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Wireless Frontier Internet Inc · 10QSB · For 3/31/04

Filed On 5/24/04, 5:28pm ET   ·   Accession Number 922423-4-773   ·   SEC File 0-08281

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  As Of                Filer                Filing    For/On/As Docs:Size              Issuer               Agent

 5/24/04  Wireless Frontier Internet Inc    10QSB       3/31/04    5:79K                                    Kramer Levin Naf..LLP/FA

Quarterly Report — Small Business   —   Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Form 10-Qsb Quarterly Report                          29    141K 
 2: EX-31       Exhibit 31.1 Certificate                               2±     9K 
 3: EX-31       Exhibit 31.2 Certificate                               2±     9K 
 4: EX-32       Exhibit 32.1 Certificate                               1      6K 
 5: EX-32       Exhibit 32.2 Certificate                               1      6K 


10QSB   —   Form 10-Qsb Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
4Item 1. Financial Statements
20Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
22Liquidity and Capital Resources
26Item 3. Controls and Procedures
27Item 1. Legal Proceedings
"Item 3. Defaults Upon Senior Securities
28Item 6. Exhibits and Reports on Form 8-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2004 WIRELESS FRONTIER INTERNET, INC. -------------------------------- (Exact name of small business issuer as specified in its charter) =============================================================================== Delaware 0-08281 75-2771930 ------- ---------- ------------------------------------------------------------------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) =============================================================================== 104 West Callaghan, Fort Stockton, Texas 79735 ---------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (432) 336-0336 -------------- Securities registered under Section 12 (b) of the Exchange Act: NONE Securities registered under Section 12 (g) of the Exchange Act: Common Stock Par Value $ 0.001 per share Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No _X__
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State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: [66,402,618 common shares as of March 31, 2004.] Transitional Small Business Disclosure Format (check one): Yes No _X__
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TABLE OF CONTENTS Page ---- PART I Financial Information Item 1. Condensed Consolidated Balance Sheets (unaudited) - As of March 31, 2004 and March 31, 2003............................1 Condensed Consolidated Statements of Operations (unaudited) - For the Three Months ended March 31, 2004 and 2003.................3 Condensed Consolidated Statements of Cash Flows (unaudited) - For the Three Months ended March 31, 2004 and 2003.................5 Notes to Condensed Consolidated Financial Statements (unaudited)........................................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................17 Item 3. Controls and Procedures...........................................23 PART II Other Information Item 1. Legal Proceedings.................................................24 Item 2. Defaults Upon Senior Securities...................................24 Signatures
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PART I - FINANCIAL INFORMATION  Item 1. Financial Statements WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET March 31, 2004 and 2003 [Download Table] ASSETS 2004 2003 ---- ---- CURRENT ASSETS Cash $ 683,326 $ 88,110 Accounts receivable 282,781 98,126 Inventories 163,604 24,235 Prepaid expenses 8,400 -- ----------- ----------- Total Current Assets 1,138,111 210,471 FIXED ASSETS Buildings 375,000 90,000 Equipment 2,489,345 623,606 Vehicles 521,131 61,020 ----------- ----------- 3,385,476 774,626 Less: Accumulated depreciation (799,113) (267,440) ----------- ----------- 2,586,363 507,186 OTHER ASSETS Goodwill 4,869,632 505,966 Covenants not to compete 10,000 10,000 ----------- ----------- 4,879,632 515,966 Less: Accumulated amortization (257,902) (46,407) ----------- ----------- 4,621,730 469,559 Shareholder receivables -- 15,779 ----------- ----------- 4,621,730 485,338 ----------- ----------- Total Assets $ 8,346,204 $ 1,202,995 =========== =========== See accompanying notes and accountant's report. 1
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[Enlarge/Download Table] LIABILITIES AND STOCKHOLDERS' EQUITY 2004 2003 ---- ----- CURRENT LIABILITIES Line of credits $ 225,656 $ 317,342 Current portion of long - term debt 147,730 83,538 Notes payable 2,070,734 -- Accounts payable 360,376 8,230 Accrued payroll 44,706 27,242 Accrued interest 1,924 5,450 Accrued taxes 16,287 8,504 ----------- ----------- Total Current Liabilities 2,867,413 450,306 LONG - TERM DEBT Long - term debt 585,054 548,609 STOCKHOLDERS' EQUITY Common stock 100,000,000 shares authorized 66,402,618 and 10,000,000 shares outstanding at March 21, 2004 and 2003 respectively, par value $.001 per share 66,403 1,000 Additional contributed capital 7,189,975 664,316 Retained deficit (2,360,615) (461,236) Treasury stock (2,026) -- ----------- ----------- 4,893,737 204,080 ----------- ----------- Total Liabilities and Stockholders' Equity $ 1,346,204 $ 1,202,995 =========== =========== 2
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WIRELESS FRONTIER INTERNET, INC. CONSOLIDATED INCOME STATEMENT For the Quarters Ended March 31, 2004 and 2003 [Download Table] 2004 2003 ---- ---- REVENUES Equipment Sales Revenues $ 242,050 $ 200,060 Cost of sales 157,268 181,952 ------------ ------------ Gross profit equipment sales 84,782 18,108 Internet service Revenues 764,238 279,096 Cost of sales 306,809 202,438 ------------ ------------ Gross profit internet sales 457,429 76,658 ------------ ------------ TOTAL GROSS PROFIT 542,211 94,766 GENERAL AND ADMINISTRATIVE Advertising and promotion 14,657 8,037 Amortization and depreciation 279,246 42,930 Legal and professional 390,298 1,965 Auto and travel 48,496 20,888 Commissions and contract labor 48,174 15,870 Office expenses and supplies 49,587 18,249 Insurance 16,277 13,970 Interest 23,751 4,274 Rent 18,584 27,721 Repairs and maintenance 4,814 2,003 Salary and wages 474,069 156,303 Taxes 50,236 14,789 Utilities 32,057 12,926 ------------ ------------ 1,450,246 339,925 ------------ ------------ LOSS FROM OPERATIONS (908,035) (245,159) Other income 22,167 10,116 ------------ ------------ NET INCOME/(LOSS) (885,868) (235,043) ============ ============ Average shares outstanding 65,936,059 Earnings/(Loss) per share (0.01) See accompanying notes and accountant's report. 3
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[Enlarge/Download Table] WIRELESS FRONTIER INTERNET, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the Years Ended December 31, 2003 through March 31, 2004 ADDITIONAL NUMBER OF COMMON CONTRIBUTED RETAINED TREASURY SHARES STOCK CAPITAL DEFICIT SHARES TOTAL --------- ------ ----------- -------- -------- ----- BALANCE January 1, 2003 7,453,000 $ 1,000 $ 664,316 $ (220,472) $ -- $ 444,844 Recapitalize for stock split 7,453,000 13,906 (13,906) -- -- -- Shares sold 4,498,947 4,499 1,272,033 -- -- 1,276,532 Acquisitions Kolinek acquisition 140,240 140 41,932 -- -- 42,072 Strategic Abstract acquisition 2,096,653 2,097 678,503 -- -- 680,600 Momuntum acquisition 767,552 768 2,620,642 -- -- 2,621,410 US Mex -West Texas acquisition 1,103,320 1,103 329,893 -- -- 330,996 Xramp 165,000 165 164,835 -- -- 165,000 Merger with Fremont Corporation 5,861,900 5,862 -- (543,011) (4,760) (541,909) Debt exchanged for stock in merger 448,204 448 110,220 -- -- 110,668 Services in connection with merger 1,125,000 1,125 -- -- -- 1,125 Net Loss for 2003 -- -- -- (711,264) -- (711,264) ----------- ----------- ----------- ----------- ----------- ----------- BALANCE December 31, 2003 31,112,816 31,113 5,868,468 (1,474,747) (4,760) 4,420,074 To balance to stock records 55,972 56 (56) -- -- -- Acquisitions OPI acquisition 1,763,812 1,764 849,857 -- -- 851,621 BCOM acquisition 177,800 178 293,192 -- -- 293,370 Treasury stock sold -- -- 106,806 -- 2,734 109,540 Stock for services 90,909 91 104,909 -- -- 105,000 Recapitalized for stock split 33,201,309 33,201 (33,201) -- -- -- Net loss for the Quarter -- -- -- (885,868) -- (885,868) ----------- ----------- ----------- ----------- ----------- ----------- BALANCE March 31, 2004 $66,402,618 $ 66,403 $7,189,975 $(2,360,615) $ (2,026) $4,893,737 =========== =========== =========== =========== =========== =========== See accompanying notes and accountant's report. 4
