U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(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, 2005
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
SEAMLESS WI-FI, INC. f/k/a ALPHA WIRELESS BROADBAND, INC.
(Exact name of small business issuer as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
33-0845463
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(I.R.S. Employer Identification No.)
4255E. Charleston Blvd. Suite D, Las Vegas, Nevada, 89104
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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: $2,113.
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 June
30, 2005: $24,469.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 2005: 24,468,944.
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
2
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
General
Seamless Wi-Fi, Inc. formerly known as Alpha Wireless Broadband, Inc.
("Company") is currently a start up business with two operating subsidiaries:
Seamless Skyy-Fi, Inc., provides 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. As of
the date of this report Seamless Skyy-Fi had 30 Wi-Fi locations installed.
And the other subsidiary is;
Seamless Peer 2 Peer, Inc., is the developer of the proprietary (patent pending)
Phenom Encryption Software. Phenom Software allows secure communications over
Wi-Fi, Local Area Network (LAN), and Wide Area Networks (WAN) with its Virtual
Internet Extranet Network technology. Phenom Software provides secure Peer
Mail, Chat, File Transfer, and remote PC access in a two-megabyte download.
Phenom Software's Application Protocol Interface (API) also supports Voice over
Internet Protocol (VoIP), Video Voice conferencing, and White Boarding. As of
the date of this report Seamless Peer 2 Peer has 2 clients currently Beta
Testing the software and its applications.
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 until 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 until May 2004 the Company was not in operation.
In May 2004, the Company opened a dating web site for seniors. This was 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 Company's 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
Company's creditors willing to accept shares of the Company's common stock for
settlement pursuant to the terms and conditions of the trust agreement.
3
In July of 2004 which is first quarter of fiscal year of June 2005, the Company,
through its wholly owned subsidiary Skyy-Fi, Inc., began the installation of
wireless Internet access equipment at businesses allowing their patron's access
to the Internet for a fee. At the time of this report Skyy-Fi, Inc had 30 Wi-Fi
locations installed.
In January 2005, the Company acquired the assets of Seamless P2P, LLC for the
Companies subsidiary Seamless Peer 2 Peer, Inc. Seamless is a developer and
provider of a software program 'Phenom" that encrypts Wi-Fi transmissions based
upon RSA's government certified 256 bit AES encryption coupled with RSA's Public
Key Infrastructure flexible telecom data and voice transport solutions. After
the acquisition the Company changed its name to Seamless Wi-Fi, Inc and changed
Skyy-Fi, Inc to Seamless Skyy-Fi, Inc. to unify the Company and its subsidiary
in its presentation as "Seamless".
The Company has three offices in Nevada and not including Officers and
Directors; has 10 independent contractor employees.
Current Operations
The Company is currently maintaining and operating the following web sites,
Seamless Skyy-Fi; www.skyyfi.com and for Seamless Peer 2 Peer;
www.seamlessp2p.net and its corporate site Seamless Wi-Fi; www.slwf.net. The two
operating subsidiaries current operations are as follows:
Seamless Skyy-Fi Business Plan;
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The Companies subsidiary Seamless Skyy-Fi is concentrating on establishing
"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.
"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.
4
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.
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
The following is a list of company competitors:
Direct Competition
Company Name Public/Private Web-Site Stock Symbol
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Advanced Internet Access, LLC 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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NetNearU, Corp. Private www.nnu.com N/A
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Wayport, Inc Private www.wayport.net N/A
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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 NTPA
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ICOA, Inc. Public www.icoacorp.com ICOA
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5
* ICOA, Inc acquired Cafe.com in August 2005.
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Several companies such as Starbucks and T-Mobile have jointly entered into the
competition with their own Wi-Fi locations. Other companies such as IOCA are
attempting to acquire existing independent Wi-Fi companies. Other attempts are
being made to develop roaming agreements between the Wi-Fi locations and
Companies to allow a more access to existing Wi-Fi customers. Cellular telephone
companies are trying 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. The
hospitality industry is going to a free Wi-Fi model and fast food chains are
offering it service for a fee for Wi-Fi access at their locations.
Other factors that impact the Wi-Fi sector is that there are venues such as
cities and collages 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.
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
6
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.
Seamless Skyy-Fi Plan forRevenue from Operations:
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Skyy-Fi Revenue
Fees are paid to Skyy-Fi by subscribers and/or from the location owner as
follows:
1. Subscribers either pay a monthly fee if they are a Skyy-Fi member or a per
use fee if they are an occasional user.
2. When the location owner offers free Wi-Fi access the owner then pays a fee to
the Company for providing and maintaining the service.
Seamless Peer 2 Peer Business Plan;
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The Companies subsidiary Seamless Peer 2 Peer is concentrating on establishing a
Client Base for its software products. The Company's plan for its current and
future clients are based upon the following business model which outlines the
clients that could benefit from its use and then establishing methods of
distribution for delivering the product to the client base.
Client Base
The Company feels that the Peer 2 Peer client base comprises the following
entities and end users:
Government agencies
Corporations
WAN and LAN operators
ISP, WISP, Wi-Fi providers
File Sharing Companies
Market and Competition
Market
The market for Internet based software services is highly competitive. There are
substantial barriers for entry into the Software Internet Service market. The
cost for determining a need then development and testing of the software program
to supply that need is significant. However the potential profit if successful
means that capital is available if the developer can present a convincing reason
for the development of the software.
Competition
Direct Competition
Company Name Public/Private Web-Site Stock Symbol
------------------------ -------------- --------------------- ------------
Grouper Networks ,Inc. Private www.grouper.com N/A
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Citrix Systems, Inc. Public www.citrix.com CTSX
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Lap Software, Inc. Private www.laplink.com N/A
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PeerMe, Inc Private www.peerme. com N/A
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3am Labs, Inc. Private www.logmein.com N/A
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Amteus Ltd Private www.jeftel.com N/A
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Eclectic Endeavours Inc. Private www.endeavors.com N/A
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Seclarity, Inc. Private www.seclarity.com N/A
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Securit-e-doc, Inc. Private www.securit-e-doc.com N/A
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7
Seamless Peer 2 Peer Marketing plan incorporates four (4) basic distribution
channels:
1) Direct Sales that targets vertical market networks for example; healthcare
providers, Government Agencies, Defense Contractors, Military, Non-Profits,
etc. The direct sales staff will focus on the domestic market.
2) OEM Distribution sales private networks as well as general users.
Furthermore, they will be able to bundle the SeamlessP2P client software
for handheld devices, PDA's, desktop computers and laptops.
3) Affiliates, Resellers and Partners sales by offering the Seamless product
through Internet Service Providers (e.g. Cable, DSL, etc.), Networking and
IT solution providers, Internet Business Portals and Wireless Internet
Service Providers.
4) Internet/Online users are able to download the program from the for
their daily Internet usage, our user base will grow by word of mouth and
recommendation and advertising. Seamless downloadable from the CNET and
Seamless websites. Over half of all downloads from the CNET sites are
originating from outside of the Continental United States (CONUS).
Proprietary Software
Seamless Peer 2 Peer is the developer of the proprietary (patent pending) Phenom
Encryption Software. Phenom Software allows secure communications over Wi-Fi,
Local Area Network (LAN), and Wide Area Networks (WAN) with its Virtual Internet
Extranet Network technology. Phenom Software provides secure Peer Mail, Chat,
File Transfer, and remote PC access in a two-megabyte download. Phenom
Software's Application Protocol Interface (API) also supports Voice over
Internet Protocol (VoIP), Video Voice conferencing, and White Boarding.
Seamless Peer 2 Peer Plan for Revenue from Operations;
Fees are paid to Seamless from the subscriber and/or the network operator:
1. Subscribers will either pay a monthly fee if they are a Seamless member
and/or a per use fee if they are occasional users.
2. Operators of a Wide Area Network (WAN) and/or a Local Area Network (LAN) who
want Seamless service then pay per month or per year based upon the number of
users that are part of the network.
SLWF plan is for the subsidiaries to grow in their respective areas and then
cross market the Companies services and products to their respective clients.
Employees
The Company has 10 independent contractor employees not including Officers and
Directors.
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.
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
8
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
and 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.
(d) Regulation of Peer 2 Peer communication;
The courts and the legislature have recently become active in the peer 2
peer communications, which can negatively impact the company due to its
acquisition of peer 2 peer software technology. If the legislatures and court
determine that this type of communications violates existing laws and/or new
laws may be proposed that could limit and/or prohibit this type of communication
then this could have a negative impact on the company to generate revenue from
this type of communications.
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
9
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.
