-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EUQ8yD+tjV79MqWshMx98gFcsQpPPWskZzCRSSW+HH4CCQHqp9TEmie+LP0SNNL5 QfdC5NDSHAxLQ5jfXnTDKw== 0001144204-04-012532.txt : 20040818 0001144204-04-012532.hdr.sgml : 20040818 20040818121040 ACCESSION NUMBER: 0001144204-04-012532 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040818 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WIRELESS FRONTIER INTERNET INC CENTRAL INDEX KEY: 0000038981 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 760402886 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-08281 FILM NUMBER: 04983509 BUSINESS ADDRESS: STREET 1: 104 WEST CALLAGHAN CITY: FORT STOCKTON STATE: TX ZIP: 79735 BUSINESS PHONE: 4323360336 MAIL ADDRESS: STREET 1: 9454 WILSHIRE BLVD STREET 2: 6TH FLOOR CITY: BEVERLY HILLS STATE: CA ZIP: 90212 FORMER COMPANY: FORMER CONFORMED NAME: FREMONT CORP DATE OF NAME CHANGE: 19930713 10QSB 1 form10qsb.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2004 WIRELESS FRONTIER INTERNET, INC. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter)
Delaware 0-08281 76-0402866 - ---------------------------------------- ------------------------------------- ------------------------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.) incorporation)
104 West Callaghan, Fort Stockton, Texas 79735 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (432) 336-0336 ------------- Securities registered under Section 12 (b) of the Exchange Act: NONE Securities registered under Section 12 (g) of the Exchange Act: Common Stock Par Value $ 0.001 per share Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 61,807,520 common shares as of June 30, 2004. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] TABLE OF CONTENTS
Page ---- PART I Financial Information Item 1. Condensed Consolidated Balance Sheets (unaudited) - As of June 30, 2004 and June 30, 2003.............................1 Condensed Consolidated Statements of Operations (unaudited) - For the Three Months ended June 30, 2004 and 2003.......2 Condensed Consolidated Statements of Cash Flows (unaudited) - For the Three Months ended June 30, 2004 and 2003.......3 Notes to Condensed Consolidated Financial Statements (unaudited)......................................................4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................18 Item 3. Controls and Procedures..............................................................................................20 PART II Other Information Item 1. Legal Proceedings....................................................................................................21 Item 3. Defaults Upon Senior Securities......................................................................................21 Item 4. Exhibits and Reports on Form 8-K.....................................................................................21 Signatures
i PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS WIRELESS FRONTIER INTERNET, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2004 and December 31, 2003
ASSETS June 30, December 31, 2004 2003 ----------- ----------- CURRENT ASSETS Cash $ 86,602 $ 226,324 Accounts receivable 140,941 252,615 Inventories 192,256 171,477 Prepaid expenses and other current assets 281,041 2,525 ----------- ----------- Total Current Assets 700,839 652,941 PROPERTY AND EQUIPMENT, net 2,090,740 2,378,606 OTHER INTANGIBLE ASSETS, net 4,489,313 3,509,244 ----------- ----------- TOTAL ASSETS $ 7,280,892 $ 6,540,791 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY 2004 2003 ----------- ----------- CURRENT LIABILITIES Accounts payable and accrued expenses $ 1,041,604 $ 672,394 Current portion of debt 2,286,710 831,551 ----------- ----------- Total Current Liabilities 3,328,314 1,503,945 LONG-TERM DEBT 708,465 616,772 ----------- ----------- Total liabilities 4,036,779 2,120,717 SHAREHOLDERS' EQUITY Common stock, $0.001 par value, 100,000,000 shares 61,808 62,226 authorized, 61,807,520 and 62,225,632 shares outstanding at June 30, 2004 and December 31, 2003 respectively Additional paid-in capital 6,585,047 5,837,355 Treasury stock (2,026) (4,760) Retained deficit (3,400,716) (1,474,747) ----------- ----------- Total shareholders' equity 3,244,113 4,420,074 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,280,892 $ 6,540,791 =========== ===========
See accompanying notes to condensed consolidated financial statements 1 WIRELESS FRONTIER INTERNET, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended June 30, June 30, ---------------------------------- ---------------------------------- 2004 2003 2004 2003 ------------ ------------ ------------ ------------ REVENUES: Equipment sales $ 473,586 $ 72,794 $ 715,636 $ 95,216 Cost of equipment sales 362,473 72,093 519,741 70,122 ------------ ------------ ------------ ------------ Gross profit equipment sales 111,113 701 195,895 25,093 Internet service 786,479 1,304,325 1,572,884 1,771,125 Cost of service 333,779 271,004 640,178 656,979 ------------ ------------ ------------ ------------ Gross profit internet service 452,700 1,033,320 932,706 1,114,146 TOTAL GROSS PROFIT 563,813 1,034,022 1,128,601 1,139,239 OTHER OPERATING EXPENSES: General and administrative 1,179,923 829,825 2,327,581 1,122,882 Amortization and depreciation 248,580 80,759 527,826 123,689 ------------ ------------ ------------ ------------ INCOME (LOSS) FROM OPERATIONS (864,689) 123,438 (1,726,806) (107,331) INTEREST EXPENSE 175,411 28,123 199,163 32,397 0 ------------ ------------ ------------ ------------ NET LOSS $ (1,040,101) $ 95,314 $ (1,925,969) $ (139,728) ============ ============ ============ ============ NET LOSS PER COMMON SHARE: $ (0.02) $ 0.00 $ (0.03) $ (0.00) COMMON SHARES OUTSTANDING: 61,807,520 30,470,910 61,807,520 30,470,910
See accompanying notes to condensed consolidated financial statements. 2 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2004 and 2003
