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 DECEMBER 31, 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)
-----------------------------------------------------------
(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 December 31, 2005, the Issuer
had 118,664,634 shares of common stock issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ ]
TABLE OF CONTENTS
PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2005.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION FOR THE THREE AND SIX MONTHS
ENDED DECEMBER 31, 2005 AND 2004
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW FOR SIX MONTHS ENDED
DECEMBER 31, 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 December 31, 2005
---------------------------------------------- -------------------
Current Assets:
-----------------------------------------------
Cash $ 66,135
Total current assets 66,135
-------------------
Property and equipment, net (note 2) 31,179
Investments (note 2) 331,780
Other Receivable (note 3) 1,414,792
Restricted Cash (note 11) 75,000
Security Deposit 6,600
TOTAL ASSETS $ 1,925,486
-------------------
Liabilities and Stockholders' (Deficit)
Current Liabilities:
-----------------------------------------------
Accounts payable $ 888,851
Payroll taxes 679,197
Judgments payable (see note 11) 346,006
Other current liabilities (note 6) 763,400
Payable to officer 55,898
Note payable related party 55,268
Note Payable (note 4) 66,833
Current maturities of long-term debt 37,500
-------------------
Total current liabilities 2,892,953
Long Term Debt 617,575
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TOTAL LIABILITIES 3,510,528
-------------------
Minority Interest (89,693)
Stockholders' (deficit): (note 8 )
-----------------------------------------------
Preferred A Stock, par value $.001
Authorized 5,000,000 Issued 967,964 968
Preferred B Stock, par value $.001
Authorized 3,000,000 Issued 0
Preferred C Stock, par value $1.00
Authorized 2,000,000 Issued 500,000 500,000
Common stock, par value $.001
Authorized 11,000,000,000 Issued 118,664,634 118,664
Additional Paid in Capital 16,926,773
Accumulated deficit (19,041,754)
-------------------
Total Stockholders' (Deficit) $ (1,495,349)
-------------------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 1,925,486
-------------------
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 6 Months Ended
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
-------------- -------------- -------------- ------------
Revenues $ 3,546 $ 244 $ 9,954 $ 244
-------------- -------------- -------------- ------------
Cost and expenses:
Cost of revenues 1,120 6,679 34,443 6,679
Software development costs 1,500,570 0 1,500,570
Selling, general and admin. 200,076 458,210 296,636 965,267
Consulting 233,730 0 774,388 828,093
Interest Expense 0 0 984,000 0
Legal Fees 69,437 147,065 106,971 0
Officer Payroll 111,550 0 291,450 0
Investment 0 0 0 0
Depreciation and amortization 1,828 25,137 1,828 50,274
-------------- -------------- -------------- ------------
Total costs and expenses 2,118,311 637,091 3,990,286 1,850,313
-------------- -------------- -------------- ------------
Net income (loss) from operations (2,114,765) ( 636,847) (3,980,332) (1,850,069)
Other income (expense)
Cancellation of indebtness 590,253 0 590,253 0
Gain on disposal of equipment 3,284 0 3,284 0
Other income 1,615 33,670 2,235
Interest expense (118,839) 0 (227,546) 0
-------------- -------------- -------------- ------------
Income (loss) before income taxes (1,640,067) ( 635,232) (3,580,671) (1,847,834)
Provision for income taxes - - - -
Income taxes (benefit) 0 0 0 0
-------------- -------------- -------------- ------------
Loss before minority interest (1,640,067) ( 635,232) (3,580,671) (1,847,834)
Minority Interest 322,666 0 356,193 0
-------------- -------------- -------------- ------------
Net income (loss) (1,317,401) ( 635,232) (3,224,478) (1,847,834)
Loss per common share ($.01) ($.17) ($.03) ($.48)
Weighted average number of
common shares outstanding 101,517,955 3,840,724 101,517,955 3,840,724
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)
Six Months Ended
December 31,
Cash flows from operating activities 2005 2004
------------ --------------
Net loss $(3,224,478) $ (1,847,834)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,828 50,274
Issuance of common stock for services 648,775 2,007,134
Issuance of common stock for payment of financing costs 984,000 -
Write-down of capitalized software costs 1,500,570 -
Cancellation of indebtedness (590,253) -
Minority interest (339,693) -
Changes in operating assets and liabilities
Other current liabilities 41,985 121,298
Accounts payable 132,420 51,822
Payroll taxes payable 16,927 (4,721)
Judgments payable (55,237) 21,753
Payable to related party - 8,446