ITEM 2. DESCRIPTION PROPERTIES
The following locations are the principal places of business of the Company:
4255 E. Charleston Blvd, Suite D, 2250 E. Tropicana Ave. Suite 19 2050 Russett Way, Suite 338,
Las Vegas, Nevada 89104 Las Vegas, Nevada 89119 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. The Company
rents additional office space, on a month to month basis. Rent expense under
these leases for the fiscal year ended June 30, 2005 was $42,998. Remaining
commitments under the operating leases are as follows:
Fiscal Year Ending June 30 Amount
------------------------------ ------
2006 34,734
2007 28,520
2008 1,355
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$64,609
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to the following legal proceedings:
Globalist v. Internet Business's International, Inc. et al
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In July 2003 Globalist sued the Company and was awarded a judgment plus interest
in the amount of approximately $301,000. The Company appealed the Court's
decision and the award amount. In February 2005 the Company reached a tentative
settlement with Globalist which required the payment of $75,000 by March 2005,
subject to Court approval. On March 8, 2005 the Company put $75,000 in its
lawyer escrow account to satisfy the settlement. This cash is classified as
restricted cash on its balance sheet. The Company is still waiting for Court
approval regarding the final settlement, at which time the funds will be paid as
per agreement. However Globalist is contesting the settlement agreement and
further court action is contemplated.
Community Bank of Nevada v Internet Business's International, Inc. et al
--------------------------------------------------------------------------------
On December 20, 2000, the Community Bank of Nevada filed a lawsuit in District
Court, Clark County against Internet Business's International. Inc., seeking the
return of equipment. The Company was not aware of the lawsuit and a default
judgment was entered against the Company in the amount of $134,052. The
Company's attorney is currently in negotiations to settle this matter.
Louis Cherry v. Internet Business's International, Inc.
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As filed in an 8K dated April 6, 2005: On June 4, 2004 an action was filed in
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Superior Court of California, Orange County, Central Justice Center Branch; Case
Number 04CC03487, entitled Louis Cherry v. Internet Business's International,
Inc. (the "Complaint"). In the Complaint, Louis Cherry alleged Breach of
Employment Contract and sought an unspecified amount of money damages. The
Complaint was settled by and between Louis Cherry and the Company, and Mr.
Cherry was not awarded any monetary sums. Additionally, Mr. Cherry waived any
claims of seeking indemnification by the Company due to actions of Mr. Cherry,
and waived certain claims against certain assets of the Company. On March 29,
2005, a Dismissal with Prejudice was entered with the Superior Court of
California, Orange County; each Party bore their own legal fees and costs.
10
Management of the Company believes that due to its current financial condition,
any unfavorable outcome in the above matters will have a materially adverse
effect on the financial condition, results of operations and cash flows of the
Company.
ITEM 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 fiscal year ended June 30,
2005.
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 "SLWF" (formerly 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
2005 2004
High Low High Low
1st Quarter 09-30 0.0006 0.0003 0.0027 0.001
2nd Quarter 12-31 0.0006 0.0001 0.0014 0.001
3rd Quarter 03-31 0.0003 0.0001 0.0009 0.001
4th Quarter 06-30 * 0.155 0.0001 0.0008 0.001
* As Post reverse of one for one thousand stock reverse.
(b) Holders of Common Equity
As of June 30, 2005 there were 153 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:
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
Number of securities to be available for future issuance
issued upon exercise of Weighted-average price of under equity compensation
outstanding options, outstanding options, plans (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
-------------------------- -------------------------- ------------------------- -------------------------------
Equity compensation plans
approved by security
holders None None None
-------------------------- -------------------------- ------------------------- -------------------------------
2003 Stock Compensation
Plan III(1) 30,000,000 .20 0
-------------------------- -------------------------- ------------------------- -------------------------------
2003 Employee and
Consultant Plan (2) 50,000,000 .10 0
-------------------------- -------------------------- ------------------------- -------------------------------
2003 Employee and
Consultant Plan(3) 40,000,000 .20 0
-------------------------- -------------------------- ------------------------- -------------------------------
2003 Employee and
Consultant Plan(4) 80,000,000 .15 0
-------------------------- -------------------------- ------------------------- -------------------------------
2004 Stock Plan(5) 80,000,000 .16 0
-------------------------- -------------------------- ------------------------- -------------------------------
2004 Employee and
Consultant Plan(6) 80,000,000 .11 0
-------------------------- -------------------------- ------------------------- -------------------------------
2005 Stock Plan(5)
Consultant Plan 1,000,000,000 .02 0
-------------------------- -------------------------- ------------------------- -------------------------------
2005Employee and
Consultant Plan(6) 1,500,000,000 .01 0
-------------------------- -------------------------- ------------------------- -------------------------------
11
(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
SLWF; to create in such directors and employees a more direct interest in the
success of the operations of SLWF 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
SLWF; to obtain services for SLWF from independent contractors, for
services, at reduced compensation or at rates and/or on terms which are
otherwise negotiated favorably to SLWF, 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.
(e) Equity Securities Issued Without Registration
e) Equity Securities Issued Without Registration
During the fiscal year ended June 30, 2005 David Karst on behalf of Windsor
Professional Plaza LLC converted 252,753 shares of preferred stock of which
100,000 shares were converted to pay the Company's operating expenses leaving a
balance of 644,625 preferred shares held as collateral.
The Board of Directors on March 8, 2005 authorized the issuance of 562,500
shares of its unregistered restricted common stock to the Reda Family Trust for
$75,000.00. On April 1, 2005 this was changed to 56,250 shares of Class A
preferred stock for $75,000. This issuance was intended to be exempt from
registration under Section 4 (2) and/or Regulation D of the Securities Act of
1933.
During the third quarter of fiscal year ended June 30, 2005 the Company issued
700,000 shares of Class C Preferred Shares convertible into $1.00 of Common
Stock after 12 months, as partial payment for the assets of Seamless P 2 P, LLC.
The acquired assets were then transferred to a subsidiary of the Company,
Seamless Peer 2 Peer, Inc., a Nevada Corporation. The Company also issued 55,784
shares of Class A Preferred Shares in order to reduce the debit "Note payable to
related party" this debit is still on the books as required by the Accountant
until the stock is cleared and the debit is paid in full.
During the first quarter of fiscal year ended June 30, 2005 the Company
cancelled 35,186 shares held by Windsor in order to reduce preferred stock
outstanding because once converted, they would have amounted to common shares in
excess of those authorized. Windsor Professional converted 117,453 shares of
preferred stock.
In May 2004 Mercatus, with the consent of the Company, assigned 1,029,231
preferred shares to Windsor Professional Plaza, LLC as collateral for the
Company's funding line of credit.
During fiscal year ended June 30, 2005 the following stock was issued. (All
shares issued by the Company for services through the third quarter and most of
the fourth quarter of fiscal year ended June 30, 2005, were issued at below par
value):
14,160,000 shares were issued for services when 1,460 shares of preferred stock
were converted to common for the principal and interest due on the Windsor
payable.
300,000 shares, valued at $.001 each, as partial payment for the acquisition of
the assets of Seamless P2P, LLC (the balance was issued in Class C Preferred
Stock, see "Preferred Stock")
Windsor converted 100,000 shares of preferred stock to 1,000,000 of common
shares, of which 900,000 of the common shares were issued for Company services.
205,210 Class A preferred shares were issued for officers services.
79,519 Class A preferred shares were issued for officer's salary
3,558,642 common shares were issued for services.
1,109,435 common shares were issued for officer's salary.
$300,000 worth of common stock to Windsor Professional Plaza LLC as payment for
$300,000 worth of debt.
220,000 shares were issued to acquire 22,000 shares of Save the World valued at
$5.00 per share.
During fiscal year ended June 30, 2004, the following stock was issued:
495,000 shares were issued for payment in full on a note owed by the Company for
past due wages.
12
546,260 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 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 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 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
280,000 shares of restricted common stock were issued to repurchase 280,000
shares of DCM.
54,000 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
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
During the third quarter of fiscal year ended June 30, 2005 the Company issued
700,000 shares of Class C Preferred Shares convertible into $1.00 of Common
Stock after 12 months as partial payment for the assets of Seamless P 2 P, LLC,
the acquired assets were then transferred to a subsidiary of the Company,
Seamless Peer 2 Peer, Inc., a Nevada Corporation.