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WIRELESS FRONTIER INTERNET, INC. CONSOLIDATED STATEMENT OF CASH FLOWS For the Quarters Ended March 31, 2004 and 2003 [Download Table] 2004 2003 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the three months $ (885,868) $ (235,043) Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation 202,536 33,830 Amortization 76,708 9,100 Stock issued for services 1,525 -- Changes in Current assets and liabilities: Decrease (Increase) in Accounts receivable (30,166) 38,698 Decrease (Increase) in Inventories 103,530 35,380 Decrease (Increase) in Prepaid expenses (5,875) -- Increase (Decrease) in Accounts payable (267,008) (18,854) Increase in Accrued payroll 16,600 9,567 Increase (Decrease) in Accrued interest -- (1) Increase (Decrease) in Accrued taxes 1,307 (4,270) ----------- ----------- NET CASH (USED) BY OPERATING ACTIVITIES (786,711) (131,593) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Fixed assets (176,901) (106,027) ----------- ----------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (176,901) (106,027) CASH FLOWS FROM FINANCING ACTIVITIES Sale of Treasury stock 109,540 -- Borrowings on Lines of Credit -- 71,232 Borrowings on Notes Payable 1,279,356 -- Increase in Long - term debt -net 31,718 65,508 ----------- ----------- NET CASH USED BY FINANCING ACTIVITIES 1,420,614 136,740 ----------- ----------- NET INCREASE (DECREASE) IN CASH 457,002 (100,880) CASH AT BEGINNING OF PERIOD 226,324 188,990 ----------- ----------- CASH AT END OF PERIOD $ 683,326 $ 88,110 =========== =========== See accompanying notes and accountant's report. 5
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History The Company was incorporated under the laws of the state of Texas on July 7, 1998 for the purpose of making equipment sales within the state of Texas and Colorado. On February 8, 2000 the controlling interest in the Company was purchased by the current majority shareholder. The current majority shareholder, on January 1, 2001 contributed the assets and operations of West-Tex Internet to the Company. At that time the Company also became an Internet Service Provider with about 475 customers in the Fort Stockton, Texas area. The Company purchased on November 30, 2001 the assets and operations of Overland Network for $200,000. This purchase expanded the Company's Internet Service Provider area to include Alpine, Fort Davis, Marathon and Marfa, Texas areas. The Company also obtained, for $5,000, a three-year covenant not to compete, within a 50-mile radius of the Company's operations including the areas purchased from the seller. The Company purchased on May 31, 2002 the assets and operations of Brooks Data Consultants, Inc. for $245,000. This purchase expanded the Company's Internet Service Provider area to include Terlingua, Presidio, Sanderson, Sheffield, Comstock, Big Bend National Park and Heath Canyon, Texas areas. The Company also obtained, for $5,000, a five-year covenant not to compete, within a 50-mile radius of the Company's operations including the areas purchased, from the seller. On January 20, 2003 the Company's Board of Directors declared a 100 to 1 stock split increasing the authorized common shares from 1,000,000 to 100,000,000. On May 28, 2003 the stockholders of the Company exchanged all the outstanding shares of the Company for 14,906,000 shares of common stock. On the same date the Company's Board of Directors declared a 2 to 1 stock split. These financial statements reflect this split as if it happened at the beginning of the periods reported. All share amounts from this point on have been adjusted for the March 31, 2004, 2 for 1 stock split. On June 1, 2003, the Company entered into an agreement to purchase all the assets and assume certain liabilities of Momentum Online Computer Services, Inc. for 873,712 shares of common stock valued at $2,621,410. In December 2003, the purchase agreement and certain terms of the employment agreement entered into with Robert McClung, the CEO and principal shareholder of Momentum, were satisfied by the issuance of 138,430 shares and 800,000 shares, consecutively, to Robert McClung increasing the total to 1,673,712 shares of common stock. This purchase expanded the Company's Internet Service Provider area to the Highway 281 of Texas corridor, which extends roughly from south of the Dallas, Fort Worth area to the north of San Antonio. The Company is presently involved in a lawsuit and other legal matters with the former owner of Momentum over the agreement and ownership of the assets purchased on June 1, 2003. See note 10 to notes to Consolidated Financial Statements. On June 30, 2003, the Company entered into an agreement to purchase all the assets of Kolinek Internet service for 280,480 shares of common stock. The acquisition was valued at $42,072. The original agreement called for a purchase price of 28,048 shares of common stock. The acquisition was re-evaluated in December 2003 to 280,480 shares. This purchase expanded the Company's Internet Service Provider area in the Highway 281 of Texas corridor. On June 30, 2003, the Company entered into an agreement to purchase all the assets of Strategic Abstract & Title Corporation for $4,000 and 4,166,640 shares of common stock valued at $680,600. The original agreement called for a purchase price of 416,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 4,166,640 shares. This purchase added three commercial buildings valued at $285,000 and the assets and business of Strategic Abstract & Title Corporation. On or about July 1, 2003, the Company acquired all the outstanding shares of US Mex Communications and West Texas Horizons for 2,206,640 shares of the Company's common stock valued at $330,996 and the assumption of $51,000 in notes payable. The note was paid in full with the December 18, 2003 notes payable. The original agreement called for a purchase 6
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price of 220,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 2,206,640 shares. The acquired company sells phone cards and provides pay phone services in Southwestern Texas. All assets, liabilities and operations have been transferred to Wireless Frontier Internet, Inc. (Texas). The corporations are now inactive subsidiaries at December 31, 2003. On September 30, 2003, the Company entered into an Agreement and Plan of Merger with Fremont Corporation a publicly traded company. Pursuant to the merger agreement Networker Systems, Inc., a wholly owned subsidiary of the Fremont, was merged into the Company with the Company being the surviving corporation. The shareholders of the Company exchanged all the outstanding shares of the Company for 32,053,158 shares of the common stock of Fremont in a one for one exchange. As a result of this transaction the Company became a wholly owned subsidiary of Fremont. In addition, Fremont also entered into an Asset Purchase Agreement with Million Treasure Enterprises Limited, a British Virgin Islands corporation. Pursuant to this agreement, Million acquired all of Fremont's equity interest in Winfill (a subsidiary of Fremont) for Millions return to Fremont of the 661,654 (pre-split) shares of common stock held by Million, the cancellation of Million's warrant to purchase 2,000,000 (pre-split) shares of common stock and the forgiveness of all sums owed by Fremont to Million. This combination was treated as a reverse merger whereby the acquired company is treated as the acquiring company for accounting purposes. On September 30, 2003 the Company entered into an Asset Purchase Agreement with Limited Liability Partnership d/b/a Xramp, to purchase certain assets and Internet subscribers of the Partnership. The purchase price was 294,643 shares of the Company's common stock valued at $165,000 and a note for $50,000. On February 9, 2004 the Company entered into an Agreement for Purchase and Sale of Stock with all the shareholders of Office Products Incorporated Computer Division, a Kansas Corporation for 3,527,624 shares of common stock valued at $922,183 and a Note payable for $373,252. This agreement is effective January 1, 2004. On March 17, 2004 the Company entered into an Asset Purchase Agreement for the purchase of the assets of BCOM.NET, INC. for 355,600 shares of common stock valued at $293,370. The agreement was effective on March 17, 2004. As of April 1, 2004 the Company was a Wireless Internet Service Provider in southwest Texas and western Kansas, providing both wireless and dial-up services in addition to the equipment sales. Cash and Cash Equivalents For the purposes of the statement of cash flows, the Company considers all short-term debt securities to be cash equivalents. Cash paid during the three months for: First Quarter 2004 ---- Interest $23,751 Income taxes -0- Income taxes The Company accounts for income taxes under a method which requires a company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in a company's financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements carrying amounts and tax basis of assets and liabilities using enacted tax rates. The Company presently prepares its tax return on the cash basis and its financial statements on the accrual basis. No deferred tax assets or liabilities have been recognized at this time, since the Company has shown losses for both tax and financial reporting. The Company has a net operating loss carry forward at March 31, 2004 of approximately $1,700,000. Depreciation and Amortization The Company provides for depreciation of fixed assets utilizing the straight-line method to apportion costs over the following estimated lives: 7
