UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 000-27045
INTERNATIONAL WIRELESS, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 36-4286069
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
120 Presidential Way Road, Woburn, Massachusetts 01801-1179
-------------------------------------------------------------------------------
(Address of principal executive offices)
781-939-7252
--------------------------
(Issuer's telephone number)
Not applicable
---------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of Mary 20, 2002, the Company had 16,997,236 issued, and 15,597,242
outstanding shares of its $.009 par value common stock.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Documents incorporated by reference: None.
INTERNATIONAL WIRELESS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheet (Unaudited) - March 31, 2002
Condensed Consolidated Statements of Operations (Unaudited) - For the
Three Months Ended March 31, 2002 and 2001 and for the Period January
1, 2001 (Inception) Through March 31, 2002
Statements of Cash Flows (Unaudited) - For the Three Months Ended
March 31, 2002 and 2001 and for the Period January 1, 2001
(Inception) Through March 31, 2002
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 2002
--------------------------------------------------------------------------------
CURRENT ASSETS
--------------------------------------------------------
Cash and cash equivalents $170,841
Marketable securities, at market
value 24,147
Prepaid expenses 152,712
--------
Total Current Assets $ 347,700
SOFTWARE, NET 5,298,238
-------------
PROPERTY AND EQUIPMENT, Net 76,643
--------------------------- ----------
OTHER ASSETS
------------
Loans receivable, related party 6,720
Security deposit 41,856
--------
Total Other Assets 48,576
----------
TOTAL ASSETS $5,771,157
==========
The accompanying notes are an integral part of these condensed financial statements
1
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 2002
----------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
-------------------
Accounts payable and accrued expenses $ 402,483
Loans payable 10,000
Notes payable, related party 118,080
Current portion of capital lease obligations 10,091
------------
Total Current Liabilities $ 540,654
OTHER LIABILITIES
-----------------
Capital lease obligations, less current portion 22,419
----------
TOTAL LIABILITIES 563,073
STOCKHOLDERS' EQUITY
--------------------
Preferred stock $.001 par value, 5,000,000 shares uthorized,
none issued and outstanding --
Common stock, $.009 par value, 50,000,000 shares
authorized; 15,001,410, issued and outstanding 135,013
Additional paid in capital 11,352,835
Stock subscription receivable (10,000)
Deficit accumulated during development stage (6,269,764)
------------
TOTAL STOCKHOLDERS' EQUITY 5,208,084
----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $5,771,157
==========
The accompanying notes are an integral part of these condensed financial statements
2
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months ended March 31, 2002 and 2001 and for the
Period January 1, 2001 (Inception) Through March 31, 2002
------------------------------------------------------------------------------------------
For the Period
September
27, 2000
(Inception)
Three Months through
Ended March 31, March 31,
-------------------------- ------------
2002 2001 2002
------------ ------------ ------------
OPERATING EXPENSES
------------------
General and administrative expenses $ 1,802,615 $141,822 $3,079,261
------------ ------------ ------------
TOTAL OPERATING EXPENSES 1,802,615 141,822 3,079,261
------------ ------------ ------------
OTHER EXPENSES
-------------
Interest expenses, net 3,174 1,365 12,028
Unrealized loss on sale of marketable securities 71,337 2,284,411 1,643,115
Loss on sale of marketable securities -- -- 1,535,360
------------ ------------ ------------
TOTAL OTHER EXPENSES 74,511 2,285,776 3,190,503
------------ ------------ ------------
NET LOSS $(1,877,126) $(2,427,598) $(6,269,764)
------------ ------------ ------------
NET LOSS PER COMMON SHARE-
--------------------------
BASIC AND DILUTED $ (0.14) $ (0.54)
------------------
WEIGHTED AVERAGE COMMON SHARES
-------------------------------
OUTSTANDING 13,507,833 4,476,611
============ ============
The accompanying notes are an integral part of these condensed financial statements
3
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months ended March 31, 2002 and 2001 and for the
Period January 1, 2001 (Inception) Through March 31, 2002
-----------------------------------------------------------------------------------------