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
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
During the current fiscal year of June 2005, the Company, through its wholly
owned subsidiary Skyy-Fi, Inc., began the installation of wireless Internet
access equipment at businesses allowing their patron's access to the Internet
for a fee. At the time of this report Skyy-Fi, Inc had 30 Wi-Fi locations
installed. Then in January 2005 during the third quarter of this fiscal year,
the Company acquired the assets of Seamless P2P, LLC for the Companies
subsidiary Seamless Peer 2 Peer, Inc. Seamless is a developer and provider of a
software program 'Phenom" that encrypts Wi-Fi transmissions based upon RSA's
government certified 256 bit AES encryption coupled with RSA's Public Key
Infrastructure flexible telecom data and voice transport solutions.
13
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, 2005, 2004, 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 June 30, June 30,
Statement of Operations Data 2005 2004
Revenues $ 2,113 $ -
Cost of revenues 35,346 -
--------------- ---------------
Gross profit (loss) (33,233) -
Cost and expenses:
Selling, general and administration 694,607 1,199,196
Judgments 555,596 435,012
Stock paid for compensation 375,957 316,577
Stock paid for services 1,766,021 455,058
Write down of intangible assets 450,625 -
Write down of investments - 1,043,552
Depreciation and amortization 77,088 1,745,090
--------------- ---------------
Total costs and expenses 3,919,894 5,194,485
--------------- ---------------
Net income (loss) from operations (3,953,127) (5,194,485)
Other income 38,928 19,005
Other (expense) - -
--------------- ---------------
Income (loss) before income taxes (3,914,199) (5,175,480)
--------------- ---------------
Income taxes (benefit) (note 9) - -
Net income (loss) $ (3,914,199) $ (5,175,480)
--------------- ---------------
Net income (loss) per common shares $ (.23) $ (3.61)
--------------- ---------------
Weighted average number of common shares outstanding 17,373,504 1,433,198
Year End June 30, 2005 June 30, 2004
Balance Sheet Data
Current assets $ 270 $ 5,469
Other assets $ 1,681,755 $ 641,012
--------------- ---------------
Total assets $ 1,682,025 $ 646,481
--------------- ---------------
Current liabilities $ 4,814,790 $ 3,915,125
Long-term debt $ 0 $ 0
Minority Interest $ 250,000
Shareholders equity (deficiency) $ (3,382,765) $ (3,268,644)
--------------- ---------------
Total liabilities and equity $ 1,682,025 $ 646,481
--------------- ---------------
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 2005 Compared To Fiscal 2004
The Company's revenues for the twelve-month period ended June 30, 2005 of $2,113
is an increase in revenue when compared with zero revenues for the fiscal year
ended June 30, 2004. The increase in revenue is from the deployed Wi-Fi system,
the other revenue is from the sale of unused equipment which was fully
depreciated and due to the fact that the debt to the Internal Revenue service
was revised due to the refilled statements for payroll.
The resulting loss for the twelve-month period ended June 30, 2005 of
($3,914,199) was a significant decrease when compared to the losses of
($5,175,480) reported for the year ended June 30, 2004. One major contributor to
14
the reduction in the losses that have occurred was due to writing down of assets
that occurred during fiscal year ended June 30, 2004.
(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).
Information on reportable segments is as follows:
FISCAL YEAR ENDED
June 30, 2005 June 30, 2004
Wi-Fi ISP NET SALES $ 2,113 $ 0
COST OF WI-FI SALES $ 35,346 $ 0
SOFTWARE NET SALES $ 0 $ 0
COST OF SOFTWARE SALES $ 0 $ 0
COST AND EXPENSES $ 3,955,240 $ 5,194,485
OTHER NET INCOME $ 38,928 $ 19,005
NET LOSS $ (3,914,199) $ (5,175,480)
TOTAL
--------------------
NET INCOME $ 0 $ 0
NET LOSS $ (3,914,199) $ (5,175,480)
(1) Wi-Fi ISP The resultant loss for this segment for the fiscal year ended
June 2005 was ($33,233) this was due to operational cost of this start-up
operation. There is no comparison available because this segment was not in
operation during the prior fiscal year.
(2) Software Net Sales: This segment was just acquired in January 2005 and
is a start-up operation.
(3) Other: For the fiscal year ended June 2005 this segment received income
of $38,928 due to sale of fully depreciated equipment and the refilling of
payroll tax reports for the prior operation which reduced the company's
liabilities and is incorporated in the dollar amount. The income for June 2004
of $19,005 is due to a returned deposit that was written off for fiscal year
ended June 30, 2002. The losses of ($3,914,199) for fiscal year of June 2005 is
less the ($5,175,480) 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 ($700,339) twelve-month period ended June 30,
2005 was an increase in the negative net cash amount when compared to the
negative net cash balance of ($430,113) for the twelve-month period ended June
30, 2004. The Company increase in negative cash was primarily from increase in
stock issued for services. The Company had an alternative source for capital so
the Company could expand its Internet operations of establishing wireless
Internet locations commonly referred to as Wi-Fi hotspots. This was being
provide by two sources; Windsor Professional Plaza LLC which was providing
capital to resolve previous Company debts, and through Blue Bear Funding LLC
which provided capital to expand the Companies operations. Windsor Professional
Plaza LLC has arranged for an alternative funding source for the Company since
both Windsor and Blue Bear Funding LLC have ceased funding due to internal
problems.
15
Critical Accounting Policies
The Securities and Exchange Commission issued Financial Reporting Release No.
60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies,"
or FRR 60, suggesting that companies provide additional disclosure and
commentary on their most critical accounting policies. The most critical
accounting policies are the ones that are most important to the portrayal of a
company's financial condition and operating results, and require management to
make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. The Company believes
that of the significant accounting policies used in the preparation of the
consolidated financial statements (see Note B to the Financial Statements), the
following are critical accounting policies, which may involve a higher degree of
judgment, complexity and estimates. The methods, estimates and judgments The
Company uses in applying these most critical accounting policies have a
significant impact on the results reported in the Company's financial
statements.
Off Balance sheet
The Company has not entered into any off balance sheet arrangements that have,
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, result of
operations, liquidity, capital expenditure, or capital resources which would be
considered material to investors.
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 2004, the Financial Accounting Standards Board (FASB) issued SFAS
NO. 123 (R), "Share-Based Payment," which revises SFAS No. 123 SFAS No. 123 (R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized as compensation expenses based upon their fair
value. Effective January 1, 2003, the Company adopted the fair value recognition
provision of SFAS No. 123. We plan to adopt SFAS No. 123 (R) effective July 1,
2005, using the modified prospective method and do not expect any impact on our
results of operations or financial position
In December, the FASB issued SFAS No 153, Exchange of Nonmonetary Assets, an
amendment of APB No. 29, Accounting for Nonmonetary Transactions exchanges of
similar productive assets and replaces it withy a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. The
Company is required to adopt FAS 153, on a prospective basis, for nonmonetary
exchanges beginning June 15, 2005 the adoption of FAS 153 did not have any
impact on the Company's financial condition, results of operations and cash
flows.
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.
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 2005 fiscal year.
16
Net Operating Loss Carry forwards
No provision for income taxes have 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 $15,000,000 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 $5,000,000 and $3,000,000 at June 30, 2005 and
2004 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, 2004 to June 30, 2005
was an increase of approximately $2,000,000.
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."
ITEM 7. FINANCIAL STATEMENTS
Financial statements as of and for the fiscal year ended June 30, 2005 and
certain information regarding fiscal year ended June 30 2004, 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 prior fiscal years of June 30, 2003 and 2002 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.
17
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 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
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; PROMOTORS AND CONTROL PERSONS;
COMPLIANCE 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 59, 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.
18
(b) Mildred Carroll, Secretary.
Ms. Carroll, age 62 is Secretary to the Company and has worked for the Company
and one or more of its subsidiaries since April 1999. Prior to that time Ms.
Carroll was self employed.
(c) Bo Linton, President Seamless Skyy-Fi, Director Seamless Wi-Fi.
Mr. Linton, age 35, was appointed Director of the Company and President of the
Seamless Skyy-Fi subsidiary in March 2005. From 2001- 2003 Bo served as the
Chairman of the Board for Berserker Entertainment, Inc. During this period Mr.
Linton also contributed to this venture as a writer/director/producer and lead
actor. In 1998, Mr. Linton founded International Capital Group, Inc. and
created a highly successful mergers and acquisitions firm that he ran until
2001.
Mr. Linton received his Bachelor of General Studies from Louisiana State
University in the spring of 1994. Some of his studies included; Finance,
Computer Science, Computer Programming, Real Estate, and Business Law.