2004 2003 ----------- ----------- OPERATING ACTIVITIES: Net income $(1,925,969) $ (139,728) Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 513,443 110,223 Stock issued for services 2,734 0 Changes in operating assets and liabilities: Accounts receivable 111,674 (737,215) Inventories (20,779) (111,151) Prepaid expenses and other current assets (278,516) (122,428) Accounts payable and accrued liabilities 369,209 260,828 ----------- ----------- Net cash (used in) provided by operating activities (1,228,203) (739,470) INVESTING ACTIVITIES: Purchases of property and equipment (519,581) (1,408,208) FINANCING ACTIVITIES: Proceeds from issuance of common equity 61,210 1,682,841 Net borrowings on lines of credit and notes payable 1,546,852 448,371 ----------- ----------- Net cash (used in) provided by financing activities 1,608,062 2,131,212 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (139,722) (16,466) CASH AND CASH EQUIVALENTS, beginning of period 226,324 188,990 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 86,602 $ 172,524 =========== =========== SUPPLEMENTAL INFORMATION: Cash paid for interest $ 56,494 $ 32,397
See accompanying notes to condensed financial statements. 3 WIRELESS FRONTIER INTERNET, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the Period Ended June 30, 2004
ADDITIONAL NUMBER OF COMMON CONTRIBUTED RETAINED TREASURY SHARES STOCK CAPITAL DEFICIT SHARES TOTAL ----------- ----------- ----------- ----------- ----------- ----------- BALANCE January 1, 2003 7,453,000 $ 1,000 $ 664,316 $ (220,472) $ -- $ 444,844 Recapitalize for stock split 7,453,000 13,906 (13,906) -- -- -- Shares sold 4,498,947 4,499 1,272,033 -- -- 1,276,532 Acquisitions 4,272,765 4,273 3,835,805 3,840,078 Merger with Fremont Corporation 5,861,900 5,862 -- (543,011) (4,760) (541,909) Debt exchanged for stock in merger 448,204 448 110,220 -- -- 110,668 Services in connection with merger 1,125,000 1,125 -- -- -- 1,125 Net Loss for 2003 -- -- -- (711,264) -- (711,264) ----------- ----------- ----------- ----------- ----------- ----------- BALANCE December 31, 2003 31,112,816 31,113 5,868,468 (1,474,747) (4,760) 4,420,074 Acquisitions 1,997,584 1,998 1,142,993 1,144,991 Treasury stock sold -- -- 106,806 -- 2,734 109,540 Stock for services 90,909 91 104,909 -- -- 105,000 Recapitalized for stock split 33,201,309 33,201 (33,201) -- -- -- Net loss for the Quarter -- -- -- (885,868) -- (885,868) ----------- ----------- ----------- ----------- ----------- ----------- BALANCE March 31, 2004 66,402,618 $ 66,403 $ 7,189,975 $(2,360,615) $ (2,026) $ 4,893,737 =========== =========== =========== =========== =========== =========== Adjustments to prior Acquisitions (1,024,560) (1,024) (95,373) Acquisitions 50,672 51 43,020 43,071 Stock for services 170,000 170 (170) Sale back of Strategic Abstract Title Co Assets (3,791,210) (3,792) (552,405) -- -- (556,197.49) Net loss for the Quarter -- -- -- (1,040,101) -- (1,040,101) ----------- ----------- ----------- ----------- ----------- ----------- BALANCE June 30,2004 61,807,520 $ 61,808 $ 6,585,047 $(3,400,716) $ (2,026) $ 3,340,510 =========== =========== =========== =========== =========== ===========
See accompanying notes to condensed financial statements. 4 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES HISTORY The Company was incorporated under the laws of the state of Texas on July 7, 1998 for the purpose of making equipment sales within the state of Texas and Colorado. On February 8, 2000 the controlling interest in the Company was purchased by Alex Gonzalez, CEO. The current majority shareholder, on January 1, 2001 contributed the assets and operations of West-Tex Internet to the Company. At that time the Company also became an Internet Service Provider with about 475 customers in the Fort Stockton, Texas area. The Company purchased on November 30, 2001 the assets and operations of Overland Network for $200,000. This purchase expanded the Company's Internet Service Provider area to include the Alpine, Fort Davis, Marathon and Marfa, Texas areas. The Company also obtained, for $5,000, a three-year covenant not to compete, within a 50-mile radius of the Company's operations including the areas purchased from the seller. The Company purchased on May 31, 2002 the assets and operations of Brooks Data Consultants, Inc. for $245,000. This purchase expanded the Company's Internet Service Provider area to include the Terlingua, Presidio, Sanderson, Sheffield, Comstock, Big Bend National Park and Heath Canyon, Texas areas. The Company also obtained, for $5,000, a five-year covenant not to compete, within a 50-mile radius of the Company's operations including the areas purchased, from the seller. On January 20, 2003 the Company's Board of Directors declared a 100 to 1 stock split increasing the authorized common shares from 1,000,000 to 100,000,000. On May 28, 2003 the stockholders of the Company exchanged all the outstanding shares of the Company for 14,906,000 shares of common stock. On the same date the Company's Board of Directors declared a 2 to 1 stock split. These financial statements reflect this split as if it happened at the beginning of the periods reported. All share amounts from this point on in the report have been adjusted for the March 31, 2003, 2 for 1 stock split. On June 1, 2003, the Company entered into an agreement to purchase all the assets and assume certain liabilities of Momentum Online Computer Services, Inc. for 873,712 shares of common stock valued at $2,621,410. In December 2003, the purchase agreement and certain terms of the employment agreement entered into with Robert McClung, the CEO and principal shareholder of Momentum, were satisfied by the issuance of 138,430 shares and 800,000 shares, respectively, to Robert McClung increasing the total to 1,673,712 shares of common stock. This purchase