Amendment to Annual Report — Small Business — Form 10-KSB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10KSB/A Form 10KSB Amendment 41 173K
2: EX-2 Exhibit 2.1 Asset Purchase Agreement 12 50K
3: EX-2 Exhibit 2.2 Asset Purchase Agreement 11 45K
4: EX-2 Exhibit 2.3 Letter of Intent 4 20K
5: EX-2 Exhibit 2.4 Agreement of Reorganization 11 45K
6: EX-2 Exhibit 2.6 Asset Purchase Agreement 11 42K
7: EX-2 Exhibit 2.7 Letter of Intent 4 21K
8: EX-2 Exhibit 2.8 Letter of Intent 4 21K
9: EX-4 Exhibit 4.1 Registration Rights Agreement 10 46K
11: EX-4 Exhibit 4.3 Wireless Convertible Debenture 10 38K
10: EX-4 Form 4.2 Common Stock Purchase Warrant 13 51K
12: EX-10 Exhibit 10.2 Agreement Purchase & Sale of Stock 8 35K
13: EX-10 Exhibit 10.3 Securities Purchase Agreement 19 95K
14: EX-10 Exhibit 10.4 Asset Purchase Agreement 13 46K
15: EX-10 Exhibit 10.5 Asset Purchase Agreement 11 43K
16: EX-31 Exhibit 31.1 Certificate 2± 12K
17: EX-31 Exhibit 31.2 Certificate 2± 12K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
WIRELESS FRONTIER INTERNET, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
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Delaware 0-08281 75-2771930
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
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104 West Callaghan, Fort Stockton, Texas 79735
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (432) 336-0336
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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 of 1934 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
--- ---
1
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State the issuer's revenues for the most recent fiscal year. $ 3,699,101
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. As of last trade on March 30, 2004:
$19,714,617 (12,884,717 shares at $1.53 / share)
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
--- ---
2
EXPLANATORY NOTE
Wireless Frontier Internet, Inc. ("Wireless Frontier") hereby amends and
restates in their entirety Items 1-6 and 8-14 of its Annual Report on Form
10-KSB for the fiscal year ended December 31, 2003 (the "Original Form 10-KSB")
that was filed with the Securities and Exchange Commission on April 12, 2004, in
order to correct certain disclosures made in the Original Form 10-KSB and to add
certain other disclosures required to be made therein pursuant to Form 10-KSB.
Please note that the information contained in the financial statements and
notes thereto in the Original Form 10-KSB is not being amended and does not
reflect events occurring subsequent to the filing of the Original Form 10-KSB.
Wireless Frontier therefore recommends that this amendment be read in
conjunction with the financial statements filed as part of the Original Form
10-KSB.
Other than in the financial statements and notes thereto or as
specifically set forth herein, all share information reflects all stock splits
effected prior to the date this Amended Annual Report is filed with the
Securities and Exchange Commission.
3
TABLE OF CONTENTS
Page
PART I
Item 1. DESCRIPTION OF BUSINESS..........................................5
Item 2. DESCRIPTION OF PROPERTY.........................................18
Item 3. LEGAL PROCEEDINGS...............................................18
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............18
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......19
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................20
Item 7. FINANCIAL STATEMENTS............................................28
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.............................28
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS................................30
Item 10. EXECUTIVE COMPENSATION..........................................33
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................35
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................37
Item 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K..........................37
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES..........................38
4
PART I
Item 1. DESCRIPTION OF BUSINESS
History
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Fremont Corporation was incorporated in the State of Utah, on April 22, 1955
under the name of Fremont Uranium Corporation. On July 1, 1993, Fremont Uranium
Corporation effected a change of domicile merger and became incorporated in the
State of Delaware. It changed its name to Fremont Corporation ("Fremont") at
such time.
In 1995 Fremont entered into a Share Exchange Agreement with Million Treasure
Enterprises Limited, a British Virgin Islands corporation ("Million") to acquire
Winfill Holdings International Limited. Fremont owned 100% of Winfill Holdings
International Limited, a British Virgin Islands corporation ("Winfill
Holdings"). Winfill owned a 98% interest in South China Bicycles Winfill Limited
("SCBW"), a Sino-foreign joint venture. The remaining 2% interest in SCBW was
owned by South China Bicycle (Holdings) Limited ("SCH"), a related party. SCBW
conducted its operations in the People's Republic of China.
Winfill Holdings was engaged in the bicycle manufacturing business. Its business
failed due to lack of capital to sustain operations and bad debt and all
business was discontinued in 1998. Fremont was dormant for three years and in
2003 new auditors were engaged and negotiations begun for the Wireless Frontier
Internet business.
On September 30, 2003, our private company, Partners Alliance Group, Inc.
("PAG") entered into an Agreement and Plan of Merger with Fremont, the
publicly-traded company. Pursuant to the merger agreement Networker Systems,
Inc., a wholly owned subsidiary of Fremont, was merged with PAG. The
shareholders of PAG exchanged all the outstanding shares of PAG for 32,053,158
shares of the common stock of Fremont in a one for one exchange. As a result of
this transaction, PAG became a wholly owned subsidiary of Fremont. This
combination was treated as a reverse merger whereby the acquired company is
treated as the acquiring company for accounting purposes. In addition, Fremont
entered into an Asset Purchase Agreement with Million. Pursuant to this
agreement, Million acquired all of Fremont's equity interest in Winfill for
Million's return to Fremont of the 661,654 shares of common stock, on a
pre-split basis, held by Million, the cancellation of Million's warrant to
purchase 2,000,000 shares of common stock, on a pre-split basis, and the
forgiveness of all sums owed by Fremont to Million. In connection with this
transaction PAG recognized $426,751 as other income in the third quarter of 2003
as forgiveness of debt.
All references in this Amended Annual Report to "the Company", "we", "our" or
"us" refer to Fremont, after giving effect to the merger with PAG, including the
operations of PAG prior to the merger.
On September 30, 2003, the Company entered into an Asset Purchase Agreement with
Bartell & Griffith, LTD. L.L.P. d/b/a Xramp to purchase certain assets and
Internet subscribers of the partnership for 294,643 shares of common stock and a
note for $50,000.
5
On February 9, 2004, the Company entered into an Agreement for Purchase and Sale
of Stock with all the shareholders of Office Products Incorporated Computed
Division, a Kansas Corporation for $1,295,434. Payment is to be made in common
stock based on the price of the Company's stock on the day of payment. However
the stock shall not be valued at a price greater than $.75 per share. This
agreement is effective January 1, 2004 and payment is to be made no later than
May 9, 2004. This purchase will expand the Company's operations into the Great
Bend, Kansas area.
The history of PAG prior to its merger with Fremont is as follows:
On July 7, 1998, PAG was incorporated under the laws of the State of Texas for
the purpose of selling computer components in Texas and Colorado. On February 8,
2000 the controlling interest in PAG was purchased by the then-minority
shareholder, executive officer and director of PAG, Alex Gonzalez. On January 1,
2001, West-Tex Internet, Inc. contributed its assets to PAG, which established
PAG as an Internet service provider. On November 30, 2001, PAG acquired Overland
Network, Inc. a company engaged in providing dial up and broadband wireless
Internet services in the Trans Pecos region of Texas. This purchase expanded
PAG's Internet service provider area to include Terlingua, Presidio, Sanderson,
Sheffield, Comstock, Big Bend National Park and Heath Canyon, Texas areas.
On May 31, 2002, PAG purchased the assets and operations of Brooks Data
Consultants, Inc. for $245,000. This purchase expanded PAG's Internet Service
Provider area to include Terlingua, Presidio, Sanderson, Sheffield, Comstock,
Big Bend National Park and Heath Canyon, Texas areas. PAG also obtained, for
$5,000, a five-year covenant not to compete, within a 50-mile radius of PAG's
operations including the areas purchased, from Brooks Data Consultants.