(d) Stanley Davis, Member, Board of Directors
Mr. Davis, age 55, has been employed in the airline industry since 1972Employed
by US Airways since 1980, he has held Manager and Director level positions in
the areas of Computer Systems, Finance, Technical Records, Maintenance Planning,
Quality Assurance, Technical Publications and Aircraft Maintenance Programs, and
Industrial Engineering,. Mr. Davis also headed up the US Airways Maintenance
and Engineering system into SoX (Sarbanes-Oxley) compliance. As Director of
Budgets, he administered a combined capital and expense budget of $1.1B per
year. Mr. Davis has designed and implemented two Maintenance Repair
Organization software systems. He also developed an award winning Electronic
Publications System which is recognized as the airline industry leader. The
application was awarded in 2002 by AIIM (Association of Information and Image
Management) as the best new publishing application world-wide (regardless of
industry), and was also awarded Computer World Magazine's recognition as the
best enterprise publishing system later that same year. He has also been
responsible for the integration of Maintenance Division Computer Systems through
two separate airline mergers. Currently Mr. Davis is the Manager-Maintenance IT
for US Airways, where his responsibilities include software, hardware, and
communication operation and development for the Maintenance Division worldwide.
Prior to US Airways, Mr. Davis was employed at Continental Airlines in various
capacities in the Maintenance Division.
Mr. Davis received his Master's of Business Administration degree from
California Lutheran University, Thousand Oaks, CA, and received his Bachelor of
Science in Applied Mathematics (minor in Mechanical Engineering) from Northrop
Institute of Technology, Inglewood, CA.
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.
19
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.
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
Summary Compensation Table
Annual compensation Long-term compensation
----------------------------- ------------------------------------------------
Awards Payouts
------------------------- -------
Restricted Securities
Other annual Stock Underlying LTIP All other
Name and Fiscal Salary Bonus compensation award(s) options/SARs Payouts Compensation
principal position Year ($) ($) ($) ($) (#) ($) ($)
------------------ ------ -------- ----- ------------ ----------- ------------ ------- ------------
Albert Reda, Chief 2005 $240,000 0 0 0 0 0 0
Executive 2004 $240,000 0 0 0 0 0 0
Officer/Secretary 2003 $180,000 0 0 0 0 0 0
(1)
(1) During fiscal June 2004 A new note was executed for the wages of
fiscal years of June 2004. The note including the end of September 2003 was for
20
$315,000. Before the end of June 2004 Mr. Reda received shares for the note
canceled and the monies owed was credited to Paid in Capital.
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 June 30, 2005 24,468,944 shares were
issued and outstanding, of which 1,4,12,000 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):
Title of Class Name and Address of Amount of
Beneficial Owner Beneficial Ownership Percent of Class
----------------- ------------------------------ -------------------- ----------------
Mildred Carroll (1)
Common Stock P.O. Box 6957 520,000 2.12
Preferred Stock A Stateline, NV 89449 -0-
----------------- ------------------------------ -------------------- ----------------
Albert R. Reda, (3)
Common Stock 2250 East Tropicana Ave #631 -0-
Preferred Stock A Las Vegas, Nevada 89119 -0-
----------------- ------------------------------ -------------------- ----------------
Reda Family Trust (3)
Common Stock 2250 East Tropicana Ave #631 -0-
Preferred Stock A Las Vegas, Nevada 89119 56,250 5.82
----------------- ------------------------------ -------------------- ----------------
Omega Limited (4)
Common Stock 1136 E. Stuart Suite 4207 125,000 .51
Preferred Stock A Fort Collins, Co. 85025 10,000 1.03
----------------- ------------------------------ -------------------- ----------------
Antigua LLC (4)
Common Stock 1136 E. Stuart Suite 4207 110,000 .45
Preferred Stock A Fort Collins, Co. 80525 -0-
----------------- ------------------------------ -------------------- ----------------
Alpha Blue Inc (4)
Common Stock 1630 Welton St. #300 -0-
Preferred Stock A Denver, Co. 80202 149,286 15.47
----------------- ------------------------------ -------------------- ----------------
ARR LLC (2)
Common Stock 2250 East Tropicana Ave #631 265,000 1.09
Preferred Stock A Las Vegas, Nevada 89119 45,924 4.75
----------------- ------------------------------ -------------------- ----------------
Windsor Professional Plaza
Common Stock 501 Main St. 149,950 .61
Preferred Stock A Windsor, Co. 80550 644,625 66.74
----------------- ------------------------------ -------------------- ----------------
Bo Linton (1)
Common Stock 2250 East Tropicana Ave #631 332,000 1.36
Preferred Stock A Las Vegas, Nevada 89119 -0-
----------------- ------------------------------ -------------------- ----------------
Stan Davis (1)
Common Stock 2250 East Tropicana Ave #631 60,000 .24
Preferred Stock A Las Vegas, Nevada 89119 -0-
----------------- ------------------------------ -------------------- ----------------
Seamless P2P LLC
Common Stock 2250 East Tropicana Ave #631 330,000 1.34
Preferred Stock C Las Vegas, Nevada 89119 700,000 100.00
----------------- ------------------------------ -------------------- ----------------
Shares of all directors and
Common Stock executive officers as a group 1,412,000 5.77
Preferred Stock A (4 persons) 261,460 27.07
----------------- ------------------------------ -------------------- ----------------
21
(1) This person is an officer and/or director and/or both of the Company.
(2) Albert Reda Corp., and ARR LLC, hold shares of the Company which were
issued as compensation for services performed by Mr. Reda for the Company
and are controlled by Albert Reda.
(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.
(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 54,626 shares 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.
22
(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. ("GBCD"). The Company during 2004 acquired marketing rights from GBCD 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.
ITEM 13. EXHIBITS
Exhibits.
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
------------------ -------------------------------------------------------------------------------------
July 7, 2004
------------------ -------------------------------------------------------------------------------------
September 21, 2004
------------------ -------------------------------------------------------------------------------------
October 4, 2004 Disclosure of Certificate of Designation for Preferred Stock fro
Alpha Wireless Broadband, Inc.
------------------ -------------------------------------------------------------------------------------
October 6, 2004 Disclosure of Letter of Intent dated September 29, 2004 entered into by
and between Alpha Wire Broadband, Inc. and Seamless P2P, LLC.
------------------ -------------------------------------------------------------------------------------
October 7, 2004 Disclosure of Location Provider Agreement
------------------ -------------------------------------------------------------------------------------
October 7, 2004 Disclosure of Location Provider Agreement
------------------ -------------------------------------------------------------------------------------
November 3, 2004 Disclosure of Creditor Trust
------------------ -------------------------------------------------------------------------------------
December 21, 2004
------------------ -------------------------------------------------------------------------------------
January 19, 2005 Disclosure of Asset Purchase agreement with Seamless P2P,LLC and Seamless
Peer 2 Peer, Inc
------------------ -------------------------------------------------------------------------------------
March 17, 2005
------------------ -------------------------------------------------------------------------------------
April 6, 2005
------------------ -------------------------------------------------------------------------------------
June 28, 2005
------------------ -------------------------------------------------------------------------------------
23
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
------------------ ------------------------------------------------------------------------------------------
July 7, 2004
------------------ ------------------------------------------------------------------------------------------
September 21, 2004
------------------ ------------------------------------------------------------------------------------------
October 4, 2004 Disclosure of Certificate of Designation for Preferred Stock fro Alpha
Wireless Broadband, Inc.
------------------ ------------------------------------------------------------------------------------------
October 6, 2004 Disclosure of Letter of Intent dated September 29, 2004 entered into by
and between Alpha Wire Broadband, Inc., and Seamless P2P, LLC.
------------------ ------------------------------------------------------------------------------------------
October 7, 2004 Disclosure of Location Provider Agreement
------------------ ------------------------------------------------------------------------------------------
October 7, 2004 Disclosure of Location Provider Agreement
------------------ ------------------------------------------------------------------------------------------
November 3, 2004 Disclosure of Creditor Trust
------------------ ------------------------------------------------------------------------------------------
December 21, 2004
------------------ ------------------------------------------------------------------------------------------
January 19, 2005 Disclosure of Asset Purchase agreement with Seamless P2P,LLC and
Seamless Peer 2 Peer, Inc
------------------ ------------------------------------------------------------------------------------------
March 17, 2005 Disclosure of appointments to the board of directors
------------------ ------------------------------------------------------------------------------------------
April 6, 2005 Disclosure of stock issuance
------------------ ------------------------------------------------------------------------------------------
June 28, 2005 Disclosure of name change to Seamless Wi-Fi, Inc.
------------------ ------------------------------------------------------------------------------------------
ITEM 14. PRINCIAPAL ACCOUNTANT FEES AND SERVICES
Audit Fees.
Fees for audit services provided by our principal accountant during the years
ended June 30, 2005 and June 30, 2004 were $45,000 and $35,000 respectively.