For the Period
September
27, 2000
(Inception)
Three Months through
Ended March 31, March 31,
-------------------------- ------------
2002 2001 2002
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,877,126) $(2,427,598) $(6,269,764)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 224,448 599 237,313
Loss on disposal of fixed assets 12,250 -- 12,250
Stock-based compensation 926,693 33,947 1,399,667
Unrealized loss on marketable securities 71,337 2,284,411 1,643,115
Loss on sale of marketable securities -- -- 1,535,360
Changes in operating assets and liabilities:
Prepaid expenses 11,405 -- (152,712)
Security deposit -- (41,856) (41,856)
Accounts payable and accrued expenses 142,890 10,521 314,141
------------ ------------ ------------
TOTAL ADJUSTMENTS 1,389,023 2,287,622 4,947,278
NET CASH USED IN OPERATING
ACTIVITIES (488,103) (139,976) (1,322,486)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities -- -- 202,892
Purchases of property and equipment (8,092) (9,460) (49,168)
Repayments (advances) under loans receivable
to related parties 39,699 (108,000) (263,216)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES $ 31,607 $ (117,460) $ (109,492)
The accompanying notes are an integral part of these condensed financial statements
4
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
For the Three Months ended March 31, 2002 and 2001 and for the
Period January 1, 2001 (Inception) Through March 31, 2002
--------------------------------------------------------------------------------
For the Period
September
27, 2000
(Inception)
Three Months through
Ended March 31, March 31,
------------------- -----------
2002 2001 2002
--------- -------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayment) proceeds from notes payable,
related party $(28,750) $163,285 $ 118,080
Payments on capital lease obligations (2,196) -- (7,529)
Net Proceeds from issuance of common stock 603,973 95,300 1,492,268
--------- -------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 573,027 258,585 1,602,819
--------- -------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $116,531 $1,149 $170,841
CASH AND CASH EQUIVALENTS - Beginning 54,310 $ -- $ --
------------------------------------- --------- -------- -----------
CASH AND CASH EQUIVALENTS - Ending $170,841 $ 1,149 $ 170,841
---------------------------------- ======== ======== ===========
The accompanying notes are an integral part of these condensed financial statements
5
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1 - Basis of Presentation
-----------------------
Basis of Presentation
-----------------------
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary in order to make the financial statements not misleading have
been included. Results for the three months ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2002. For further information, refer to the financial
statements and footnotes thereto included in the International Wireless,
Inc. ("the Company") annual report on Form 10-KSB for the year ended
December 31, 2001.
NOTE 2 - Description of Business, Going Concern Uncertainty and Management's
--------------------------------------------------------------------
Plans
-----
The Company and Nature of Business
---------------------------------------
International Wireless, Inc. (the "Company") was incorporated on September
27, 2000 in the State of Delaware. The Company intends to acquire software
companies involved in wireless technology. During the period September 27,
2000 (Incorporation) through December 31, 2000 the Company did not have any
activity. Since January 2001, the Company's efforts have been devoted to
raising capital and seeking out companies to acquire. Accordingly, through
the date of these financial statements, the Company is considered to be in
the development stage and the accompanying financial statements represent
those of a development stage enterprise.
Reverse Merger
---------------
On December 27, 2001, Origin Investment Group, Inc. ("Origin") acquired all
of the Company's outstanding common stock by the issuance of 9,495,014
shares of $.009 par value common stock (the "Merger"). Simultaneously,
Origin changed its name to International Wireless, Inc. and effected a
one-for-nine reverse stock split, which reduced Origin's outstanding shares
of common stock from 10,985,565 to 1,220,890. In connection with the
Merger, the Company became a wholly owned subsidiary of Origin and the
Company's officers and directors replaced Origin's officers and directors.
Prior to the Merger, Origin was a non-operating "shell" corporation.