expanded the Company's Internet Service Provider area to the Highway 281 of Texas corridor, which extends roughly from south of the Dallas, Fort Worth area to the north of San Antonio. The Company is presently involved in a lawsuit and other legal matters with the former owner of Momentum over the agreement and ownership of the assets purchased on June 1, 2003. See note 10 to notes to Consolidated Financial Statements. On June 30, 2003, the Company entered into an agreement to purchase all the assets of Kolinek Internet service for 280,480 shares of common stock. The acquisition was valued at $42,072. The original agreement called for a purchase price of 28,048 shares of common stock. The acquisition was re-evaluated in December 2003 to 280,480 shares. This purchase expanded the Company's Internet Service Provider area in the Highway 281 of Texas corridor. On June 30, 2003, the Company entered into an agreement to purchase all the assets of Strategic Abstract & Title Corporation for $4,000 and 4,166,640 shares of common stock valued at $680,600. The original agreement called for a purchase price of 416,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 4,166,640 shares. This purchase added three commercial buildings valued at $285,000 and the assets and business of Strategic Abstract & Title Corporation. During the second quarter of 2004, the Company determined that the business of Strategic did not match the direction of the Company. The owner of Strategic is a shareholder of the Company. On June 9, 2004, the Company bought back 3,791,210 shares of the Company's common stock in exchange for the assets originally acquired plus 250,000 stock purchase warrants. The warrants have an exercise price of $0.25 per share. A gain of $12,481 was recorded to Additional Paid-in Capital, and not to income, since the original purchase and subsequent sale of these assets were effected using shares of the Company's common stock. On or about July 1, 2003, the Company acquired all the outstanding shares of US Mex Communications and West Texas Horizons for 2,206,640 shares of the Company's common stock valued at $330,996 and the assumption of $51,000 in notes payable. The note was paid in full with the December 18, 2003 notes payable. The original agreement called for a purchase price of 220,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 2,206,640 shares. The acquired company sells phone cards and provides pay phone services in Southwestern Texas. All assets, liabilities and operations have been transferred to Wireless Frontier Internet, Inc. (Texas), a wholly-owned subsidiary of the Company. 5 On September 30, 2003, the Company entered into an Agreement and Plan of Merger with Fremont Corporation a publicly traded company. Pursuant to the merger agreement Networker Systems, Inc., a wholly owned subsidiary of the Fremont, was merged into the Company with the Company being the surviving corporation. The shareholders of the Company exchanged all the outstanding shares of the Company for 32,053,158 shares of the common stock of Fremont in a one for one exchange. As a result of this transaction the Company became a wholly owned subsidiary of Fremont. This combination was treated as a reverse merger whereby the acquired company is treated as the acquiring company for accounting purposes. In addition, Fremont also entered into an Asset Purchase Agreement with Million Treasure Enterprises Limited, a British Virgin Islands corporation. Pursuant to this agreement, Million acquired all of Fremont's equity interest in Winfill (a subsidiary of Fremont) for Millions return to Fremont of the 661,654 (pre-split) shares of common stock held by Million, the cancellation of Million's warrant to purchase 2,000,000 (pre-split) shares of common stock and the forgiveness of all sums owed by Fremont to Million. On September 30, 2003 the Company entered into an Asset Purchase Agreement with Limited Liability Partnership d/b/a Xramp, to purchase certain assets and Internet subscribers of the Partnership. The purchase price was 294,643 shares of the Company's common stock valued at $165,000 and a note for $50,000. On February 9, 2004 the Company entered into an Agreement for Purchase and Sale of Stock with all the shareholders of Office Products Incorporated Computer Division, a Kansas Corporation for 3,905,514 shares of common stock. This agreement is effective January 1, 2004. On March 17, 2004 the Company entered into an Asset Purchase Agreement for the purchase of the assets of BCOM.NET, INC. for 355,600 shares of common stock valued at $293,370. The agreement was effective on March 17, 2004. On April 5, 2004 the Company entered into an Asset Purchase Agreement with RayTech Internet, Inc. to purchase certain assets and Internet subscribers of the Partnership. The purchase price was $10,000 and 50,672 shares of the Company's common stock. This purchase extends the Company's service to Big Springs, Texas on Interstate 20. CASH AND CASH EQUIVALENTS For the purposes of the statement of cash flows, the Company considers all short-term debt securities to be cash equivalents. Cash paid during the six months ended June 30, 2004 for: Interest $56,494 Income taxes -0- INCOME TAXES The Company accounts for income taxes under a method which requires a company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in a company's financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements carrying amounts and tax basis of assets and liabilities using enacted tax rates. The Company presently prepares its tax return on the cash basis and its financial statements on the accrual basis. No deferred tax assets or liabilities have been recognized at this time, since the Company has shown losses for both tax and financial reporting. The Company has a net operating loss carry forward at June 30, 2004 of approximately $2,500,000. DEPRECIATION AND AMORTIZATION The Company provides for depreciation of fixed assets utilizing the straight-line method to apportion costs over the following estimated lives: Years ----- Buildings 40 Equipment 5 Vehicles 5 The Company provides for amortization of purchased Customer Lists, which represents the value of Internet subscribers purchased, utilizing the straight-line method, to apportion costs over a 3 year estimated life. 8 The Company provides for amortization of the covenants not to compete utilizing the straight-line method to apportion costs over the life of the covenant. Presently the Company has two covenants not to compete. One has a three-year life and the other has a five-year life. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE -2 FIXED ASSETS Fixed assets are summarized by major classifications as follows: June 30, 2004 2003 ----------- ----------- Buildings $ 90,000 $ 375,000 Equipment 1,709,669 1,201,423 Vehicles 521,131 466,334 ----------- ----------- 2,320,800 2,042,757 Accumulated Depreciation (765,522) (311,791) ----------- ----------- $ 1,555,278 $ 1,730,966 =========== =========== Depreciation expense for the six months ended June 30, 2004 and 2003 was $349,582 and $91,645 respectively. NOTE 3 - GOODWILL AND COVENANTS NOT TO COMPETE On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires the Company to evaluate its existing intangible assets and goodwill that were acquired in prior purchase business combinations, and to make any necessary reclassifications in order to conform to the new criteria in SFAS No. 141 for recognition apart from goodwill. Accordingly, the Company is required to reassess the useful lives and residual values of all identifiable intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments. In addition, to the extent an intangible asset is then determined to have an indefinite useful life, the Company is required to test the intangible asset for impairment in accordance with the provisions of SFAS No. 142. The Company's valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and projections of future operating performance. If these assumptions differ materially from future results, the Company may record impairment charges in the future. Additionally, the Company's policy is to perform its annual impairment testing for all reporting units in the fourth quarter of each fiscal year. At June 30, 2004 the Company's carrying value of goodwill totaled $3,904,092. On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Under SFAS No. 144, the Company tests certain long-lived assets or group of assets for recoverability whenever events or changes in circumstances indicate that the Company may not be able to recover the asset's carrying amount. SFAS No. 144 defines impairment as the condition that exists when the carrying amount of a long-lived asset or group exceeds its fair value. The Company's valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and projections of future operating performance. If these assumptions differ materially from future results, the Company may record impairment charges in the future. Goodwill and covenants not to compete are summarized by major classifications as follows: June 30, 2004 2003 ----------- ----------- Goodwill $ 3,904,092 $ 2,877,246 Customer Lists 929,059 633,206 Covenants not to compete 10,000 10,000 ----------- ----------- 4,843,151 3,520,452 Less: Accumulated amortization (353,838) (69,349) ----------- ----------- $ 4,489,313 $ 3,451,103 =========== =========== Amortization expense for the six months ended June 30, 2004 and 2003 was $178,244 and $32,044 respectively. 9 Future amortization expense for the next five years is as follows: 2004 $306,841 2005 $306,841 2006 $306,841 2007 $8,539 2008 $0 NOTE 4 - ACQUISITIONS On June 1, 2003, the Company entered into an agreement to purchase all the assets and assume certain liabilities of Momentum Online Computer Services, Inc. for 873,714 shares of common stock valued at $2,621,410. This purchase expanded the Company's Internet Service Provider area to the Highway 281 of Texas corridor, which extends roughly from south of the Dallas, Fort Worth area to the north of San Antonio. The Company is presently involved in a lawsuit and other legal matters with the former owner of Momentum over the agreement and ownership of the assets purchased on June 1, 2003. See litigation footnote. Assets Acquired were: Cash $12,053 Accounts receivable 123,490 Inventory 26,717 Equipment and furniture 280,425 Customer List 500,000 Goodwill 1,992,202 ---------- Total Assets $2,934,887 ========== Liabilities Assumed were: Accounts payable $97,792 Accrued payroll 24,177 Accrued interest 1,123 Accrued taxes 17,891 Lines of credit 59,422 Notes payable 59,250 Long - Term debt 54,222 ---------- Total Liabilities $ 313,877 ========== On June 30, 2003, the Company entered into an agreement to purchase all the assets of Kolinek Internet service for 280,480 shares of common stock. The acquisition was valued at $42,072. The original agreement called for a purchase price of 28,048 shares of common stock. The acquisition was re-evaluated in December 2003 to 280,480 shares. This purchase expanded the Company's Internet Service Provider area in the Highway 281 of Texas corridor. Assets Acquired: Customer List $10,000 Goodwill $32,072 On June 30, 2003, the Company entered into an agreement to purchase all the assets of Strategic Abstract & Title Corporation for $4,000 and 4,166,640 shares of common stock valued at $680,600. The original agreement called for a purchase price of 416,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 4,166,640 shares. This purchase added three commercial buildings valued at $285,000 and the assets and business of Strategic Abstract & Title Corporation. On June 9, 2004, the Company bought back 3,791,210 shares of the Company's stock in exchange for the assets