Audit services consisted primarily of the annual audits, review of our financial
statements, and services that are normally provided by our accountants in
connection with statutory and regulatory filings or engagements for those fiscal
years.
Audit-Related Fees.
There were no fees billed for services reasonably related to the performances of
the audit or review of our financial statements outside of those fees disclosed
above under the caption Audit Fees for fiscal years 2005 and 2004.
Tax Fees.
None.
All Other Fees.
There were no other fees billed for services.
24
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.
Seamless Wi-Fi, Inc.
/s/ Albert R. Reda
---------------------
Albert R. Reda
Chief Executive Officer, Secretary
September 28, 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, Director
September 28, 2005
/s/ Mildred Carroll
Mildred Carroll
Secretary
September 28, 2005
25
SEAMLESS WI-FI, INC
(FORMERLY ALPHA WIRELESS BROADBAND, INC)
Index to Financial Statements
Page
------
Report of Independent Registered Public Accountant. . . . . F-2
Consolidated Balance Sheet as of
June 30, 2005 . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the years ended
June 30, 2005 and June 30, 2004 . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended June 30, 2005 and June 30, 2004 . . . F-5-6
Consolidated Statements of Cash Flows for the years ended
June 30, 2005 and June 30, 2004 . . . . . . . . . . . . . F-7-8
Notes to Consolidated Financial Statements .. . . . . . . . F-9-21
The accompanying notes are an integral part of these financial statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Seamless Wi-Fi, Inc
(Formerly Alpha Wireless Broadband, Inc)
We have audited the accompanying consolidated balance sheet of Seamless Wi-Fi,
Inc. and Subsidiaries as of June 30, 2005 and the related statements of
operations, changes in stockholders' (deficit) and cash flows for each of the
years in the two year period ended June 30, 2005. 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 audits 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. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 Seamless Wi-Fi, Inc. and
Subsidiaries at June 30, 2005 and the results of its' operations and its' cash
flows for each of the years in the two year period ended June 30, 2005 in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that Seamless
Wi-Fi, Inc. and Subsidiaries 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.
Kempisty & Company
Certified Public Accountants PC
New York, New York
September 23, 2005
F-2
SEAMLESS WI-FI, INC
(FORMERLY ALPHA WIRELESS BROADBAND, INC)
CONSOLIDATED BALANCE SHEET JUNE 30, 2005
Assets June 30, 2005
------------------------------------------------ ---------------
Current Assets:
---------------
Cash $ 270
Total current assets 270
---------------
Property and equipment, net (note 2) -
Proprietary Software (note 2) 1,380,570
Investments (note 2) 135,280
Other Receivable (note 3) 84,305
Restricted Cash (note 13) 75,000
Security Deposit 6,600
TOTAL ASSETS $ 1,682,025
---------------
Liabilities and Stockholders' (Deficit)
------------------------------------------------ ---------------
Current Liabilities:
--------------------
Accounts payable $ 795,586
Payroll taxes 662,270
Judgments payable 1,174,388
Other current liabilities (note 6) 1,393,942
Payable to officer 65,268
Note payable related party 103,282
Note Payable (note 4) 620,054
---------------
Total current liabilities 4,814,790
---------------
TOTAL LIABILITIES 4,814,790
Commitment and Contingencies
Minority Interest 250,000
Stockholders' (deficit): (note 8 )
----------------------------------
Preferred A Stock, par value $.001
Authorized 5,000,000 Issued 976,819 977
Preferred B Stock, par value $.001
Authorized 3,000,000 Issued 0 -
Preferred C Stock, par value $1.00
Authorized 2,000,000 Issued 700,000 700,000
Common stock, par value $.001
Authorized 20,000,000,000 Issued 24,468,944 24,469
Additional Paid in Capital 11,709,065
Accumulated deficit (15,817,276)
---------------
Total Stockholders' (Deficit) $ (3,382,765)
---------------
TOTAL LIABILITIES & STOCKHOLDERS DEFICIT $ 1,682,025
---------------
The accompanying notes are an integral part of these financial statements
F-3
SEAMLESS WI-FI, INC
(FORMERLY ALPHA WIRELESS BROADBAND, INC)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
June 30, June 30,
2005 2004
------------ ------------
Revenues $ 2,113 $ -
Cost of revenues 35,346 -
Gross profit (loss) (33,233) -
Cost and expenses:
Selling, general and administration 694,607 1,199,196
Judgments 555,596 435,012
Stock paid for compensation 375,957 316,577
Stock paid for services 1,766,021 455,058
Write down of intangible assets 450,625 -
Write down of investments - 1,043,552
Depreciation and amortization 77,088 1,745,090
------------ ------------
Total costs and expenses 3,919,894 5,194,485
------------ ------------
Net income (loss) from operations (3,953,127) (5,194,485)
Other income 38,928 19,005
Other (expense) - -
------------ ------------
Income (loss) before income taxes (3,914,199) (5,175,480)
------------ ------------
Income taxes (benefit) (note 9) - -
Net income (loss) $(3,914,199) $(5,175,480)
------------ ------------
Net income (loss) per common shares $ (.23) $ (3.61)
------------ ------------
Weighted average number of common
shares outstanding 17,373,504 1,433,198
The accompanying notes are an integral part of these financial statements
F-4
SEAMLESS WI-FI, INC.
(FORMERLY ALPHA WIRLESS BROADBAND, 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 178,273 $ 178 1,029,231 $ 1,029 $7,095,643 $ (6,727,597) $ 369,253
Common stock issued for
Services 157,108 157 - - 138,324 - 138,481
Common stock issued for
TMR payment 202,895 203 99,797 100,000
Common stock issued for
investment in DCME 280,000 280 - - 279,720 - 280,000
Common stock issued for
TMR agreement 156,391 156 - - 156,235 - 156,391
Common stock issued for
Officers compensation 495,000 495 - - 316,082 - 316,577
Common stock issued for
conversion of preferred stock 546,260 546 (54,626) (54) 545,714 546,260
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 2,015,927 $ 2,015 902,639 $ 903 $8,631,515 $(11,903,077) $(3,268,644)
---------- -------- ---------- --------- ----------- ------------- ------------
The accompanying notes are an integral part of these financial statements
F-5
SEAMLESS WI-FI, INC.