Pursuant to Securities and Exchange Commission rules, the Merger of a
private operating company (International Wireless, Inc.) into a
non-operating public shell corporation with nominal net assets (Origin) is
considered a capital transaction. Accordingly, for accounting purposes, the
Merger has been treated as an acquisition of Origin by the Company and a
recapitalization of the Company. The historical financial statements prior
to December 27, 2001 are those of the Company.
6
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 2 - Description of Business, Going Concern Uncertainty and Management's
--------------------------------------------------------------------
Plans,continued
---------------
Acquisition Agreement
----------------------
On January 11, 2002, the Company acquired 100% of the issued and
outstanding stock of Mitigo Inc ("Mitigo") for an aggregate purchase price
of 4,398,000 shares of the Company's common stock to be issued to the
stockholders of Mitigo ("Sellers"). An aggregate of 2,998,006 shares were
issued to the sellers at closing and 1,399,994 shares are held in escrow.
These escrow shares will be released to the Sellers pursuant to a formula
based on net income for 2002 and 2003, as defined in the agreement. Any
escrow shares not released to the Sellers, will be returned to the Company.
The allocation of the purchase price was as follows
Fair Value Per
Shares Share Fair Value
Common Stock (a) (b) 2,998,006 1.76 $ 5,276,491
-----------
Total Purchase Price $ 5,276,491
===========
Fair value of net assets acquired
---------------------------------
Property and equipment $ 3,989
Software (C) 5,518,998
Liabilities assumed (246,496)
---------------
Fair value of indentifiable net assets acquired 5,276,491
Goodwill --
-----------
5,276,491
===========
(a) based upon average of five day close price from the acquisition date.
(b) Does not include 1,399,994 shares held in escrow
(C) Software is being amortized over 5 years
7
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 2 - Description of Business, Going Concern Uncertainty and Management's
--------------------------------------------------------------------
Plans,continued
---------------
Going Concern Uncertainty and Management's Plans
-----------------------------------------------------
As shown in the accompanying financial statements, the Company incurred a
net loss of $1,877,126 during the three months ended March 31, 2002
resulting in a deficit accumulated during the development stage of
$6,269,764. Management's plans include the raising of capital, seeking out
additional companies to acquire and generating revenue through the sale of
the Mitigo software. Failure to raise capital, acquire additional companies
or generate revenue may result in the Company depleting its available
funds, not, being able to fund its investment pursuits and cause it to
curtail or cease operations. Additionally, even if the Company does raise
sufficient capital, acquire additional companies or generate revenue, there
can be no assurances that the net proceeds or the revenue will be
sufficient to enable it to develop business to a level where it will
generate profits and cash flows from operations.
These matters raise substantial doubt about the Company's ability to
continue as a going concern. However, the accompanying financial statements
have been prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal course
of business. These financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of
the liabilities that might be necessary should the Company be unable to
continue as a going concern.
New Accounting Pronouncements
-----------------------------
In July 2001, the Financial Accounting Standards Boars ("FASB") issued SFAS
No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires the use of the purchase method of
accounting for business combinations initiated after June 30, 2001, and
eliminates the pooling-of- interests method. SFAS No. 142 requires, among
other things, the use of a non- amortization approach for purchased
goodwill and certain intangibles. Under a non- amortization approach,
goodwill and ceratin intangibles will not be amortized in earnings, but
instead will be reviewed for impairment at least annually.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supercedes SFAS No.
121, "Accounting for the Impairement of Long-lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 but sets forth new criteria for asset
classification and broadens the scope of qualifying discontinued
operations.
The Company implemented these standards effective January 1, 2002 and they
did not have a material effect on the consolidated financial statements.
NOTE 3 - Stockholders' Equity
---------------------
During the three months ended March 31, 2002 the Company issued 10,000
shares of the Company's common stock to a consultant for services provided.
Stock based compensation expense of $15,000 was recorded during the three
months ended March 31, 2002 in connection with this issuance.
