U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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
------
(State or other jurisdiction of incorporation of organization)
33-0845463
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(I.R.S. Employer Identification No.)
800 No. Rainbow Blvd. Parkway, Suite 200 Las Vegas, Nevada 89109
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(Address of principal executive offices)
(775) 588-2387
--------------
(Issuer's telephone number)
3753 Howard Hughes Parkway, Suite 200 Las Vegas, Nevada 89109
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(Former name, former address and former fiscal year, if changed since last
report)
Check mark whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) been subject to such filing requirements for the past 90
days. Yes -[-X] No [ ].
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 2005, the Issuer
had 90,659,597shares of common stock issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ ]
TABLE OF CONTENTS
PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER
30, 2005.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THREE MONTHS ENDED SEPBETMBER 30, 2005 AND 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
ITEM 3. CONTROLS AND PROCEDURES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Seamless Wi-Fi, Inc. f/k/a Alpha
Wireless Broadband, Inc. and subsidiaries (collectively, the "Company"),
included herein were prepared, without audit, pursuant to rules and regulations
of the Securities and Exchange Commission. Because certain information and
notes normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America were
condensed or omitted pursuant to such rules and regulations, these
financial statements should be read in conjunction with the financial
statements and notes thereto included in the audited financial statements of
the Company as included in the Company's Form 10-KSB for the year ended
June 30, 2005.
3
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Assets September 30, 2005
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Current Assets:
-----------------------------------------------
Cash $ 200,744
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Total current assets 200,744
Property and equipment, net (note 2) -
Proprietary Software (note 2) 1,500,570
Investments (note 2) 278,780
Other Receivable (note 3) 1,282,693
Restricted Cash (note 13) 75,000
Security Deposit 6,600
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TOTAL ASSETS $ 3,344,387
====================
Liabilities and Stockholders' (Deficit)
Current Liabilities:
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Accounts payable $ 867,356
Payroll taxes 678,877
Judgments payable 1,211,700
Other current liabilities (note 6) 737,798
Payable to officer 52,882
Note payable related party 60,268
Note Payable (note 4) 66,833
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Total current liabilities 3,675,714
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TOTAL LIABILITIES 3,675,714
Commitment and Contingencies
Minority Interest 222,822
Stockholders' (deficit): (note 8 )
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Preferred A Stock, par value $.001
Authorized 5,000,000 Issued 970,244 970
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 90,659,597 90,659
Additional Paid in Capital 16,377,954
Accumulated deficit (17,723,732)
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Total Stockholders' (Deficit) $ (554,149)
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TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 3,344,387
====================
The accompanying notes are an integral part of these financial statements
4
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
3 Months Ended
September 30, September 30,
2005 2004
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Revenues $ 6,408 $ 0
Cost and expenses:
Cost of revenues $ 33,323 $ 0
Selling, general and admin. $ 1,084,066 $ 313,657
Consulting $ 540,658 $ 276,468
Interest Expense $ 108,707 $ 377,863
Legal Fees $ 37,534 $ 24,960
Officer Payroll $ 179,900 $ 60,000
Investment $ - $ 110,000
Depreciation and amortization $ - $ 25,137
--------------------- ---------------
Total costs and expenses $ 1,984,188 $ 1,213,222
--------------------- ---------------
Net income (loss) from operations $ (1,977,780) $ (1,213,222)
Other income $ 37,176 $ 620
--------------------- ---------------
Income (loss) before income taxes $ (1,940,604) $ ( 1,212,602)
Income taxes (benefit) $ 0 $ 0
--------------------- ---------------
Net income (loss) before minority interest $ (1,940,604) $ (1,212,602)
--------------------- ---------------
Minority Interest 33,527 -
Net income (loss) $ (1,907,077) $ (1,212,602)
--------------------- ---------------
Net income (loss) per common share (.03) (1.43)
Weighted average number of common shares outstanding 57,564,270 850,469
The accompanying notes are an integral part of these financial statements
5
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
3 Months Ended
September 30, September 30,
2005 2004
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Cash Flows From Operating Activities
---------------------------------------------