(FORMERLY ALPHA WIRLESS BROADBAND, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 2005
Preferred Stock
Common Stock ($0.001 A ($1.00 C Capital in
($0.001 par value) par value) par value) Excess of
Shares Amount Shares Shares Amount Par Value Deficit Total
---------- ------------- --------- --------- --------- ------------- ------------- -----------------
Balance
June 30, 2004 2,015,927 $ 2,015 902,639 $ 903 $ 8,631,515 $(11,903,077) $ (3,268,644)
Common stock issued
for services 3,553,507 3,555 - 777,275 780,830
Common stock issued
for investment
in Seamless 630,000 630 365,370 366,000
Common stock issued
for WPP payment 600,000 600 599,400 600,000
Common stock issued
for investment
in SWTG 220,000 220 109,780 110,000
Common issued for
Officer compensation 1,109,435 1,109 346,375 347,484
Preferred C stock
Issued for Seamless 700,000 700,000
Preferred A stock
issued for Officers
compensation
And services 284,729 285 28,188
Sale of Preferred
A stock 56,250 56 74,944
Common stock issued
for conversion of
preferred A stock 2,174,940 2,175 (217,443) (218) 489,531 491,488
Common stock issued
for services 5,135 5 3,477 3,482
Post reverse common
stock issued for
conversion of
preferred A stock 14,160,000 14,160 (1,460) (1) 283,210 297,369
Cancellation of
preferred stock (47,896) (48)
Loss for fiscal
year ended
June 30, 2005 - - - - - - (3,914,199) (3,914,199)
Balance
June 30, 2005 24,468,944 $ 24,469 976,819 700,000 $700,977 $ 11,709,065 $(15,817,276) $ (3,382,765)
---------- ------------- --------- --------- --------- ------------- ------------- -----------------
The accompanying notes are an integral part of these financial statements
F-6
SEAMLESS WI-FI, INC
(FORMERLY ALPHA WIRELESS BROADBAND, INC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
2005 2004
------------- -------------
Cash Flows From Operating Activities
------------------------------------
Net income (loss) ($3,914,199) ($5,175,480)
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation and amortization 77,088 1,745,090
Write down of intangibles 450,625 0
Write down of Investment 82,500 1,043,552
Issuance of stock for services 1,766,021 455,058
Stock Compensation 375,957 316,577
Changes in operating assets and liabilities:
Restricted cash (75,000)
Other assets (90,905)
Accounts payable 126,312 265,453
Accrued liabilities 261,119 (381,919)
Judgments payable 739,376 435,012
Other current liabilities (393,929) 695,972
Payable to officer (105,304) 170,572
------------- -------------
Net cash used in operating activities ( 700,339) (430,113)
Cash Flows From Investing Activity
----------------------------------
Sale of property and equipment 0 140,940
Purchase of intangible assets (25,713) (16,752)
Cash portion of purchase of DCME stock 0 (140,940)
------------- -------------
Net cash used in investing activates (25,713) (16,752)
Cash Flows From Financing Activates
-----------------------------------
Safe of Preferred Stock 75,000
Net proceeds from debt issuance 660,139 333,377
Note payable related party (14,286) 117,568
------------- -------------
Net cash provided by financing activates 720,853 450,945
Net increase (decrease) in cash (5,199) 4,080
Cash, beginning of year 5,469 1,389
------------- -------------
Cash, end of year $ 270 $ 5,469
------------- -------------
The accompanying notes are an integral part of these financial statements
F-7
SEAMLESS WI-FI, INC
(FORMERLY ALPHA WIRELESS BROADBAND, INC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
Supplemental Cash Flow Disclosure June 30, 2005 June 30, 2004
----------------------------------------------------------------- -------------- --------------
Interest Paid $ 0 $ 60,000
Taxes Paid $ 0 $ 0
Supplemental Disclosures of Cash Flow Information
-------------------------------------------------
Non-cash investing and financing activities:
Common stock issued for services $ 1,766,021 $ 455,058
Common stock issued for officer's compensation $ 375,957 $ 316,577
Common stock issued for TMR payment $ 0 $ 256,391
Common stock issued for conversion of
preferred stock and pay operating expenses $ 600,000 $ 0
Common stock and preferred stock issued for acquisition of assets $ 1,066,000 $ 0
Common stock issued for investment $ 110,000 $ 280,000
Subsidiary common stock issued for investment $ 250,000 $ 0
The accompanying notes are an integral part of these financial statements
F-8
SEAMLESS WI-FI, INC
(FORMERLY ALPHA WIRELESS BROADBAND, INC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2005
Note 1. Summary of Significant Accounting Policies
Description of Business and Change in Control
Prior to December 31, 1997, Seamless Wi-Fi, Inc formerly known as Alpha Wireless
Broadband, Inc. "the Company" was in the food product manufacturing business and
formerly known as International Food and Beverage, Inc. In November 1998, new
stockholders bought majority control from the previous Chief Executive Officer
through a private transaction. Immediately thereafter, the former CEO resigned
and the new stockholders assumed the executive management positions. In
December 1998, after new management was in place, a decision was made to change
the Company's principal line of business from manufacturing to high technology.
The Company changed its name from International Food & Beverage, Inc. to
Internet Business's International, Inc., and reincorporated the Company on
December 8, 1998 in the state of Nevada. During April of 1999, the Company
announced the opening of its first e-commerce site and engaged in the
development, operation and marketing of a number of commercial web sites. The
Company's subsidiaries consisted of: Lending on Line (providing real estate
loans and equipment leasing), Internet Service Provider (providing national
Internet access dial-up service, wireless high speed Internet, and Internet web
design and hosting), E. Commerce (providing Auction sites), and Direct Marketing
(providing direct marketing of long distance phone service, computers with
Internet access, and Internet web design hosting). The Company ceased operations
during the fiscal year ended June 30, 2003. During the fiscal year ended June
2004 changed its name to Alpha Wireless Broadband, Inc, and started a new
wireless operation through it's wholly owned subsidiary Skyy-Fi, Inc a Nevada
Corporation. Skyy-Fi began providing access to the Internet, by installing
equipment in locations such as hotels and coffee shops for use by their patrons.
These locations are commonly known as Wi-Fi Hotspots
During the current fiscal year ended June 2005, the Company, through its wholly
owned subsidiary Skyy-Fi, Inc., began the installation of wireless Internet
access equipment at businesses allowing their patron's access to the Internet
for a fee Skyy-Fi, Inc has 30 Wi-Fi locations installed.
In January 2005, the Company acquired the assets of Seamless P2P, LLC and
contributed these assets to its 80% owned subsidiary Seamless Peer 2 Peer, Inc.,
which is a developer and provider of a software program 'Phenom"that encrypts
Wi-Fi transmissions based upon RSA's government certified 256 bit AES encryption
coupled with RSA's Public Key Infrastructure flexible telecom data and voice
transport solutions. After the acquisition the Company changed its name to
Seamless Wi-Fi, Inc and changed Skyy-Fi, Inc., to Seamless Skyy-Fi, Inc.
The Company has three offices in Nevada and excluding Officers and Directors
uses the services of 10 independent contractors.
Principles of Consolidation
The financial statements include the accounts of the Company and its wholly
owned subsidiaries and majority-owned subsidiary. The minority interest
represents outstanding voting stock of the subsidiary not owned by the Company.
All significant intercompany accounts and transactions have been 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.
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-9
Property and Equipment
Property and equipment is stated at cost and depreciated using the straight-line
method over the estimated useful life of the assets, which is generally three to
five years for computers and computer related equipment and five to seven years
for furniture and other non-computer equipment. Leasehold improvements are
amortized using the straight-line method over the shorter of their estimated
useful lives or the term of the lease, ranging from one to five years.
Investments
Investments are stated at the lower of cost or market value.
Proprietary Software in Development
In accordance with SFAS No. 86, Accounting for the Cost of Computer Software to
be Sold, Leased, or Otherwise Marketed Software ("FAS 86"), the Company has
capitalized certain computer software development costs upon the establishment
of technological feasibility. Technological feasibility is considered to have
occurred upon completion of a detailed program design which has been confirmed
by documenting and tracing the detail program design is not pursued, upon
completion of a working model that has been confirmed by testing to be
consistent with the product design. Amortization is provided based on the
greater of the rations that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product, The
estimated useful life for the straight-line method is determined to be 2 to 5
years.
These unamortized computer software and computer software development costs were
$1,380,570 at June 30, 2005. The amount charged to expense for the amortization
of these capitalized software costs and for amounts written down to net
realizable were zero. There were no research and developments costs incurred for
the development of computer software $0 in 2005 and 2004.
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. During this fiscal year ended 2005, the company charged
off $450,625 of intangible assets.
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-10
Concentration of Credit Risk
The Company is subject to credit risk through trade receivables. Monthly
Internet access fees and web hosting are generally billed to the customer's
credit card, thus reducing the credit risk. The Company routinely assesses the
financial strength of significant customers and this assessment, combined with
the large number and geographic diversity of its customers, limits the Company's
concentration of risk with respect to trade accounts receivable.
Income Taxes
The Company accounts for income taxes under the asset and liability approach of
reporting for income taxes. Deferred taxes are recorded based upon the tax
impact of items affecting financial reporting and tax filings in different
periods. A valuation allowance is provided against net deferred tax assets where
the Company determines realization is not currently judged to be more likely
than not. The Company and its 80% of more owned U.S; subsidiaries file a
consolidated federal income tax return. Although income tax returns have not
been filed since 1999, the Company has no material tax liability due to its
losses during these periods. The Company is currently having these income tax
returns prepared.
Earnings (Loss) per Share ("EPS")
Basic EPS is computed by dividing income (loss) be the weighted average number
of common shares outstanding for the period. Diluted EPS is computed giving
effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares consist of incremental shares issuable
upon conversion of preferred stock outstanding.
Reverse Stock Split
The Company's Board of Directors effected a 1 for 1,000 reverse stock split of
its common stock $.001 par value on June 3, 2005. Accordingly all shares
information included in the consolidated financial statements has been adjusted
to reflect the reverse stock split. The reverse stock split did not change the
ratio for the conversion of the preferred stock which remained at 1 share of
Series A preferred stock converts into 10,000 of common stock.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
NO. 123 (R), "Share-Based Payment," which revises SFAS No. 123 SFAS No. 123 (R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized as compensation expenses based their fair value.
Effective January 1, 2003, the Company adopted the fair value recognition
provision of SFAS No. 123. We plan to adopt SFAS No. 123 (R) effective July 1,
2005, using the modified prospective method and do not expect any impact on our
results of operations or financial position
In December, the FASB issued SFAS No 153, Exchange of Nonmonetary Assets, an
amendment of APB No. 29, Accounting for Nonmonetary Transactions exchanges of
similar productive assets and replac3s it withy a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. The
Company is required to adopt FAS 153, on a prospective basis, for nonmonetary
exchanges beginning after June 15, 2005 the adoption of FAS 153 did not have any
impact on the Company's financial condition, results of operations and cash
flows.
