10QSB 1 doc1.txt 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 SEPTEMBER 30, 2001 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-11968 WORLDWIDE WIRELESS NETWORKS, INC. (NAME OF REGISTRANT IN ITS CHARTER) NEVADA 88-0286466 (STATE OF INCORPORATION) (I. R. S. EMPLOYER IDENTIFICATION NO.) 770 THE CITY DRIVE SOUTH, SUITE 3700 ORANGE, CALIFORNIA 92868 (714) 937-5500 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS) ________________ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE ________________ SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, PAR VALUE $.001 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of September 30, 2001, there were 42,839,039 shares of the registrant's Common Stock issued and outstanding. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The registrant represents that the Consolidated Financial Statements furnished herein have been reviewed by Chisholm & Associates, the Company's independent auditors, and prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior years, and that such Consolidated Financial Statements reflect, in the opinion of the management of the Company, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position of Worldwide Wireless Networks, Inc. and its subsidiaries (the "Company") as of September 30, 2001, and the results of its operations and its cash flows for the nine months then ended. WORLDWIDE WIRELESS NETWORKS, INC. Consolidated Financial Statements September 30, 2001 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of Worldwide Wireless Networks, Inc. (formerly Pacific Link Internet, Inc.) Orange, CA We have reviewed the accompanying balance sheet of Worldwide Wireless Networks, Inc. as of September 30, 2001 and the related statements of income and cash flows for the period then ended. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet as of December 31, 2000, and the related statements of income, retained earnings, and cash flows for the year then ended (not presented herein); and in our report dated January 19, 2001, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 2000 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ Chisholm & Associates October 31, 2001
Worldwide Wireless Networks, Inc. Consolidated Balance Sheets ASSETS ------ September 30, 2001 December 31, 2000 -------------------- ------------------- (Unaudited) CURRENT ASSETS Cash and Cash Equivalents $ 16,012 $ 121,329 Accounts Receivable (Less Allowance for Doubtful Accounts of $5,115 and $15,000 Respectfully) 66,569 263,797 Other Current Assets - 7,500 Inventory 151,316 2,131,892 Prepaid Expenses 100,192 39,001 -------------------- ------------------- Total Current Assets 334,089 2,563,519 -------------------- ------------------- PROPERTY & EQUIPMENT Office Equipment 193,981 197,592 Leased Equipment 115,165 61,315 Machinery Equipment 1,817,663 1,839,675 -------------------- ------------------- 2,126,809 2,098,582 Less: Accumulated Depreciation - Leased Equipment (71,017) (61,315) Accumulated Depreciation (1,212,438) (801,475) -------------------- ------------------- Total Property & Equipment 843,354 1,235,792 -------------------- ------------------- OTHER ASSETS Investments 150,000 300,000 Other Assets - 2,858 Deposits 43,523 52,421 -------------------- ------------------- Total Other Assets 193,523 355,279 -------------------- ------------------- TOTAL ASSETS $ 1,370,966 $ 4,154,590 ==================== ===================
Worldwide Wireless Networks, Inc. Consolidated Balance Sheets LIABILITIES AND STOCKHOLDERS' EQUITY --------------------------------------- September 30, 2001 December 31, 2000 -------------------- ------------------- (Unaudited) CURRENT LIABILITIES Accounts Payable $ 1,166,468 $ 3,099,153 Accrued Expenses 926,686 328,816 Lines of Credit 53,000 69,839 Unearned Revenue 58,149 90,525 Current Portion of Long Term Liabilities 2,173,079 1,663,080 -------------------- ------------------- Total Current Liabilities 4,377,382 5,251,413 -------------------- ------------------- LONG TERM LIABILITIES Notes Payable 1,069,743 677,282 Notes Payable - Related Party 75,000 75,000 Convertible Debentures 1,603,530 2,000,000 Capital Lease Payable 28,336 10,798 Less Current Portion (2,173,079) (1,663,080) -------------------- ------------------- Total Long Term Liabilities 603,530 1,100,000 -------------------- ------------------- TOTAL LIABILITIES 4,980,912 6,351,413 -------------------- ------------------- STOCKHOLDERS' EQUITY Common Stock, 50,000,000 Shares of $.001 Par Value Authorized, 42,839,039 and 12,844,060 Shares Issued and Outstanding 42,839 12,844 Additional Paid In Capital 6,244,770 5,380,633 Accumulated Other Comprehensive Income (Loss) 0 (400,000) Retained Earnings (9,897,555) (7,190,300) -------------------- ------------------- Total Stockholders' Equity (3,609,946) (2,196,823) -------------------- ------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,370,966 $ 4,154,590 ==================== ===================