On January 20, 2003 PAG's Board of Directors declared a 100 to 1 stock split
increasing the authorized common shares from 1,000,000 to 100,000,000, prior to
our merger.
On April 1, 2003, PAG changed its name to Wireless Frontier Internet, Inc., a
Texas corporation.
On May 28, 2003 PAG's stockholders exchanged all the outstanding shares of PAG
for 14,906,000 shares of common stock.
On June 1, 2003, PAG entered into an agreement to purchase all the assets and
assume certain liabilities of Momentum Online Computer Services, Inc.
("Momentum") for 873,712 shares of common stock. 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
PAG's Internet Service Provider area to the Highway 281 corridor, that extends
roughly from south of the Dallas, Fort Worth area to the north of San Antonio.
On June 30, 2003, PAG entered into an agreement to purchase all the assets of
Kolinek Internet service for 28,048 shares of common stock. The purchase price
for the acquisition was renegotiated in December 2003 to 280,480 shares of
common stock. This purchase expanded PAG's Internet Service Provider area in the
Highway 281 corridor.
6
On June 30, 2003, PAG entered into an agreement to purchase all the assets of
Strategic Abstract & Title Corporation for 416,664 shares of common stock. The
purchase price for the acquisition was renegotiated in January 2004 to 4,166,640
shares of common stock. This purchase added three commercial buildings valued at
$285,000 and the assets and business of Strategic Abstract & Title Corporation.
Strategic Abstract & Title Corporation is a title company. Strategic is
continuing its operations as a wholly-owned subsidiary. The purchase of this
company was primarily for the assets which include a building in downtown Fort
Stockton, TX where our telecommunications staff is located and a building near
downtown Midland, TX giving us the ability to house our infrastructure and begin
expanding our dial-up and wireless services in the Midland/Odessa and Big
Springs regions immediately.
On or about July 1, 2003, PAG acquired all the outstanding shares of US Mex
Communications and West Texas Horizons for 220,664 shares of common stock and
the assumption of $51,000 in notes payable. The note was paid in full with the
December 18, 2003 notes payable. The purchase price for the acquisition was
renegotiated in January 2004 to 2,206,640 shares of common stock. The acquired
company sells phone cards and provides pay phone services in Southwestern Texas.
Business of the Company
-----------------------
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.
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.
7
Strategy
--------
Our business strategy revolves around the need to provide quality wireless and
dial-up Internet access to clients, in the process fully satisfying their
Internet data needs, at a fraction of the time and cost of traditional wire-line
providers. Our intent is to grow our customer base as rapidly as possible, while
maintaining a higher than average level of service and support for the customers
and their needs. We intend to implement our growth strategy through the
marketing of services and the acquisition of both dial-up and wireless Internet
service providers. In addition, we intend to continue our networking and
telecommunications equipment sales.
Our business will also focus on increasing Wi-fi penetration in a greater market
area. Our services are designed and intended to deliver efficient, reliable, and
cost-effective solutions; bringing high-speed Internet access to rural markets
within the United States. We believe that we are in a position to meet the
Internet access needs of Wi-fi consumers. Users in rural areas require broadband
access to the Internet, but often may not have access to cable or digital
subscriber line connections from traditional service providers. These customers
are typically found in cities with less than 150,000 inhabitants in North
America, and in most suburban and semi-rural areas where there are few Internet
access options other than traditional telephone dial-up connections.
Consumers in rural areas desire affordable high-speed Internet access. Consumer
demand in rural areas for faster, broadband transmission speeds has largely
remained unsatisfied because a growing portion of the market has found itself
"priced out" of the "broadband revolution". Especially critical in this regard
has been the ability to deliver broadband content over the "last mile" (the
connection between the Internet backbone and the end-user), which is the central
data bottleneck in telecommunications networks today.
We are focused on providing the solution to the "last mile" problem faced by
traditional wired telecommunications services, namely the ability to build out a
network that provides the level of services demanded by end users. In medium to
small markets, and in areas of the United States with limited or no existing
telecommunications infrastructure, the cost to install or upgrade wired services
to provide the level of access customers expect is prohibitive. We believe that
our fixed wireless Internet access services are faster and less expensive to
deploy than traditional wired services, with a lower cost-per-user to install,
deploy and manage.
Our wireless network services are designed to operate in the license-free ISM
radio spectrum, which facilitates a more rapid and low-cost market introduction
for service providers than for licensed or hardwire solutions. Our products
utilize direct sequence spectrum or DSS communications, which ensures reliable,
secure, low-interference communications.
The Market
----------
The market for our fixed wireless access service is driven by the worldwide
demand for Internet access as well as the increasing demand for high speed
Internet access. Our target market in North America is comprised of cities with
a population of fewer than 150,000, suburban areas of larger cities and
industrial parks. In these markets, our services address the demands of
organizations and consumers who require broadband access to the Internet, but
often do not have
8
access to cable or digital subscriber line connections from traditional service
providers. We believe that the growth of our business will be driven by the
following:
o growth in the number of Internet users world wide;
o growing demand for high speed Internet access;
o scarcity of access technologies that are capable of efficiently and
economically delivering more than 1 Mbps;
o lack of wireline infrastructures; and
o lack of suitable broadband access technologies in rural and suburban
areas in North America.
In meeting these market requirements, we believe our fixed wireless access
service offers the following features:
o instant blanket coverage without digging up streets or leasing
capacity from competitors;
o a pay-as-you-grow deployment model, which allows for lower-cost
market entry (compared to fixed wire or cable based systems) with
incremental costs matched to incremental revenues;
o bandwidth increments that address the requirements of small and
mid-size businesses;
o point-to-multipoint technology allowing for burstable, bandwidth on
demand services, which are specially suited towards a data-centric
environment;
o wireless technology which enables those who do not have access to
copper, coaxial or fiber optic wire to participate in the high-speed
Internet access market;
o significant cost advantages through the use of license-free radio
frequencies; and
o easy to set up, non-line-of-sight modems resulting in further
significant cost savings by avoiding expensive truck rolls to
install customer premise equipment.
Currently, our products operate in the unlicensed spectrum, specifically 900 MHz
and 2.4 GHz. We believe that our 900 MHz products in particular could enjoy wide
acceptance because of their non-line-of-sight and easy to set up features.
Deployments that combine business and consumer subscribers can be shown to offer
a viable and profitable business case for service operators.
9
Regulation of Wireless Communications
-------------------------------------
Currently, our technology is deployed in license free frequency bands. As such,
our products are not subject to any wireless or transmission licensing in the
United States, Canada and many other jurisdictions worldwide. The products do,
however, have to be approved by the Federal Communications Commission, for use
in the United States, Federal Ministry of Industry and Department of Industry in
Canada, for use in Canada, and other regulatory bodies for use in other
jurisdictions, to ensure they meet the rigorous requirements for use of these
bands.
Continued license-free operation will be dependent upon the continuation of
existing government policy and, while we are not aware of any policy changes
planned or expected, this cannot be assured. License-free operation of our
products in the 902 to 928 MHz and the 2.4 GHz bands are subordinate to certain
licensed and unlicensed uses of the bands and our products must not cause
harmful interference to other equipment operating in the bands and must accept
interference from any of them. If we should be unable to eliminate any such
harmful interference, or should our products be unable to accept interference
caused by others, we or our customers could be required to cease operations in
the bands in the locations affected by the harmful interference. Additionally,
in the event the 902 to 928 MHz or the 2.4 GHz bands becomes unacceptably
crowded, and no additional frequencies are allocated, our business could be
adversely affected.
10
Risk Factors
------------
The information in this Amended Annual Report contains forward-looking
statements. These statements relate to future events or future financial
performance. In some cases, forward-looking statements can be identified by
terminology such as "may," "will," "should," "could," "expects," "hopes,"
"believes," "plans," "anticipates," "estimates," "predicts," "potential," or
"continue" or the negative of such terms and other comparable terminology. These
statements are only predictions. These factors may cause the Company's actual
results to differ materially from any forward-looking statement.