Net income (loss) ($1,907,077) ($1,212,602)
Adjustments to reconcile net income (loss)
To net cash used by operating activities:
Depreciation and amortization - 25,137
Issuance of stock for services 494,000 874,420
Changes in operating assets and liabilities:
Accounts payable 71,770 50,283
Payroll Taxes Payable 16,607 -
Judgments payable 37,312 10,876
Other Receivevable (1,198,388) -
Other current liabilities (656,144) 41,037
Payable to officer (50,400) 51,315
Note Payable Related Party - (6,000)
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Net cash used in operating activities ($3,192,320) ($165,526)
Cash Flows From Investing Activity
---------------------------------------------
Investment (143,500) ( 7,530)
Purchase of intangible assets (120,000) (4,506)
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Net cash used in investing activities ($263,500) ($12,036)
Cash Flows From Financing Activities
---------------------------------------------
Conversion and sale of stock 3,661,294 -
Payment Related Party Note (5,000) -
Net issuance of long-term debt - 173,367
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Net cash provided by financing activities $ 3,656,294 $ 173,367
Net increase (decrease) in cash 200,474 (4,195)
Cash, beginning of period 270 5,469
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Cash, end of period $ 200,744 $ 1,274
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The accompanying notes are an integral part of these financial statements
6
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC.
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
(Unaudited)
Supplemental Cash Flow Disclosure September 30 2005 June 30 2005
------------------------------------------------- ------------------ -------------
Interest Paid $ 0 $ 0
Taxes Paid $ 0 $ 0
Supplemental Disclosures of Cash Flow Information
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Non-cash investing and financing activities:
Common stock issued for services $ 494,000 $ 1,766,021
Common stock issued for officer's compensation $ 0 $ 375,957
Common stock issued for conversion of
preferred stock and pay operating expenses $ 0 $ 600,000
Common stock issued for acquisition of assets $ 0 $ 1,066,000
Common stock issued for investment $ 0 $ 110,000
Subsidiary common stock issued for investment $ 0 $ 250,000
The accompanying notes are an integral part of these financial statements
7
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRLESS BROADBAND, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Description of Business and Change in Control
Prior to December 31, 1997, 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
The Company, through its wholly owned subsidiary Seamless Skyy-Fi, Inc., has 30
Wi-Fi locations installed. Seamless Skyy-Fi, Inc has installed wireless Internet
access equipment at businesses allowing their patron's access to the Internet
for a fee.
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 patent pending software program Phenom
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Encryption Software that encrypts Wi-Fi transmissions based upon RSA's
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government certified 256 bit AES encryption coupled with RSA's Public Key
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Infrastructure flexible telecom data and voice transport solutions.
-----
In May 2005 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.
8
Property and Equipment
Property and equipment is stated at cost and depreciated using the straight-line
method over the estimated useful life of the assets, which is generally three to
five years for computers and computer related equipment and five to seven years
for furniture and other non-computer equipment. Leasehold improvements are
amortized using the straight-line method over the shorter of their estimated
useful lives or the term of the lease, ranging from one to five years.
Investments
Investments are stated at the lower of cost or market value.
Proprietary Software in Development
In accordance with SFAS No. 86, accounting for the Cost of Computer Software to
be Sold, Leased, or Otherwise Marketed Software ("FAS 86"), the Company has
capitalized certain computer software development costs upon the establishment
of technological feasibility. Technological feasibility is considered to have
occurred upon completion of a detailed program design which has been confirmed
by documenting and tracing the 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
$1,150,570 at September 30, 2005. The amounts 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 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 June 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.
Concentration of Credit Risk
The Company is subject to credit risk through trade receivables. Monthly
Internet access fees and web hosting are generally billed to the customer's
credit card, thus reducing the credit risk. The Company routinely assesses the
financial strength of significant customers and this assessment, combined with
the large number and geographic diversity of its customers, limits the Company's
concentration of risk with respect to trade accounts receivable.
