------------- -------------------- -----------------
Albert Reda Corp. (2)
Common Stock 2250 East Tropicana Ave #631
Las Vegas, Nevada 89119 1,000,000 .0496%
-------------- --------------------------------- -------------------- -----------------
Albert R. Reda, (3)
Common Stock 2250 East Tropicana Ave #631
Las Vegas, Nevada 89119 156,609 .0008%
-------------- --------------------------------- -------------------- -----------------
Omega Limited (4)
Common Stock 1136 E. Stuart Suite 4207
Fort Collins, Co. 85025 109,000,000 5.407%
-------------- --------------------------------- -------------------- -----------------
Antigua LLC (4)
Common Stock 1136 E. Stuart Suite 4207
Fort Collins, Co. 80525 110,000,000 5.457%
-------------- --------------------------------- -------------------- -----------------
Adobe Oil
Common Stock P.O. Box 485
Laguna Beach, Calif. 92652 200,000,000 9.921%
-------------- --------------------------------- -------------------- -----------------
Alpha Blue Inc (4)
Common Stock 1630 Welton St. #300
Denver, Co. 80202 151,000,000 7.490%
-------------- --------------------------------- -------------------- -----------------
ARR LLC (2)
Common Stock 2250 East Tropicana Ave #631
Las Vegas, Nevada 89119 125,000,000 5.789%
-------------- --------------------------------- -------------------- -----------------
Windsor Professional Plaza
Common Stock 501 Main St.
Windsor, Co. 80550 154,470,000 7.662%
-------------- --------------------------------- -------------------- -----------------
Shares of all directors and
Common Stock executive officers as a group (2
persons) 597,770,831 29.652%
-------------- --------------------------------- -------------------- -----------------
(1) Mildred Carroll is an officer of the Company.
(2) Albert Reda Corp. and ARR LLC are controlled by Albert Reda, who holds
shares issued as compensation for services performed by Mr. Reda for the
Company.
(3) Albert Reda is an officer and director of the Company.
(4) Albert Reda has an interest in this entity but does not control it.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than as set forth below, during the past two years, there have not been
any transactions that have occurred between the Company and its officers,
directors, and five percent or greater shareholders.
18
(a) On January 1, 2000, Mr. Reda entered into an employment agreement with the
Company for the position of Chief Executive Officer. The following are the
material terms of this agreement:
(1) A salary of $180,000.00, payable in semi-monthly installments in
accordance with the Company's practices, less normal payroll deductions. On the
anniversary date of each year through the fourth year, the salary each is
increased by $1,000 per month.
(2) This agreement was changed to the $180,000 per annum effective July 2002
retroactive to January 1, 2002. Based upon a note issued to Mr. Reda to cover
the amounts due per this employment agreement, the term of the agreement was
also extended till January 2007.
(3) In addition to this compensation, the Company will periodically review
Mr. Reda's performance and services rendered with a view to paying
discretionary bonuses based upon above-average or outstanding performance for a
prior period. Any such bonuses approved by the Company will be paid to Mr. Reda
within 30 days of the grant thereof. The following performance milestones shall
justify the particular restricted stock bonuses, to be issued by the company, as
set forth below:
(A) At $2 million in sales, 500,000 shares of common stock.
(B) At $3 million in sales, 800,000 shares of common stock.
(C) At $5 million in sales, 1,000,000 shares of common stock.
(D) At $8 million in sales, 2,000,000 shares of common stock.
(E) At $10 million in sales, 2,500,000 shares of common stock.
(F) At $12 million in sales, 3,000,000 shares of restricted common
stock.
(4) In addition to the Salary and bonuses stated above, Mr. Reda will be
eligible to participate in a health insurance plan, including dependent
coverage, supplied by the Company. Mr. Reda will also be entitled to participate
in any and all group life, workers' compensation, health plan or accidental
insurance plans which are adopted by the Company for the benefit of executive
officers or employees. Mr. Reda will also be entitled to such sick leave and
paid holidays and to such other perquisites of employment, as customarily are
extended by the Company to executive officers or employees. In addition Mr. Reda
will also be entitled to vacation benefits.
(b) During the fiscal year ended June 30, 2004 the Company entered into several
transactions with David Karst, a shareholder, and several companies he owns as
follows:
(1) 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.
(2) 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.
(3) Additional conversions resulting in the issuance of 1,000,000,000 common
shares were done in August and September 2004 to pay the Company's operating
expenses.