During the three months ended March 31, 2002, the Company issued 100,000
shares of the Company's common stock to an individual, as a commission
related to employment of the Company's Chief Executive Officer. Stock based
compensation expense of $150,000 was recorded during the three months ended
March 31, 2002 in connection with this issuance.
8
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 3 - Stockholders' Equity, continued
---------------------
During the three months ended March 31, 2002, the Company issued 6,500
shares of common stock in exchange for 27,562 shares of common stock of
Telehublink, Inc. The difference between the value of the Company's common
stock exchanged for Telehublink, Inc common stock at the date of exchange
was $8,065 which was recorded as stock based compensation expense for the
three months ended March 31, 2002.
During the three months ended March 31, 2002, the Company issued 26,000
shares of common stock as payment of a bridge loan payable and accrued
interest of approximately $13,000. The difference between the value of the
common stock and the principal and interest paid was $62,400 which was
recorded as stock based compensation expense for the three months ended
March 31, 2002.
During the three months ended March 31, 2002, the Company received proceeds
of $143,073 from stock subscriptions receivables relating to issuance of
common stock during 2001.
NOTE 4 - Stock Options
--------------
During the three months ended March 31, 2002, the Company issued options to
consultants to purchase 650,000 shares of common stock at an exercise price
of $.40 per common share. These options vest immediately and expire after
six months. These options had a fair value of $637,875, calculated using
the Black Scholes options pricing model which was recorded as stock based
compensation for the three months ended March 31, 2002. During the three
month period March 31, 2002, 387,500 of these options were exercised and
the Company realized total proceeds of $155,000.
On April 18, 2002, the Company granted options to purchase 100,000 shares
of the Company's common stock pursuant to a letter agreement and a stock
option agreement with a law firm whereby a portion of the legal services
provided will be paid by the issuance of these options. These options will
have an initial exercise price of $1.00, for options which vest prior to
October 15, 2002, and for options which vest after October 15, 2002, the
exercise price shall be the average closing price of the common stock for
the 30 day trading days ending October 15, 2002. These options will be
earned and shall vest based on a value of $0.40 per option and will expire
five years from the date of grant.
NOTE 5 - Warrants
--------
Exercise of Warrants
----------------------
During the three months ended March 31, 2002, an aggregate of 757,500
warrants were exercised for an aggregate of $335,900 at exercise prices
ranging from $0.40 to $0.75 per warrant in exchange for 757,500 shares of
the Company's common stock. The Company realized cash proceeds of $305,900
converted a loan payable of $20,000 and recorded a stock subscription
receivable in the amount of $10,000.
9
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 5 - Warrants, continued
--------
Adjustment of Warrants
------------------------
Certain warrants of the Company are subject a clause whereby the warrants
are not exercisable until the Company sends the warrant holders written
confirmation that the five consecutive trading day average closing bid
price equals or exceed 150% of the value of the exercise price of the
warrants. The warrant holders shall have 10 business days to exercise the
entire amount of the warrants pursuant to the agreement; should the warrant
holders fail to exercise, the number of warrants outstanding as well as the
exercise price are subject to adjustment. During the three months ended
March 31, 2002, certain warrant holders did not exercise there warrants
after receiving written confirmation and therefore the total outstanding
warrants of the Company was reduced by 81,601.
Settlement Agreement
---------------------
On February 19, 2002 the Company entered into a settlement agreement with a
holder of a warrant to purchase 133,332 shares of the Company's common
stock with an exercise price of $1.50 per share. The holder had records
showing that he had ownership rights to additional warrants not recorded on
the Company's books at the time of the reverse merger with Origin in
December, 2001. In settlement the parties agreed to cancel all other
warrants of the holder in return for reducing the exercise price on the
warrant from $1.50 to $0.46 to per share.