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.
F-11
Note 2. Certain Financial Statement Information
June 30,
2005
---------------
Investment:
Stock of PMCC/GNVN $ 107,692
Stock of DCM Enterprises 88
Stock of Save the World 27,500
---------------
Total Long Term Investments $ 135,280
===============
Property and equipment:
Office furniture and equipment $ 146,683
Machinery and computer equipment 12,809
Less: accumulated depreciation (159,492)
---------------
Property and equipment, net $ 0
===============
Intangible assets:
Proprietary Software 1,380,570
Less: accumulated amortization 0
---------------
Intangible assets, net $ 1,380,570
===============
Note 3 . Other Receivables
During 2005 the company paid $84,305 in bills for the Global Debit Cash Card
("GBCD"). GBCD is a publicly traded company and the President of the Company is
also an officer and director of GBCD. GBCD has agreed to pay the Company 168,710
shares of its restricted common stock as payment for this debit.
Note 4. Note Payable
Note payable as of June 30, 2005 consists of the following:
Note Payable-Windsor Professional Plaza LLC $ 620,054
----------
Total $ 620,054
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, 2005 the current liabilities exceed current assets by $4,814,520. As
shown in the financial statements, the Company incurred a net loss of $3,919,824
for the fiscal year ended June 30, 2005.
The future success of the Company is dependent on its ability to obtain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. The Company had obtained two
funding sources; Windsor Professional Plaza LLC which was providing capital to
resolve previous company debts, and Blue Bear Funding LLC which provided capital
to expand the Company's operations. Windsor Professional Plaza LLC has arranged
for an alternative funding source for the company since both Windsor and Blue
Bear Funding LLC ceased funding due internal problems.
Management believes that the current funding is sufficient to maintain its
current operating level for the next twelve months.
F-12
Note 6 . Other Current Liabilities
Other current liabilities consist of the following:
Payable to DCME for stock purchase $ 635,026 (1)
Credit Cards payable 298,217 (2)
Payable to Integrated Communications 180,513 (3)
Various liabilities assumed from
Alpha Tooling acquisition 231,958
Preferred fees payable 48,228
-------------
$ 1,393,942
(1) Bears interest at 10% per annum.
(2) Payments in varying amounts are due monthly with interest at 18%
per annum.
(3) Results from contract cancellation.
Note 7. Related Party Transactions
During the fiscal year ended June 30, 2005 David Karst on behalf of Windsor
Professional Plaza LLC, converted 252,753 shares of preferred stock (100,000
shares of which were converted to pay the Company's operating expenses) leaving
a balance of 644,625 preferred shares.
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 54,626 shares of preferred stock were converted into
546,260,000 common shares and used to pay expenses of the Company.
During 2005 and 2004, the Company cancelled 35,196 and 71,966 respectively
shares of Class A Preferred Stock.
As of June 30, 2005 the Company had borrowed a total of $623,422 from Windsor
Professional Plaza, LLC - See Note 4.
The Company appointed KFG LLC as the Trustee for the Creditor Trust -
See Note 13.
The Company appointed Financial Services LLC as the Creditor Trust - Trust
Protector - See Note 13.
Subsequent to June 30, 2004, Skyy-Fi entered into a factoring and Security
Agreement with 1st American Factoring a/k/a Blue Bear Funding, a sister Company
of Financial Services LLC.
The Company has entered into various transactions with entities affiliated with
its President as follows:
The President of the Company is also the CEO and Director of DCM Enterprises,
Inc. See Note 11 for details of the various transactions between the Company
and DCM Enterprises.
The President of the Company is an officer of Global Debit Cash Card, Inc.
("GDCC"). The Company during 2004 acquired marketing rights from GDCC for cash
and stock consideration valued at $515,000. The balance of the Marketing rights
were written off in the third quarter of fiscal 2005.
During 2004 the Company issued 13,000 common shares to children of its president
for consulting services rendered.
F-13
Note 8. Stockholders' Equity
Issuance of Common Stock and Preferred Stock
--------------------------------------------------
The Board of Directors of the Corporation may from time to time authorize by
resolution the issuance of any or all shares of the Common Stock and the
Preferred Stock herein authorized in accordance with the terms and conditions
set forth in the Articles of Incorporation for such purposes, in such amounts,
to such persons, corporations, or entities, for such consideration and in the
case of the Preferred Stock, in one or more series, all as the Board of
Directors in its discretion may determine and without any vote or either action
by the stockholders, except as otherwise required by law. The Board of
Directors, from time to time also may authorize by resolution, options, warrants
and other rights convertible into Common or Preferred stock (collectively
"securities"). The securities must be issued for such consideration, including
cash, property, or services, as the Board of Directors may deem appropriate,
subject to the requirement that the value of such consideration be less than the
par value of the shares issued. Any shares issued for which the consideration so
fixed paid or delivered shall be fully paid stock and the holder of such shares
shall not be liable for any further call of assessment or any other payment
thereon, provided that the actual value of such consideration is not less that
then par value of the shares so issued. The Board of Directors may issue shares
Common Stock in the form of a distribution or distributions pursuant to a stock
dividend or split-up of the shares of the Common Stock only to ten holders of
the outstanding shares of the Common Stock.
Authorized Shares
------------------
During November 2004 the board of directors amended the articles of
incorporation to increase the authorized to 20,000,000,000 shares (par value of
$.001) of which 19,990,000,000 are common shares and 10,000,000 are preferred.
There are three classes of preferred stock which are as follows; Class A
Preferred of 5,000,000 shares of which one (1) share of preferred converts to
10,000 shares of common stock, Class B Preferred of 3,000,000 shares of which
(1) share converts to 1,000 shares of common stock, and Class C Preferred of
2,000,000 shares. As of this date the Company has only filed for 11,000,000,000
shares authorized and plans to amend the previous resolution to decrease the
authorized during the annual renewal filing date for the company with the state
of Nevada.
The Company plans to amend the previous resolution decreasing the authorized to
11,000,000 shares so no amendment to the Articles of Incorporation will have to
be filed with the State of Nevada.
On September 30, 2004 the Company amended its Certificate of Incorporation and
authorized 3,000,000 shares of Class C Preferred stock, $1.00 par value,
convertible, with a stated value of $1.00 per share for conversion purposes. The
Class 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. Therefore One Dollar ($1.00) of
Preferred Stock (which is one share of Class C Preferred) will be converted into
$1.00 worth of common stock. For example if the price per share of the common
stock on the date of conversion is $.10 per share the holder of the Preferred
stock will receive 10 shares of common stock for every shares of Class C
Preferred stock that is converted into common.
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.
Stock Issuance
During fiscal year ended June 30, 2005 the following stock was issued. (All
shares issued by the Company for services through the third quarter and most of
the fourth quarter of fiscal year ended June 30, 2005, were issued at below par
value):
14,160,000 shares were issued for services when 1,460 shares of preferred stock
were converted to common for the principal and interest due on the Windsor
payable.
F-14
300,000 shares, valued at $.001 each, as partial payment for the acquisition of
the assets of Seamless P2P, LLC (the balance was issued in Class C Preferred
Stock, see "Preferred Stock")
Windsor converted 100,000 shares of preferred stock to 1,000,000 of common
shares, of which 900,000 of the common shares were issued for Company services.
205,210 Class A preferred shares were issued for officers services.
79,519 Class A preferred shares were issued for officer's salary
3,558,642 common shares were issued for services.
1,109,435 common shares were issued for officer's salary.
$300,000 worth of common stock to Windsor Professional Plaza LLC as payment for
$300,000 worth of debt.
220,000 shares were issued to acquire 22,000 shares of Save the World valued at
$5.00 per share.
During fiscal year ended June 30, 2004, the following stock was issued:
495,000 shares were issued for payment in full on a note owed by the Company for
past due wages.
546,260 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 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 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 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
280,000 shares of restricted common stock were issued to repurchase 280,000
shares of DCM.
54,000 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
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.
Preferred Stock
During the fiscal year ended June 30, 2005 David Karst on behalf of Windsor
Professional Plaza LLC converted 252,753 shares of preferred stock of which
100,000 shares were converted to pay the Company's operating expenses leaving a
balance of 644,625 preferred shares held as collateral.
F-15
The Board of Directors on March 8, 2005 authorized the issuance of 562,500
shares of its unregistered restricted common stock to the Reda Family Trust for
$75,000.00. On April 1, 2005 this was changed to 56,250 shares of Class A
preferred stock for $75,000. This issuance was intended to be exempt from
registration under Section 4 (2) and/or Regulation D of the Securities Act of
1933.