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Years ----- Buildings 40 Equipment 5 Vehicles 5 The Company provides for amortization of purchased Goodwill, which represents the value of Internet subscribers purchased, utilizing the straight-line method, to apportion costs over a 15 year estimated life. The Company provides for amortization of the covenants not to compete utilizing the straight-line method to apportion costs over the life of the covenant. Presently the Company has two covenants not to compete. One has a three-year life and the other has a five-year life. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE -2 FIXED ASSETS Fixed assets are summarized by major classifications as follows: March, 31 2004 2003 ---- ---- Buildings $375,000 $90,000 Equipment 2,619,287 623,606 Vehicles 521,131 61,020 ------- ------ 3,515,418 774,626 Accumulated Depreciation (799,113) (267,440) --------- --------- $2,716,305 $507,186 ========== ======== Depreciation expense for the three months ended March 31, 2004 and 2003 was $202,536 and $33,830 respectively. NOTE 3 - GOODWILL AND COVENANTS NOT TO COMPETE Goodwill and covenants not to compete are summarized by major classifications as follows: March 31, 2004 2003 ---- ---- Goodwill $4,602,620 $505,996 Covenants not to compete 10,000 10,000 ------ ------ 4,612,620 515,996 Less: Accumulated amortization (257,902) (47,407) --------- -------- $4,354,718 $468,589 ========== ======== Amortization expense for the three months ended March 31, 2004 and 2003 was $76,710 and $9,100 respectively. Future amortization expense for the next five years is as follows: 2004 $306,841 2005 $306,841 2006 $306,841 2007 $306,841 2008 $306,841 NOTE 4 - ACQUISITIONS 8
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On June 1, 2003, the Company entered into an agreement to purchase all the assets and assume certain liabilities of Momentum Online Computer Services, Inc. for 873,714 shares of common stock valued at $2,621,410. This purchase expanded the Company's Internet Service Provider area to the Highway 281 of Texas corridor, which extends roughly from south of the Dallas, Fort Worth area to the north of San Antonio. The Company is presently involved in a lawsuit and other legal matters with the former owner of Momentum over the agreement and ownership of the assets purchased on June 1, 2003. See litigation footnote. Assets Acquired were: Cash $12,053 Accounts receivable 123,490 Inventory 26,717 Equipment and furniture 280,425 Goodwill - Internet Subscribers 2,492,202 --------- Total Assets $2,934,887 ========== Liabilities Assumed were: Accounts payable $97,792 Accrued payroll 24,177 Accrued interest 1,123 Accrued taxes 17,891 Lines of credit 59,422 Notes payable 59,250 Long - Term debt 54,222 ------ Total Liabilities $313,877 ======== On June 30, 2003, the Company entered into an agreement to purchase all the assets of Kolinek Internet service for 280,480 shares of common stock. The acquisition was valued at $42,072. The original agreement called for a purchase price of 28,048 shares of common stock. The acquisition was re-evaluated in December 2003 to 280,480 shares. This purchase expanded the Company's Internet Service Provider area in the Highway 281 of Texas corridor. Assets Acquired: Goodwill - Internet Subscribers $42,072 On June 30, 2003, the Company entered into an agreement to purchase all the assets of Strategic Abstract & Title Corporation for $4,000 and 4,166,640 shares of common stock valued at $680,600. The original agreement called for a purchase price of 416,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 4,166,640 shares. This purchase added three commercial buildings valued at $285,000 and the assets and business of Strategic Abstract & Title Corporation. Assets Acquired: Cash $15,425 Accounts receivable 3,161 Buildings 285,000 Equipment and furniture 234,858 Goodwill 89,552 ------ Total Assets $628,996 ======== On or about July 1, 2003, the Company acquired all the outstanding shares of US Mex Communications and West Texas Horizons for 2,206,640 shares of the Company's common stock valued at $330,996 and the assumption of $51,000 in notes payable. The note was paid in full with the December 18, 2003 notes payable. The original agreement called for a purchase price of 220,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 2,206,640 shares. The acquired company sells phone cards and provides pay phone services in Southwestern Texas. All assets, liabilities and 9
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operations have been transferred to Wire Frontier Internet, Inc. (Texas). The corporations are now inactive subsidiaries at December 31, 2003. Assets Acquired: Equipment and furniture $270,682 Goodwill 381,996 ------- Total Assets $652,678 ======== Liabilities Assumed: Accounts payable $ 51,000 Notes payable 270,682 ------- Total Liabilities $321,682 ======== On September 30, 2003 the Company entered into an Asset Purchase Agreement (the"Xramp Agreement") with Bartell & Griffith, LTD. L.L.P., d/b/a/ Xramp ("Xramp Partnership") to purchase certain assets and Internet subscribers of the Xramp Partnership. The purchase price was 294,643 shares of the Company's common stock and a note for $50,000. The note was paid off in March 2004. Assets Acquired: Equipment and furniture $46,950 Goodwill - Internet Subscribers 168,050 ------- Total $215,000 Liabilities Assumed: Note payable $50,000 ======= On February 9, 2004 the Company entered into an Asset Purchase Agreement with Office Products Incorporated, to purchase Internet subscribers, certain assets, and Computer Service customers d/b/a Office Products Incorporated Computer Division. The purchase price was 3,527,623 shares of the Company's common stock for 142 wireless customers at $589 each and the Computer Store with gross receipts of $313,000. In addition there are 377,892 shares plus $275,000 to pay for the debt of $373,252 within 90 days of the signing of the agreement. These amounts not been remitted by the Company as of May 21, 2004. The Company is in negotiations with the former owners over the final amounts due. Assets Acquired: Inventory $95,657 Equipment and 207,034 furniture Goodwill - Internet Subscribers 922,182 ------- Total $1,224,873 Liabilities Assumed: Note payable $373,252 ======== On March 2, 2004 the Company entered into an Asset Purchase Agreement with BCOM.NET, INC to purchase certain assets and Internet subscribers of the Incorporation. The purchase price was 355,600 shares of the Company's common stock for 47 wireless customers valued at $589 each, 363 dial-up customers valued at $249 each and 18,878 shares of the Company's common stock to offset the debt. Assets Acquired: 10