Our litigation with Momentum could have a material adverse affect on our
operations.
On June 1, 2003 we purchased the assets of Momentum. Momentum has filed
suit seeking rescission of the of the purchase agreement and restoration of the
parties to their positions prior to June 1, 2003, as if no agreement existed. In
2003, the revenue generated by the assets purchased from Momentum represented
24.6% of our revenue for that year. We are vigorously defending this matter. In
the event we are not successful in this litigation we would no longer own the
assets that we acquired from Momentum and our revenues would substantially
decline. This would have a material adverse effect on our business and results
of operations. Regardless of the outcome of the litigation, it will likely
result in substantial costs and diversion of resources and management attention.
We have a limited operating history.
We have a limited operating history. We may encounter risks and
difficulties frequently encountered by early stage companies in new and rapidly
evolving markets. We cannot assure stockholders that our business strategy will
be successful or that we will successfully address these risks. Our failure to
do so could materially adversely affect our business, financial condition and
operating results.
If we are unable to obtain additional financing, our ability to repay
indebtedness already due and to grow and expand would be significantly limited.
We were required to repay $1,315,000 in convertible debentures no later
than April 11, 2004. 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 equity securities. We cannot be
assured that our proposed private placement of equity 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 would be on terms favorable to us. If
adequate funds are not available, we will be unable to repay the indebtedness
coming due or to grow and expand our business in which case, there would be
substantial doubt about our ability to continue as a going concern.
We have incurred and may continue to incur losses.
11
We began operations in 1998 and have incurred net losses from operations
in each year since our inception. We currently intend to continue to invest in
infrastructure development, applications development, sales and marketing, and
acquisitions in order to execute on our business plan. We expect that we will
incur losses for at least the next 12 months and there can be no assurances that
we will ever be profitable.
Our operating results are likely to fluctuate.
We are unable to forecast our revenues with certainty because of the
unknown demand for our high-speed service and the emerging nature of the
wireless data access industry. Our revenues could fall short of our expectations
if we experience delays in completing the installation of our network or
entering into agreements with additional channel partners. Our future operating
results will be subject to annual fluctuations due to several factors, some of
which are outside our control.
Our business model uses estimates to project revenues and cost, and those
estimates may be inaccurate.
Initial cost projections of providing high-speed reliable access to
businesses are extremely difficult to develop. Although variables have been
established for the mean installation cost and the cost of goods, they are
dependent on many other independent variables. Due to many factors, the costs
associated with network installation will vary substantially between
metropolitan areas. Because we have not previously operated in the fixed
wireless broadband or wireless LAN market, we may have failed to consider all
costs involved, and our actual costs may be significantly greater than our
estimated costs.
We have completed only a limited number of high-speed wireless installations.
The market for wireless data access services is in the early stages.
Critical issues concerning wireless communications and data access, including
security, reliability, cost, regulatory issues, ease of use and quality of
service, remain unresolved and are likely to affect the market for our
high-speed service. We cannot reliably project potential demand for our
high-speed service, particularly whether there will be sufficient demand at the
volume and prices we need to be profitable. Moreover, if the customer base for
our high-speed service does not expand at the rate required to support the
planned deployment of our network, our revenue and business will suffer, and we
may be unable to complete our planned deployment. In addition, competition to
provide wireless data access services of the type we offer could result in a
high turnover rate among our users, which could have an adverse effect on our
business and results of operations.
We must deploy our high-speed network in a limited time in order to compete
effectively.
Rapid introduction of our service is crucial to successfully compete
against other wireless access providers. If we are unable to deploy our
high-speed network in accordance with sales goals, we could incur substantial
unanticipated costs or be forced to revise our business plan.
We need to expand our sales and support organizations.
We currently have a small customer service and support organization and
will need to increase our staff to support new customers and the expanding needs
of existing customers. The employment market for sales personnel and customer
service and support personnel in this
12
industry is very competitive, and we may not be able to hire the kind and number
of sales personnel, customer service and support personnel we are targeting. Our
inability to hire qualified sales, customer service and support personnel may
materially adversely affect our business, operating results and financial
condition.
We may be unable to attract and retain customers.
We have no way of predicting whether our marketing efforts will be
successful in attracting new customers and acquiring substantial market share.
Our past advertising has been directed toward a limited target market. We do not
currently have the technical staff required to quickly deploy service personnel
to multiple service calls. Businesses may fear contracts that are not
serviceable. This concern may hinder our ability to negotiate long-term
agreements with our customers.
Our customers may cancel their contracts with us.
While we may obtain firm, long-term purchase commitments from corporate
and/or residential customers, cancellations and non-renewals in excess of
anticipated sales-reductions would adversely affect profitability. The
short-term nature of our customer commitments and the possibility of rapid
changes in demand reduce our ability to estimate accurately future customer
requirements. We may increase staffing, purchase additional equipment and incur
other expenses to meet the anticipated demand of our customers but that
increased demand may not materialize, thus adversely affecting our ability to
make a profit. Additionally, any of our long-term relationships may be
terminated at any time, for valid or invalid reasons, with or without recourse
and termination of a significant number of these relationships could have a
material and adverse effect on our business.
We may lose market share to new and existing competitors.
We must timely implement our business plan because there is significant
concern regarding competing firms entering the Company's target markets. We
recognize significant value in being the first-to-market in many different
geographical areas, since most bandwidth providers provide long-term contracts
with customers. We may be unable to secure contracts with some customers due to
their existing contracts with other service providers.
We depend on a physical infrastructure largely maintained by third parties and
subject to disruption by events outside our control.
Our success will depend upon the capacity, reliability and security of the
infrastructure used to carry data between our users and the Internet. While we
own most of the network, there are certain portions of the network, which rely
on segments owned, operated and maintained by third parties. Accordingly, we
have no control over the quality of maintenance provided to these third-party
network segments. A bandwidth carrier that provides poor service and has
frequent network breaks greatly limits our ability to provide quality service to
our clients. Our financial and business results may be negatively affected by
leasing poorly maintained infrastructure from various third parties.
If we are unable to negotiate leases for the installation of our equipment, the
deployment of our network will be impaired.
13
The deployment of a majority of our services depends on our ability to
connect via rooftops and tower locations owned by third parties. This space is
required for the implementation of Points of Presence, consisting of wireless
access points and transmission towers. We have identified sites that would
ideally accommodate the placement of our network equipment.
The owners of these buildings may not recognize the value of high-speed
access, or be willing to allow us to place network equipment on their premises.
In addition, there is substantial competition from a variety of communications
companies for these ideal sites, and a large amount of communication equipment
may previously exist at these locations. If we are not able to negotiate these
leases, or we are not able to negotiate leases on terms that are favorable or
acceptable to us, the deployment of our network will be impaired, and financial
results will be negatively affected.
Even if we were to successfully build our network, we may be unable to maintain
that network.
Once completed, each of our networks will be subject to the operational
risks inherent in a large-scale, wireless telecommunications system. The
operations, administration, maintenance and repair of these networks require the
coordination and integration of sophisticated and highly specialized hardware
and software technologies and equipment. We cannot assure that, even if built to
specifications, our networks will function as expected, in a cost-effective
manner. The failure of hardware or software to function as required could render
a network unable to perform at design specifications, which would require us to
pay for costly repairs or retrofits. At least initially, we will engage third
parties to perform operations, administration and maintenance of its networks
and will depend on the performance of these third parties.
If the industry adopts a wireless standard that is incompatible with our
equipment, we may be unable to operate in the market.
There are currently many competing standards in the wireless data
transport market, and it is important to recognize these standards. While
802.11b has become widely accepted, there is no guarantee that the industry's
reliance on this standard will continue. The 802.11b standard may be replaced by
another standard, and our antennas and transport mechanisms may not interoperate
with other standards and equipment.