Payable to officer 120,000 (116,958)
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Net cash used in operating activities (763,156) 291,214
------------ --------------
Cash flows from investing activities
Purchase of intangible assets (85,000) (191,659)
Purchase of investments (112,195) -
Advances to related party (132,099) -
Purchase of equipment (33,007) -
------------ --------------
Net cash used in investing activities (362,301) (191,659)
------------ --------------
Cash flows from financing activities
Net decrease in credit lines - (99,828)
Proceeds from issuance of notes payable 1,452,471 -
Repayment of notes payable (79,500) -
Repayment of advances from officer (167,384) -
Repayment of related party advances (14,265) -
------------ --------------
Net cash provided by financing activities 1,191,322 (99,828)
------------ --------------
Net increase (decrease) in cash 65,865 (273)
Cash, beginning of period 270 1,274
------------ --------------
Cash, end of period $ 66,135 $ 1,001
============ ==============
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)
Six Months Ended
December 31,
2005 2004
---------- --------
Supplemental cash flow disclosure
Interest paid $ - $ 8,500
Income taxes paid $ - $ -
Noncash investing and financing activities
Common stock issued for services $ 648,775 $874,428
Common stock issued for payment of financing costs $ 984,000 -
Common stock issued for conversion of preferred A stock
and debt cancellation $4,030,217 $ -
Common stock issued for conversion of preferred C stock $ 200,000 $ -
Common stock issued for investment $ - $110,000
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
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Organization and Operations
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 36
Wi-Fi locations. Seamless Skyy-Fi, Inc has installed wireless Internet access
equipment at businesses allowing their patron's access to the Internet for a fee
or free basis.
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
------
Encryption Software that encrypts Wi-Fi transmissions based upon RSA's
--------------------
government certified 256 bit AES encryption coupled with RSA's Public Key
Infrastructure flexible telecom data and voice transport solutions.
In May 2005 the Company changed its name to Seamless Wi-Fi, Inc and changed
Skyy-Fi, Inc., to Seamless Skyy-Fi, Inc.
In December 2005 the Company started a hosting company Alpha Internet offering
Seamless clients a high-security hosting facility.
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. 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.
8
Cash and Cash Equivalents
The Company considers all short-term, highly liquid investments with an original
maturity date of three months or less to be cash equivalents.
Property and Equipment
Property and equipment is stated at cost and depreciated using the straight-line
method over the estimated useful life of the assets, which is generally three to
five years for computers and computer related equipment and five to seven years
for furniture and other non-computer equipment. Leasehold improvements are
amortized using the straight-line method over the shorter of their estimated
useful lives or the term of the lease, ranging from one to five years.
Investments
Investments are stated at the lower of cost or market value.
Proprietary Software in Development
In accordance with SFAS No. 86, accounting for the Cost of Computer Software to
be Sold, Leased, or Otherwise Marketed Software ("FAS 86"), the Company has
capitalized certain computer software development costs upon the establishment
of technological feasibility. Technological feasibility is considered to have
occurred upon completion of a detailed program design which has been confirmed
by documenting and tracing the detailed program design 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 ratios that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product, The
estimated useful life for the straight-line method is determined to be 2 to 5
years.
The unamortized computer software and computer software development costs were
$1,500,570 at September 30, 2005. During the quarter ended December 31, 2005 the
computer software development team failed to deliver the completed software
program as per agreement. The unamortized development cost were expensed and in
January 2006 a new computer software development team was contracted and the
costs related to the development will be expensed until the development of the
computer software program is completed
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
9
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, 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 affected 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 December 31, 2005, and 2004, have been included.