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Equipment and furniture $26,358 Goodwill - Internet Subscribers 267,012 ------- Total $293,370 ======== NOTE 5 - NOTES PAYABLE Lines of Credit: On November 14, 2002, the Company entered into a Line of Credit Agreement with a local bank for $170,000 due June 4, 2004. The interest rate is 6.75%. The loan is secured by all accounts and other rights to payments, inventories, equipment, instruments and chattel paper, general intangibles, documents, and deposit accounts owned by the Company. The majority shareholder and officer of the Company also guarantee the loan. The balance due at March 31, 2003 was $170,000. On June 1, 2003 in connection with the acquisition of Momentum the Company assumed a Line of Credit Agreement dated November 11, 2002 with a local bank for $75,000 payable on demand and if no demand is made, then on November 22, 2003. The note was renewed in December 2003 when an interest payment was made and the new maturity date is June 19, 2004. The interest rate is 8.5%. The loan is secured by all monies the Company has on deposit with the bank. The note is guaranteed by the former shareholder of Momentum, who is also an Officer of the Company. At March 31, 2004 the balance outstanding for Wireless Frontier Internet under this agreement was $55,656. Notes Payable: In connection with the Momentum acquisition, on April 1, 2003 the Company entered into a loan agreement with an individual and shareholder for $59,250 for working capital funds advance to the Momentum since inception. The loan is due on demand with an 8% interest rate. Accruing interest is due monthly. The note is unsecured. The balance due at March 31, 2004 was $54,203. On September 30, 2003 as part of the Xramp Agreement the Company agreed to pay $50,000. The agreement was satisfied in March 2004 by payment in full of the loan. On December 18, 2003, the Company entered into a loan agreement with a Bank for $353,279. The interest rate varies at 2 points over the Wall Street Journal Prime Rate. The rate at March 31, 2004 was 6%. The Note was renewed and now matures on June 17, 2004. The note is secured by all vehicles, office equipment, accounts receivable, telephone equipment and all other assets. At March 31, 2004 the balance outstanding under this agreement was $328,279. On February 9, 2004, the Company entered into an Agreement for Purchase and Sale of Stock with Office Products Incorporated, Computer Division. This agreement called for $373,252 to be paid in stock and cash within 90 days from the signing of the agreement. This amount has not been paid as of May 21, 2004. The Company is presently in discussions with the former owners concerning this amount. The Company is in default in relation to this amount at this time. At March 31, 2004 the balance outstanding under this agreement was $373,252. In March 2004, the Company issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, and warrants to purchase an aggregate of 7,655,000 shares of the Company's common stock at an exercise price of $0.20 per share. Under the terms of the debentures, the note holders have the option to convert the principal balance of the debentures, in whole or in part, into shares of common stock at a conversion price equal to $0.20 per share. These debentures matured on April 11, 2004, and the Company was unable to pay off the debentures at maturity. The Company is currently negotiating with the holders of the debentures representing this indebtedness to extend the maturity of the indebtedness. The Company is in default in relation to these debentures. At March 31, 2004 the balance outstanding under these agreements was $1,315,000. Long - Term Debt: 11
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On May 30, 2002, the Company entered into a loan agreement with a local bank for $469,073. The loan calls for 24 monthly payments of $7,000, followed by 47 monthly payments of $8,500 and 1 payment of $11,603. All payments include interest at 6.75%, which varies with the Wall Street Journal Prime Rate. The loan is secured by all equipment, accounts receivable, and inventories whether now owned or hereafter acquired, wherever located. Certain shareholders and officers of the Company also guarantee the loan. The balance due at March 31, 2004 was $372,872. On January 8, 2003, the Company entered into a loan agreement with a local bank for $14,500. The loan calls for 30 monthly payments of $532 including interest. The initial interest was 7.5%, which varies with Wall Street Journal Prime Rate. The loan is secured by the vehicle purchased. Certain shareholders and officers of the Company also guarantee the loan. The balance at March 31, 2004 outstanding under this agreement was $8,196. On April 15, 2003, the Company entered into a loan agreement with a local bank for $88,340. The loan calls for 60 monthly payments of $1,566 plus interest. The initial interest was 6.75%, which varies with the Wall Street Journal Prime Rate. The loan is secured by the installation vehicles purchased. The majority shareholder and an officer of the Company also guarantee the loan. The balance at March 31, 2004 outstanding under this agreement was $76,338. On April 15, 2003, the Company entered into a loan agreement with a Finance Company for $28,394. The loan calls for 60 monthly payments of $473 including 0% interest. The loan is secured by the vehicle purchased. The majority shareholder and an officer of the Company also guarantee the loan. The balance at March 31, 2004 outstanding under this agreement was $23,188. On April 21, 2003, the Company entered into a loan agreement with a local Credit Union for $35,402. The loan calls for 60 monthly payments of $504 plus interest at 6.75%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guarantee the loan. The balance at March 31, 2004 outstanding under this agreement was $30,566. On April 21, 2003, the Company entered into a loan agreement with a Finance Company for $38,702. The loan calls for 60 monthly payments of $645 plus interest at 6.25%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guarantee the loan. The balance at March 31, 2004 outstanding under this agreement was $33,571. On April 21, 2003, the Company entered into a loan agreement with a Finance Company for $35,402. The loan calls for 60 monthly payments of $571 plus interest at 6.25%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guarantee the loan. The balance at March 31, 2004 outstanding under this agreement was $30,050. On May 1, 2003, the Company assumed a loan of an employee in exchange for the vehicle secured by the loan. The loan amount assumed was financed by a Finance Company and was for $32,005, the balance due at May 1, 2003. The loan calls for 40 additional monthly payments of $762 plus interest at 0%. The loan is secured by the installation vehicle purchased. The employee of the Company is still liable for the loan. The balance at March 31, 2004 outstanding under this agreement was $23,619. On May 1, 2003, the Company entered into a loan agreement with a Finance Company for $40,546. The loan calls for 60 monthly payments of $676 plus interest at 0%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guarantee the loan. The balance at March 31, 2004 outstanding under this agreement was $33,113. In May 2003, the Company entered into a loan agreement with an individual for $90,000 effective to May 1, 2001 to purchase the Company's headquarters building in Fort Stockton, Texas. Rent paid since May 1, 2001 has been applied to the note and recorded as other income in the first quarter of 2003. The loan calls for 180 monthly payments of $900 including interest at 8.759%. The note is secured by the building. The balance at March 31, 2004 outstanding under this agreement was $78,297. On June 1, 2003 in connection with the acquisition of Momentum the Company assumed the following loans: 12
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On October 18, 2000 the Company entered into a loan agreement with a finance company for $25,860 to purchase a vehicle. The loan calls for 48 monthly payments of $658 including interest at 10.2%. The installation vehicle secures the note. A shareholder and officer of the Company also guarantee the note. The balance at March 31, 2004 outstanding under this agreement was $4,543. On April 16, 2001 the Company entered into a loan agreement with a finance company for $17,125 to purchase equipment. The loan calls for 36 monthly payments of $586 including interest at 15.9%. The equipment secures the note. A shareholder and officer of the Company also guarantee the note. The balance at March 31, 2004 outstanding under this agreement was $0. On July 10, 2001 the Company entered into a loan agreement with a local bank for $54,785 to purchase equipment. The loan is due on demand and if no demand is made, then 35 monthly payments of $1,771 including interest at 10.0%. The equipment secures the note along with funds that the Company has on deposit with the bank. A shareholder and officer of the Company also guarantee the note. The balance at March 31, 2004 outstanding under this agreement was $9,865. On December 30, 2002 the Company entered into a loan agreement