NOTES TO FINANCIAL STATEMENTS
NOTE 1. GENERAL BUSINESS AND ACCOUNTING POLICIES
Organization and Business
Broadband Wireless International Corporation (the Company) was originally
incorporated in the state of Nevada under the name Black Giant Oil Company on
July 23, 1973. On February 10, 2000, the Company changed its name to Broadband
Wireless International Corporation. The Company's current business plan is to
operate as a Virtual Broadband Network Operator (VBNO) service provider. The
Company has been unsuccessful during the previous three years in its previous
business endeavors and has only recently begun implementing its plan to become a
VBNO provider.
The Company holds multiple oil producing interests as a fractional partner in
Canadian oil properties currently operated by Talisman Energy Canada of Calgary,
Alberta. These properties were inherited from Black Oil Company, the predecessor
of Broadband Wireless International Corporation. The fractional interest
produces monthly revenue which is currently secured to Mr. David Bernstein, for
loan proceeds prior to the reorganization filing of the Company.
In the opinion of management, all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial position and
results of operations for the periods presented have been made. The results for
interim periods are not necessarily indicative of trends or of results to be
expected for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's most recent report on Form 10-KSB.
Basis of Presentation
The unaudited financial statements have been prepared in accordance with United
States generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation. All
such adjustments are of a normal recurring nature. The results of operations for
the interim period are not necessarily indicative of the results to be expected
for a full year. These statements should be read in conjunction with the
financial statements and footnotes thereto included in the Form 10-KSB for the
year ended March 31, 2004.
Revenue Recognition
For the nine-months ended December 31, 2004 and prior, the Company generated
minimal revenues from its oil interests. This was recognized when earned.
Revenue earned prior to March 31, 2004 are the subject of an ongoing management
investigation. Therefore, prior period financials statements should not be
relied upon. See Note 2.
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and
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BROADBAND WIRELESS INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. GENERAL BUSINESS AND ACCOUNTING POLICIES (CONTINUED)
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Earnings (Loss) per Share
The basic earnings (loss) per share are calculated by dividing the Company's net
income (loss) available to common stockholders by the weighted average number of
common shares during the year. The diluted earnings (loss) per share are
calculated by dividing the Company's net income (loss) available to common
stockholders by the diluted weighted average number of shares outstanding during
the year. The diluted weighted average number of shares outstanding is the basic
weighted number of shares adjusted as of the first year for any potentially
dilutive debt or equity. The Company has no potentially dilutive debt or equity.
All options are currently anti-dilutive.
Stock Based Compensation
The Company accounts for its stock based compensation based upon provisions in
SFAS No. 123, Accounting for Stock-Based Compensation and as amended by SFAS no.
148. The Company adopted a plan on June 2, 2004. The maximum number of shares of
common stock that may be issued pursuant to the plan is 50,000,000 shares. As of
December 31, 2004, 41,000,000 shares have been issued under the 2004 Stock
Compensation Plan.
Income Taxes
The Company provides for income taxes under Statement of Financial Accounting
Standards No. 109 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities and the current tax rates in effect when these differences are
expected to reverse.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it was uncertain whether they will generate sufficient
taxable income in the future to fully utilize the net deferred tax asset.
Accordingly, a valuation allowance equal to the deferred tax asset has been
recorded. The total deferred tax asset is calculated by multiplying a 15%
estimated tax rate by the items making up the deferred tax account, the NOL. The
total valuation allowance is a comparable amount.
NOTE 2. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Management of the Company has concluded that the Company's financial statements
for the unaudited quarterly periods ended June 30, 2003, September 30, 2003 and
December 31, 2003 filed on Forms 10-QSB should no longer be relied upon.
Further, prior period financial statements may be subject to non-reliance based
upon an ongoing management investigation.
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BROADBAND WIRELESS INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 2. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)
The Company is doing everything in its power to locate and rectify prior period
financial statements based on obtaining documentation from previous management.
NOTE 3. GOING CONCERN
The financial statements included in this filing have been prepared in
conformity with generally accepted accounting principles that contemplate the
continuance of the Company as a going concern. The Company's cash position may
be inadequate to pay all of the costs associated with its intended business
plan. Management intends to use borrowings and security sales to mitigate the
effects of its cash position, however no assurance can be given that debt or
equity financing, if and when required will be available. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets and classification of liabilities that might
be necessary should the Company be unable to continue existence.
NOTE 4. STOCKHOLDERS' EQUITY
The aggregate number of shares of common stock that the Company is authorized to
issue is 400,000,000 shares at a par value of $0.0001 and the number of shares
of preferred stock that the Company is authorized to issue is 25,000,000 shares
at a par value of $0.10.
On March 29, 2004, the Company declared a 10% stock dividend of 20,800,000
shares.
On June 2, 2004, the Company filed a Form S-8 registering 50,000,000 shares of
common stock. The shares consist of shares to be issued under the 2004 Stock
Compensation Plan.
On October 21, 2004, the Company issued 1,500,000 shares of common stock to
Marjone Mamaghani for consulting services. The shares were issued unrestricted
pursuant to the S-8 Registration filed on June 2, 2004.
On November 2, 2004, the Company issued 3,000,000 shares of common stock to Dale
Godboldo pursuant to his consulting agreement dated April 23, 2004. The shares
were issued unrestricted pursuant to the S-8 Registration filed on June 2, 2004.
Stock Issuances in the Quarter for Previous Periods.
On October 1, 2004, the Company issued 2,000,000 shares of common stock to Dale
Godboldo pursuant to his consulting agreement dated April 23, 2004. The shares
were issued unrestricted pursuant to the S-8 Registration filed on June 2, 2004.
The issuance of the stock was backdated to the second quarter ended September
30, 2004.