Readers of these financial statements should note that the interim results for
the three month and six month periods ended December 31, 2005, and December 31,
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
----------------------------------------------------
December 31, 2005
--------------------
Investment:
Stock of DCM Enterprises $ 88
Stock of Global Debit Cash 331,692
Stock of Save the World 0
--------------------
Total Long Term Investments $ 331,780
====================
Property and equipment:
Office furniture and equipment $ 0
Machinery and computer equipment 33,007
Less: accumulated depreciation ( 1,828)
--------------------
Property and equipment, net $ 31,179
====================
Note 3. Other Receivables
----------------------------
During 2005 the company advanced funds 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 issued to the Company shares of its restricted
common stock as payment for this debit. 4,049,809 were issued during the quarter
ended December 31, 2005, which brings the total shares held by the Company to
4,112,809 these are valued at the amount of the debt $1,414,792.
10
Note 4. Note Payable
-----------------------
During the quarter ended December 31, 2005 the remaining notes that were payable
to Windsor Professional Plaza LLC, were assigned to Ayuda Funding LLC. These
notes are secured by series A convertible preferred stock, (See Note 8 Preferred
Stock). These notes allow the note holder to convert the preferred stock to
common stock to pay off the note and interest due in case of a default in the
quarterly interest payments for the loan. See Note 7. Related Party
Transaction.
During the quarter ended December 31, 2005 a loan for $300,000 was made to the
Company by Russell Singer, a five percent or greater share holder of the
Company, (owner of Adobe Oil) which was secured by 269,230 shares of GNVN stock
as collateral. The Company defaulted on the loan and the lender perfected
ownership of the collateral stock See Note 7. Related Party Transaction
As of the quarter ended December 31, 2005 the Company made an offer to settle
the debt of $66,833 with Blue Bear Funding, which is currently in Chapter 11
Bankruptcy. As of this filing the Company has not received a response to its
offer.
During the quarter ended September 30, 2005 several notes payable to Windsor
Professional Plaza LLC, were paid in full and or assigned to Ayuda Funding LLC.
These notes were secured by series A convertible preferred stock, (See Note
8-Preferred Stock.). These notes were in default which per legal counsel, which
allowed the note holder to convert the preferred stock to common stock.
Proceeds from the converted stock paid off some of the notes. See Note 7.
Related Party Transaction
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 second quarter ended December 31, 2005 for fiscal year ended June 30,
2006. The current assets are less then current liabilities by $2,826,818 and
the Company incurred a net loss of $3,224,478.
Management believes that if it were to lose its current funding source and if an
alternative funding source were not obtained then Company would 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 320,350 (1)
Payable to Integrated Communications 193,796 (2)
Various liabilities assumed from
Alpha Tooling acquisition 249,254
------------
$ 763,400
(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 quarter ended of December 31, 2005 of fiscal year ended June 30, 2006
the Company purchased two judgments from Adobe Oil. These judgments totaled
$773,145 of which one was in the amount of $134,052 in favor of Community Bank.
Adobe Oil received cash and stock as payment in full for the judgments. Russell
Singer is the Principal shareholder of Adobe Oil.
During the quarter ended December 31, 2005 a loan for $300,000 was made to the
Company by Russell Singer (owner of Adobe Oil) which was secured by 269,230
shares of GNVN stock as collateral. The Company defaulted on the loan and the
lender perfected ownership of the collateral stock
During the quarter ended December 31, 2005 a Russell Singer acquired $200,000
of Preferred C stock from Seamless P2PLLC
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 and the loan to Windsor was paid,
(See Note 4 Note Payable).
11
As of September 30, 2005 the Company appointed Financial Services LLC as the
Trust Protector for the Creditor Trust. The Trust is currently managed by
Mildred Carrroll who is also the Trustee and is also the Company's Secretary
-.During the first quarter ended September 30, 2005 The Company created a
Creditor Trust and appointed KFG LLC as Trust Protector which was managed by
David Karst as the Trustee for the Creditor Trust - see Note 10 c. Creditor
Trust.