with a finance company for $13,600 to purchase equipment. The loan calls for 36 monthly payments of $465 including interest at 15.9%. The equipment secures the note. The balance at March 31, 2004 outstanding under this agreement was $8,566. Total Long-Term debt at March 31 is as follows: 2004 ---- Long-term debt $732,784 Less Current portion (147,730) --------- Long-term debt $ 585,054 ========= Maturities on long-term debt are as follows: Year ending December 31, 2003 $147,730 2004 137,108 2005 135,379 2006 135,678 2007 108,586 Thereafter 100,021 NOTE 6 - EMPLOYEE STOCK OPTION PLAN The Board of Directors in their October 1, 2003 meeting agreed to allocate 20,000,000 shares to the Employee Stock Option Plan to be established later. There has been no further action as of this time. NOTE 7 - EQUITY In January 2004 the Company renegotiated all but one of the Company's acquisitions and most of its stock sale contracts entered into during 2003. The additional shares issued resulting from these negotiations are reflected in these financial statements as if they were issued at the time of the original contract. NOTE 8 - COMMITMENTS The Company leases real estate in Sanderson, Texas under a one-year agreement due to expire in 2005, with an option to renew each year until 2007. The lease calls for monthly payments of $650 per month and half of the monthly electric bill. The Company leases real estate in Fort Stockton, Texas under a one-year agreement due to expire in 2004. The lease calls for monthly payments of $750 per month. 13
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The Company leases real estate in Alpine under a five-year agreement due to expire in 2008. The lease calls for monthly payments of $675 per month. The Company leases equipment on a 48 month lease from Pinnacle Towers (Global Signal) due to expire in 2007. The lease calls for monthly payments of $324.48 per month. The Company leases real estate in Marble Falls, Texas under a 5-year agreement due to expire April 30, 2008. The Company may terminate this lease at any time after the third full year of the lease with six months notice. The lease calls for monthly payments of $1,200 per month. The Company leases antenna space on the Kingsland site in Kingsland, Texas under a five-year agreement due to expire in 2006. The lease calls for monthly payments of $275 per month. The lease has two automatic five year term renewals unless cancelled with 90-day notice. The Company leases antenna space on the Rebecca Creek site in Spring Branch, Texas under a five-year agreement due to expire in 2006. The lease calls for payments of $250 per month. The lease has two automatic five-year renewals unless cancelled with 90-day notice. The Company leases antenna space on the Fairland site in Marble Falls, Texas under a five-year agreement due to expire in 2006. The lease calls for payments of $200 per month. The lease has two automatic five-year renewals unless cancelled with 90-day notice. The Company leases antenna space on the Burnet site in Burnet site in Burnet, Texas under a five-year agreement due to expire in 2006. The lease calls for payments of $200 per month. The lease has two automatic five-year renewals unless cancelled with 90-day notice. The Company leases antenna space on the N-R Ranch site in Blanco, Texas under a five year agreement due to expire in 2004. The lease calls for payments of $100 per month. The lease has unlimited automatic five-year renewals unless cancelled with 60-day notice. The Company leases antenna space on the Storage Tank site in Llano, Texas under a five year agreement due to expire in 2007. The lease calls for payments of $200 per month. The lease has one automatic three-year renewal unless cancelled with 30-day notice. The Company leases real estate from Robert McClung in Blanco, Texas on an on-going basis. The lease calls for monthly payments of $1,200 per month. The Company leases antenna space from Uptown Blanco LTD in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $200 per month. The Company leases antenna space William Proctor in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space on the Bulverde VFW Tower site in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space on the Kings Point Water Tower in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space from Blanco Communications in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space from City of Ellinwood, Kansas under a five-year agreement due to expire in October 2008. The lease calls for payments of $600 per month. 14
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The Company leases antenna space from City of Hoisington, Kansas under a five-year agreement due to expire in 2008. The lease calls for payments of $0 per month. The Company leases antenna space from Great Bend Housing Authority, Kansas under a three-year agreement due to expire in 2006. The lease calls for payments of $350 per month. The Company leases antenna space from Carpenter Properties in Alpine, Texas under a two-year agreement due to expire in May 2006. The lease calls for payments of $200 per month. The Company leases antenna space from Paul Ruby, SR in Beeville, Texas under a two-year agreement due to expire in December, 2005. The lease calls for payments of $150 per month. Future minimum lease payments are as follows: 2004 $106,294 2005 $99,294 2006 $85,694 2007 $54,594 2008 $48,300 NOTE 9 - RELATED PARTY TRANSACTIONS There are no significant related party transactions during the first quarter of 2004. NOTE 10 - LITIGATION On November 10, 2003 Momentum filed a complaint against the Company in district state court for the State of Texas in relation to the asset purchase agreement the Company entered into with Momentum on June 1, 2003. The complaint alleges the Company breached its contract as a result of the failure to deliver shares of common stock of the Company as required pursuant to the asset purchase agreement. The court issued an injunction requiring that any revenue generated from the subject assets be placed in escrow and utilized to pay any outstanding invoices in connection with the use of the assets. In addition, the court also ordered mediation, which did not produce a resolution. On January 6, 2004 Momentum filed for voluntary bankruptcy in Federal bankruptcy court. This action stopped the proceeding in state court until a hearing on the Company's holdings can be heard. The Company believes that Momentum's lawsuit is without merit and intends to vigorously defend the matter. NOTE 11 - SUBSEQUENT EVENTS On April 5, 2004 the Company entered into an Asset Purchase Agreement with RayTech Internet, Inc. to purchase certain assets and Internet subscribers of the Partnership. The purchase price was $10,000 and 50,672 shares of the Company's common stock for 163 dial-up customers at $249 each. This purchase extends the Company's service to Big Springs, Texas on Interstate 20. Assets Acquired: Goodwill - Internet Subscribers 35,336 ------ Total $35,336 ======= 15
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On April 11, 2004, the Company failed to pay $1,315,000 of debentures that matured on that date. The Company is currently negotiating with the holders of the debentures representing this indebtedness to extend the maturity of the indebtedness. The Company is in default in relation to these debentures. On May 9, 2004, the Company failed to pay $373,252 in stock and cash due the former owners of Office Products Incorporated, Computer Division. The Company is presently in discussions with the former owners concerning this amount. The Company is in default in relation to this amount at this time. NOTE 12 - GOING CONCERN The Company has not generated significant profits to date. This factor among others including the agreement default for $373,279, the debenture defaults for $1,315,000 and the Lines of Credit due June 4, 2004 for $170,000 and due June 19, 2004 for $55,656, may indicate the Company will be unable to continue as a going concern. The Company's continuation as a going concern depends upon its ability to obtain additional sources of capital and financing. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 16