NOTE 6 - Commitments and Contingencies
-------------------------------
Related Party Licensing agreement
------------------------------------
On January 10, 2002, Mitigo entered into a licensing agreement with
Cobblestone Software, Inc ("Cobblestone") whereby Cobblestone granted
Mitigo exclusive license to its intellectual property rights relating to,
among other things, decoding visibly encoded public-domain symbols for use
in mobile commerce. In consideration for the license granted, Mitigo paid
Cobblestone $5,000 upon execution of the agreement and an additional
$25,000 will be due September 1, 2002 and $50,000 will be due September 1,
2003 and each year thereafter. Mitigo may elect however at its sole
discretion to cede back certain intellectual property rights whereby the
payment due subsequent to such election and each year thereafter would
remain at $25,000. Cobblestone is owned by the Chief Technology Officer of
the Mitigo and a relative of the Chief Technology Officer.
10
INTERNATIONAL WIRELESS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 7 - Subsequent events
------------------
Employment Agreement
---------------------
On March 29, 2002, effective as of May 1, 2002 the Company entered into an
agreement with an individual in which he will become the President and
Chief Executive Officer of the Company. The agreement has an initial term
of three years and may be extended for an additional three year period by
approval of the Board of the Directors. The agreement provides the payment
for a base salary, an incentive increment and the payment of a
discretionary bonus by the Company. Future minimum payments to be made
pursuant to this agreement are as follows:
For the
Year Ending
December 31, Amount
2002 $ 140,933
---- -----------
2003 285,350
2004 331,183
2005 142,334
-----------
Total $ 899,800
===========
Pursuant to the terms of this agreement the Company issued options to
purchase 1,500,000 shares of common stock which may be exercised on a
cashless basis. The initial 250,000 options are exercisable as of May 1,
2002 at a price of $1.05 per common share throughout the term of the
agreement. The balance of the options (1,250,000) are exercisable, upon the
attainment of certain financial goals, as defined, at prices ranging from
$1.05 to $2.25 per common share throughout the term of the agreement. If
the financial goals are achieved, the Company will recognize compensation
equal to the difference between the fair market value and the exercise
price at the time the performance conditions are achieved. Issuance of the
shares would result in substantial compensation expenses to the Company.
Operating lease
----------------
During May 2002, the Company entered into a noncancelable operating lease
for additional space at their corporate headquarters. This lease is due to
commence on July 1, 2002 with initial rental payments of $79,575 per annum
plus expenses increasing to $91,560 per annum plus expenses through the
termination date of July 2005.
Warrants and Options
-------------------
During the second quarter 2002, warrants to purchase 183,332 shares of
common stock were exercised at prices ranging from $0.40 to $0.46 per share
resulting in proceeds of $81,333 to the Company.
During the second quarter 2002, options to purchase 412,500 shares of
common stock were exercised at prices ranging from $0.40 to $0.46 per share
resulting in proceeds of $174,000 to the Company.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Quarterly Report on Form 10-QSB for the quarterly period ended March 31,
2002 contains "forward-looking" statements within the meaning of the Federal
securities laws. These forward-looking statements include, among others,
statements concerning the Company's expectations regarding sales trends, gross
and net operating margin trends, political and economic matters, the
availability of equity capital to fund the Company's capital requirements, and
other statements of expectations, beliefs, future plans and strategies,
anticipated events or trends, and similar expressions concerning matters that
are not historical facts. The forward-looking statements in this Quarterly
Report on Form 10-QSB for the quarterly period ended March 31, 2002 are subject
to risks and uncertainties that could cause actual results to differ materially
from those results expressed in or implied by the statements contained herein.
The interim financial statements have been prepared by International Wireless,
Inc. and in the opinion of management, reflect all material adjustments which
are necessary to a fair statement of results for the interim periods presented,
including normal recurring adjustments. Certain information and footnote
disclosures made in the most recent annual financial statements included in the
Company's Form 10-KSB for the year ended December 31, 2001, have been condensed
or omitted for the interim statements. It is the Company's opinion that, when
the interim statements are read in conjunction with the December 31, 2001
financial statements, the disclosures are adequate to make the information
presented not misleading. The results of operations for the three months ended
March 31, 2002 are not necessarily indicative of the operating results for the
full fiscal year.