(4) 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.
(5) The Company borrowed $333,377 from Windsor Professional Plaza, LLC - See
Note 4.
(6) The Company appointed KFG LLC as the Trustee for the Creditor Trust -
See Note 13.
(7) The Company appointed Financial Services LLC as the Creditor Trust -
Trust Protector - See Note 13.
(8) 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.
(c) The Company has entered into various transactions with entities affiliated
with its President as follows:
(1) 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.
(2) 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.
(3) During 2004 the Company issued 13,000,000 common shares to children of
its president for consulting services rendered.
19
ITEM 13. EXHIBITS
Exhibits.
Number Description
------ -----------------------------------------------------------------------------------
Stock Purchase Agreement (incorporated by reference to Exhibit 99.1 of Form 8-K
10.18 filed on September 9, 2003).
------ -----------------------------------------------------------------------------------
Asset Purchase Agreement between the Company and Debit Card Marketing, Inc.
10.19 (incorporated by reference to Exhibit 99.1 of Form 8-K filed on March 5, 2004).
------ -----------------------------------------------------------------------------------
Factoring and Security Agreement between the Company and 1st American Factoring
10.20 (incorporated by reference to Exhibit 99.1 of Form 8-K filed on June 30, 2004).
------ -----------------------------------------------------------------------------------
14.1 Code of Ethics (filed herewith).
------ -----------------------------------------------------------------------------------
Subsidiaries of the Company (incorporated by reference to Exhibit 21 of the Form
21 10-Q filed on February 15, 2001).
------ -----------------------------------------------------------------------------------
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
31 herewith).
------ -----------------------------------------------------------------------------------
Certification Pursuant to 18 U.S. C. Section 1350, as adopted pursuant to
32 Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith).
------ -----------------------------------------------------------------------------------
Reports on Form 8-K.
September 9, 2003 Disclosure of agreement to sell 370,000 shares of PMCC pursuant to a Stock Purchase
Agreement
----------------- ---------------------------------------------------------------------------------------
September 9, 2003 Disclosure of Failure of Ace Optics and subsequent settlement agreement regarding Ace
Optics
----------------- ---------------------------------------------------------------------------------------
October 10, 2003 Disclosure of Territory Marketing Agreement with Debit Card Marketing, Inc.
----------------- ---------------------------------------------------------------------------------------
December 11, 2003 Disclosure of Asset Purchase Agreement entered into between wholly owned subsidiary and
Debit Card Marketing, Inc.
----------------- ---------------------------------------------------------------------------------------
March 5, 2004 Disclosure of Asset Purchase Agreement entered into between the Company and Debit Card
Marketing, Inc.
----------------- ---------------------------------------------------------------------------------------
April 27, 2004 Disclosure of Change of Accountants
----------------- ---------------------------------------------------------------------------------------
June 30, 2004 Disclosure of Factoring and Security Agreement with First American Factoring
----------------- ---------------------------------------------------------------------------------------
20
ITEM 14. PRINCIAPAL ACCOUNTANT FEES AND SERVICES
Audit Fees.
The aggregate fees billed for each of the last two fiscal years and the first
two quarters of fiscal year ended June 30, 2004 for professional services
rendered by Henry Schiffer CPA were paid in full prior to the dismissal by the
Company. The aggregate fees billed and paid for each of the third quarter of
fiscal year ended June 30, 2004, and for year ended June 30, 2004 for the review
of financial statement and audit of the Registrant's annual financial statements
included in the company's Form 10-QSB's: third quarter year ended June 30, 2004
and Form 10-KSB for year ended June 30, 2004 totaled $17,500.
Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for assurance and
related services by Henry Schiffer CPA that are reasonably related to the
performance of the audit or review of the Registrant's financial statements and
are not reported under Audit Fees above: $0.
Tax Fees.
The aggregate fees billed and paid in each of the last two fiscal years for
professional services rendered by Henry Schiffer CPA for tax compliance, tax
advice, and tax planning: $5,000
All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products and
services provided by Henry Schiffer CPA, other than the services reported above:
$0.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Alpha Wireless Broadband, Inc.
/s/ Albert R. Reda
---------------------
Albert R. Reda
Chief Executive Officer, Secretary
Dated: January 11, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date indicated.