Worldwide Wireless Networks, Inc. Consolidated Statements of Operations (Unaudited) Three Mths Ended September 30, Nine Mths Ended September 30, ---------------------------------- --------------------------------- 2001 2000 2001 2000 ----------------- --------------- --------------- ---------------- SALES 477,595 $ 1,046,146 1,530,291 2,757,520 COST OF GOODS SOLD 198,107 804,875 873,844 1,835,716 ----------------- --------------- --------------- ---------------- GROSS PROFIT 279,488 241,271 656,447 921,804 ----------------- --------------- --------------- ---------------- OPERATING EXPENSES General And Administrative Expenses 600,662 972,520 2,340,508 3,248,688 Sales 74,534 366,868 243,308 574,966 ----------------- --------------- --------------- ---------------- TOTAL OPERATING EXPENSES 675,196 1,339,388 2,583,816 3,823,654 ----------------- --------------- OPERATING INCOME (395,707) (1,098,117) (1,927,368) (2,901,850) ----------------- --------------- --------------- ---------------- OTHER INCOME AND (EXPENSE) Interest Expense (102,489) (49,322) (280,461) (107,806) Interest Income - - 101 - Miscellaneous Income 2,262 3,690 50,474 - Loss on Investment (150,000) - (550,000) - ----------------- --------------- --------------- ---------------- TOTAL OTHER INCOME AND (EXPENSE) (250,228) (45,632) (779,887) (107,806) ----------------- --------------- ---------------- NET INCOME (LOSS) (645,935) ($1,143,749) (2,707,255) (3,009,656) ================= =============== =============== ================ NET INCOME (LOSS) PER SHARE (0.02) ($0.09) (0.11) (0.24) ================= =============== =============== ================ WEIGHTED AVERAGE NUMBER OF COMMON SHARES 37,119,511 12,833,214 23,245,140 12,511,135 ================= =============== =============== ================
Worldwide Wireless Networks, Inc. Consolidated Statements of Cash Flows For the Nine Months Ended September 30, (Unaudited) 2001 2000 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) ($2,707,255) ($3,009,656) Adjustments to Reconcile Net Income (Loss) to Net Cash Used in Operating Activities: Depreciation and Amortization 496,312 401,322 Bad Debt (9,885) (7,505) Shares Issued for Services 185,625 545,407 Shares Issued for Insurance Policy 77,501 33,000 Shares Issued for Interest 23,844 0 Loss on Investment 550,000 0 Loss on Sale of Assets 5,385 0 Changes in Asset and Liabilities (Increase) Decrease in Current Assets: Accounts Receivable 207,113 (226,051) Other Current Assets 7,500 (14,237) Inventory 2,060,706 (2,027,707) Prepaid Expenses (61,191) (26,755) Increase (Decrease) in Current Liabilities: Accounts Payable and Accrued Expenses (1,334,816) 2,537,318 Accrued Expenses 0 Lines of Credit (16,839) (10,057) Unearned Revenue (32,376) (10,829) -------------- ------------- Net Cash Provided (Used) by Operating Activities (548,376) (1,815,750) -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment (191,544) (819,441) Proceeds from Sale of Assets 2,150 0 Net Cash (to) from Deposits 8,898 (15,327) Cash from Deferred Charges 2,858 7,803 -------------- ------------- Net Cash Provided (Used) by Investing Activities (177,638) (826,965) -------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Debt Financing 440,750 1,775,000 Principal Payments on Debt Financing (130,750) (57,434) Transfer of Assets to inventory Shares Issued for Cash 311,280 970,000 Registration Fees Paid (583) (6,879) -------------- ------------- Net Cash Provided (Used) by Financing Activities 620,697 2,680,687 -------------- ------------- Net Increase (Decrease) in Cash and Cash Equivalents (105,317) 37,972 -------------- ------------- Cash and Cash Equivalents Beginning 121,329 136,311 -------------- ------------- Ending $ 16,012 $ 174,283 ============== ============= Supplemental Cash Flow Information Cash paid for Interest $ 48,730 $ 12,422 Cash paid for Income Taxes $ 400 $ 0 Non-cash Financing Transactions: Stock Issued for Goods and Services $ 263,126 $ 578,407 Stock Issued for Accrued Interest $ 23,844 $ 0 Stock Issued to acquire Investment $ 1,200,000 Stock Issued to Retire Long Term Liabilities $ 396,470 $ 100,000