9
Income Taxes
The Company accounts for income taxes under the asset and liability approach of
reporting for income taxes. Deferred taxes are recorded based upon the tax
impact of items affecting financial reporting and tax filings in different
periods. A valuation allowance is provided against net deferred tax assets where
the Company determines realization is not currently judged to be more likely
than not. The Company, its subsidiaries, and its 80% owned subsidiary 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) by the weighted average number
of common shares outstanding for the period. Diluted EPS is computed giving
effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares consist of incremental shares issuable
upon conversion of preferred stock outstanding.
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.
Interim Financial Information
The unaudited balance sheet, the unaudited statements of income and cash flows
have been prepared in accordance with United States generally accepted
accounting principles for interim financial information. In our opinion, all
adjustments (consisting solely of normal recurring accruals) considered
necessary for a fair presentation of the financial position, results of
operations and cash flows as of September 30, 2005, and 2004, have been
included. Readers of these financial statements should note that the interim
results for the three month periods ended September 30, 2005, and September 30,
2004, are not necessarily indicative of the results that may be expected for the
fiscal year as a whole.
Note 2. Certain Financial Statement Information
September 30, 2005
---------------------
Investment:
Stock of PMCC/GNVN $ 107,692
Stock of DCM Enterprises 88
Stock of Global Debit Cash 143,500
Stock of Save the World 27,500
---------------------
Total Long Term Investments $ 278,780
=====================
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 1,500,570
Less: accumulated amortization 0
---------------------
Intangible assets, net $ 1,500,570
=====================
10
Note 3. Other Receivables
During 2005 the company advanced $143,500 to 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 issue to the Company shares of
its restricted common stock as payment for this debit.
Note 4. Note Payable
Note payable to Windsor Professional Plaza LLC. During the quarter September 30,
2005 the note payable to Windsor Professional Plaza LLC. was paid in full.
The note was secured by series A convertible preferred stock, (See Note
7-Preferred Stock.). This note was in default which per legal counsel, allowed
the note holder to convert the preferred stock to common stock. The proceeds
from the converted stock paid off the note.
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 the first quarter ended September 30, 2005 for fiscal year ended June 30,
2006. The current assets are less then current liabilities by $554,149 and the
Company incurred a net loss of $1,907,077.
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 one funding
source Windsor Professional Plaza LLC which has been paid off in full. The
funding line has been reassigned to Mercatus until a new funding entity can be
obtained.
Management believes that unless an alternative funding source can be obtained
the Company will not be able maintain its current operating level for the next
twelve months.
Note 6 . Other Current Liabilities
Other current liabilities consist of the following:
Credit Cards payable 309,598 (1)
Payable to Integrated Communications 187,396 (2)
Various liabilities assumed from
Alpha Tooling acquisition 240,804
---------
$ 737,798
(1) Payments in varying amounts are due monthly with interest at 18% per
annum.
(2) Results from contract cancellation.
Note 7. Related Party Transactions
During the first quarter ended September 30, 2005 of fiscal year ended June 30,
2006 Windsor Professional Plaza LLC converted 6,575 shares of Series A preferred
stock into 65,750,000 shares of Common 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 (100,000
shares of which were converted to pay the Company's operating expenses).
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 shares of Class A
Preferred Stock respectively.
11
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.
("GBCD"). The Company during 2004 acquired marketing rights from GBCD 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.
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 of preferred converts to 1,000 shares of common stock, and Class C
Preferred of 2,000,000 shares. As of this date the Company has not updated its
articles of incorporation with the state of Nevada, which shows only
11,000,000,000 shares authorized.
The company plans to amend the previous resolution decreasing the authorized to
10,000,000 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 2,000,000 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
12
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.
Stock Issuance
During the first quarter ended September 30, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006;
-----
140,000 shares of common stock were issued for advertising and expensed at
$6,622.
300,000 shares of common stock were issued for marketing and expensed at
$14,190.
Windsor Professional Plaza LLC converted 6,575 shares of preferred Series A
stock into 65,750,000 shares of common stock of which 10,000,000 shares of
common stock were issued for consulting and expensed at $473,000.