The equipment we purchase may not be compatible with other brands.
Although 802.11b compliant equipment is required to interoperate with all
other compliant products, several respected wireless publications have proven
that some 802.11b equipment is not compatible with other brands. In the event
that the Company is required to use wireless equipment from a variety of
manufacturers, some of these products may not operate with our other installed
wireless equipment. We will take all proper precautions such as comprehensive
initial tests and tracking, in purchasing equipment from new manufacturers to
ensure that it is interoperable. Even with these measures, we may purchase
equipment that, under certain conditions, does not interoperate with other
equipment. The costs related to purchasing this equipment could be high, and
would negatively affect the profitability of the Company.
14
We depend on a limited number of suppliers, and we have experienced shipment
delays.
We depend on limited source suppliers for many of the principal components
of our network. Some of our suppliers have experienced shipment delays, either
as a result of capacity limitations at their production facilities or because
they were unable to obtain raw materials or parts necessary for the network
components they manufacture. Some of these supply shortages are ongoing to the
present date, and others occur frequently with no predictability in occurrence.
If we continue to experience these current or any future supply problems and are
unable to develop alternative sources of supply quickly and on a cost-effective
basis, our ability to obtain and install the equipment we need to implement our
service will be impaired. This impairment would cause delays in our network
deployment, and negatively affect our financial results.
We cannot guarantee future wireless developments.
While we believe that the future of wireless as a dominant transport
factor is certain, we cannot guarantee the success and future developments of
wireless technology. Other unpredicted factors may hinder the success and
integration of wireless technologies. While it is our hope to utilize the
scalability of all wireless network equipment, we do not know if new
developments will require significant upgrades. It is uncertain whether new
products will be able to be integrated into our network infrastructure, and we
cannot predict the feasibility of new technologies.
We depend upon key personnel and will need to retain additional personnel as we
grow.
Our success depends on the continuing services of Alex Gonzalez, our chief
executive officer and director. The loss of this individual could have a
material and adverse effect on our business operations. Additionally, the
success of our operations will largely depend upon our ability to successfully
attract and maintain competent and qualified key management personnel. As with
any startup company, there can be no guaranty that we will be able to attract
such individuals or that the presence of such individuals will necessarily
translate into profitability for the Company. Our inability to attract and
retain key personnel may materially and adversely affect our business
operations.
We may be unable to manage effectively our growth and expansion.
We have grown recently and expect to continue the expansion of our
operations. This growth has placed, and will continue to place, significant
strain on management, operations, technical, financial, systems, sales,
marketing and other resources. The ability to manage the expansion to date, as
well as any future expansion, will require progressive enhancements or upgrades
of processes, equipment, accounting and other systems and the implementation of
a variety of procedures and controls. We cannot assure that significant problems
in these areas will not occur. Any failure to enhance or expand these systems
and implement procedures and controls in an efficient manner and at a pace
consistent with our business activities could harm our financial condition and
results of operations. The success of the internal growth strategy of the
Company will depend on various factors, including the demand for our products
and services and our ability to generate new and higher margin business. These
factors are, at least in part, beyond our control and there can be no assurance
the our internal growth strategy will be successful.
15
We operate in an industry with rapidly changing technology, and our success will
depend on our ability to develop new products and services that keep pace with
technological advances.
The market for data access and communications services is characterized by
rapidly changing technology and evolving industry standards in both the wireless
and wire line industries. Our success will depend to a substantial degree on our
ability to develop and introduce, in a timely and cost-effective manner,
enhancements to our high-speed service and new products that meet changing
customer requirements and evolving industry standards. For example, increased
data rates provided by wired data access technologies, such as digital
subscriber lines, may affect customer perceptions as to the adequacy of our
service and may also result in the widespread development and acceptance of
applications that require a higher data transfer rate than our high-speed
service provides. Our technology or systems may become obsolete upon the
introduction of alternative technologies. If we do not develop and introduce new
products and services in a timely manner, we may lose users to competing service
providers, which would adversely affect our business and results of operations.
Our networks may become obsolete.
Each of our networks is expected to have a design life of not less than 10
years; however, there can be no assurance of the actual useful life of any of
these systems. A number of factors will affect the useful life of each of its
networks, including quality of construction, unexpected deterioration and
technological or economic obsolescence. Failure of any of its systems to operate
for their full design life could have a materially adverse effect on us.
We face a number of risks associated with potential acquisitions.
As part of our business strategy, we have made, and expect to continue to
make, acquisitions of complementary companies, products and technologies. We
depend on these acquisitions to grow our business, and there can be no assurance
that we will continue to find attractive acquisition targets. In addition, any
future acquisitions would be accompanied by risks commonly encountered in
acquisitions, including, but not limited to, difficulties in integrating the
operations, technologies, products and personnel of the acquired companies and
insufficient revenues to offset increased expenses associated with acquisitions.
Failure to manage and successfully integrate acquisitions we make could harm our
business, our strategy and our operating results in a material way.
We may face litigation and liability for information displayed on our Websites.
We may be subjected to claims for defamation, negligence, copyright or
trademark infringement and various other claims relating to the nature and
content of materials we publish. These types of claims have been brought,
sometimes successfully, against online services in the past. We could also face
claims based on the content that is accessible from our websites through links
to other websites. Any litigation arising from these claims would likely result
in substantial costs and diversion of resources and management attention, and an
unsuccessful defense to one or more such claims could result in material
damages. We have no insurance coverage for these types of claims.
We face a number of regulatory risks.
16
Federal and State Telecommunications Regulation. Certain of our operations
are subject to regulation by the FCC and state public utility commissions. The
FCC is restructuring access rates and universal service mechanisms, which will
affect our costs and rates for our services. Changes in the regulation or
interpretation of legislation affecting our operations could have a material
adverse effect on our business, operating results and financial condition.
Municipal and Other Local Regulation. Municipalities will require us to
obtain building permits and licenses or franchises in order to operate radio
frequency equipment on towers and rooftops. A municipality's decision to require
us to remove our facilities or abandon our network could also be materially
adverse. In some municipalities where we expect to construct networks, we will
be required to pay license or franchise fees based on a percentage of gross
revenue. There is no guarantee that franchise fees will remain at their current
levels after existing franchises expire. In addition, we could be placed at a
competitive disadvantage if our competitors do not pay the same level of fees.
However, the 1996 Act requires states and municipalities to manage public rights
of way in a competitively neutral and non-discriminatory manner.
17
Item 2. DESCRIPTION OF PROPERTY
The Company leases 2,700 square feet of office and light warehouse space in Fort
Stockton, Texas under a lease that expires on December 31, 2004. The annual rent
for this property is $9,000. The Company also leases 400 square feet of office
space in Alpine, Texas under a lease that expires on February 28, 2008. The
annual rent for this property is $8,100.
The Company owns a 2,000 square foot building in Fort Stockton, Texas which it
uses for its corporate offices. The Company also owns a 1,300 square foot
building in Fort Stockton, Texas which it uses for its corporate offices and a
4,536 square foot building and adjoining lot in Midland, Texas which it uses for
the corporate offices of Strategic Abstract & Title Corporation.
All of the above properties or leases are used for the Company's operations.
Item 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote of the security holders during the
fiscal year ended December 31, 2003.
18
PART II
Item 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market under the
symbol "WFRI (PNK)" (Pink Sheets). The table below sets forth the high and low
price information for the Company's common stock for the periods indicated. Such
prices are inter-dealer prices, without mark-up, mark-down or commission and may
not represent actual transactions. The full prices have been adjusted to reflect
all stock splits effected prior to the date this Amended Annual Report is filed
with the Securities and Exchange Commission.
High Low
---- ---
Fiscal Year Ended December 31, 2003
4th Quarter $.60 $.165
3rd Quarter $.75 $.0005
2nd Quarter * *
1st Quarter * *
Fiscal Year Ended December 31, 2002
4th Quarter * *
3rd Quarter * *
2nd Quarter * *
1st Quarter * *
* (No reliable data is available from Pink Sheet reports due to the inactivity
of the stock during this period.)