originally acquired plus 250,000 stock purchase warrants. The warrants have an exercise price of $0.25 per share. Assets Acquired were: Cash $ 15,425 Accounts receivable 3,161 Buildings 285,000 Equipment and furniture 234,858 Goodwill 89,552 -------- Total Assets $628,996 ======== 10 On or about July 1, 2003, the Company acquired all the outstanding shares of US Mex Communications and West Texas Horizons for 2,206,640 shares of the Company's common stock valued at $330,996 and the assumption of $51,000 in notes payable. The note was paid in full with the December 18, 2003 notes payable. The original agreement called for a purchase price of 220,664 shares of common stock. The acquisition was re-evaluated in January 2004 to 2,206,640 shares. The acquired company sells phone cards and provides pay phone services in Southwestern Texas. All assets, liabilities and operations have been transferred to Wire Frontier Internet, Inc. (Texas), a wholly-owned subsidiary of the Company. Assets Acquired: Equipment and furniture $270,682 Goodwill 381,996 ------- Total Assets $652,678 ======== Liabilities Assumed: Accounts payable $ 51,000 Notes payable 270,682 ------- Total Liabilities $321,682 ======== On September 30, 2003 the Company entered into an Asset Purchase Agreement (the"Xramp Agreement") with Bartell & Griffith, LTD. L.L.P., d/b/a/ Xramp ("Xramp Partnership") to purchase certain assets and Internet subscribers of the Xramp Partnership. The purchase price was 294,643 shares of the Company's common stock and a note for $50,000. The note was paid off in March 2004. Assets Acquired: Equipment and furniture $ 46,950 Customer List 35,000 Goodwill 133,050 -------- Total $215,000 ======== Liabilities Assumed: Note payable $ 50,000 ======== On February 9, 2004 the Company entered into an Asset Purchase Agreement with Office Products Incorporated, to purchase Internet subscribers, certain assets, and Computer Service customers d/b/a Office Products Incorporated Computer Division. The purchase price was 3,527,623 shares of the Company's common stock. In addition, 377,892 shares plus $275,000 was to be provided to pay for debt of $373,252 within 90 days of the signing of the agreement. These amounts have not been remitted by the Company as of August 16, 2004. The Company is in negotiations with the former owners over the final amounts due. Assets Acquired: Inventory $ 95,657 Equipment and 207,034 furniture Customer List 125,782 Goodwill 796,400 ---------- Total $1,224,873 ========== Liabilities Assumed: Note payable $ 373,252 ========== On March 17, 2004 the Company entered into an Asset Purchase Agreement with BCOM.NET, INC to purchase certain assets and Internet subscribers of the Incorporation. The purchase price was 355,600 shares of the Company's common stock. 11 Assets Acquired: Equipment and furniture $ 26,358 Customer List 82,000 Goodwill 185,012 -------- Total $293,370 ======== On April 5, 2004 the Company entered into an Asset Purchase Agreement with RayTech Internet, Inc. to purchase certain assets and Internet subscribers of the Partnership. The purchase price was $10,000 and 50,672 shares of the Company's common stock. This purchase extends the Company's service to Big Springs, Texas on Interstate 20. Assets Acquired: Customer List $53,071 NOTE 5 - DEBT On November 14, 2002, the Company entered into a Line of Credit Agreement with a local bank for $170,000 due June 4, 2004. This loan was subsequently renewed and is now due on December 20, 2004. The interest rate is 6.75%. The loan is secured by all accounts and other rights to payments, inventories, equipment, instruments and chattel paper, general intangibles, documents, and deposit accounts owned by the Company. The majority shareholder and officer of the Company also guaranteed the loan. The balance due at June 30, 2004 was $170,000. The Company is on good terms with this lender and we have no reason to believe that this lender will not renew this loan in the future. On June 1, 2003, in connection with the acquisition of Momentum, the Company assumed a Line of Credit Agreement dated November 11, 2002 with a local bank for $75,000 payable on demand and if no demand is made, then on November 22, 2003. The note was renewed in December 2003 when an interest payment was made and the new maturity date is June 19, 2004. The interest rate is 8.5%. The loan is secured by all monies the Company has on deposit with the bank. The note is guaranteed by the former shareholder of Momentum, who is also an Officer of the Company. At June 30, 2004 the balance outstanding for Wireless Frontier Internet under this agreement was $55,656. In connection with the Momentum acquisition, on April 1, 2003 the Company entered into a loan agreement with an individual and shareholder for $59,250 for working capital funds advance to the Momentum since inception. The loan is due on demand with an 8% interest rate. Accruing interest is due monthly. The note is unsecured. The balance due at June 30, 2004 was $54,885. On September 30, 2003 as part of the Xramp Agreement the Company agreed to pay $50,000. The agreement was satisfied in March 2004 by payment in full of the loan. On December 18, 2003, the Company entered into a loan agreement with a Bank for $353,279. The interest rate varies at 2 points over the Wall Street Journal Prime Rate. The rate at June 30, 2004 was 6%. The Note was renewed and now matures on September 17, 2004. The note is secured by all vehicles, office equipment, accounts receivable, telephone equipment and all other assets. At June 30, 2004 the balance outstanding under this agreement was $328,279. The Company is on good terms with this lender and we have no reason to believe that this lender will not renew this loan in the future. On February 9, 2004, the Company entered into an Agreement for Purchase and Sale of Stock with Office Products