/s/ Albert R. Reda
Albert R. Reda
Chief Executive Officer, and Director
January 11, 2005
/s/ Mildred Carroll
Mildred Carroll
Secretary
January 11, 2005
22
Index to Financial Statements Page
--------------------------------------------------------------------- ----
Report of Independent Registered Accountant . . . . . . . . . . . . . F-1
Report of Independent Accountant. . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of
June 30, 2004 and June 30, 2003 . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the years ended
June 30, 2004, June 30, 2003, and June 30, 2002 . . . . . . . . . . F-4
Consolidated Statement of Stockholders' Equity
for the years ended June 30, 2004, June 30, 2003, and June 30, 2002 F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 2004, June 30, 2003, and June 30, 2002 . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-9
23
[LETTERHEAD OF KEMPISTY & COMPANY]
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
Board of Directors
Alpha Wireless Broadband, Inc.
We have audited the accompanying consolidated balance sheet of Alpha Wireless
Broadband, Inc., formerly Internet Business's International Inc. as of June 30,
2004, and the related consolidated statement of operations, changes in
stockholders' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Alpha Wireless Broadband, Inc. as of June
30, 2003 were audited by other auditors whose report dated October 8, 2003
expressed an unqualified opinion on the statements.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of June 30 2004,
and the results of its operations and its cash flows for the period then ended,
in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Alpha
Wireless Broadband, Inc. will continue as a going concern. As more fully
described in Note 5, the Company incurred operating losses during the 2004 and
2003 fiscal years and requires additional capital to continue operations. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding these matters are described in Note
5. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Kempisty & Company
Certified Public Accountants PC
New York, New York
November 11, 2004
F-1
[LETTERHEAD OF HENRY SCHIFFER, CPA]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Alpha Wireless Broadband, Inc.
(Formerly Internet Business's International, Inc.)
We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity and cash flows of Alpha Wireless Broadband, Inc. for the
year ended June 30, 2003. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards generally accepted in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of Alpha Wireless Broadband, Inc.'s
operations and cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Alpha
Wireless Broadband, Inc. will continue as a going concern. As more fully
described in Note 5, the Company has incurred operating losses since inception
and requires additional capital to continue operations. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans regarding these matters are described in Note 5. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
By: /s/ Henry Schiffer
---------------
Henry Schiffer, CPA
Beverly Hill, California
October 8, 2003
F-2
ALPHA WIRELESS BROADBAND, INC
(FORMERLY INTERNET BUSINESS'S INTERNATIONAL, INC)
CONSOLIDATED BALANCE SHEET
JUNE 30, 2004
Assets June 30, 2004
----------------------------------------------- ---------------
Current Assets:
Cash $ 5,469
Total current assets $ 5,469
---------------
Property and equipment, net $ 37,210
Intangible assets, net $ 496,022
Investments $ 107,780
---------------
Total other assets $ 641,012
TOTAL ASSETS $ 646,481
===============
Liabilities and Stockholders' (Deficit)
Current Liabilities:
-----------------------------------------------
Accounts payable $ 669,274
Accrued liabilities $ 401,451
Judgments payable $ 435,012
Other current liabilities $ 1,787,871
Payable to officer $ 170,572
Note payable related party $ 117,568
---------------
Note Payable $ 333,377
Total current liabilities $ 3,915,125
Total Liabilities $ 3,915,125
---------------
Stockholders' (deficit)
Preferred Stock, par value $.001 $ 903
Authorized 10,000,000 Issued 902,639
Common stock, par value $.001 $ 2,015,928
Authorized 10,000,000,000 Issued 2,015,926,692
Additional Paid in Capital $ 6,617,602
Accumulated deficit $ (11,903,077)
---------------
Total Stockholders' (Deficit) $ (3,268,644)
---------------
Total Liabilities & Stockholders Deficit $ 646,481
===============
The accompanying notes are an integral part of these financial statements
F-3
ALPHA WIRELESS BROADBAND, INC
(FORMERLY INTERNET BUSINESS'S INTERNATIONAL, INC)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
June 30, June 30,
--------------- -------------
2004 2003
Revenues $ 0 $ 778,784
Cost and expenses:
Cost of revenues $ 0 $ 45,000
Selling, general and administration $ 395,217 $ 2,629,324
Judgments $ 435,012
Depreciation and amortization $ 1,745,090 $ 1,919,823
--------------- -------------
Total costs and expenses $ 2,575,319 $ 4,594,147
--------------- -------------
Net income (loss) from operations $ (2,575,319) $ (3,815,363)
Other income $ 19,005
Other (expense) $ (2,619,166) $ (902,935)
--------------- -------------
Income (loss) before income taxes $ (5,175,480) $ (4,718,298)
--------------- -------------
Income taxes (benefit) $ 0 $ 0
Net income (loss) $ (5,175,480) $ (4,718,298)
--------------- -------------
Net income (loss) per common shares nil ($0.05)
Weighted average number of common
shares outstanding 1,433,197,844 103,273,603
The accompanying notes are an integral part of these financial statements
F-4
ALPHA WIRELESS BROADBAND, INC.