As of March 23, 2004, there were approximately 2,395 holders of record of the
Company's common stock.
Dividends
The Company has neither declared nor paid any cash dividends on its common stock
during the last two fiscal years, and it is not anticipated that any such
dividend will be declared or paid in the foreseeable future. Any payment of
dividends in the future will be dependent upon the amount of funds legally
available and is contingent upon the Company's earnings, financial condition,
capital requirements, and other factors which the Board of Directors deem
relevant.
19
Item 6. 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. These forward-looking statements are based
largely on our current expectations and are subject to a number of risks and
uncertainties. Actual results could differ materially from these forward-looking
statements. Important factors to consider in evaluating such forward-looking
statements include those set forth above under the caption "Item 1 - Description
of Business - Risk Factors."
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.
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.
20
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 year ended December 31, 2003 compared to year ended
-----------------------------------------------------------------------------
December 31, 2002.
-----------------
For the year ended December 31, 2003 the Company had $1,445,334 in equipment
sales revenue (net of sales costs) and $779,141 in Internet service revenue (net
of sales costs). In 2002 the Company had $577,700 in equipment sales revenue,
(net of sales costs) and $372,284 in Internet service revenue (net of sales
costs). The gross profit was $2,224,475 (net of sales costs) in 2003 compared to
$949,984 (net of sales costs) in 2002. The increase in the Company's gross
profits in 2003 as compared to the same period in 2002 was due to an increase in
Internet service revenue (as compared to equipment sales revenue), which carries
a higher profit margin than equipment sales revenue.
The Company incurred total operations expenses of $3,425,443 in 2003 compared to
$979,793 in 2002 a total increase of 349%. The major components of the expenses
were as follows:
Expenses Increase Percentage
-------- -------- ----------
Advertising and promotion $ 88,269 $ 19,199 459%
Amortization and depreciation 520,318 155,754 334%
Legal and professional 223,468 7,500 2,980%
Auto and travel 209,499 58,057 361%
Commissions and contract labor 96,591 14,702 657%
Office expenses and supplies 228,702 52,967 432%
Salary and wages 1,493,952 434,618 344%
Taxes 259,325 68,509 379%
Utilities 119,957 39,885 301%
The substantial increases in costs of operations of 349% compares to substantial
increases in gross profit of 234% over prior year. The increase in the Company's
expenses in 2003 compared to the same period in 2002 was due to (i) an increase
in legal and professional fees due to the Company's merger with Fremont; (ii) an
increase in auto and travel expenses due to the Company seeking to acquire other
companies and servicing and supporting new territories we acquired; and (iii) 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, 2003 expenses reflect an investment in future operational capabilities
as a company and management is hopeful
21
that revenues will increase without substantial expense increase. The Company
sustained a net loss of ($711,264) in 2003 (after other income of $488,704) as
compared to a net loss of ($21,739) in 2002 (after other income of $8,070). The
net loss per share was ($.03) in 2003 and loss was nominal per share in 2002.
Liquidity and Capital Resources
-------------------------------
At December 31, 2003, we had working capital of $226,324 and inventories
of $171,477. 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 December 31, 2003, the Company had current assets of $652,941, fixed
assets of $2,378,606 (net of depreciation), and other assets of $3,509,244
(after deducting amortization), consisting primarily of goodwill. The Company,
at year end, had current liabilities of $1,503,945, and long term debt of
$616,772.
As of December 31, 2003, other than smaller bank notes and equipment
financing, we did not have any significant financing arrangements in place. As
of December 31, 2003, we had $226,324 in cash and $252,615 in accounts
receivable that could be used in connection with funding our operations.
Cash flow for the Company from operations remains marginal and may require
supplemental funding in the future. We believe that the impact of inflation on
our operations since our inception has not been material.
In 2003 the Company sold 8,997,894 shares of Common stock for $1,276,532.
The original number of shares sold was 899,789. The sales were renegotiated in
January 2004 to 8,997,894 shares.
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 equity
securities. We cannot be assured that our proposed private placement of equity
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 would be on terms
favorable to us. If adequate funds are not available, we will be unable to repay
the
22
indebtedness coming due 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 December
31, 2003 was $171,231.88.
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 the $75,000 would be
due on November 22, 2003. Momentum paid the interest to renew the loan and it
currently has a June 19, 2004 maturity date. See "Legal Proceedings." The
interest rate is 9%. 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 December 31, 2003 the
balance outstanding 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 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 December 31, 2003 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 at
December 31, 2003 was $50,000.
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 December 31, 2003 was 6%. The Note is due March 18,
2004. The note is secured by all
23
vehicles, office equipment, accounts receivable, telephone equipment and all
other assets. At December 31, 2003 the balance outstanding under this agreement
was $353,279.
Long - Term Debt:
-----------------
On June 15, 2001, the Company entered into a loan agreement with Fort Stockton
Development Corporation for $50,000. The interest rate is 3% and is due in full
on June 15, 2004. The loan will be forgiven in proportion to the number of full
time jobs created at a ratio of $2,000 per full time job. Furniture, fixtures
and equipment secure the note. To date the Company has added over 20 full time
jobs under this agreement. In the second quarter of 2003 the Company met the
requirements for complete forgiveness of this loan. Accordingly the balance
outstanding was written off to Other income during 2003. At December 31, 2003
the balance outstanding under this agreement was $0.
On June 29, 2001, the Company entered into a loan agreement with a local bank
for $27,000. The initial interest rate on the loan was 9% that varied with the
Wall Street Journal Prime Rate. The rate at December 31, 2002 was 6.25%. The
loan calls for 60 monthly payments of $563 including interest. The loan is
unsecured, however the bank has the right of offset in all the Company's
accounts with the lender. The loan was paid in full in 2003 as part of the
December 18, 2003 note payable negotiations. At December 31, 2003 the balance
outstanding under this agreement was $0.
On September 4, 2001, the Company entered into a loan agreement with a local
bank for $40,000. The interest rate is 8%. The loan calls for 60 monthly
payments of $813 including interest. The vehicle purchased secures the loan.
This loan was paid off during the 2003, in connection with its assumption in a
vehicle purchase, by one of the Company's employees. At December 31, 2003 the
balance outstanding under this agreement was $0.
On April 15, 2002, the Company entered into a loan agreement with a local bank
for $16,350. The loan calls for monthly payments of $621 including interest. The
initial interest was 6.75%, which varies with the Wall Street Journal Prime
Rate. The rate at December 31, 2002 was 6.25%. The loan is unsecured, however
the bank has the right of offset in all the Company's accounts with the lender.
The loan was paid in full in 2003 as part of the December 18, 2003 note payable
negotiations. At December 31, 2003 the balance outstanding under this agreement
was $0.
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 December 31, 2002 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 December 31, 2003 was $387,580.
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%,
24
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 loan was paid in full in 2003 as part of the December
18, 2003 note payable negotiations. At December 31, 2003 the balance outstanding
under this agreement was $9,602.
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 December 31, 2003 outstanding under this
agreement was $80,563.
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 December
31, 2003 outstanding under this agreement was $24,608.
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 December 31, 2003 outstanding under
this agreement was $32,134.
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 December 31, 2003 outstanding
under this agreement was $34,527.
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 December 31, 2003 outstanding
under this agreement was $31,288.
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 December 31, 2003
outstanding under this agreement was $25,906.
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
25
Company, Alex Gonzalez, also guaranteed the loan. The balance at December 31,
2003 outstanding under this agreement was $35,140.
On May 27, 2003, the Company entered into a loan agreement with a local bank for
$40,768. The loan calls for 60 monthly payments of $807 including interest at
7.0%. 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 loan was paid in full in 2003 as part of the December 18, 2003 note
payable negotiations. At December 31, 2003 the balance outstanding under this
agreement was $0.