WORLDWIDE WIRELESS NETWORKS, INC. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001 GENERAL Worldwide Wireless Networks, Inc.(the Company) has elected to omit substantially all footnotes to the financial statements for the nine months ended September 30, 2001 since there have been no material changes (other than indicated in other footnotes) to the information previously reported by the Company in their Annual Report filed on the Form 10-KSB for the year ended December 31, 2000. UNAUDITED INFORMATION ---------------------- The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all normal and recurring adjustments which are, in the opinion of management, necessary to properly reflect the results of the interim period presented. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year. INVENTORY --------- In November 1999, the Company entered into a purchase agreement with Adaptive Broadband Corporation (Adaptive). During 2001, the purchase agreement has been canceled and $1,485,241 in inventory has been returned to Adaptive. INVESTMENTS ----------- During 2001, the Company has recognized a loss of $550,000 for the investment in the common stock of Bridge Technology, Inc. (Bridge). The loss has been recognized due to management's determination that the value of Bridge is in a permanent decline. CONVERTIBLE DEBENTURES ----------------------- During 2001, the Company issued 20,002,412 shares of its common stock for notes payable for $396,470 in principle and $26,163 in interest. EQUITY LINE OF CREDIT ------------------------ During 2001, the Company issued 8,976,485 shares of its common stock for cash of $311,280. CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT We hereby consent to the use of our report for the nine months ended September 30, 2001, dated October 31, 2001 in the Form 10QSB for Worldwide Wireless Network, Inc. /s/ Chisholm & Associates November 12, 2001 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENT REGARDING "FORWARD LOOKING STATEMENTS". Statements contained in this quarterly report that are not based on historical fact, including without limitation statements containing the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect" and similar words, constitute "forward-looking statements". These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. These factors include, among others, the following: general economic and business conditions, both nationally and in the regions in which we operate; technology changes; the competition we face; changes in our business strategy or development plans; the high leverage of Worldwide; our ability to attract and retain qualified personnel; existing governmental regulations and changes in, or our failure to comply with, governmental regulations; liability and other claims asserted against us; it's our ability or the ability of our third-party suppliers to take corrective action in a timely manner with respect to changing government regulations; and other factors referenced in our filings with the Securities and Exchange Commission. GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. Other than as required by law, we disclaim any obligation to update information concerning the factors mentioned above or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments. Overview. Worldwide Wireless is a networking solutions company that provides -------- high speed Internet access using our own wireless network, data center services and network consulting. Since April 1999 we have undertaken large-scale commercial operations and have developed a commercial customer base, a direct sales force and have expanded our wireless network. Our primary market is currently Orange County, California, where we operate our wireless network. Since our inception, we have operated at a net loss, due primarily to our investment in expanding our network coverage and customer acquisition costs. Management believes that efforts to continue expansion will result in additional losses from which recovery would be difficult. Therefore, we have temporarily discontinued our expansion efforts beyond our Orange County operations. We plan to resume expansion efforts in other markets after we have established profitability in Orange County. There can be no assurance that we will be able to access either debt or equity capitalization in sufficient amounts or on acceptable terms to continue to fund operations and continue growth of our customer base, nor that we will ever achieve profitability from operations. We currently have a $20,000,000 equity line of credit with Whitsend Investments Limited that may be utilized on an as needed basis with certain limitations. Through September 30, 2001 draws totaling $330,000 have been made against the equity line of credit resulting in the issuance of 8,976,485 shares of the company's common stock. If we are unable to access this capital, or any other capital to fund current operations, then we would be unable to continue operations. Revenues. We generate revenues primarily through the sale of annuity-like -------- service contracts with customers, the sale of equipment and installation of wireless networks, and network consulting. We recognize revenues when services are completed. Our revenues for the nine months ended September 30, 2001 and 2000 were $1,530,291 and $2,757,520, respectively, which