(FORMERLY INTERNET BUSINESS'S INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE
30, 2004
Common Stock Preferred Stock Capital in
($0.001 par value) ($0.001 par value) Excess of
Shares Amount Shares Amount Par Value Deficit Total
-------------- ----------- ---------- --------- ----------- ------------- ------------
Balance July 1, 2003 178,272,603 $ 178,274 1,029,231 $ 1,029 $6,917,547 $ (6,727,597) $ 369,253
Common stock issued for
Services 157,108,282 157,108 - - (18,627) - 138,481
Common stock issued for
TMR payment 202,895,000 202,895 (102,895) 100,000
Common stock issued for
investment in DCME 280,000,000 280,000 - - - - 280,000
Common stock issued for
TMR agreement 156,390,807 156,391 - - - - 156,391
Common stock issued for
Officers compensation 495,000,000 495,000 - - (178,423) - 316,577
Common stock issued for
conversion of preferred stock 546,260,000 546,260 (54,626) (54) 54,620
Cancellation of preferred stock (71,966) (72) (72)
Loss for fiscal year ended
June 30, 2004 - - - - - (5,175,480) (5,175,480)
-------------- ----------- ---------- --------- ----------- ------------- ------------
Balance June 30, 2004 2,015,926,692 $2,015,928 902,639 $ 903 $6,617,602 $(11,903,077) $(3,268,644)
============== =========== ========== ========= =========== ============= ============
The accompanying notes are an integral part of these financial statements
F-5
ALPHA WIRELESS BROADBAND, INC.
(FORMERLY INTERNET BUSINESS'S INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 2003
Common Stock Preferred Stock Capital in
($0.001 par value) ($0.001 par value) Excess of
Shares Amount Shares Amount Par Value Deficit Total
------------ -------- ---------- -------- ------------ ------------- ------------
Balance June 30, 2002 38,272,603 $382,736 - $ - $ 6,214,114 $ (2,009,299) $ 4,587,551
Preferred stock issued - - 1,029,231 1,029 (1,029) - -
Common stock issued for
Compensation (par value $.01) 40,000,000 400,000 - - - 400,000
Common stock issued for
investment in DCME 40,000,000 40,000 - - - - 40,000
(par value $.0001)
Common stock issued for
Compensation (par value $.001) 60,000,000 60,000 - - - - 60,000
Net adjustment for par
value change (704,462) - - 704,462 - -
Loss for fiscal year ended
June 30, 2003 - - - - - (4,718,298) (4,718,298)
------------ -------- ---------- -------- ------------ ------------- ------------
Balance June 30, 2003 178,272,603 $178,274 $1,029,231 $ 1,029 $6,,917,547 $( 6,727,597) $ 369,253
============ ======== ========== ======== ============ ============= ============
The accompanying notes are an integral part of these financial statements
F-6
ALPHA WIRELESS BROADBAND, INC
(FORMERLY INTERNET BUSINESS'S INTERNATIONAL, INC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
-------------- -------------
Cash Flows From Operating Activities
--------------------------------------------------
Net income (loss) ($5,175,480) ($4,718,298)
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation and amortization 1,745,090 1,919,823
Write down of Investment 1,043,552
Issuance of stock for services 455,058
Adjustment for companies acquired 306,597
Changes in operating assets and liabilities:
Accounts payable 265,453 403,821
Accrued liabilities (381,919) 783,370
Judgments payable 435,012
Other current liabilities 695,972
Payable to officer 170,572
Note Payable Related Party 117,568
-------------- -------------
Net cash used in operating activities ($322,525) ($1,611,284)
-------------- -------------
Cash Flows From Investing Activity
--------------------------------------------------
Sale of property and equipment 140,940
Purchase of intangible assets (6,772) (194,068)
Cash portion of purchase of DCME stock (140,940)
-------------- -------------
Net cash used in investing activates ($6,772) ($194,068)
-------------- -------------
Cash Flows From Financing Activates
--------------------------------------------------
Net repayment of credit lines (92,969)
Net issuance of long-term debt 333,377 400,000
Payment of notes 726,746
Common stock/issuance-reverse net 712,649
-------------- -------------
Net cash provided by financing activates $ 333,377 $ 1,746,426
-------------- -------------
Net increase (decrease) in cash 4,080 (58,926)
Cash, beginning of year 1,389 60,315
-------------- -------------
Cash, end of year $ 5,469 $ 1,389
-------------- -------------
Supplemental Cash Flow Disclosure
Interest Paid $ 60,000 $ -
Taxes Paid $ - $ -
Supplemental Disclosures of Cash Flow Information
--------------------------------------------------
Non-cash investing and financing activities:
Common stock issued for services $ 138,481 $ -
Common stock issued for officer's compensation 316,577 -