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The following discussion of our financial condition and results of our operations should be read in conjunction with the Financial Statements and Notes thereto. This document contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. Statements contained herein that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include, but are not limited to, (i) the Company's ability to obtain additional financing; (ii) the Company's ability to deploy its high-speed network in a timely fashion; (iii) the Company's ability to keep pace with technological changes in its industry; and (iv) the Company's ability to attract and retain its customers. In addition, significant fluctuations in quarterly results may occur as a result of the timing of customer demand for the Company's high-speed services and the timing of the installation of the Company's networks. Additional factors that would cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in the Company's filings with the Securities and Exchange Commission, including those factors discussed under the caption "Risk Factors" in the Company's most recent Annual Report on Form 10-KSB/A. The Company undertakes no obligation to publicly release the revisions in such forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events or circumstances, except as otherwise required by securities and other applicable laws. Plan of Operation The Company is a wireless broadband Internet service provider located in Fort Stockton, Texas. In addition, the Company is also a traditional Internet service provider. The Company currently provides services to customers in over 100 cities throughout Southwest Texas and Kansas. The Company was designed to deliver efficient, reliable and cost effective solutions to bringing high-speed Internet access to rural markets within the United States. The Company believes it has positioned itself to meet the Internet access needs of organizations and consumers which require broadband access to the Internet in its operating area, but do not have access to cable or DSL from the traditional service providers. The Company offers broadband Internet service through a network of point-to-point and point-to-multipoint wireless networks. The Company uses terrestrial circuits to connect the Internet backbone and then distributes the signal through a series of towers and repeaters to customer premise equipment (CPE) located at the subscriber's residence or business. Also, by utilizing the expertise of the Company's Network Engineers, the Company delivers value added services to its subscribers by offering network integration services. This service is provided by selling, installing and maintaining the hardware necessary for virtual private networks (VPN's), Voice over IP (VoIP) and data integration services. 17
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The Company will focus its primary marketing efforts on providing wireless broadband access services to customers located in rural areas of Texas and Kansas and then throughout the United States. The Company will also focus on cities of less than 150,000 inhabitants. As the Company positions itself as a high quality service provider, it targets to offer network reliability complemented by quality customer support. As part of its business strategy, the Company plans to continue to make acquisitions of complementary companies, products and technologies. In order to implement these strategies and to fund its operations and repay its indebtedness, the Company will need to raise substantial capital over the next year. Please see discussion below under "Liquidity and Capital Resources." The Company will focus its effort on customer satisfaction by attracting and retaining a core team of professionals. We plan to increase our staffing levels only as required by our operation. We currently have no plans to significantly increase the number of our employees. Discontinued Operations ----------------------- The Company discontinued all of the operations of the Fremont businesses in late 1998 and 1999, due to lack of capital, bad debt and unprofitability. Any assets were liquidated or written off. Debts were settled or negotiated. No operating results of the prior Fremont businesses are included in this discussion or in the operating statements of the Company due to such discontinuance. Results of Operations --------------------- Results of operations for the quarter ended March 31, 2004 compared to the quarter ended March 31, 2003. ---------------------------------------------------------------------------- For the three months ended March 31, 2004 the Company had $242,050 in equipment sales revenue and $764,238 in Internet service revenue. For the three months ended March 31, 2003 the Company had $200,060 in equipment sales revenue, and $279,096 in Internet service revenue. The increase in revenues is primarily from the acquisitions expanding our customer base. The cost of sales for equipment sales revenue is $157,268 which consists of purchasing equipment and accessories. The cost of sales for Internet sales is $306,809 consisting of telephone lines, installation costs, and service costs. The gross profit margin for equipment sales was 35% for the three months ended March 31, 2004 compared to 9% for the three months ended in March 31, 2003. The increase in the Company's gross profit margin for equipment sales for the three months ended March 31, 2004 as compared to the three months ended March 31, 2003 was due to the mix of sales with an increase of services sales resulting in a higher profit margin than equipment sales. The gross profit margin for Internet sales was 60% for the three months ended March 31, 2004 compared to 28% for the three months ended March 31, 2003. This increase in gross profit margin for Internet service revenue is from the acquisitions and building our existing customer base while utilizing parts of our existing infrastructure. The Company incurred total operations expenses of $1,450,246 for the three months ended March 31, 2004 compared to $339,925 for the three months ended March 31, 2003, a total increase of 427%. The major components of the expenses were as follows: 18
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Expenses Expenses Percentage 2004 2003 Change ---- ---- ------ Advertising and promotion $ 14,657 $ 8,037 182% Amortization and depreciation 279,246 42,930 650% Legal and professional 390,298 1,965 19862% Auto and travel 48,496 20,888 232% Commissions and contract labor 48,174 15,870 304% Office expenses and supplies 49,587 18,249 272% Salary and wages 474,069 156,303 303% Taxes 50,236 14,789 340% Utilities 32,057 12,926 248% The substantial increases in costs of operations of 427% compare to substantial increases in gross profit of 234% over prior year. The increase in the Company's expenses for three months ended March 31, 2004 compared to the same period in 2003 was primarily due to (i) increase of the amortization costs with the acquisition of new companies and increase of depreciation costs from acquiring more equipment and the purchasing of company vehicles; and (ii) an increase in legal and professional fees primarily due to the Company's merger with Fremont and ongoing costs of operating as a public company; (iii) an increase in auto and travel expenses due to the Company seeking to acquire other companies and servicing companies that were acquired; and (iv) an increase in salaries and wages due to the hiring of additional staff to support the Company's acquisition of additional companies and to promote the growth of those companies. The Company believes that while the trend of losses may continue, 2004 expenses reflect investment in future operational capabilities as a company and management is hopeful that revenues will increase without substantial expense increase. The Company sustained a net loss of ($885,868) for the three months ended March 31, 2004 (after other income of $22,167) as compared to a net loss of ($235,043) for the same period in 2003 (after other income of $10,116). The net loss per share was ($.01) for three months ended March 31, 2004 and loss was nominal per share for the same period in 2003.  Liquidity and Capital Resources ------------------------------- At March 31, 2004, we had working capital of $682,610 and inventories of $163,605. We have historically sustained our operations and funded our capital requirements with the funds received from working capital loans received from various financial institutions, as well as the private placement of equity securities and debentures convertible into our equity securities, as more fully described below. At March 31, 2004, the Company had current assets of $917,328, fixed assets of $2,560,005 (net of depreciation), and other assets of $4,574,786 (after deducting amortization), consisting primarily of goodwill. As of March 31, 2004, other than smaller bank notes and equipment financing we did not have any significant financing arrangements in place. As of March 31, 2004, we had $683,326 in cash and $282,781 in accounts receivable that could be used in connection with funding our operations. 19