represents a 45% decrease. The $1,227,229 decrease in revenue for the nine months ended September 30, 2001, compared to the same period in 2000, is primarily attributable to discontinuing unprofitable segments of our business, such as Dial-up, DSL, and certain frame circuit services. Additionally, sales of equipment declined from $869,174 to $217,660 for the nine months ended September 30, 2000, and 2001, respectively. Sales of wireless services decreased slightly to $921,983 for the nine months ending September 30, 2001, from $1,083,467 for the nine months ended September 30, 2000 due primarily to the slowing economy. We believe that growth in revenue will come from additional penetration in markets currently served by existing networks, expansion of complimentary product lines to existing and new customers, and geographic expansion using currently deployed technologies. We have spent, and intend to continue to spend, significant resources on these activities. Cost of Sales. Our cost of sales consists of third-party network usage and --------------- other outsourced service costs; the cost of roof rights; and the cost of equipment sold. Third-party network costs are expensed in the period when services are rendered and are generally proportional to the number of customers. Our total cost of sales for goods and services sold for the nine months ended September 30, 2001, and 2000, equaled $873,844, and $1,835,716, respectively, reflecting a decrease of 52%. The $961,872 decrease in our cost of sales for the nine months ended September 30, 2001 is relative to the decrease in revenue due to the discontinuance of Dial-up, DSL, and certain frame relay services, as well as, reduced costs associated with equipment sales. Gross profit as a percentage of sales increased from approximately 33% for the nine months ended September 30, 2000 to approximately 43% for the same period in 2001. The gross profit as a percentage of sales for the three months ended September 30, 2001 increased to 58% from 23%, compared to the same period in 2000. We do not currently anticipate that inflation will have a material impact on our results of operations in the near future. Sales and Marketing. Sales and marketing expenses include salaries, sales --------------------- commissions, employee benefits, travel and related expenses for our direct sales force, fees paid to third-party sales agents, marketing and sales support functions. For the nine months ended September 30, 2001, and 2000, our sales and marketing expense equaled $243,308 and $574,966, respectively, for a decrease of $331,658 or 58% from the prior year. The decrease in sales and marketing expense for the nine months ended September 30, 2001 is attributable to staff restructuring due to the suspension of our Los Angeles expansion. In the fourth quarter of 2000, management restructured the sales department, reducing the number of sales representatives to six and eliminating the telemarketing group as part of a reorientation towards a concentration on the Orange County market, and a suspension of the Los Angeles expansion. In an effort to increase our revenues, user base, and brand awareness, we expect to have a slight increase in the amount of spending on sales and marketing over the next year. Marketing costs associated with increasing our user base, which to date have been minimal, are expensed in the period incurred. General and Administrative. General and administrative expenses include ---------------------------- salaries, employee benefits and expenses for our executive, finance, human resources, and technical staff; repairs, maintenance, and depreciation of network equipment; legal, professional, and other services; and occupancy costs for business premises. Investment in network equipment is related primarily to geographic network expansion and incremental customer installations, which result in increased depreciation expense in future periods. In addition, general and administrative expenses include fees for professional services and occupancy costs. Our general and administrative expenses were $2,340,508 for the nine months ended September 30, 2001, compared with $3,248,688 for the nine months ended September 30, 2000. This represents a decrease of $908,180, or 28%, for the nine months ended September 30, 2001. The decrease in general and administrative expense for the nine months ended September 30, 2001 is attributable to implementing management's restructuring plan, including staff reductions, to focus on the Orange County market. We expect general and administrative expenses to continue to decline as further cost restructuring efforts are implemented. Interest Expense. Interest expense consists primarily of interest accrued for ----------------- notes payable. We incurred a significant