The Company's auditors in the most recent annual financial statements included
in the Company's Form 10-KSB for the year ended December 31, 2001 have issued a
going concern opinion. The Company's auditors have reported that the Company has
suffered recurring net operating losses and has a current ratio deficit that
raises substantial doubt about our Company's ability to continue as a going
concern. Additionally even if the Company does raise sufficient capital, acquire
additional companies or generate revenues, there can be no assurances that the
net proceeds or the revenues will be sufficient to enable it to develop the
business to a level where it will generate profits and cash flows from
operations.
The Company is in the development stage and to date, has not generated any
revenues from operation. The Company intends to fund its operations and other
capital needs for the next 12 months substantially from proceeds from additional
private or public offerings of equity and/or from debt financing, but there can
be no assurance that such funds will be sufficient for these purposes. In
addition, there can be no assurance that such financing will be available, or
that such financing will be available on acceptable terms.
Overview:
International Wireless, Inc. (the "Company") was incorporated in the State of
Maryland on April 6, 1999 as Origin Investment Group, Inc. ("Origin"). On
December 27, 2001, the Company went through a reverse merger with International
Wireless, Inc., a Delaware corporation ("International Wireless"). Thereafter on
January 2, 2002, the Company changed its name from Origin to our current name,
International Wireless, Inc.
12
The Company was originally formed as a non-diversified closed-end management
investment company, as those terms are used in the Investment Company Act of
1940 ("1940 Act"). The Company at that time elected to be regulated as a
business development company under the 1940 Act. The Company's original
investment strategy had been, since inception, to invest in a diverse portfolio
of private companies that in some way build the Internet infrastructure by
offering hardware, software and/or services which enhance the use of the
Internet. On December 7, 2001, the Company held a special meeting of its
shareholders in accordance with a filed Form DEF 14A with the Securities and
Exchange Commission whereby the shareholders voted on withdrawing the Company
from being regulated as a business development company and thereby no longer be
subject to the Investment Company Act of 1940 and to effect a one-for-nine
reverse split of its total issued and outstanding common stock. On December 14,
2001 the Company filed a Form N-54C with the Securities and Exchange Commission
formally notifying its withdrawal from being regulated as a business development
company. The purpose of the withdrawal of the Company from being regulated as a
business development company and the one-for-nine reverse split of its total
issued and outstanding common stock was to allow the Company to merge on
December 27, 2001, through a reverse merger to acquire all the outstanding
shares of International Wireless. Under the said reverse merger, the former
Shareholders of International Wireless ended up owning a 88.61% interest in the
Company. Thereafter on January 2, 2002, the Company changed its name from Origin
to our current name, International Wireless, Inc.
On January 11, 2002, the Company acquired Mitigo, Inc. a Delaware corporation
with its corporate headquarters located in Woburn, Massachusetts. The
acquisition consisted of a stock for stock exchange in which the Company
acquired all of the issued and outstanding common stock of Mitigo in exchange
for the issuance of a total of 4,398,000 shares of its common stock, 2,998,006
of which was delivered at closing, and the remaining 1,399,994 are being held in
escrow for distribution subject to the achievement of certain net income
performances for the years 2002 and 2003. As a result of this transaction,
Mitigo became a wholly-owned subsidiary of the Company.
Principal products and services:
Mitigo is in the business of developing visual intelligence software solutions
for wireless and mobile devices. Mitigo software decodes barcodes and other
visual symbols in mobile handsets and Personal Data Assistants ("PDAs") that
have integrated digital cameras. This capability enables mobile devices to
conduct rapid mobile transactions and pinpoint navigation to multimedia content
and information. The Company believes that the Mitigo technology significantly
improves the usability and functionality of mobile devices helping overcome user
interface barriers to mobile transactions and commerce. The Company currently
has no other products or services.