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As we generally obtain all of our funding from operations, a decrease in revenue could negatively impact our short and long term liquidity. We believe that the impact of inflation on our operations since our inception has not been material. In March 2004, we issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, and warrants to purchase an aggregate of 7,655,000 shares of our common stock at an exercise price of $0.20 per share. Under the terms of the debentures, the noteholders have the option to convert the principal balance of the debentures, in whole or in part, into shares of our common stock at a conversion price equal to $0.20 per share. These debentures matured on April 11, 2004, and we were unable to pay off the debentures at maturity. We are currently negotiating with the holders of the debentures representing this indebtedness to extend the maturity of the indebtedness. There can be no assurance, however, that we will enter into definitive agreements to extend the indebtedness. In addition, we will need to raise additional capital in order to repay the indebtedness. In order to meet this repayment obligation and in order to further grow our business, we are pursuing a potential private placement of our securities. We cannot be assured that our proposed private placement of securities will be completed or that it would generate sufficient proceeds for us to satisfy our obligations under the debentures. Even if the proposed private placement were to be completed, we cannot be assured that it will be on terms favorable to us. If adequate funds are not available, we will be unable to repay the indebtedness or to grow and expand our business in which case, there would be substantial doubt about our ability to continue as a going concern. In addition, we may need to obtain additional capital in the future. If the need arises, we may attempt to obtain funding through the use of various types of short-term funding, loans or working capital financing arrangements from banks or financial institutions. We may also be required to raise additional capital in public equity markets. Our ability to raise additional capital in public markets will depend primarily upon prevailing market conditions and the demand for our products and services. No assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on terms acceptable to the Company. Lines of Credit: ---------------- On November 14, 2002, the Company entered into a Line of Credit Agreement with a local bank for $175,000 due June 4, 2004. The interest rate is 6.75%. The loan is secured by all accounts and other rights to payments, inventories, equipment, instruments and chattel paper, general intangibles, documents, and deposit accounts owned by the Company. Alex Gonzalez, the majority shareholder and an officer of the Company, also guaranteed the loan. The balance due at March 31, 2004 was $170,000. On June 1, 2003, in connection with the acquisition of Momentum the Company assumed a Line of Credit Agreement dated November 11, 2002 with a local bank for $75,000 payable on demand which was renewed with a new maturity date of June 2004. The note is in default and is part of the Bankruptcy proceedings and litigation with the former owner of Momentum. See "Legal Proceedings." The interest rate is 8.5%. The loan is secured by all monies Momentum has on deposit with the local bank. The note is guaranteed by the former shareholder of Momentum, who is also an Officer of the Company. At March 31, 2004 the balance outstanding for Wireless Frontier Internet under this agreement was $55,656. 20
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Notes Payable: -------------- In connection with the Momentum acquisition, on April 1, 2003 the Company entered into a loan agreement with an individual and shareholder of the Company, Pat McClung, for $59,250 for working capital funds advance to the Momentum since inception. The loan is due on demand with an 8% interest rate. Accruing interest is due monthly. The note is unsecured. The balance due at March 31, 2004 was $54,885. On September 30, 2003, the Company entered into an Asset Purchase Agreement with Bartell & Griffith, LTD. L.L.P. d/b/a Xramp ("Xramp Partnership") to purchase certain assets and Internet subscribers of the Xramp Partnership. As part of this agreement, the Company agreed to pay $50,000. The agreement carries no stated rate of interest and is to be paid by April 16, 2004. The balance due was paid in March 2004. On December 18, 2003, the Company entered into a loan agreement with a Bank for $353,279. The interest rate varies at 2 points over the Wall Street Journal Prime Rate. The rate at March 31, 2004 was 6%. The Note was renewed in March 2004 and matures in June 2004. The note is secured by all vehicles, office equipment, accounts receivable, telephone equipment and all other assets. At March 31, 2004 the balance outstanding under this agreement was $328,279. Long - Term Debt: ----------------- On May 30, 2002, the Company entered into a loan agreement with a local bank for $469,073. The loan calls for 24 monthly payments of $7,000, followed by 47 monthly payments of $8,500 and 1 payment of $11,603. All payments include interest at 6.75%, which varies with the Wall Street Journal Prime Rate. The interest rate at March 31, 2004 was 6.25%. The loan is secured by all equipment, accounts receivable, and inventories whether now owned or hereafter acquired, wherever located, as well as personally by Alex Gonzalez, Joe Chris Alexander and Ronald Marosko. Certain shareholders and officers of the Company also guarantee the loan. The balance due at March 31, 2004 was $372,872. On January 8, 2003, the Company entered into a loan agreement with a local bank for $14,500. The loan calls for 30 monthly payments of $532 including interest. The initial interest was 7.5%, which varies with Wall Street Journal Prime Rate. The loan is secured by the vehicle purchased. Certain shareholders and officers of the Company also guarantee the loan. The balance due at March 31, 2004 was $8,196. On April 15, 2003, the Company entered into a loan agreement with a local bank for $88,340. The loan calls for 60 monthly payments of $1,566 plus interest. The initial interest was 6.75%, which varies with the Wall Street Journal Prime Rate. The loan is secured by the installation vehicles purchased. The majority shareholder and an officer of the Company, Alex Gonzalez and Jay Knabb also guaranteed the loan. The balance at March 31, 2004 outstanding under this agreement was $76,338. On April 15, 2003, the Company entered into a loan agreement with a Finance Company for $28,394. The loan calls for 60 monthly payments of $473 including 0% interest. The loan is secured by the vehicle purchased. The majority shareholder and an officer of the Company also guaranteed the loan. The balance at March 31, 2004 outstanding under this agreement was $23,188. 21
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On April 21, 2003, the Company entered into a loan agreement with a local Credit Union for $35,402. The loan calls for 70 monthly payments of $504 plus interest at 6.75%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company, Alex Gonzalez and Jay Knabb also guaranteed the loan. The balance at March 31, 2004 outstanding under this agreement was $30,566. On April 21, 2003, the Company entered into a loan agreement with a finance company for $38,702. The loan calls for 60 monthly payments of $645 plus interest at 6.25%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company, Alex Gonzalez and Jay Knabb also guaranteed the loan. The balance at March 31, 2004 outstanding under this agreement was $33,571.. On April 21, 2003, the Company entered into a loan agreement with a finance company for $35,402. The loan calls for 60 monthly payments of $571 plus interest at 6.25%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company, Alex Gonzalez and Jay Knabb also guaranteed the loan. The balance at March 31, 2004 outstanding under this agreement was $30,050. On May 1, 2003, the Company assumed a loan of former employee in exchange for the vehicle secured by the loan. The loan amount assumed was financed by a Finance Company and was for $32,005, the balance due at May 1, 2003. The loan