increase in the principal amount of our notes payable during fiscal year 2000, totaling over $2,000,000. The increase to $280,461 for the nine months ended September 30, 2001, from $107,806 for the nine months ended September 30, 2000, represents an increase of $172,655 or 160%, due to the increase in our overall level of indebtedness. Loss on Investment. We have taken an additional other-than-temporary loss of $550,000 on our original investment of $1,200,000 in Bridge Technology during the nine months ended September 30, 2001. Our investment in Bridge Technology has suffered from losses due to weak market conditions. The original price per share of $8.00 in July 2000 suffered a continuous decline down to $2.06 by the end of December 2000, and has continued to remain in the low $1.00 range through the period ended September 30, 2001. Based upon market forecasts and the slim probability of a reverse trend, management recognized a permanent write down from $8.00 to $4.67 per share at December 31, 2000, and recorded an additional write down of $3.67 per share during the period ended September 30, 2001, to arrive at a re-stated carrying value of $150,000 for this investment, or $1.00 per share, and a cumulative write down of $1,050,000. LIQUIDITY AND CAPITAL RESOURCES. Since Worldwide Wireless Networks, Inc.'s inception, we have financed our operations primarily through the private placement of equity securities, loans, leasing arrangements and cash-flow from operations. As of September 30, 2001, cash reserves totaled $16,012 and current assets totaled $334,089. The decrease in current assets from $2,563,519 at December 31, 2000 is primarily due to significant reductions in inventory accomplished by returning unnecessary equipment valued at approximately $1,800,000 to several suppliers, sales of surplus equipment, and tighter management of accounts receivable. Our current liabilities as of September 30, 2001 were $4,377,382 of which $2,173,079 accounted for the current portion of our long-term liabilities, and $1,166,468 is attributable to current accounts payable. Of the current portion of long-term liabilities, one note with outstanding principal of $48,247 requires monthly payments of $16,667, including interest and is due September 28, 2001. The other notes do not require payments until maturity. Management is negotiating maturity extensions; however no assurance can be given that such extensions will be achieved. We have paid interest rates ranging from 15.5% to 32.5%, or an average of 21.7%, on these obligations as a new company without a credit history. As of September 30, 2001, we had $603,530 in long-term liabilities (other than the current portion of long-term liabilities discussed above and reflected on our financial statement as a current liability). As of September 30, 2001, our principal commitments consisted of office, roof-rights payments, and equipment leases. Future minimum principal payments on notes payable were approximately $48,247. Operating lease payments due through the end of fiscal years 2001 and 2002 were $72,300 and $289,200, respectively. The company has several operating leases, primarily for roof rights in Los Angeles County and office space in both Orange and Los Angeles County, payments for which total $208,327 for fiscal 2001 and $212,564 for fiscal 2002. The company has not made payments on these leases as of March 1, 2001 and is negotiating termination or sub-leases on these sites. The accompanying financial statements include accrued expenses totaling $107,920 through September 30, 2001 for these leases. Net cash used to fund our operating activities for the nine months ended September 30, 2001 was $548,376, compared to $1,815,750 in funds utilized by operating activities for the nine months ended September 30, 2000, representing a decrease of 70%. Net cash used for operating activities consisted primarily of net operating losses and network asset purchases. Net cash provided by our financing activities was $620,697 for the nine months ended September 30, 2001, a decrease of $2,059,990 compared to the $2,680,687 for the nine months ended September 30, 2000. Net cash provided by financing activities was attributable to the sale of debt and equity securities as described in the Recent Developments section below. Our net loss for the nine months ended September 30, 2001 totaled $2,707,255 or $0.11 per share, compared to $3,009,656 or $.24 per share, for the nine months ended September 30, 2000. The net loss for September 30, 2001 included a recognized loss of $550,000 on securities held for investment. We expect to continue to incur future significant capital expenditures in our current market of Orange County, including additions and enhancements to our server and network infrastructure, software licenses, and