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.
As filed in an 8K dated July 6, 2004 the established a creditor Pursuant to
the terms and conditions of the trust agreement, shares of the Company's
common stock were be transferred in trust to KFC LLC, which has accepted
the appointment as trustee.
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.
As of June 30, 2005 the Company had borrowed a total of $623,422 from Windsor
Professional Plaza, LLC - See Note 4.
As of September 30, 2005 the Company appointed Financial Services LLC as the
Trust Protector for Creditor Trust. The Trust is currently managed by Mildred
Carrroll who is also the Trustee and is also the Company's Secretary -. The
Company's previous Creditor Trust had appointed KFG LLC as Trust Protector which
was managed by David Karst as the Trustee for the Creditor Trust - see Note 10
c. Creditor Trust.
c. Creditor Trust.
-------------------
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.For details of the various transactions between the Company and DCM
Enterprises See Note 8. Stockholders' Equity.
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 balances of the Marketing rights
were written off in the third quarter of fiscal 2005.For details of the various
transactions between the Company and Global Debit Cash Card, Inc See Note 8.
Stockholders' Equity.
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
12
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
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 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
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 second quarter ended December 31, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006
----
800,000 shares of common stock were issued for services and expensed at $32,000
for consulting on public relations.
112,500 shares of common stock were issued for services and expensed at $4,500
for marketing.
670,000 shares of common stock were issued for services and expensed at $33,500
for consulting on mergers and acquisitions.
Ayuda Funding LLC converted 2,280 shares Series A preferred stock into
22,800,000 shares of common stock, valued at $1,390,720, of which $773,145 was
used to pay judgments and $617,575 constitutes a loan to the Company.
200,000 shares of Series C preferred stock were converted into 3,622,537 shares
of common stock valued at $200,000 by Russell Singer who acquired those shares
from Seamless P2P LLC as per asset purchase agreement dated January 2005. See
Note 7. Related Party Transactions.
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.
13
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 was 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.
Preferred Stock
During the second quarter ended December 31, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006, Ayuda Funding LLC converted 2,280 shares Series A Preferred stock into
-----
22,800,000 shares of Common stock.
14
200,000 shares of Series C preferred stock were converted into 3,622,537 shares
of common stock valued at $200,000 by Russell Singer who acquired those shares
from Seamless P2P LLC as per asset purchase agreement dated January 2005. See
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 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 are three reportable
segments based on the customers served by each segment: Such determination was
based on the level at which executive management reviews the results of
operations in order to make decisions regarding performance assessment and
resource allocation
The Company is currently a start up business that is providing "Wireless
Internet" access at business locations and a developer and provider of a patent
pending software. In December 2005 the Company started a hosting company Alpha
Internet offering Seamless clients ahigh-security hosting facility. See Note 1.
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:
FOR SECOND QUARTER ENDED DECEMBER 31, OF FISCAL YEAR ENDED
June 30, 2006 June 30, 2005
Wi-Fi ISP NET SALES $ 9,954 $ 244
COST OF WI-FI SALES (34,443) (6,679)
SOFTWARE NET SALES 0 0
COST OF SOFTWARE SALES 0 0
COST AND EXPENSES (3,955,843) (1,843,634)
OTHER NET INCOME 399,661 2,235
NET LOSS BEFORE MINORITY INTEREST $ (3,580,671) $ (1,847,834)
MINORITY INTEREST 356,193 0
NET LOSS $ (3,224,478) $ (1,847,834)
15
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."
c. Creditor Trust
-------------------
As of September 30, 2005 the Company appointed Financial Services LLC as the
Trust Protector for the Creditor Trust. The Trust is currently managed by
Mildred Carroll who is also the Trustee and is also the Company's Secretary -.