On May 27, 2003, the Company entered into a loan agreement with a local Bank for
$41,407. The loan calls for 60 monthly payments of $820 plus interest at 7.0%.
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 loan was paid in full in 2003 as part of the December 18, 2003 note
payable negotiations. At December 31, 2003 the balance outstanding under this
agreement was $0.
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 December 31, 2003 outstanding under this agreement was $79,865.
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 December 31, 2003 outstanding under this agreement was $5,732.
On February 5, 2001 Momentum entered into a loan agreement with a finance
company for $4,100 to purchase equipment. The loan calls for 36 monthly payments
of $141 including interest at 16.5%. The equipment secures the note. A
shareholder and officer of Momentum also guaranteed the note. The balance at
December 31, 2003 outstanding under this agreement was $0.
On February 6, 2001 Momentum entered into a loan agreement with a finance
company for $18,929 to purchase equipment. The loan calls for 36 monthly
payments of $637 including interest at 14.6%. The equipment secures the note. A
shareholder and officer of Momentum also guaranteed the note. The balance at
December 31, 2003 outstanding under this agreement was $0
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
26
also guaranteed the note. The balance at December 31, 2003 outstanding under
this agreement was $1,281.
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 December 31, 2003 outstanding under this agreement was $8,685.
On February 6, 2002 Momentum entered into a loan agreement with a finance
company for $10,584 to purchase equipment. The loan calls for 24 monthly
payments of $545 including interest at 25.5%. The equipment secures the note. A
shareholder and officer of Momentum also guaranteed the note. The balance at
December 31, 2003 outstanding under this agreement was $0.
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
December 31, 2003 outstanding under this agreement was $6,587.
In connection with the US Mex-West Texas Horizon agreement the Company assumed
the debt payments for one year on certain loans for phone card terminals and pay
phones. The amount assumed was $321,682. The loan was paid in full in 2003 as
part of the December 18, 2003 note payable negotiations. At December 31, 2003
the balance outstanding under this agreement was $0.
Total Long-Term debt at December 31, 2003 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
27
Thereafter 100,021 N/A
Item 7. FINANCIAL STATEMENTS
Item 7 is not being amended and restated in this Amended and Restated Annual
Report.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Wireless Frontier Internet, Inc. (f/k/a Fremont Corporation) (the "Company"),
through its wholly owned subsidiary Winfill Holdings International Limited
("Winfill"), a British Virgin Island corporation, incurred a net loss in 1998 as
a result of various factors, including declining sales, a shortage of working
capital, and a bad debt provision necessitated in substantial part by the
bankruptcy of a major customer. These aforementioned factors and the cessation
of operations of Winfill, prevented the Company's auditors, Arthur Anderson &
Co. ("Arthur Anderson"), from finalizing the Company's audit for the year ended
December 31, 1998 and, as a result, the Company failed to file its Form 10-KSB
Annual Report for the year ended December 31, 1998 and all other required
reports under the Securities Exchange Act of 1934 (the "Exchange Act") since. In
addition, as described in Item 5 below, the Company consummated a transaction in
July 2003 that resulted in a change in management. As a result, current
management of the Company have not been in contact with a representative of
Arthur Anderson as a result of the winding-down of Arthur Andersen's business,
effectively terminating the Company's relationship with Arthur Andersen. As a
result of the cessation of the Company's business operations and Arthur
Anderson's winding-down, current management has been unable to determine if
Arthur Anderson has terminated its auditor relationship with the Company
although Arthur Andersen will no longer serve as the Company's independent
auditor.
The audit reports of Arthur Andersen on the consolidated financial statements of
the Company for each of the years ended December 31, 1997, and December 31,
1996, did not contain any adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 1997 and December 31, 1996, as well
as during the period from January 1, 1998 through the date of the winding-down
of Arthur Anderson's affairs, there were no disagreements with Arthur Andersen
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Arthur Andersen would have caused them to make reference
to the matter in their report.
During the two most recent fiscal years and through the date of the winding-down
of Arthur Anderson's affairs, there have been no reportable events (as defined
in Regulation S-K Item 304(a)(1)(v)).
The Company has been unable to contact Arthur Andersen in connection with a
request that Arthur Andersen furnish a letter addressed to the Securities and
Exchange Commission stating whether it agrees with the above statements and
disclosure due to the fact that the personnel
28
primarily responsible for the Company's account (including the engagement
partner and manager) have left Arthur Andersen.
On September 17, 2003, the Company, upon recommendation of the Board of
Directors, engaged Pollard-Kelley Auditing Services Inc. ("Pollard-Kelley") to
serve as the Company's independent public accountants.
During the two most recent fiscal years and through the date hereof, the Company
did not consult Pollard-Kelley with respect to the application of accounting
principles to a specified transaction, either completed or proposed; or the type
of audit opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.
During the two most recent fiscal years and through September 17, 2003, the
Company has not consulted with Pollard-Kelley regarding either:
o the application of accounting principles to any specified
transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial
statements, and neither a written report was provided to the Company
nor oral advice was provided that Pollard-Kelley concluded was an
important factor considered by the Registrant in reaching a decision
as to the accounting, auditing or financial reporting issue; or
o any matter that was either subject of disagreement or event, as
defined in Item 304(a)(1)(iv)(A) of Regulation S-B and the related
instruction to Item 304 of Regulation S-B, or a reportable event, as
that term is explained in Item 304(a)(1)(iv)(A) of Regulation S-B.
Item 8a. 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 fiscal year ended December 31, 2003 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.
29
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their ages and positions
are as follows:
Name Age Company Position
---- --- ----------------
Alex Gonzalez 42 Chairman & CEO
Jasper Knabb 38 President & Director
Joe Chris Alexander 44 Vice President of Operations
Ronald J. Marosko 36 Vice President of IT
Jaime R. Velasco 41 Executive Vice President
Lorenzo Clarke 40 Chief Technology Officer
Sandy Landstrom 49 Chief Financial Officer
James Bentley King 34 Director
William Lawson Allen 60 Director
John R. Morrow 44 Director
Dr. Cecil George MD 48 Director
Alex Gonzalez, age 42, is the CEO and Chairman of the Company. With over 20
years of experience in the telecommunications and data networking industry, Mr.
Gonzalez has extensive knowledge in local, wide, and metropolitan-area networks.
He has been involved in designing and managing over 1,000 voice and data
networks globally. He served as an Early Adopter Partner for Cisco Systems in
1998 and participated in the Advanced Technology Products program for wireless
products. In 2000 Mr. Gonzalez co-founded Wireless Frontier Internet, Inc. with
Joe Chris Alexander, the Vice President of Operations, and Ronald Marosko, the
Vice President of IT. Mr. Gonzalez pioneered the broadband wireless Internet
industry throughout the Trans Pecos region in Texas. He currently is serving a
four-year term to the Governor-appointed Texas On-line Authority where he has
been tasked to represent rural Texas on Internet development. Mr. Gonzalez
formerly served as Vice President of Sales & Marketing for Flair Data Systems,
Inc. from 1989 through 1999. Prior to that, he was a Sales Manager for MCI
Communications and a Regional Manager for ClayDesta Communications. Mr. Gonzalez
received a bachelor's degree in business administration from Texas A&M
University in 1983.
Jasper C. Knabb, age 38, has been President and Director of the Company since
2003. Prior to joining the Company, he was a Managing Director of OTC Wireless
from 2002-2003. Prior to that, he was President and CEO of Beach Access from
2001 through 2003, and President and CEO of Microland from 1995 through 2001.