calls for 40 additional monthly payments of $762 plus interest at 0%. The loan is secured by the installation vehicle purchased. An employee of the Company, Alex Gonzalez, is still liable for the loan. The balance at March 31, 2004 outstanding under this agreement was $23,619. On April 15, 2003, the Company entered into a loan agreement with a Finance Company for $40,546. The loan calls for 60 monthly payments of $676 plus interest at 0%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company, Alex Gonzalez, also guaranteed the loan. The balance at March 31, 2004 outstanding under this agreement was $33,113. In May 2003, the Company entered into a loan agreement with an individual for $90,000 to purchase the Company's headquarters building in Fort Stockton, Texas. Rent paid since May 1, 2001 has been applied to the note and recorded as other income in the first quarter of 2003. The loan calls for 180 monthly payments of $900 including interest at 8.759%. The note is secured by the building. The balance at March 31, 2004 outstanding under this agreement was $78,297. On June 1, 2003 in connection with the acquisition of Momentum the Company assumed the following loans: On October 18, 2000, Momentum entered into a loan agreement with a finance company for $25,860 to purchase a vehicle. The loan calls for 48 monthly payments of $658 including interest at 10.2%. The installation vehicle secures the note. A shareholder and officer of Momentum also guaranteed the note. The balance at March 31, 2004 outstanding under this agreement was $4,543. On April 16, 2001 Momentum entered into a loan agreement with a finance company for $17,125 to purchase equipment. The loan calls for 36 monthly payments of $586 including interest at 15.9%. The equipment secures the note. A shareholder and officer of Momentum also guaranteed the note. The balance at March 31, 2004 outstanding under this agreement was $0. 22
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On July 10, 2001 Momentum entered into a loan agreement with a local bank for $54,785 to purchase equipment. The loan is due on demand and if no demand is made, then 35 monthly payments of $1,771 including interest at 10.0%. The equipment secures the note along with funds that Momentum has on deposit with the local bank. A shareholder and officer of Momentum also guaranteed the note. The balance at March 31, 2004 outstanding under this agreement was $9,865. On December 30, 2002 entered into a loan agreement with a finance company for $13,600 to purchase equipment. The loan calls for 36 monthly payments of $465 including interest at 15.9%. The equipment secures the note. The balance at March 31, 2004 outstanding under this agreement was $8,566. Total Long-Term debt at December 31 is as follows: 2003 ---- Long-term debt $764,502 Less Current portion (147,730) -------- Long-term debt $616,772 ======== Maturities on long-term debt and future minimum lease payments are as follows: Year ending December 31, Maturities on Future Minimum long-term debt Lease Payments 2004 $147,730 $79,494 2005 137,108 $65,094 2006 135,379 $56,994 2007 135,678 $56,994 2008 108,586 $56,994 Thereafter 100,021 N/A  Item 3. CONTROLS AND PROCEDURES Evaluation of Internal and Disclosure Controls ---------------------------------------------- The Company's principal executive and principal financial officers have evaluated the effectiveness of the Company's disclosure controls and procedures as of the quarter ended March 31, 2004 and have concluded that such disclosure controls and procedures are adequate and effective based upon their evaluation as of such date. There were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation of such, including any corrective actions with regard to significant deficiencies and material weaknesses. 23
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PART II - OTHER INFORMATION  Item 1. LEGAL PROCEEDINGS On June 1, 2003, PAG, pursuant to that certain Asset Purchase Agreement, purchased the assets of Momentum in exchange for the issuance of shares of PAG. On November 10, 2003, Momentum filed a complaint against PAG in district state court for the State of Texas seeking rescission of the purchase agreement and restoration of the parties to their earlier positions prior to June 1, 2003, as if no agreement existed. Momentum's complaint alleges that PAG breached its contract as a result of the failure to deliver shares of common stock of PAG as required pursuant to the Asset Purchase Agreement. The court issued an injunction requiring that any revenue generated from the subject assets be placed in escrow and utilized to pay any outstanding invoices in connection with the use of the assets. In addition, the court also ordered mediation, which did not produce a resolution. On January 7, 2004, Momentum filed a Petition in Bankruptcy. The Bankruptcy Petition stayed all matters pending in state district court and all proceedings were transferred to the Bankruptcy court in Austin Texas. All legal issues are currently pending before the Bankruptcy Court. The management of the Company believes that Momentum's lawsuit is without merit and intends to vigorously defend this matter.  Item 3. Defaults Upon Senior Securities In March 2004, the Company issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, and warrants to purchase an aggregate of 7,655,000 shares of the Company's common stock at an exercise price of $0.20 per share. Under the terms of the debentures, the note holders have the option to convert the principal balance of the debentures, in whole or in part, into shares of common stock at a conversion price equal to $0.20 per share. These debentures matured on April 11, 2004, and the Company was unable to pay off the debentures at maturity. The Company is currently negotiating with the holders of the debentures representing this indebtedness to extend the maturity of the indebtedness. The Company is in default in relation to these debentures. At March 31, 2004 the balance outstanding under these agreements was $1,315,000. 24
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Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following documents are filed as part of this report: -------------------------------------------------------------------------------- Exhibit No. Description -------------------------------------------------------------------------------- 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -------------------------------------------------------------------------------- 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -------------------------------------------------------------------------------- 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -------------------------------------------------------------------------------- 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -------------------------------------------------------------------------------- (b) Reports on Form 8-K (1) We filed a Current Report on Form 8-K, dated January 14, 2004, in which we reported under Item 2 and Item 5 the merger of Fremont Corporation, Networker Systems, Inc. and Wireless Frontier Internet, Inc. and under Item 4 a change in the Company's certifying accountant. (2) We filed an amended Current Report on Form 8-K/A, dated March 22, 2004, in which we reported under Item 4 a change in the Company's certifying accountant. 25
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SIGNATURES In accordance with requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WIRELESS FRONTIER INTERNET, INC. By: /s/ Alex Gonzalez ----------------------------------- Name: Alex Gonzalez Title: Chairman and Chief Executive Officer Date: May 24, 2004 26

Dates Referenced Herein   and   Documents Incorporated By Reference

Referenced-On Page
This 10QSB Filing   Date First   Last      Other Filings
7/7/989
2/8/009
10/18/001625
1/1/019
4/16/011625
5/1/011525
7/10/011626
11/30/019
5/30/021524
5/31/029
11/11/021423
11/14/021423
12/30/021626
1/8/031524
1/20/039
3/21/035
3/31/03321
4/1/0314243
4/15/031525
4/21/031525
5/1/031525
5/28/039
6/1/03927
6/30/0391210QSB
7/1/03912
9/30/03102410QSB, NTN 10Q
10/1/0316
11/10/031827
11/22/0314
12/18/03924
12/31/0371610KSB, 10KSB/A, NT 10-K
1/1/0410
1/6/0418
1/7/0427
1/14/04288-K, NTN 10Q
2/9/041014
3/2/0413
3/17/0410
3/21/045
3/22/04288-K/A
For The Period Ended3/31/0412710QSB/A, NT 10-Q
4/1/0410
4/5/0418
4/11/041427
4/16/0424
5/9/0419
5/21/041314
Filed On / Filed As Of5/24/0429
6/4/041423
6/17/0414
6/19/041419
4/30/0817
 
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