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 of common stock were issued for services when 1,460 shares of
preferred stock were converted to common.
300,000 shares of common stock , valued at $.001 each were issued 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")
3,368,734 shares of common stock were issued for officer salaries and for
services.
Windsor converted 100,000 shares of preferred Series A stock to 1,000,000 of
common shares, of which 900,000 of the common shares were issued for Company
services.
2,224,718 shares of common stock were issued for officer's salary and for
services.
$300,000 worth of shares of common stock were issued to Windsor Professional
Plaza LLC as payment for $300,000 worth of debt.
220,000 shares of common stock were issued to acquire 22,000 common shares of
Save the World valued at $5.00 per share.
874,430 shares of common stock were issued for services.
During fiscal year ended June 30, 2004, the following stock was issued:
--------------------------------------------------------------------------------
495,000 shares of common stock were issued for payment in full on a note owed by
the Company for past due wages.
540,000 shares of common stock were issued per the conversion of preferred
Series A 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
162,650 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
common shares of DCM.
13
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 first quarter ended September 30, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006, Windsor Professional Plaza LLC converted 6,575 shares Series A Preferred
-----
stock into 65,750,000 shares of Common stock.
During the fiscal year ended June 30, 2005, David Karst on behalf of Windsor
-----------------------------------------------
Professional Plaza LLC converted 252,753 shares of preferred Series A stock of
which 100,000 shares were converted to pay the Company's operating expenses
leaving a balance of 644,625 preferred Series A shares held as collateral.
On March 8, 2005 the Board of Directors 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.
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.
The Company cancelled 35,186 preferred Series A shares held by Windsor in order
to reduce preferred Series A stock outstanding because once converted, they
would have amounted to common shares of Stock in excess of those authorized.
Windsor Professional converted 117,453 shares of preferred Series A stock.
During the fiscal year ended June 30, 2004, In May 2004 Mercatus, with the
-------------------------------------------------
consent of the Company, assigned 1,029,231 preferred Series A shares to Windsor
Professional Plaza, LLC as collateral for the Company's funding line of credit.
Note 9. Segment Information
In accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," management has determined that there were three reportable
segments based on the customers served by each segment: Full service internet
service provider (ISP). Such determination was based on the level at which
executive management reviews the results of operations in order to make
decisions regarding performance assessment and resource allocation. Even though
all operations ceased before the previous year end of June 30, 2003 there were
ongoing expenses related to the closing of the respective operations.
The Company is currently a start up business that is concentrating on providing
"Wireless Internet" access at business locations. The Company was a full service
Internet service provider that served customers requiring Internet access in the
western United States through dial-up, and high-speed wireless; web hosting and
web design (which ceased operations as of June 30, 2003).
Certain general expenses related to advertising and marketing, information
systems, finance and administrative groups are not allocated to the operating
segments and are included in "other" in the reconciliation of operating income
reported below. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note 1).
14
Information on reportable segments is as follows:
FOR FIRST QUARTER ENDED SEPTEMBER 30, OF FISCAL YEAR ENDED
June 30, 2006 June 30, 2005
Wi-Fi ISP NET SALES $ 6,406 $ 0
COST OF WI-FI SALES (33,323) 0
SOFTWARE NET SALES 0 0
COST OF SOFTWARE SALES 0 0
COST AND EXPENSES (1,977,780) (1,213,222)
OTHER NET INCOME 37,176 620
NET LOSS $ (1,940,604) $ (1,212,602)
MINORITY INTEREST 33,527 0
NET LOSS $ (1,907,077) $ (1,212,602)
Note 10. Other Events
a. Company Acquisition
In January 2005 the Company acquired the proprietary software asset of Seamless
P 2 P, 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 $.001 each 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.
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."
Note 11. 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.
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. The
amount of the judgment is included in judgments payable.
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.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion and analysis of the Company's financial condition and
results of operations should be read with the consolidated financial statements
and related notes included elsewhere in this Report.