13
Mitigo has developed software to decode commercial 1D and 2D bar codes as well
as other emerging symbologies. The Mitigo bar code decoding technology is based
on software that represents the culmination of 7 years of work by Dr. Tom
Antognini, a PhD from MIT, and Mitigo's Vice President of Technology. Mitigo
plans to support the mobile telephone/Internet convergence market by enabling
mobile-commerce and e-commerce from print-based bar codes. Mitigo plans to
license its client software to device manufacturers, including producers of
mobile handsets, PDAs and other devices.
Mitigo's technology is protected by two patents granted to Mr. Antognini in
August, 2000 and January 2001, and licensed to Mitigo, and has been specifically
targeted to accommodate the constraints of decoding bar codes from any print
media, including magazines, catalogs, posters, billboards, newspapers,
promotional material, and direct mail, etc. The technology will also read a bar
code from a screen, such as would be found on a mobile handset, a PDA, personal
computers, or television.
Mitigo's exclusive licensed software technology helps solve a barrier to mobile
commerce by enabling a mobile handset equipped with a simple digital camera to
also function as a bar code reader. The technology does not require an advanced
wireless network infrastructure such as 3G to operate, and is functional across
any of the wireless formats currently supported by handset manufacturers and
carriers. The Company believes that its technology can be of value to telecom
companies in its potential to enhance revenue opportunities. By making it easier
for consumers using mobile phones to perform more transactions with their
devices, the Company believes that the mobile carriers will be able to earn
additional revenues from the sale of goods and services through the devices.
The Company believes that mobile handsets, PDAs and other device equipped with
the Mitigo technology will allow such devices to read and process bar codes for
instant commerce or content retrieval. For example, in the future, consumers
may be able to download train schedules into their PDAs or mobile phone simply
by scanning a bar code at the train station or purchase products by scanning a
bar code on an advertisement.
Mitigo's technology decodes using a digital image of a bar code that can be
captured by a digital camera. Mitigo does not employ laser scanning of any kind
to decode bar codes, as laser technology is presently not suitable for consumer
devices due to cost, energy consumption, physical size constraints, bar code
format constraints, etc. Mitigo's solution is software only. The Mitigo software
uses the digital camera, processor and storage capabilities of the handset that
are already present. As such, the Company believes Mitigo's software solution is
a cost effective way to add functionality into a mobile handset or PDA.
CodePoint - Version 1.0:
Now in beta form, Mitigo's bar code processing software, version 1.0, is
designed to decode 1D and 2D bar codes and support a variety of handheld
devices, including mobile phones, bar code readers, and PDAs. The software
recognizes, decodes and processes bar code images (bitmaps) generated by
consumer-grade CMOS image sensors. The software also acts as an operating system
to control sensing of bar codes in digital images and will include an API to
14
interface with the operating environment resident in the host device. This
software is Mitigo's primary offering and the Company believes to offer superior
performance for bar code sensing and decoding when compared to other
commercially available software programs. Mitigo has optimized the software to
work inside of a consumer-grade CMOS digital camera. Other solutions on the
market require higher cost CCD or more expensive CMOS chips to function. The
Company believes that its Mitigo solution is the lowest cost, best performing
solution for consumer applications.
The Company's initial focus is on licensing our bar code processing software to
mobile handset manufacturers and makers of PDAs. The Company plans to also
license their decoding technology to device manufacturers, including bar code
reader manufacturers. As part of its strategy, the Company plans to support all
major mobile and wireless operating systems with their product set. The Company
is on schedule to ship Version 1.0 of the software in the 2nd quarter of 2002.
The consolidated financial statements of the Company include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. All material
intercompany balances and transactions are eliminated at consolidation. The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States.