Common stock issued for TMR payment 100,000 -
Common stock issued for conversion of
preferred stock and pay operating expenses 546,208 -
The accompanying notes are an integral part of these financial statements
F-7
ALPHA WIRELESS BROADBAND, INC
(FORMERLY INTERNET BUSINESS'S INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Description of Business and Change in Control
Prior to December 31, 1997, Alpha Wireless Broadband, Inc 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 patrons access to the Internet for a fee.
At the time of this report Skyy-Fi, Inc had 20 Wi-Fi locations installed.
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.
F-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 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
In June of 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 of 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.
In May of 2002 a one for ten-share reverse stock split became effective. This
was the first part of a Securities Purchase Agreement in conjunction with a
stock registration. The Company received $120,000 as a loan to be paid with the
registration of stock during the fiscal year. Due to the price drop in the stock
after the reverse the registration did not occur. The Loan proceeds were booked
as long-term debt. The stock reverse difference of shares issued and outstanding
in the amount of $2,544,624 was included in additional paid-in capital.
In March 2000, the Company issued an additional 7,000,000 shares of the
Company's common stock, in a private placement to a qualified investor, which
provided $3,382,560 to the Company.
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.
F-9
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)
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
F-10
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.
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.
F-11
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.
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,
2004
-----------------
Investment:
Stock of PMCC/GNVN $ 107,692
Stock of DCM Enterprises 88
-----------------
Total Long Term Investments $ 107,780
=================
Property and equipment:
Office furniture and equipment $ 146,683
Machinery and computer equipment 12,809
Less: accumulated depreciation (122,282)
-----------------
Property and equipment, net $ 37,210
=================
Intangible assets:
Web Sites 3,000
Computer Programs 3,772
Purchase of Territory Marketing Agreement 515,000
Less: accumulated amortization (25,750)
-----------------
Intangible assets, net $ 496,022
=================
F-12
Note 4. Note Payable
Note payable as of June 30, 2004 consists of the following: Note payable Windsor
Professional Plaza LLC.
Note Payable - Windsor Professional Plaza LLC $333,337
-------
Total $ 333,377
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 June 30, 2004 the current liabilities exceed current assets by $3,576,279. As
shown in the financial statements, the Company incurred a net loss of $5,792,976
for the fiscal year ended June 30, 2004.
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
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
During the fiscal year ended June 30, 2004 the Company entered into several
transactions with David Karst, a shareholder, and several companies he owns as
follows:
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.
Additional conversions resulting in the issuance of 1,000,000,000 common shares
were done in August and September 2004 to pay the Company's operating expenses.
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 -
See Note 4.
F-13
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.
Note 7. Stockholders' Equity
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 it's preferred stock outstanding.
Stock Issuance
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
F-14
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 June 2004 the
Company cancelled 71,966 shares in order to reduce preferred stock outstanding
because they would have converted into an amount of common shares in excess of
those authorized.
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), mortgage banking business (which ceased operation in
June 2002), and business-to-consumer ("B2C") provider (which ceased operations
during fiscal year ended June 2003). 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.
F-15
Full service Internet service provider serves 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).
Mortgage banking business includes online mortgage loan origination, processing,
servicing and re-sales, (which ceased operations in June 2002).