The Company's previous Creditor Trust had appointed KFG LLC as Trust Protector
which was managed by David Karst as the Trustee for the Creditor Trust - see
Note 7. Related Party Transactions
As filed in an 8K dated July 6, 2004 the Company established a creditor trust
Pursuant to the terms and conditions of the trust agreement, shares of the
Company's common stock were to be transferred in trust to KFC LLC, which has
accepted the appointment as trustee.
The Company's creditor trust had been established to return the maximum amount
to beneficiaries and to allow the Company to continue to operate without
interruption.
Following the submission of claims and validation of such claims, the trustee
was to liquidate the trust property and distribute the proceeds to the
trust beneficiaries in a manner the trustee deems most beneficial.
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
judgment was paid, and the case dismissed. See Note 7 Related Party Transaction.
16
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 three subsidiaries as follows: Its web site is www.slwf.net.
------------
Seamless Skyy-Fi, Inc., 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.
-------------------
In December 2005 the Company started a hosting company Alpha Internet offering
Seamless clients a high-security hosting facility.
(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
36 Wi-Fi locations for its Seamless Skyy-Fi, Inc., Wi-Fi subsidiary, and has
installed its Phenom Software Encryption Program at two locations per beta test
agreements deploying the Seamless Peer 2 Peer, Inc. software. Seamless Peer 2
Peer, Inc is the Copmany's software developing 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 second 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".
17
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 and six months ended December31, 2005 were $3,546 and
$9,954 respectively as compared with $244 for the corresponding period in
2004, an increase of $3,212 and $9,710 respectively.
The total Cost and Expense which includes Selling, general and administrative
expenses; for the three months and six months ended December 31, 2005 was
$2,118,311 and $3,990,286 as compared to $637,091 and $1,850,313 for the same
period in 2004, which represents an increase of $1,481,220 and $2,139,973
repetitively.
The continued high cost of the selling, general and administrative expenses
reflect the fact that the Company is still in its development stage. Another
factor is due to the fact that the original software development company failed
as per its agreement to deliver to the Company a completed software program for
its peer to peer venue there by causing the Company to write off its development
cost of $1,500,570. These funds would have been amortized over a three year
period instead of expensed this quarter if the software program would have been
delivered.
Other Income; either from extraordinary income due to cancellation of a debt to
the company or from payment in full on debt for a reduced amount (with the
difference represented as income) and /or from the sale of fully of partially
depreciated equipment where the income from the sale is greater than the amount
depreciated. Since there are no expectations that further activities 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 and six months ended December 31, 2005 are $1,317,401
and $,3,224,478 as compared to $635,232 and $1,847,834 for the same period in
2004 a Net Loss increase of $682,169 and $1,376,644 respectively.
Management believes these results are a direct reflection of continued higher
expenses due to the continued expansion of the business and developmental cost
of the software program and its related expenses. These expenses are 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 SECOND QUARTER ENDED DECEMBER 31, OF FISCAL YEAR ENDED
June 30, 2006 June 30, 2005
Wi-Fi ISP NET SALES $ 9,954 $ 244
COST OF WI-FI SALES (34,443) (6,679)
SOFTWARE NET SALES 0 0
COST OF SOFTWARE SALES 0 0
COST AND EXPENSES (3,955,843) (1,843,634)
OTHER NET INCOME 399,661 2,235
NET LOSS BEFORE MINORITY INTEREST $ (3,580,671) $ (1,847,834)
MINORITY INTEREST 356,193 0
NET LOSS $ (3,224,478) $ (1,847,834)
The following discussion should be read in conjunction with the financial
statements of the Company and notes thereto contained elsewhere in this report.
18
Information on reportable segments is as follows:
(1) WISP: The resultant losses from operations for the Wi-Fi ISP segment,
including the second quarter of fiscal year ended June 30, 2006 of $24,489, are
expected to continue because of the expenses related to the startup of this
operation.
(2) Software: The resultant losses from the Software encryption program
segment for the second quarter of fiscal year ended June 30, 2006, are expected
to continue because of the expenses related to the startup of this operation.