When the words used in this Report, such as; "expects," "anticipates,"
"believes," "plans," "will" and similar expressions are intended to identify
forward-looking statements. These are statements that relate to future periods
and include, but are not limited to statements; as to statements regarding our
critical accounting policies, adequacy of cash, expectations regarding net
losses and cash flow, statements regarding growth and profitability, need for
future financing, dependence on personnel, operating expenses, ability to
respond to rapid technological change and statements regarding the issuance of
common stock to the Company's executive officers. Forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. These risks and uncertainties include,
but are not limited to, those discussed below, as well as risks related to our
ability to develop and timely introduce products that address market demand, the
impact of alternative technological advances and competitive products, market
fluctuations, the Company's ability to obtain future financing, and the risks
set forth below under "Factors That May Affect the Company's Results." These
forward-looking statements speak only as of the date hereof. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
Overview
Seamless Wi-Fi, Inc. ("Company") is currently a start up business that is
currently operating two subsidiaries as follows: Its web site is www.slfw.net .
------------
Seamless Skyy-Fi, Inc., that is providing "Wireless Internet" access at business
locations. This service is referred to as Wireless Fidelity or Wi-Fi, for short.
Wi-Fi also refers to wireless equipment that meets published 802.11(x)
standards. Wi-Fi equipment operates in 2.4 and 5.8 GHz which are unlicensed
frequencies. There are many wireless Internet systems available but they all
have universal compatibility. The Wi-Fi POP is commonly referred to as a "Wi-Fi
Hotspot". Wireless Internet refers to radio frequencies that may either be
licensed (which is above 5.8 GHz "gigahertz") and or unlicensed frequency (which
is between 2.4 to 5.8 GHz). Its web site is www.skyyfi.com .
--------------
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. Its web site is
www.seamlessp2p.net .
---------
(A) PLAN OF OPERATION
The Company has three offices in Nevada and not including Officers and
Directors; has 10 independent contractor employees
The Company is currently a start up operation. As of this date the Company has
34 Wi-Fi locations for its Seamless Skyy-Fi, Inc., Wi-Fi subsidiary, and has
installed two of its Phenom Software Encryption Program at six locations and 4
additional beta test agreements for the software to be deployed for its
Seamless Peer 2 Peer, Inc., software developer subsidiary.
(B) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
With the Company starting up a business it is important to note that the
following discussion and analysis of the Company's financial condition and
results of operations should be read with the consolidated financial statements
and related notes included elsewhere in this Report.
The selected financial data for the First Quarter of Fiscal years ended June 30,
2006, 2005, are derived from the financial statements of the Company and should
be read in conjunction with the audited financial statements included in the
June 30, 2006 and 2005 10K/SB. 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".
16
Results of Operations
In accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," management had determined that there were three reportable
segments, (all of which have ceased operations in the fourth quarter for fiscal
year ended June 2003), based on the customers served by each segment: Full
service internet service provider (ISP), which ceased operation during the
fiscal year ended June 2003. The current wireless internet service
business-to-consumer ("B2C") provider primarily consisted of 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).
Analysis of Financial Condition
Revenues; for the three months ended September 30, 2005 were $ 6,408 as compared
with $0 for the corresponding period in 2004, an increase of $ 6,408.
Selling, general and administrative expenses; for the three months ended
September 30, 2005 was $1,984,188 as compared to $1,213,222 for the same period
in 2004, a increase of $770,966 or approximately 164 %.
The continued high cost of the selling, general and administrative expenses
reflect the impact of stock that was preferred stock that was converted common
stock after the company defaulted on its loans to Windsor. The loans proceeds
were used to compensate needed services by various professionals. Thus far,
during 2005 the quarter ended September 31, 2005 the Company received an
additional $200,743 from its funding line these funds will be used to maintain
growth and cover expenses during this quarter. The company plans to continue to
pursue revenue growth and expects to utilize additional private placements or
other equity financing during the remainder of 2005.