Business-to-consumer provider primarily consists of cellular phone service
origination fees and sales (which ceased operation 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:
FISCAL YEAR ENDED
--------------------------------
June 30, 2004 June 30, 2003
--------------- ---------------
FULL-SERVICE ISP
NET SALES $ 0 $ 657,096
OPERATING INCOME $ (786,753) $ (2,093,562)
MARKETING (B-TO-B/C)
NET SALES $ 0 $ 1,688
OPERATING INCOME $ 0 $ (71,355)
OTHER
NET INCOME $ 19,005 $ 120,000
OPERATING INCOME $ (4,388,727) $ (2,553,381)
TOTAL
NET SALES $ 0 $ 778,784
OPERATING INCOME $ (5,175,480) $ (4,718,298)
During June 30, 2003 management decided to close down the Marketing segment of
the Company. The debts of the subsidiary were incorporated into the parent
Company and the debts owed to the parent Company of $1,259,236 were written off.
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.
F-16
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.
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.
F-17
e. Dividend
On June 17 2002, the Company announced the sale of Aces Optics to CRT Corp. for
2,000,000 shares of CRT restricted stock valued at $1.00 per share. The dividend
was to be based on one share of CRT Corp. per 100 shares of post reverse shares
of the Company. On July 8, 2002, the Company announced the dividend record date
of July 17, 2002. On July 18, 2002 the Company announced the date of
distributions to be August 30, 2002. By September 15, 2002 the Transfer agent,
working with DTC, completed the issuance of the divided CRT Corp. restricted
shares to its shareholders.
f. PMCC
On August 2, 2000, the Company announced that it had entered into an agreement
whereby the Company would purchase 2,460,000 shares of PMCC Financial Corp.
("PMCC"), a full-service mortgage banking company, from PMCC's former chairman
of the board, Ronald Friedman, and The Ronald Friedman 1997 Grantor Retained
Annuity Trust, which represented 66.36% of the outstanding shares of PMCC. The
aggregate purchase price of $3,198,000 is to be paid in cash to the seller by
the Company as follows: $700,000 at date of closing; $306,857 for each of the
seven installment payments to be paid on the 30th, 60th, 90th, 120th, 150th,
180th and 210th days following the close; $175,000 on each of the 240th and
270th day after the date of the closing. Shares of PMCC, a listed AMEX company,
were not trading at the time of the agreement. In the event that three months
after closing, PMCC's shares are not actively trading on the AMEX or NASDQ
exchanges and the Company has not merged PMCC with the Company or any of the
Company's subsidiaries, the purchase price shall be reduced by the amount of the
final two $175,000 payments.
On July 28, 2000, in a separate transaction, the Company entered into a stock
purchase agreement with an unrelated individual whereby the Company would sell
up to 370,000 shares of PMCC that the Company either owns or will eventually
own, for total consideration of $1,387,500. Shares of PMCC stock sold by the
Company will be released to the buyer in proportion to payments received.
On March 2, 2001, the Company filed an action against Ronald Friedman and The
Ronald Friedman 1997 Grantor Retained Annuity Trust in Federal Court, in Orange
County, California for rescission of the purchase of the PMCC stock agreement
and return of $1,006,857 paid by the Company. On August 16, 2001 Ronald
Friedman, Robert Friedman, and The Ronald Friedman 1997 Grantor Retained Annuity
Trust filed an action against the Company for the balance of the price under the
contract in the amount of $2,191,143. This action was filed in the U.S.
District Court for the Southern District of New York. In February 2002 the New
York case was transferred to California and consolidated with the case filed by
the Company in Orange County, CA. The Company feels that it will prevail in this
action.
As of December 31, 2000, the Company received payments of $559,812 and released
149,283 shares of PMCC stock that it owned. If PMCC is not actively trading
within six months of the agreement, the Company will issue to the Buyer the
equivalent number of shares of stock of the Company. PMCC has been actively
trading as of January 19, 2001, and the $410,529 gain on the sale of the PMCC
stock has been included in revenues for that period, ending December 31, 2000.
In January 2001, PMCC was de-listed from the American Stock Exchange and began
trading on the Pink Sheets under the symbol "PMCF". This met the trading
requirement as per the stock sale agreement the Company had entered into with an
unrelated individual.
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
-----
F-18
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 InternetBusiness'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. InternetBusiness'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.
Note 13- Subsequent Events
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 September 2004 the Company changed its name to Alpha Wireless Broadband,
Inc.
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.
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.
F-19