Plan of Operation:
The Company plans to support the mobile telephone/Internet convergence market by
enabling mobile-commerce and e-commerce from print-based bar codes. It plans to
license its software to device manufacturers, including producers of mobile
handsets, PDAs and other devices. As part of its strategy, the Company plans to
support all major mobile and wireless operating systems with their product set.
The Company is on schedule to ship Version 1.0 of its software in the 2nd
quarter of 2002.
The Company plans to pursue multiple opportunities in licensing its CodePoint
product family into various channels. A primary sales channel is the enterprise
mobile computing area where a growing number of organizations are looking to
utilize visual symbol reading to streamline business processes, update supply
chain databases, equip field sales and support employees and other users in the
mobile workforce. An additional opportunity for the Company is in the form of
security related products. The CodePoint product family can have applicability
in law enforcement, building, property, and other security applications.
The Company in addition is pursuing licensing the CodePoint software into mobile
devices such as handsets through manufacturers of mobile handsets and operating
systems developers.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGSS
None
15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Acquisition Agreement
----------------------
On January 11, 2002, the Company acquired 100% of the issued and outstanding
stock of Mitigo Inc. ("Mitigo") for an aggregate purchase price of 4,398,000
shares of the Company's common stock issued to the stockholders of Mitigo
("Sellers"). An aggregate of 2,998,006 shares were issued to the sellers at
closing and 1,399,994 shares are held in escrow. These escrow shares are to be
released to the Sellers pursuant to a formula based on net income for 2002 and
2003, as defined in the agreement. Any escrow shares not released to the
Sellers, will be returned to the Company.
Sales of Equity Securities
-----------------------------
During the three months ended March 31, 2002 the Company issued 10,000 shares of
the Company's common stock to a consultant for services provided. Stock based
compensation expense of $15,000 was recorded during the three months ended March
31, 2002 in connection with this issuance.
During the three months ended March 31, 2002, the Company issued 100,000 shares
of the Company's common stock to an individual, as a commission related to
employment of the Company's Chief Executive Officer. Stock based compensation
expense of $150,000 was recorded during the three months ended March 31, 2002 in
connection with this issuance.
During the three months ended March 31, 2002, the Company issued 6,500 shares of
common stock in exchange for 27,562 shares of common stock of Telehublink, Inc.
The difference between the value of the Company's common stock exchanged for
Telehublink, Inc common stock at the date of exchange was $8,065 which was
recorded as stock based compensation expense for the three months ended March
31, 2002.
During the three months ended March 31, 2002, the Company issued 26,000 shares
of common stock as payment of a bridge loan payable and accrued interest of
approximately $13,000. The difference between the value of the common stock and
the principal and interest paid was $62,400 which was recorded as stock based
compensation expense for the three months ended March 31, 2002.
16
Settlement Agreement
---------------------
On February 19, 2002 the Company entered into a settlement agreement with a
holder of a warrant to purchase 133,332 shares of the Company's common stock
with an exercise price of $1.50 per share. The holder had records showing that
he was promised additional warrants not recorded on the Company's books at the
time of the reverse merger with Origin in December, 2001. In settlement the
parties agreed that the holder was entitled to no more than the recorded 133,332
shares of the Company's stock in return for reducing the exercise price on the
warrant from $1.50 to $0.46 to per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(b) Reports on Form 8-K:
Three Months Ended March 31, 2002
The Company filed a Form 8-K on January 17, 2002 relating to the January
11, 2002 acquisition of Mitigo, Inc. by the Company for a total of 4,398,000
shares of the Company, 2,998,006 shares at closing and 1,399,994 shares held in
escrow.
17
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERNATIONAL WIRELESS, INC.
----------------------------
(Registrant)
Date: May 20, 2002 By: /s/ GRAHAM PAXTON
--------------------------------
Graham Paxton
President and Chief
Executive Officer
(Duly Authorized
Officer)
Date: May 20, 2002 By: /s/ ADAM COGLEY
---------------------------------
Adam Cogley
Chief Financial Officer
(Principal Financial
and Accounting Officer)
18