equipment. The actual amount of capital expenditures will depend on the rate of growth in our user base and available resources, which is difficult to predict, and which could change dramatically over time. Technological advances may also require us to make capital expenditures to develop or acquire new equipment or technology. We have investigated the availability, source and terms for external debt financing, and we are exploring options that may be available to us. However, we cannot assure that we will be able to obtain financing on terms agreeable to us. Also, the acquisition of funding through the issuance of debt could result in a substantial portion of our cash flows from operations being dedicated to the repayment of principal and interest on the indebtedness, and could render us more vulnerable to competitive and economic downturns. Any future securities offerings will be affected through registered offerings, or in compliance with applicable exemptions under federal and state laws. The purchasers and manner of issuance will be determined according to our financial needs and the terms available. After determination of the availability of debt financing, we may elect to offer securities and, accordingly, we will determine the type of offering or the type or number of securities which we will offer at that time. However, we cannot assure that a future securities offering will be successful. We have no plans to make a public offering of our common stock at this time. We also note that each time we issue more shares of our common stock, our shareholders experience dilution in the percentage of ownership of their common stock. Management Plan. ---------------- Our primary business goals are to continue to streamline operations, increase market penetration in Orange County, become self-sufficient and establish profitability utilizing our current network in Orange County. After we accomplish this, we will resume our expansion plans in other markets. RECENT DEVELOPMENTS. Adaptive Broadband Corporation. -------------------------------- In November 1999, we entered into a contract to purchase wireless telecommunications equipment from Adaptive Broadband Corporation. Under that agreement, we committed to purchase 2,624 units, 5,120 units and 7,760 units during the first, second and third years of the agreement, respectively. Due to the expense of retro-fitting our network to be able to use the equipment, we terminated this agreement on February 15, 2001 and have returned equipment that we acquired pursuant to the contract. This resulted in a reduction both in inventory and accounts payable of approximately $1,485,240 in the first quarter of 2001. The termination of this agreement is not expected to have any material impact on our continuing operations, other than a restocking fee of $15,000. Filing of Registration Statement. ----------------------------------- On June 14, 2001, we filed Pre-Effective Amendment No. 6 to our Registration Statement on Form SB-2 (Registration No. 333-57108) which we filed with the U.S. Securities and Exchange Commission under the Securities Act of 1933 (the "SB-2/A"). Our initial filing of this Form SB-2 was on March 15, 2001. The filing of this registration statement was made to meet our obligations to some selling stockholders under various agreements we have entered into. These selling stockholders are offering for sale up to 19,804,274 shares of our common stock. All proceeds from the sale of common stock under the SB-2/A will go to the selling stockholders. We will not receive any proceeds from the sale of common stock. We may, however, receive proceeds from the exercise of warrants described in the SB-2/A, should the holders of the warrants choose to exercise them (which is solely in the holders' discretion). Of the 19,804,274 shares offered in the SB-2/A, 16,000,000 has been issued upon the conversion of convertible debentures. Esyon Corporation ------------------ We received a term sheet in December 2000 from Esyon Corporation that indicated a willingness to provide additional debt and/or equity capitalization in such amounts as may be mutually determined between us. We are continuing to negotiate a definitive strategic alliance agreement with Esyon, however in the interim Esyon has made loans to us in the principal face amount of $487,000 under secured promissory notes bearing interest at 10% per annum and coming due in January 2002. We are hopeful that the definitive agreement will be completed by the end of the first fiscal quarter of 2002, although there can be no assurance that it will be completed by that time or at all. Settlement of Dispute with Pacific Industrial Partners, LLC ------------------------------------------------------------------ On July 12, 2000, a lawsuit was filed in Orange County