Incorporated, Computer Division. This agreement called for $373,252 to be paid in stock and cash within 90 days from the signing of the agreement. This amount has not been paid as of August 16, 2004. The Company is presently in discussions with the former owners concerning this amount. At June 30, 2004 the balance outstanding under this agreement was $373,252. In March 2004, the Company issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, plus late penalties, and warrants to purchase an aggregate of 6,575,000 shares of the Company's common stock at an exercise price of $0.20 per share. Under the terms of the debentures, the noteholders had the option to convert the principal balance of the debentures, in whole or in part, into shares of the Company's common stock at a conversion price equal to $0.20 per share. These debentures matured on April 11, 2004, and the Company was unable to pay off the debentures at maturity. The Company agreed with the noteholders to extend the maturity date to August 11, 2004 and to reduce the conversion price of the debentures to $0.10 per share. The Company paid off the debt of $1,315,000 and interest of $142,668 with the proceeds of a Private Placement Offering on August 6, 2004. At June 30, 2004 the principal balance outstanding under these agreements was $1,315,000, with accrued interest and penalties $142,668. Pursuant to a letter agreement between the Company and the noteholders, the warrants are now exercisable for $0.05 per share. On May 30, 2002, the Company entered into a loan agreement with a local bank for $469,073. The loan calls for 24 monthly payments of $7,000, followed by 47 monthly payments of $8,500 and 1 payment of $11,603. All payments include interest at 6.75%, which varies with the Wall Street Journal Prime Rate. The loan is secured by all equipment, accounts receivable, and inventories whether now owned or hereafter acquired, wherever located. Certain shareholders and officers of the Company also guaranteed the loan. The balance due at June 30, 2004 was $362,890. 12 On January 8, 2003, the Company entered into a loan agreement with a local bank for $14,500. The loan calls for 30 monthly payments of $532 including interest. The initial interest was 7.5%, which varies with Wall Street Journal Prime Rate. The loan is secured by the vehicle purchased. Certain shareholders and officers of the Company also guaranteed the loan. The balance at June 30, 2004 outstanding under this agreement was $7,110. On April 15, 2003, the Company entered into a loan agreement with a local bank for $88,340. The loan calls for 60 monthly payments of $1,566 plus interest. The initial interest was 6.75%, which varies with the Wall Street Journal Prime Rate. The loan is secured by the installation vehicles purchased. The majority shareholder and an officer of the Company also guaranteed the loan. The balance at June 30, 2004 outstanding under this agreement was $73,589. On April 15, 2003, the Company entered into a loan agreement with a Finance Company for $28,394. The loan calls for 60 monthly payments of $473 including 0% interest. The loan is secured by the vehicle purchased. The majority shareholder and an officer of the Company also guaranteed the loan. The balance at June 30, 2004 outstanding under this agreement was $22,739. On April 21, 2003, the Company entered into a loan agreement with a local Credit Union for $35,402. The loan calls for 60 monthly payments of $504 plus interest at 6.75%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guaranteed the loan. The balance outstanding at June 30, 2004 under this agreement was $29,498. On April 21, 2003, the Company entered into a loan agreement with a Finance Company for $38,702. The loan calls for 60 monthly payments of $645 plus interest at 6.25%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guaranteed the loan. The balance at June 30, 2004 outstanding under this agreement was $31,588. On April 21, 2003, the Company entered into a loan agreement with a Finance Company for $35,402. The loan calls for 60 monthly payments of $571 plus interest at 6.25%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guaranteed the loan. The balance at June 30, 2004 outstanding under this agreement was $28,261. On May 1, 2003, the Company assumed a loan of an employee in exchange for the vehicle secured by the loan. The loan amount assumed was financed by a Finance Company and was for $32,005, the balance due at May 1, 2003. The loan calls for 40 additional monthly payments of $762 plus interest at 0%. The loan is secured by the installation vehicle purchased. The employee of the Company is still liable for the loan. The balance at June 30, 2004 outstanding under this agreement was $30,522. On May 1, 2003, the Company entered into a loan agreement with a Finance Company for $40,546. The loan calls for 60 monthly payments of $676 plus interest at 0%. The loan is secured by the installation vehicle purchased. The majority shareholder and an officer of the Company also guaranteed the loan. The balance at June 30, 2004 outstanding under this agreement was $32,471. In May 2003, the Company entered into a loan agreement with an individual for $90,000 effective to May 1, 2001 to purchase the Company's headquarters building in Fort Stockton, Texas. Rent paid since May 1, 2001 has been applied to the note and recorded as other income in the first quarter of 2003. The loan calls for 180 monthly payments of $900 including interest at 8.759%. The note is secured by the building. The balance at June 30, 2004 outstanding under this agreement was $76,296. On June 1, 2003 in connection with the acquisition of Momentum the Company assumed the following loans: On October 18, 2000 the Company entered into a loan agreement with a finance company for $25,860 to purchase a vehicle. The loan calls for 48 monthly payments of $658 including interest