Other Income; is either extraordinary income from payment in full on debt for
a reduced amount (with the difference represented as income) and from the sale
of fully or partially depreciated equipment where the income from the sale is
greater than the amount depreciated. Since there are no expectations that
furthers sales will occur and that the revenues from previous operations are
dissimilar therefore there will be no comparison of the quarters.
Net Loss; for the three months ended September 30, 2005 was $1,907,077 as
compared to $1,212,602 for the same period in 2004 an increase of $694,475 or
approximately 157%.
Management believes these results are a direct reflection of continued higher
expenses due to the continued expansion of the business and new acquisition and
its related expenses. These expenses are not expected to remain high however
sales for both the Wi-Fi and software programs will continue to increase which
should result in a decrease in the net operating loss.
FOR FIRST QUARTER ENDED SEPTEMBER 30, OF FISCAL YEAR ENDED
June 30, 2006 June 30, 2005
Wi-Fi ISP NET SALES $ 6,406 $ 0
COST OF WI-FI SALES (33,323) 0
SOFTWARE NET SALES 0 0
COST OF SOFTWARE SALES 0 0
COST AND EXPENSES (1,977,780) (1,213,222)
OTHER NET INCOME 37,176 620
NET LOSS $ (1,940,604) $ (1,212,602)
MINORITY INTEREST 33,527 0
NET LOSS $ (1,907,077) $ (1,212,602)
The following discussion should be read in conjunction with the financial
statements of the Company and notes thereto contained elsewhere in this report.
17
Information on reportable segments is as follows:
(1) WISP: The resultant loss from operations for the Wi-Fi ISP segment for
first quarter for fiscal year ended June 30, 2006 of $26,917 are expected to
continue because these expenses are related to the startup of this operation.
(2) Software: The resultant loss from the Software encryption program
segment for first quarter for fiscal year ended June 30, 2006 are expected to
continue because these expenses are related to the startup of this operation.
Liquidity and Capital Resources
Net cash used in operating activities at the end of the first quarter of fiscal
year ended June 30, 2006, decreased to ($3,192,320) due to the use of stock for
services which is an increase compared to the results for the same period ended
2004 of ($165,526). The Company is seeking alternative sources of capital so
the Company can expand its new Internet operations of establishing wireless
Internet locations commonly referred to as Wi-Fi hotspots and to allow the
deployment of it Phenom Software program. Prior to end of the previous fiscal
year end of June 30, 2005 the Company was being funded by two sources; Windsor
Professional Plaza LLC and Blue Bear Funding, both Companies have ceased their
funding of the Company and the Company is currently seeking alternative sources
to fund Companies current operations.
Capital Expenditures
The Company funded Global Debit Cash Card $143,500 during the first quarter of
fiscal year ended June 30, 2005.
Acquisitions
In January 2005 the Company acquired the assets of Seamless P2P LLC for 700,000
shares of Preferred Class "C" Shares and 300,000,000 shares of the Company's
Common stock valued at $1,000,000 and 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 August 2003 the Company acquired Alpha Tooling, Inc. with 190,000 shares of
DCM Enterprises, Inc. common stock, as per an agreement with DCM Enterprises,
Inc. The Company then transferred Alpha Tooling, Inc. to DCM Enterprises, Inc.
for credit towards the debit it had with DCM Enterprises, Inc. After October 1,
2003 the transaction was changed by agreement to an Asset Assignment. The
Company assigned certain assets of Alpha Tooling for credit of $311,639 which
reduced the debt owed to DCM Enterprises, Inc. from $760,000 to $448,361. The
Company retained the Alpha Tooling Corporation which had assets of $42,050
(which were not assigned to DCM Enterprises, Inc.), and debt of $351,306.
In April 2005 GLCD reversed it stock 1,000 shares of GLCD for 1 of GBCD (the new
stock symbol) GBCD recently traded at $1.01 per share in low volume.
In December 2003 GLCD acquired the assets of DCM for 60,000,000 common shares of
GLCD which included reduction of the note owed by the Company to $515,000,
which was transferred as an asset to GLCD. GLCD is traded over the counter
(OTC) on the Pink Sheets LLC quotation service under the symbol "GLCD".