Superior Court against us and some of our officers, directors and shareholders by Pacific Industrial Partners, LLC and its affiliates (collectively, "PIP") for breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel and intentional interference with existing contract. The dispute arose out of a convertible debt note we signed dated January 6, 2000, as amended, in which PIP proposed to finance up to $2.5 million dollars through the purchase of convertible notes at eight percent interest (with an option to purchase up to $3 million dollars in additional notes). On April 17, 2001, we resolved the dispute through settlement negotiations. In exchange for dismissal of the pending litigation and releases of all claims against all parties, we have agreed to the following: (a) cash payment of $115,000, of which $70,000 was paid by check from persons other than us to PIP and its affiliates, and the remaining balance of $45,000 is payable from us by installments under a promissory note, which is secured by a Stipulated Entry of Judgment for that amount; (b) 400,000 shares of common stock of WWWN to be transferred to PIP and its affiliates; and (c) 1,000,000 warrants for the purchase of 1,000,000 shares of our free-trading common stock. With respect to the warrants, we have registered for resale only the shares underlying the warrants. The free-trading common stock received by PIP in the settlement was provided by some of our founding stockholders. As of the date of this filing, we have issued warrants for the purchase of 750,000 shares. Universal Business Insurance, Inc. ------------------------------------- We executed a Share Purchase Agreement with Universal Business Insurance, Inc. on March 30, 2001. Under this Agreement, we agreed to issue, register for free trading and deliver 553,582 shares of common stock to Universal in exchange for payment of our premium owed for Director's and Officer's insurance coverage for the period between March 13, 2001 and March 13, 2002. The amount of the applicable premium was $66,429.83. On August 6, 2001, pursuant to the Share Purchase Agreement, we issued Universal an additional 55,358 shares of restricted common stock in accordance with the Securities and Exchange Commission Regulation 144 as the highest bid price on July 30, 2001 was less than $0.10 per share. Feldhake, August & Roquemore LLP ------------------------------------ We have entered into a Share Purchase Agreement with our outside law firm, Feldhake, August & Roquemore LLP. Under that agreement, we will issue 200,000 shares of common stock for a credit of $20,000 to be applied against our outstanding balance with them. Bridge Technology, Inc. ------------------------- We entered into an agreement with Bridge Technology, Inc. on June 28, 2000. Under this Agreement, we issued 300,000 shares of restricted common stock for 150,000 restricted shares of Bridge Technology common stock. The shares were issued as restricted in accordance with the Securities and Exchange Commission Regulation 144. During the second quarter ended June 30, 2001, we were notified by Bridge Technology that they unilaterally cancelled the 150,000 share stock certificate issued to us without our consent. We view this as an illegal and fraudulent action. The asset has a current carrying value of $150,000 on the balance sheet and as described in the Loss on Investment section, we have recognized a cumulative write down of $1,050,000 for this asset on our statement of operations. At this time we are contemplating our options ranging from further negotiations to possible litigation. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Except as disclosed below, we are not involved in any material pending legal proceedings, other than routine litigation incidental to our business, to which we are a party or of which any of our property is subject: Sean Loftis and 1st Universe L.P. ------------------------------------- We entered into an agreement with Mr. Loftis whereby we would provide wireless internet services to customers located by Mr. Loftis, and with whom Mr. Loftis would enter into contracts to provide wireless internet services. Mr. Loftis received a profit to the extent that the fees charged by him to the customer exceeded the fees charged by us to him. On January 31, 2001 we terminated the agreement, and were subsequently sued by 1st Universe and Mr. Loftis for, among other things, breach of contract, breach of the implied covenant of good faith and interference with contract. 