30
Joe Chris Alexander, age 44, is the Company's Vice President of Operations. He
co-founded West Texas Internet in 1999. Together with Alex Gonzalez, the CEO,
and Ronald Marosko, the Vice President of IT, he is a co-founder of Wireless
Frontier Internet, Inc. Since the contribution by West Texas of its assets to
Wireless Frontier Internet, Inc., Mr. Alexander has had significant involvement
in the day-to-day operations of the Company. Mr. Alexander has over 22 years of
experience in wireless communications, electronics and networking fields and
helped to pioneer broadband wireless Internet into rural America. Over the past
20 years, Mr. Alexander has developed and owned numerous companies within these
fields and has partnered in several other entrepreneurial businesses. Mr.
Alexander was a sales agent for The New York Life Insurance Company from 1995
through 2000. Since 1998, he has been an owner and principal in Direct
Bytes.com. Mr. Alexander attended Texas A&M University.
Ronald J. Marosko, Jr., age 36, has served as the Company's Vice President of IT
and Senior Network Engineer since 1995. With over 15 years of experience in the
telecommunications and data networking industry, including a certification as a
Cisco Certified Internetwork Expert (CCIE), Mr. Marosko has extensive knowledge
in local, wide, and metropolitan-area networks. He served as an Early Adoption
Partner in IP Telephony for Cisco Systems in 1998 and participated in the
Advanced Technology Products program for wireless network products. Together
with Alex Gonzalez, the CEO, and Joe Chris Alexander, the Vice President of
Operations, he is a co-founder of Wireless Frontier Internet, Inc. He also holds
Wireless Specialization certifications from Cisco Systems, other engineering
certifications from Adtran, Motorola, and Madge Networks, and an FCC Amateur
Radio License. Mr. Marosko served as the Senior Network Engineer for Flair Data
Systems, Inc. from 1996 through 2000, and as a Communications Engineer in the
Texas Medical Center. He attended Houston Community College and received an
Associate Degree in 1992.
Jaime R. Velasco, age 41, is the Executive Vice President of the Company. Mr.
Velasco has over 18 years of experience in the telecommunications and data
industry. He began his tenure with ClayDesta Communications as an executive
outside sales representative. In 1989, he joined U.S. Long Distance, Inc.
(USLD), as Senior Manager of Operations. Mr. Velasco was involved from a
managerial role, in the acquiring of a Vancouver public company which became
listed on NASDAQ. He installed USLD's first switch and also opened the Company's
first operator center. In 1994, he joined American Telescource International,
Inc. (ATSI), as Vice President of Sales and Marketing. The company went public
in Vancouver and became listed on NASDAQ. In 1999, Mr. Velasco founded US-Mex
Communications, Inc. focusing on voice communications. Since US-Mex
Communication's merger with Wireless Frontier Internet, Inc. in 2003, Mr.
Velasco has served as the Executive Vice President of the Company. He received
his bachelor's degree in Business Management (BBA) from Sul Ross State
University in 1987.
Lorenzo Clarke, age 40, has served as the Company's Vice President since 2003.
Mr. Clarke has 15 years experience in network build out, network design and
telephony integration. Mr. Clarke has worked with networks as simple as a
point-to-point connection to installation and configuration of hundreds of
sites. Mr. Clarke has various certifications in Cisco, Bay Networks, ANACOM,
DATACOMM, Cannon, ADTRAN, Inter-Tel, LARSCOM and IBM. From 2002 through 2003 he
was a Senior Network Engineer at Arnet Kent Datacom, and from 1999 through 2000,
he was a Senior Network Engineer at DNS. Mr. Clarke holds an Associate Degree in
Electronics from Arizona State University.
31
Sandy Landstrom, age 49, has served as the Company's Chief Financial Officer
since 2003. Most recently Ms. Landstrom worked for United Healthcare as an
Electronic Eligibility Analyst, handling major accounts and prior to that for
Micros Systems project managing the Y2K transition and afterwards their new beta
software for Opera Property Management System. Ms. Landstrom worked in the
Hospitality Industry for 25 years with the last 10 years working for HEI Hotels
as General Manager of the BWI Airport Marriott (1994-1998) and General Manager
of the Embassy Suites Atlanta Airport (1989-1994). Throughout this career she
held various board positions including Treasurer and Vice President of the
Annapolis and Anne Arundel County Conference and Visitors Bureau in Annapolis,
MD. Ms. Landstrom studied business at Northern Virginia Community College and
attended numerous business courses sponsored by Marriott Corporation.
James Bentley King, age 34, received a BBA in 1994 from Texas Christian
University. He worked in the banking industry in Lubbock TX as a loan officer
for FNB Lubbock and Norwest for 4 years. Mr. King became a Director of Frontier
Wireless Internet, Inc. in 2004. Mr. King has been employed as the General
Manager of Southwest Marketers, Inc. since 1996. He has been President of
JSJKing, Inc. since 2003.
William Lawson Allen, age 60, received a BBA in Finance in 1971 from the
University of North Texas and graduated from the Southwestern Graduate School of
Banking at SMU. He was employed at Pecos County State Bank as Executive Vice
President since 1983. In 2004 he became President and Directors of Fort Davis
State Bank. He was appointed a Director of Frontier Wireless Internet, Inc. in
2004.
John Richard Morrow, age 42, graduated form Texas A&M University 1983 with a BA
in Business Management. He has been the owner and President of Valley
Distributors since 1984. He has also been owner and CEO of Permian Distributing
since 1994. He was appointed as a Director of Frontier Wireless Internet, Inc.
in 2004.
Dr. Cecil George MD, age 49, received a BSC Magna Cum Laude in 1977 from Texas
A&M University and graduated from the University of Texas Health Science Center
at San Antonio, TX. He started his private practice in Fort Stockton in November
1983, specializing in Family Practice. Dr. George is currently serving as Chief
of Staff of Pecos County Memorial Hospital, EMT Director for Terrell County, EMT
Director for Firestone, EMT Director for Imperial, EMS Director for Fort
Stockton, a Director for Wireless Frontier Internet, and Medical Director of
Cactus Health Services, Inc. in Sanderson, TX.
There are no family relationships among any of the Company's directors and
executive officers, except that Jaime Velasco is a cousin of Alex Gonzalez.
During the past five years, there have been no filings of petitions under
federal bankruptcy laws, or any state insolvency laws, by or against any
business of which any director or executive officer of the Company was a general
partner or executive officer at the time or within two years before the time of
such filing.
During the past five years, no director or executive officer of the Company has
been convicted in a criminal proceeding or been subject to a pending criminal
proceeding.
32
During the past five years, no director or executive officer of the Company has
been the subject of any order, judgment, or decree, not subsequently reversed,
suspended or vacated by a court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities.
During the past five years, no director or executive officer of the Company has
been found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law.
The Board of Directors acts as the Audit Committee and the Board has no separate
committee. The Company's Board of Directors has determined that William Lawson
Allen is an audit committee financial expert.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's common stock to file initial reports of ownership and reports of
changes in ownership with the SEC. Such persons are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms filed by such
persons. Based solely on its review of public filings, or representations from
certain reporting persons, the Company believes that, with respect to the fiscal
year ended December 31, 2003, and each of the prior fiscal years, each of the
Company's executive officers and directors, and each of the persons known to the
Company to beneficially own more than 10% of the Company's common stock,
complied with all any reporting requirements, except that none of the Company's
directors or executive officers filed a Form 3 in a timely manner.
Item 10. EXECUTIVE COMPENSATION
The following table summarizes the compensation earned by or paid to our Chief
Executive Officer and the other most highly compensated executive officers whose
total salary and bonuses exceeded $100,000 for services rendered in all
capacities during the fiscal years ended December 31, 2003, 2002 and 2001. Each
of the executive officers named on the following table is hereafter referred to
as a "Named Executive Officer."
[Enlarge/Download Table]
--------------------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus (s) Other Restricted Securities LTIP All Other
Principal Position ($) Annual Stock Underlying Payouts Compen-sation
Compen- Awards Options
sation ($)
Alex Gonzalez, Chairman & 2003 $139,119 0 0 0 0 0 (1)
Chief Executive Officer 2002 $91,750 0 0 0 0 0 0
2001 $50,176 0 0 0 0 0 0
Jasper Knabb, President & 2003 $96,808 $100,000 0 0 0 0 0
Director
2002 0 0 0 0 0 0 0
2001 0 0 0 0 0 0 0
Totals 2003 0 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------
33
There was no Directors' Compensation of any type in the prior two years.