In September 2003 the Company, through its wholly owned subsidiary Global
Debit Cash Card, Inc., a Nevada Corporation ("GLCD") agreed to purchase from
DCM the Colorado and Utah territories for marketing the CARDS as per the USA
Territory Marketing Representative Agreement. Pursuant to the terms of the
agreement GLCD will operate as the Territory Marketing Representative ("TMR") in
Colorado and Utah and license resellers of the CARDS. The Licensed Activated
Resellers ("LAR") will be licensed through GLCD, the TMR.
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.
18
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 the company's
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 which require us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
Stock-Based Compensation Arrangements
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.
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.
Net Operating Loss Carry forwards
For the fiscal year ended June 30, 2005, the Company had net operating loss
carry forwards for federal and state purposes of approximately $5,117,636 and
$3,070,582 respectively. These carry forwards begin to expire in 2016 and 2006
respectively.
Forward Looking Statements
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations contains "forward looking statements" within the meaning
of Rule 175 under the Securities Act of 1933, as amended, and Rule 3b-6 under
the Securities Act of 1934, as amended, including statements regarding, among
other items, the Company's business strategies, continued growth in the
Company's markets, projections, and anticipated trends in the Company's business
and the industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar expressions identify
forward-looking statements. These forward-looking statements are based largely
on the Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. The Company
cautions that these statements are further qualified by important factors that
could cause actual results to differ materially from those in the forward
looking statements, including, among others, the following: reduced or lack of
increase in demand for the Company's products, competitive pricing pressures,
changes in the market price of ingredients used in the Company's products and
the level of expenses incurred in the Company's operations. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire or prove to be accurate.
The Company disclaims any intent or obligation to update "forward looking
statements."
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. We maintain "disclosure
controls and procedures," as such term is defined in Rule 13a-14(c) under the
Securities Exchange Act of 1934, or the Exchange Act, that are designed to
ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in Securities and Exchange Commission
rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Treasurer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management
recognized that disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Additionally, in
designing disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible disclosure controls and procedures. The design of any disclosure
controls and procedures also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
19
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 Quarterly 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 Quarterly Report was being
prepared.
(b) Changes in internal controls. We plan to institute greater controls by
adding additional staff to allow for greater third person review and
verification of all transactions thereby enhancing the accuracy of all records.
We are also looking to implement many of the new requirements required under the
Sarbanes-Oxley Act of 2002 during the coming year. However, we believe that
there were are no significant changes in our internal controls or, to our
knowledge, in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Globalist v. Internet Business's International, Inc. et al
-----------------------------------------------------------------
In 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. Pursuant to the payment of the settlement amount of
$75,000 on March 8, 2005, the Board of Directors issued 562,500,000
shares of its unregistered restricted common stock to the Reda Family Trust
for $75,000.00. This issuance was intended to be exempt from registration
under section 4(2) and/or Regulation D of the Securities Act of 1933. On
April 1 2005 the 562,500,000 shares of its unregistered common stock which
were not issued on March 8, 2005 was changed to the issuance 56,250 shares of
Class A Preferred Shares. The Company is still waiting for Court approval
regarding the final settlement at which time the funds will be paid as per
agreement.
Ronald Friedman, Robert Friedman, the Ronald Friedman 1997 Grantor Retained
--------------------------------------------------------------------------------
Annuity Trust v. Internet Business's International, Inc. et al and Internet
--------------------------------------------------------------------------------
Business's International. Inc. v Ronald Friedman 1997 Grantor Retained Annuity
--------------------------------------------------------------------------------
Trust
-----
In April 2001 Ronald Friedman and the Ronald Friedman 1997 Grantor Retained
Annuity Trust sued the Company for, among other things, breach of contract, in
the United States District Court, Southern District of New York. The case was
transferred to the United States District Court, Central District of California,
Southern Division, to be consolidated with Internet Business's International.
Inc. v Ronald Friedman 1997 Grantor Retained Annuity Trust. At that time the
Company filed a cross-complaint against the Trust for rescission and the return
of $1,006,857. This case has been dismissed by the judge.