at 10.2%. The installation vehicle secures the note. A shareholder and officer of the Company also guaranteed the note. The balance at June 30, 2004 outstanding under this agreement was $2,569. On April 16, 2001 the Company entered into a loan agreement with a finance company for $17,125 to purchase equipment. The loan calls for 36 monthly payments of $586 including interest at 15.9%. The equipment secures the note. A shareholder and officer of the Company also guaranteed the note. The balance at June 30, 2004 outstanding under this agreement was $0. On July 10, 2001 the Company entered into a loan agreement with a local bank for $54,785 to purchase equipment. The loan is due on demand and if no demand is made, then 35 monthly payments of $1,771 including interest at 10.0%. The equipment secures the note along with funds that the Company has on deposit with the bank. A shareholder and officer of the Company also guaranteed the note. The balance at June 30, 2004 outstanding under this agreement was $4,552. 13 On December 30, 2002 the Company entered into a loan agreement with a finance company for $13,600 to purchase equipment. The loan calls for 36 monthly payments of $465 including interest at 15.9%. The equipment secures the note. The balance at June 30, 2004 outstanding under this agreement was $7,171. Total Debt at June 30 is as follows: 2004 Debt $2,995,175 Less Current portion (2,286,710) ----------- Long-term debt $ 708,465 ========== Maturities on long-term debt are as follows: Year ending December 31, 2003 $147,730 2004 2,286,710 2005 135,379 2006 135,678 2007 108,586 Thereafter 100,021 NOTE 6 - EMPLOYEE STOCK OPTION PLAN AND OTHER EMPLOYEE RELATED ACTIONS The Board of Directors in their October 1, 2003 meeting agreed to allocate 20,000,000 shares to the Employee Stock Option Plan to be established later. There has been no further action as of this time. On July 7, 2004, certain officers of Wireless Frontier Internet, Inc. (the "Company") contributed to the capital of the Company the number of issued and outstanding shares of the common stock, par value $0.001 per share (the "Common Stock"), of the Company set forth opposite his name below. Shareholder Number of Shares ----------- ---------------- Alex J. Gonzalez 13,762,122 Joe Chris Alexander 883,334 Ronald J. Marosko, Jr. 883,334 Jaime R. Velasco 1,100,000 On June 7, 2004, the Company entered into employment agreements with the following officers of the Company: Alex J. Gonzalez, Joe Chris Alexander, Ronald J. Marosko, Jr. and Kelly E. Simmons. The Company approved the grant to certain of its officers of employee stock options to purchase the number of shares of Common Stock set forth opposite his name below. Each option will be vested immediately and be exercisable as follows: (i) 25% of such option shall become exercisable on December 31, 2004 at a price of $0.25 per share; (ii) an additional 25% of such option shall become exercisable on December 31, 2005 at a price of $0.31 per share; (iii) an additional 25% of such option shall become exercisable on December 31, 2006 at a price of $0.40 per share; and (iv) an additional 25% of such option shall become exercisable on December 31, 2007 at price of $0.50 per share. The exercise of these options will be conditioned upon the satisfaction of certain conditions set forth in each shareholder's respective option agreements. Shareholder Number of Options to be Granted ----------- ------------------------------- Alex J. Gonzalez 13,762,122 Joe Chris Alexander 883,334 Ronald J. Marosko, Jr. 883,334 Jaime R. Velasco 1,100,000 14 NOTE 7 - EQUITY In January 2004 the Company renegotiated all but one of the Company's acquisitions and most of its stock sale contracts entered into during 2003. The additional shares issued resulting from these negotiations is reflected in these financial statements as if they were issued at the time of the original contract. On June 30, 2003, the Company entered into an agreement to purchase all the assets of Strategic Abstract & Title Corporation for $4,000 and 4,166,640 shares of common stock valued at $680,600. The original agreement called for a purchase price of 416,664 shares of common stock. On June 9, 2004, the Company bought back 3,791,210 shares of the Company's stock in exchange for the assets originally acquired plus 250,000 stock purchase warrants. The warrants have an exercise price of $0.25 per share. The 3,791,210 shares were cancelled. In March 2004, the Company issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, plus late penalties, and warrants to purchase an aggregate of 6,575,000 shares of the Company's common stock at an exercise price of $0.05 per share. NOTE 8 - COMMITMENTS The Company leases real estate in Sanderson, Texas under a one-year agreement due to expire in 2005, with an option to renew each year until 2007. The lease calls for monthly payments of $650 per month and half of the monthly electric bill. The Company leases real estate in Fort Stockton, Texas under a one-year agreement due to expire in 2004. The lease calls for monthly payments of $750 per month. The Company leases real estate in Alpine under a five-year agreement due to expire in 2008. The lease calls for monthly payments of $675 per month. The Company leases equipment on a 48 month lease from Pinnacle Towers (Global Signal) due to expire in 2007. The lease calls for monthly payments of $324.48 per month. The Company leases real estate in Marble Falls, Texas under a 5-year agreement due to expire April 30, 2008. The Company may terminate this lease at any time after the third full year of the lease with six months notice. The lease calls for monthly payments of $1,200 per month. The Company leases antenna space on the Kingsland site in Kingsland, Texas under a five-year agreement due to expire in 2006. The lease calls for monthly payments of $275 per