During the third quarter of fiscal year ended June 30, 2005 the Company issued
700,000 shares of Class C Preferred Shares convertible into $1.00 of Common
Stock after 12 months, as partial payment for the assets of Seamless P 2 P, LLC.
The acquired assets were then transferred to a subsidiary of the Company,
Seamless Peer 2 Peer, Inc., a Nevada Corporation. The Company also issued 55,784
shares of Class A Preferred Shares in order to reduce the debit "Note payable to
related party" this debit is still on the books as required by the Accountant
until the stock is cleared and the debit is paid in full.
During the first quarter of fiscal year ended June 30, 2005 the Company
cancelled 35,186 shares held by Windsor in order to reduce preferred stock
outstanding because once converted, they would have amounted to common shares in
excess of those authorized. Windsor Professional converted 117,453 shares of
preferred stock.
In May 2004 Mercatus, with the consent of the Company, assigned 1,029,231
preferred shares to Windsor Professional Plaza, LLC as collateral for the
Company's funding line of credit.
Note 9. 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 $15,000,000 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 $5,000,000 and $3,000,000 at June 30, 2005 and
2004 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, 2004 to June 30, 2005
was an increase of approximately $2,000,000.
Note 10. Commitments
The Company, through its Alpha Tooling Inc. subsidiary has entered into lease
agreements for office space and an automobile that expire through October, 2007.
The Company rents additional office space in Nevada, on a month to month basis.
Rent expense under these leases for the fiscal year ended June 30, 2005 was
$42,998. Remaining commitments under the operating leases are as follows:
Fiscal Year Ending June 30 Amount
------------------------------ ------
2006 34,734
2007 28,520
2008 1,355
-------
$60,609
-------
Note 11. Segment Information
In accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," management has determined that there were three reportable
segments based on the customers served by each segment: Full service internet
service provider (ISP). Such determination was based on the level at which
executive management reviews the results of operations in order to make
decisions regarding performance assessment and resource allocation. Even though
all operations ceased before the previous year end of June 30, 2003 there were
ongoing expenses related to the closing of the respective operations.
The Company is currently a start up business that is concentrating on providing
"Wireless Internet" access at business locations. The Company was a full service
Internet service provider that served customers requiring Internet access in the
western United States through dial-up, and high-speed wireless; web hosting and
web design (which ceased operations as of June 30, 2003).
F-16
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, 2005 June 30, 2004
---------------------- --------------- ---------------
Wi-Fi ISP NET SALES $ 2,113 $ 0
COST OF WI-FI SALES (35,346) 0
SOFTWARE NET SALES 0 0
COST OF SOFTWARE SALES 0 0
COST AND EXPENSES (3,919,894) 5,194,485
OTHER NET INCOME 38,928 19,005
NET LOSS $ (3,914,199) $ (5,175,480)
TOTAL
---------------------- --------------- ---------------
NET INCOME $ 0 $ 0
NET LOSS $ (3,914,199) $ (5,175,480)
Note 12. Other Events
a. Company Acquisition
In January 2005 the Company acquired the proprietary software asset of Seamless
P2P, LLC for $1,000,000 worth of Company stock: as follows: 700,000 shares of
Class C Preferred Shares convertible into $1.00 of Common Stock after 12 months
and 300,000 shares of Common stock valued at $.001each and a 20% interest in the
new subsidiary of the Company "Seamless Peer 2 Peer, Inc" a Nevada Corporation.
These assets were transferred to the new subsidiary of the Company Seamless Peer
2 Peer, Inc.
In December 2003 the Company acquired the assets of Debit Card Marketing Company
Enterprises, Inc for 60,000,000 shares of Global Debit Cash Card, Inc. (a
subsidiary of the Company) which included reduction of the note owed by the
Company to $515,000. That debit transferred as an asset to Global Debit Cash
Card, Inc.
In June 2002, DCM Enterprises, Inc. ("DCM") entered into an asset purchase
agreement with the Company for the purchase of assets consisting of equipment,
inventory, and proprietary information used in the sale of sunglasses
(hereinafter referred to as "Ace Optics"). The purchase price consisted of
2,000,000 restricted shares of DCM's common stock valued at $1,000,000 or $0.50
per share. However, due to a disagreement with the Company's former officer and
director, the Company was unable to take control of Ace Optics. Therefore, the
transaction was rescinded. On August 22, 2003, DCM and the Company entered into
an agreement to compensate DCM for the rescinded Ace Optics agreement. Pursuant
to the Compensation Agreement, IBII has agreed to compensate the DCM
approximately $768,000 in either cash, stock, or in other assets mutually agreed
upon since the Company has received approximately $141,000 in equipment,
$269,000 in cash, $150,000 in land and $65,060 in deposit related to real
property purchase. The amount owed under this agreement carries a 5% annual
interest rate. The entire amount is owed and due on February 22, 2005. Albert
Reda, the Company's CEO, also serves as DCM's CEO.
In September 2003 the Company through its 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
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towards the debit it had with DCM Enterprises, Inc. After October 1st 2003 the
transaction was changed by agreement to an Asset assignment.
b. Marketing Agreement
As filed in an 8K dated April 27, 2005; The Company is writing off its $450,625
investment in the "Territory Marketing Agreement" that the Company acquired from
Global Debit Cash Card, Inc. Global was unable to establish a viable private
label debit card program that was the primary part of the agreement and the
reason that the Company entered into to the agreement to sell debit cards. See
agreement synopsis below:
"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 156,391 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
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 provided 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 allowed the Company
to purchase from the investor 200,000 shares of the 560,000 shares of DCME based
upon the following terms per quarter. 40,000 shares of DCME for 40,000,000
shares of restricted common stock of the Company. This agreement to purchase the
200,000 shares of DCME is only in effect until such time that DCME begins
trading.
d. Agreement between the company and DCM Enterprise,
March 18 2004 DCM filed the following information on form 8K as further
agreement to the original agreement between the Company and DCM:
In August 2003 the Company agreed to provide the Buyer of Ace Optics an
alternative company or return the Buyer's stock since Ace Optics ceased
operations immediately after the acquisition. In lieu of an alternative Company
the Buyer and Seller agreed that the balance of the DCME stock received by the
Seller will be returned to the Buyer. Subsequently the Company acquired and then
sold Alpha Tooling to DCM.
In August 2003 The Company acquired Alpha Tooling, Inc. with 190,000 shares of
DCM Enterprises, Inc stock. As per an agreement with DCM Enterprises, Inc the
Company initially transferred Alpha Tooling, Inc to DCM Enterprises, Inc, in
exchange for a reduction of the debit it had with DCM Enterprises, Inc. During
October 2003 the transaction was changed by agreement to an Asset assignment.
The Company assigned certain assets of Alpha Tooling for credit of $311,639
which reduced the debt owed to DCM Enterprises, Inc. from $760,000 to $448,361.
Note 13. Legal Proceedings
Globalist v. Internet Business's International, Inc. et al
In July 2003 Globalist sued the Company and was awarded a judgment plus interest
in the amount of approximately $301,000. The Company appealed the Court's
decision and the award amount. In February 2005 the Company reached a tentative
settlement with Globalist which required the payment of $75,000 by March 2005,
subject to Court approval. On March 8, 2005 the Company put $75,000 in its
lawyer escrow account to satisfy the settlement. This cash is classified as
restricted cash on its balance sheet. The Company is still waiting for Court
approval regarding the final settlement, at which time the funds will be paid as
per agreement. However Globalist is contesting the settlement agreement and
further court action is contemplated.
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Community Bank of Nevada v Internet Business's International, Inc. et al
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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. The
amount of the judgment is included in judgments payable.
Louis Cherry v. Internet Business's International, Inc.
-----------------------------------------------------------
As filed in an 8K dated April 6, 2005: On June 4, 2004 an action was filed in
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Superior Court of California, Orange County, Central Justice Center Branch; Case
Number 04CC03487, entitled Louis Cherry v. Internet Business's International,
Inc. (the "Complaint"). In the Complaint, Louis Cherry alleged Breach of
Employment Contract and sought an unspecified amount of money damages. The
Complaint was settled by and between Louis Cherry and the Company, and Mr.
Cherry was not awarded any monetary sums. Additionally, Mr. Cherry waived any
claims of seeking indemnification by the Company due to actions of Mr. Cherry,
and waived certain claims against certain assets of the Company. On March 29,
2005, a Dismissal with Prejudice was entered with the Superior Court of
California, Orange County; each Party bore their own legal fees and costs.
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.
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