Community Bank of Nevada v Internet Business's International, Inc. et al
--------------------------------------------------------------------------------
On December 20, 2000, the Community Bank of Nevada filed a lawsuit in District
Court, Clark County against Internet Business's International. Inc., seeking the
return of equipment. The Company was not aware of the lawsuit and a default
judgment was entered against the Company in the amount of $134,052. The
Company's attorney is currently in negotiations to settle this matter.
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.
20
ITEM 2. CHANGES IN SECURITIES
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 if 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
the 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.
All shares issued by the Company for services through the period ended March 31,
2005, were issued at below par value.
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 of preferred converts to 1,000 shares of common stock, and Class C
Preferred of 2,000,000 shares. As of this date the Company has not updated its
articles of incorporation with the state of Nevada, which shows only
11,000,000,000 shares authorized.
The company plans to amend the previous resolution decreasing the authorized to
10,000,000 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 5,000,000 shares of Class C Preferred stock, $0.001 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 into 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 the first quarter ended September 30, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006;
-----
140,000 shares of common stock were issued for advertising and expensed at
$6,622.
300,000 shares of common stock were issued for marketing and expensed at
$14,190.
Windsor Professional Plaza LLC converted 6,575 shares of preferred Series A
stock into 65,750,000 shares of common stock of which 10,000,000 shares of
common stock were issued for consulting and expensed at $473,000.
21
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 of common stock were issued for services when 1,460 shares of
preferred stock were converted to common.
300,000 shares of common stock , valued at $.001 each were issued 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")
3,368,734 shares of common stock were issued for officer salaries and for
services.
Windsor converted 100,000 shares of preferred Series A stock to 1,000,000 of
common shares, of which 900,000 of the common shares were issued for Company
services.
2,224,718 shares of common stock were issued for officer's salary and for
services.
$300,000 worth of shares of common stock were issued to Windsor Professional
Plaza LLC as payment for $300,000 worth of debt.
220,000 shares of common stock were issued to acquire 22,000 common shares of
Save the World valued at $5.00 per share.
874,430 shares of common stock were issued for services.
During fiscal year ended June 30, 2004, the following stock was issued:
--------------------------------------------------------------------------------
495,000 shares of common stock were issued for payment in full on a note owed by
the Company for past due wages.
540,000 shares of common stock were issued per the conversion of preferred
Series A 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
162,650 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
common 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.
22
Preferred Stock
During the first quarter ended September 30, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006, Windsor Professional Plaza LLC converted 6,575 shares Series A Preferred
-----
stock into 65,750,000 shares of Common stock.
During the fiscal year ended June 30, 2005, David Karst on behalf of Windsor
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Professional Plaza LLC converted 252,753 shares of preferred Series A stock of
which 100,000 shares were converted to pay the Company's operating expenses
leaving a balance of 644,625 preferred Series A shares held as collateral.
On March 8, 2005 the Board of Directors 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.
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.
The Company cancelled 35,186 preferred Series A shares held by Windsor in order
to reduce preferred Series A stock outstanding because once converted, they
would have amounted to common shares of Stock in excess of those authorized.
Windsor Professional converted 117,453 shares of preferred Series A stock.
During the fiscal year ended June 30, 2004, In May 2004 Mercatus, with the
-------------------------------------------------
consent of the Company, assigned 1,029,231 preferred Series A shares to Windsor
Professional Plaza, LLC as collateral for the Company's funding line of credit.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibits included or incorporated by reference herein are set forth in the
Exhibit Index following the signatures.
(B) REPORTS ON FORM 8-K
None
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SEAMLESS WI-FI, INC.
f/k/a ALPHA WIRELESS BROADBAND, INC.
Date: November 9, 2005
/s/ Albert R. Reda
---------------------
Albert R. Reda
Chief Executive Officer, Secretary
EXHIBIT INDEX
Number Description
--------------------------------------------------------------------------------
31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(filed herewith).
32 Certification Pursuant to 18 U.S. C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
24