Liquidity and Capital Resources
Net cash used in operating activities at the end of the second quarter of fiscal
year ended June 30, 2006, decreased by ($3,224,478) due to the use of stock for
services which is an increase compared to the results for the same period ended
2005 of ($1,847,834). The Company has a source for capital so the Company can
expand its Internet operations of establishing wireless Internet locations
commonly referred to as Wi-Fi hotspots and to allow the continued development
of its Phenom Software program.
Capital Expenditures
During the second quarter of fiscal year ended June 30, 2006 the Company
acquired equipment for the distribution of Wi-Fi which has a current book value
of $31,179.
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.
19
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
20
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 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 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. On March 8, 2005 the Company put $75,000 in its
lawyer's 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
judgment was paid, the case settled and dismissed. See Note 7 Related Party
Transaction.
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.
21
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
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 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 second quarter ended December 31, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006
----
800,000 shares of common stock were issued for services and expensed at $32,000
for consulting on public relations.
112,500 shares of common stock were issued for services and expensed at $4,500
for marketing.
670,000 shares of common stock were issued for services and expensed at $33,500
for consulting on mergers and acquisitions.
Ayuda Funding LLC converted 2,280 shares Series A preferred stock into
22,800,000 shares of common stock, valued at $1,390,720, of which $773,145 was
used to pay judgments and $617,575 constitutes a loan to the Company.
200,000 shares of Series C preferred stock were converted into 3,622,537 shares
of common stock valued at $200,000 by Russell Singer who acquired those shares
from Seamless P2P LLC as per asset purchase agreement dated January 2005. See
Note 7. Related Party Transactions.
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):
22
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 was 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.
Preferred Stock
During the second quarter ended December 31, 2005 of fiscal year ended June 30,
--------------------------------------------------------------------------------
2006, Ayuda Funding LLC converted 2,280 shares Series A Preferred stock into
-----
22,800,000 shares of Common stock
200,000 shares of Series C preferred stock were converted into 3,622,537 shares
of common stock valued at $200,000 by Russell Singer who acquired those shares
from Seamless P2P LLC as per asset purchase agreement dated January 2005. See
Note 7. Related Party Transactions.
23
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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-----------------------------------------------
During the quarter ended December 31, 2005 the remaining notes that were payable
to Windsor Professional Plaza LLC, were assigned to Ayuda Funding LLC. These
notes are secured by series A convertible preferred stock, (See Note 8 Preferred
Stock). These notes allow the note holder to convert the preferred stock to
common stock to pay off the note and interest due in case of a default in the
quarterly interest payments for the loan. See Note 7. Related Party
Transaction.
During the quarter ended December 31, 2005 a loan for $300,000 was made to the
Company by Russell Singer, a five percent or greater share holder of the
Company, (owner of Adobe Oil) which was secured by 269,230 shares of GNVN stock
as collateral. The Company defaulted on the loan and the lender perfected
ownership of the collateral stock See Note 7. Related Party Transaction
During the quarter ended September 30, 2005 several notes payable to Windsor
Professional Plaza LLC, were paid in full and or assigned to Ayuda Funding LLC.
These notes were secured by series A convertible preferred stock, (See Note
8-Preferred Stock.). These notes were in default which per legal counsel, which
allowed the note holder to convert the preferred stock to common stock.
Proceeds from the converted stock paid off some of the notes.
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.
24
(B) REPORTS ON FORM 8-K
On October 20, 2005 the Company filed an 8K which described the asset purchase
agreement between Seamless Skyy-Fi, Inc., a subsidiary of the company and Indigo
Technology Services, Inc.
On October 26, 2005 the Company filed an 8K which described Seamless
Peer-to-Peer, a subsidiary of the Company entered into a non-binding Letter of
Intent with Intent Media Works, Inc. ("Intent") whereby Seamless and Intent
shall negotiate in good faith, and upon mutually agreeable terms and conditions,
to develop Seamless' proprietary closed peer-to-peer network services.
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: February 9, 2006
/s/ Albert R. Reda
---------------------
Albert R. Reda
Chief Executive Officer,
Chief Financial Officer
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).
25