1st Universe and Mr. Loftis filed the suit on February 6, 2001, in the Superior Court of Orange County, California, seeking compensatory and punitive damages. Mr. Loftis alleges that we breached the agreement by terminating internet access services on short notice and entering into new contracts with his customers. We dispute all of Mr. Loftis' allegations and are actively litigating against his claims. DFL Capital Partners, LLC ---------------------------- On March 28, 2000, we filed a lawsuit in Orange County, California Superior Court - Central Justice Center, against one of our former consultants, DFL Capital Partners, LLC, and our former legal counsel, alleging, among other things, fraud and malpractice. The dispute arose out of an Option Agreement we entered into in 1998 whereby DFL provided certain consulting services in exchange for options to purchase common stock of Worldwide Wireless. We retained legal counsel recommended to us by DFL, but we were never advised that the partner of the law firm who represented us specifically was, at the same time, also the managing member of DFL Capital Partners, LLC. As a result of this undisclosed conflict of interest, we believe that the agreement which the law firm counseled us to sign did not adequately protect us in terms of the services which we understood we were supposed to receive and the number of stock options which DFL was to receive as compensation for these services. We began settlement negotiations with DFL during fiscal year 2000, and subsequently dismissed the lawsuit. At this point, with no settlement having yet been achieved, we are re-evaluating our claims against DFL and our former counsel, and continue to dispute DFL's entitlement to any interest in the Company. ITEM 2 - CHANGES IN SECURITIES None ITEM 3 (A) - DEFAULTS UPON SENIOR SECURITIES PHI Mutual Ventures, LC -------------------------- On March 15, 2000 PHI Mutual Ventures, LC loaned us $1,000,000 under a secured promissory note bearing interest at 11% per annum. The promissory note became due on March 15, 2001, and began to accrue a late interest rate of 18% per annum. As of the date of this filing, we are in default on the principal and interest in the amount of $1,241,923, which indebtedness exceeds 5% of our total assets. We are currently negotiating with PHI Mutual Ventures, LC to obtain an extension on the promissory note, however there can be no assurance that these negotiations will be successful. Mutual Ventures Corporation ----------------------------- On October 24, 2000 Mutual Ventures Corporation loaned us $200,000 under a secured promissory note bearing interest at 12% per annum. The promissory note became due on January 24, 2001, and began to accrue a late interest rate of 18% per annum. As of the date of this filing, we are in default on the principal and interest in the amount of $234,800, which indebtedness exceeds 5% of our total assets. We are currently negotiating with Mutual Ventures Corporation to obtain an extension on the promissory note, however there can be no assurance that these negotiations will be successful. PHI Mutual Ventures, LC -------------------------- On May 1, 2000 PHI Mutual Ventures, LC loaned us $100,000 under a secured promissory note bearing interest at 12% per annum. The promissory note became due on June 30, 2000, and began to accrue a late interest rate of 18% per annum. As of the date of this filing, we are in default on the principal and interest in the amount of $126,608, which indebtedness exceeds 5% of our total assets. We are currently negotiating with PHI Mutual Ventures, LC to obtain an extension on the promissory note, however there can be no assurance that these negotiations will be successful. 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 EXHIBIT NUMBER Description -------- ----------------------------------------------------------------- 4.3(3) Form of Promissory Note with Esyon Corporation 10.15(1) Settlement Agreement, dated January 25, 2001, between Worldwide Wireless and Sinclair Davis Trading Corporation. 10.16(2) Share Purchase Agreement, dated March 30, 2001, between Worldwide Wireless and Universal Business Insurance, Inc. 10.17(2) Settlement Agreement, dated April 17, 2001, between Worldwide Wireless and Pacific Industrial Partners 10.18(2) Share Purchase Agreement, dated April 23, 2001, between Worldwide Wireless and Feldhake, August & Roquemore LLP 10.19(3) Letter of Intent, dated December 28, 2000, between Esyon Corporation and Worldwide Wireless 23.1* Consent of Independent Public Accountants dated April 27, 2001, for quarterly financial statements ended March 31, 2001 1 Previously filed with Form SB-2/A dated March 16, 2001 2 Previously filed with Form SB-2/A dated April 24, 2001 3 Previously filed with Form SB-2/A dated May 7, 2001 Reports on Form 8-K. ---------------------- None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WORLDWIDE WIRELESS NETWORKS, INC. Date: November 13, 2001 /s/ ------------------------------ Jerry Collazo President and Acting Chief Executive Officer /s/ ------------------------------ Steve Button Controller