On October 15, 2004, the Company issued 12,740,000 shares of restricted common
stock to 17 investors pursuant to its private placement completed in May of
2003. The issuances were backdated to the second quarter ended September 30,
2004.
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BROADBAND WIRELESS INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
On October 21, 2004, the Company issued 2,000,000 shares of common stock to
Keith Hoffman and Davie Phan pursuant to a consulting agreement dated January
27, 2003. The shares were issued unrestricted pursuant to the S-8 Registration
filed on June 2, 2004. The issuance of the stock was backdated to the second
quarter ended September 30, 2004.
On October 21, 2004, the Company issued 5,000,000 shares of common stock for
consulting services. The shares were issued unrestricted pursuant to the S-8
Registration filed on June 2, 2004. The Company subsequently rescinded the
5,000,000 shares due to non-performance of the consultant. As of December 31,
2004 the shares have not been returned to the Company.
There were no other equity transactions during the nine months ended December
31, 2004.
NOTE 5. CONTINGENCIES AND COMMITMENTS
The Company has no leases.
Enhancement Holdings, LLC
On December 28, 2002, the Company contracted with Enhancement Holdings, LLC and
Stanley Holdings Business Trust to provide collateral to facilitate a line of
credit. As part of the original agreement three of the principals of Enhancement
also became directors of the Company. On May 12, 2004, the Company filed suit in
Nevada District Court against Enhancement Holdings, LLC, Paul Harris, Benjamin
Stanley and John Walsh for fraud, negligent misrepresentation, breach of
contract and rescission. The suit was removed to the United States District
Court for the District of Nevada on May 19, 2004. The lawsuit arises out of the
agreement between the Company and Enhancement Holdings, LLC pursuant to which
Enhancement Holdings, LLC had agreed to provide a guaranty to facilitate the
acquisition of a line of credit for the Company. On June 8, 2004, the court
entered a temporary restraining order enjoining Paul Harris, Benjamin Stanley
and John Walsh from holding themselves out as officers and/or directors of the
Company and prohibiting them from selling or transferring any shares in the
Company. On June 16, 2004, the court entered a preliminary injunction to the
same effect. After a further hearing before the court on July 22, 2004, the
court ordered that the preliminary injunction be dissolved to the extent that it
prohibited Paul Harris, Benjamin Stanley and John Walsh from holding themselves
out as directors of the Company. The court also ordered the Company to hold a
special stockholders election to determine who should serve as the Company's
directors. According to the special meeting held on December 9, 2004, the
Company announced the removal of Paul Harris, Ben Stanley and John Walsh as
Directors of the Company effective December 16, 2004.
Susan Joseph v. EDTV
The Company's motion to the court to have the disposition of the case set aside
was granted on December 9, 2004. The case was continued to January 25, 2005. The
Company is currently in negotiations with Joseph's attorney to settle the case.
The Company anticipates that it will cost the Company $100,000 to defend the
case. The stock Joseph is asking for is approximately worth $100,000 at the
Company's current stock price. The Company has recorded a contingent
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BROADBAND WIRELESS INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 5. CONTINGENCIES AND COMMITMENTS (CONTINUED)
liability of $100,000 in its December 31, 2004 financial statements to account
for the anticipated settlement of the case.
Suit by Former Contractor
A former contract consultant filed suit against the Company for alleged back
commissions and stock. The time period involved was May 2002 to approximately
November 2002. Management feels that this suit is without merit and therefore no
loss has been recorded.
Rescission of Stock Issued to Consultant
As of December 31, 2004, Company rescinded the 5,000,000 shares issued to a
consultant on October 21, 2004, due to non-performance of the consultant. As of
December 31, 2004 the shares have not been returned to the Company. Because the
Company has not received the 5,000,000 shares back, there may be a dispute as to
the actual number of shares if any that the Consultant is due. No adjustments
have been made to the December 31, 2004 financials.
NOTE 6. RELATED PARTY TRANSACTIONS
Payable to Stockholder
During the nine months ended December 31, 2004, the Company borrowed funds from
two stockholders to cover administrative expenses. These are demand notes with
no interest.
Payable to Mobile Wireless
Mobile Wireless is a company which has common ownership and management with the
Company. This is a demand note which currently carries no interest.
NOTE 7. PREPAID CONSULTING
For the nine months ended December 31, 2004, the Company prepaid for services to
be rendered on a monthly basis. As the services are being performed the amounts
reflected in the statements are being decreased accordingly.
8
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact are forward-looking statements for purposes of
federal and state securities laws, including, but not limited to, any
projections of earnings, revenue or other financial items; any statements of the
plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or belief;
and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words may, could, estimate,
intend, continue, believe, expect or anticipate or other similar words. These
forward-looking statements present our estimates and assumptions only as of the
date of this report. Except for our ongoing securities laws, we do not intend,
and undertake no obligation, to update any forward-looking statement.
Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any or our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and inherent risks and
uncertainties. The factors impacting these risks and uncertainties include, but
are not limited to:
º increased competitive pressures from existing competitors and new entrants;
º increases in interest rates or our cost of borrowing or a default under any
material debt agreements;
º deterioration in general or regional economic conditions;
º adverse state or federal legislation or regulation that increases the costs
of compliance, or adverse findings by a regulator with respect to existing
operations;
º loss of customers or sales weakness;
º inability to achieve future sales levels or other operating results;
º the unavailability of funds for capital expenditures;
º the unavailability of funds to maintain operations; and
º operational inefficiencies in distribution or other systems.
For a detailed description of these and other factors that could cause
actual results to differ materially from those expressed in any forward-looking
statement, please see Factors That May Affect Our Results of Operations in this
document.
In this filing references to Company, we, our, and/or us, refers to
Broadband Wireless International Corporation.
9