The Company had no Long Term Incentive Compensation Plans in the form of
restricted stock awards, stock appreciation rights ("SARs"), phantom stock,
stock options, warrants, convertible securities, performance units and/or
performance shares, or any other such instruments during the 2003 or 2002
calendar years.
There were no Aggregated Option/SAR Exercises in last Fiscal Year nor were there
any Financial Year End Option/SAR Values.
Employment Agreements
---------------------
As of the date this Amended Annual Report is filed with the SEC, the Company
does not have any employment agreements with any of its officers or employees.
The Company is presently negotiating employment agreements with each of Alex
Gonzalez, Joe Chris Alexander and Ronald Marosko.
34
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of common stock of the
Company as of March 31, 2004 by (i) each person known by the Company to own more
than 5% of the Company's common stock, (ii) each of the directors, (iii) each of
the Named Executive Officers and (iv) all directors and executive officers as a
group. Unless otherwise noted, such persons have sole voting and investment
power with respect to such shares.
Amount and Nature
Name and Address of of Beneficial
Beneficial Ownership Ownership Percent of Class
-------------------- ----------------- ----------------
Patrick Cordero 4,166,640 6.3%
Strategic Abstract & Title
Beneficially
Address
Alex Gonzalez 18,760,000 28.3%
Chairman and CEO
104 West Callaghan
Fort Stockton, Texas 79735
Jasper Knabb 4,178,000 6.3%
President and Director
104 West Callaghan
Fort Stockton, Texas 79735
Dr. Cecil R George, MD 5,400 .008%
Director
104 West Callaghan
Fort Stockton, Texas 79735
William Lawson Allen 120,000 .18%
Director
104 West Callaghan
Fort Stockton, Texas 79735
John Richard Morrow 160,000 .24%
Director
104 West Callaghan
Fort Stockton, Texas 79735
James Bentley King 40,000 .6%
Director
104 West Callaghan
Fort Stockton, Texas 79735
35
All Executive Officers 27,430,040 41.3%
and directors as a Group
36
There are no outstanding arrangements that may result in a change in control of
the Company.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
--------------------------
As of December 31, 2003, the Company had no outstanding loans to shareholders or
its officers or directors.
Item 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description
--- -----------
2.1 Asset Purchase Agreement between Partners Alliance Group, Inc. and Todd
Jagger, individually and d/b/a the Overland Network Inc., dated November
30, 2001 (filed herewith).
2.2 Asset Purchase Agreement between Partners Alliance Group, Inc. and
William L. Brooks of Brooks Data Consultants, Inc., dated May 31, 2002
(filed herewith).
2.3 Letter of Intent to enter into Stock Purchase Agreement between Wireless
Frontier Internet, Inc. and U.S.-MEX Communications, Inc. and West Texas
Horizons, dated May 7, 2003 (filed herewith).
2.4 Agreement of Reorganization between Wireless Frontier Internet, Inc. and
Momentum Online Computer Services, Inc., dated May 31, 2003 (filed
herewith).
2.5 Agreement and Plan of Merger between Wireless Frontier Internet, Inc.,
Fremont Corporation and Networker Systems, Inc., dated September 16,
2003 (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated January 14, 2004 and incorporated herein by reference).
2.6 Asset Purchase Agreement between Wireless Frontier Internet, Inc. and
Bartell & Griffith, Ltd. LLP, dated September 30, 2003 (filed herewith).
2.7 Letter of Intent to enter into Asset Purchase Agreement between Wireless
Frontier Internet, Inc. and Strategic Abstract & Title Corporation,
dated June 30, 2003 (filed herewith).
2.8 Letter of Intent to enter into Asset Purchase Agreement between Wireless
Frontier Internet, Inc. and Kolinek Internet Service, dated June 30,
2003 (filed herewith).
3.1 Articles of Incorporation of the Company (incorporated by reference to
the Company's Registration Statement on Form 10).
3.2 Bylaws of the Company (incorporated by reference to the Company's
Registration Statement on Form 10).
37
4.1 Form of Registration Rights Agreement between the Company and the
Purchasers named therein, dated March 11, 2004 (filed herewith).
4.2 Form of Wireless Frontier Internet, Inc. Common Stock Purchase Warrant,
dated March 11, 2004 (filed herewith).
4.3 Form of Wireless Frontier Internet, Inc. Convertible Debenture, dated
March 11, 2004 (filed herewith).
10.1 Asset Purchase Agreement by and between Fremont Corporation and Million
Treasure Enterprises Limited, dated as of September 16, 2003 (filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K, dated January
14, 2004 and incorporated herein by reference).
10.2 Stock Purchase Agreement between Terry L. Vink, Kenneth M. Vink, Craig
Vink, Paul Marshall, Steve Black, Joe Wilson and Wireless Frontier,
Internet, Inc. dated February 9, 2004 (filed herewith).
10.3 Form of Securities Purchase Agreement between Wireless Frontier
Internet, Inc. and the Purchasers named therein, dated March 11, 2004
(filed herewith).
10.4 Asset Purchase Agreement between Wireless Frontier Internet, Inc. and
Bcom.net, Inc., dated March 17, 2004 (filed herewith).
10.5 Asset Purchase Agreement between Wireless Frontier Internet, Inc. and
Raytech Internet, Inc., dated April 5, 2004 (filed herewith).
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
Item 14. Principal Accounting Fees and Services
General. Pollard-Kelley Auditing Services, Inc. is the Company's principal
auditing accountant firm. The Company's Board of Directors has considered
whether the provision of audit services is compatible with maintaining auditor
independence.
Audit Fees. Pollard-Kelley Auditing Services charged the Company fees
which included, $16,759 for 2001 and 2002 audits, $10,838 financial statement
for a subsidiary acquisition, in 2003 $4,534 for quarterly reviews, and $13,750
for audit on Fremont predecessor in 2003. D. Ronald Voss CPA billed $3,743 in
2003 for the audit of an acquired company
38
There were no tax fees or other fees in 2002 or 2003, except Zaher
Nooromohamed billed $1,890 in 2002 and $1,490 in 2003 for tax filings.
The Company's Board acts as the audit committee and had no "pre-approval
policies and procedures" in effect for the auditors' engagement for the audit
year 2002 and 2003.
All audit work was performed by the auditors' full time employees.
39
SIGNATURES
In accordance with Section 13 or 15(d) 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.
WIRELESS FRONTIER INTERNET, INC.
By: /s/ Alex Gonzalez
----------------------------
Name: Alex Gonzalez
Title: Chairman and Chief Executive
Officer
Date: May 13, 2004
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Alex Gonzalez
----------------------------
Name: Alex Gonzalez
Title: Chairman and Chief Executive
Officer (Principal Executive
Officer)
Date: May 13, 2004
By: /s/ Sandy Landstrom
----------------------------
Name: Sandy Landstrom
Title: Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
Date: May 13, 2004
By: /s/ Jasper Knabb
----------------------------
Name: Jasper Knabb
Title:President and Director
Date: May 13, 2004
40
By: /s/ James Bentley King
----------------------------
Name: James Bentley King
Title: Director
Date: May 13, 2004
By: /s/ William Lawson Allen
----------------------------
Name: William Lawson Allen
Title: Director
Date: May 13, 2004
By: /s/ John R. Morrow
----------------------------
Name: John R. Morrow
Title: Director
Date: May 13, 2004
By: /s/ Dr. Cecil George M.D.
----------------------------
Name: Dr. Cecil George M.D.
Title: Director
Date: May 13, 2004
41
Dates Referenced Herein and Documents Incorporated by Reference
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