month. The lease has two automatic five year term renewals unless cancelled with 90-day notice. The Company leases antenna space on the Rebecca Creek site in Spring Branch, Texas under a five-year agreement due to expire in 2006. The lease calls for payments of $250 per month. The lease has two automatic five-year renewals unless cancelled with 90-day notice. The Company leases antenna space on the Fairland site in Marble Falls, Texas under a five-year agreement due to expire in 2006. The lease calls for payments of $200 per month. The lease has two automatic five-year renewals unless cancelled with 90-day notice. The Company leases antenna space on the Burnet site in Burnet site in Burnet, Texas under a five-year agreement due to expire in 2006. The lease calls for payments of $200 per month. The lease has two automatic five-year renewals unless cancelled with 90-day notice. The Company leases antenna space on the N-R Ranch site in Blanco, Texas under a five year agreement due to expire in 2004. The lease calls for payments of $100 per month. The lease has unlimited automatic five-year renewals unless cancelled with 60-day notice. The Company leases antenna space on the Storage Tank site in Llano, Texas under a five year agreement due to expire in 2007. The lease calls for payments of $200 per month. The lease has one automatic three-year renewal unless cancelled with 30-day notice. The Company leases real estate from Robert McClung in Blanco, Texas on an on-going basis. The lease calls for monthly payments of $1,200 per month. 15 The Company leases antenna space from Uptown Blanco LTD in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $200 per month. The Company leases antenna space William Proctor in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space on the Bulverde VFW Tower site in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space on the Kings Point Water Tower in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space from Blanco Communications in Blanco, Texas under a three-year agreement due to expire in 2006. The lease calls for payments of $100 per month. The Company leases antenna space from City of Ellinwood, Kansas under a five-year agreement due to expire in October 2008. The lease calls for payments of $600 per month. The Company leases antenna space from City of Hoisington, Kansas under a five-year agreement due to expire in 2008. The lease calls for payments of $0 per month. The Company leases antenna space from Great Bend Housing Authority, Kansas under a three-year agreement due to expire in 2006. The lease calls for payments of $350 per month. The Company leases antenna space from Carpenter Properties in Alpine, Texas under a two-year agreement due to expire in May 2006. The lease calls for payments of $200 per month. The Company leases antenna space from Paul Ruby, SR in Beeville, Texas under a two-year agreement due to expire in December, 2005. The lease calls for payments of $150 per month. Future minimum lease payments are as follows: 2004 $106,294 2005 $99,294 2006 $85,694 2007 $54,594 2008 $48,300 NOTE 9 - RELATED PARTY TRANSACTIONS There are no significant related party transactions during the second quarter of 2004. NOTE 10 - LITIGATION On November 10, 2003 Momentum filed a complaint against the Company in district state court for the State of Texas in relation to the asset purchase agreement the Company entered into with Momentum on June 1, 2003. The complaint alleges the Company breached its contract as a result of the failure to deliver shares of common stock of the Company as required pursuant to the asset purchase agreement. The court issued an injunction requiring that any revenue generated from the subject assets be placed in escrow and utilized to pay any outstanding invoices in connection with the use of the assets. In addition, the court also ordered mediation, which did not produce a resolution. On January 6, 2004 Momentum filed for voluntary bankruptcy in Federal bankruptcy court. This action stopped the proceeding in state court until a hearing on the Company's holdings can be heard. The Company believes that Momentum's lawsuit is without merit and intends to vigorously defend the matter. 16 NOTE 11 - SUBSEQUENT EVENTS In March 2004, the Company issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, plus late penalties, and warrants to purchase an aggregate of 6,575,000 shares of the Company's common stock at an exercise price of $0.20 per share. Under the terms of the debentures, the noteholders had the option to convert the principal balance of the debentures, in whole or in part, into shares of the Company's common stock at a conversion price equal to $0.20 per share. These debentures matured on April 11, 2004, and the Company was unable to pay off the debentures at maturity. The Company agreed with the noteholders to extend the maturity date to August 11, 2004 and to reduce the conversion price of the debentures to $0.10 per share. The Company paid off the debt of $1,315,000 and interest of $142,668 with the proceeds of a Private Placement Offering on August 6, 2004. At June 30, 2004 the principal balance outstanding under these agreements was $1,315,000, with accrued interest and penalties $142,668. Pursuant to a letter agreement between the Company and the noteholders, the warrants are now exercisable for $0.05 per share. The Company is in the process of raising capital through a Private Placement Offering of investment units, with each unit consisting of one share of the Company's common stock and a warrant to purchase one-half of one share of the Company's common stock. The Company has raised $2,648,962 through August 16, 2004. The proceeds of these funds were used primarily to repay the debentures mentioned above, and associated placement and legal fees. The maximum amount of the Private Placement Offering is $5 million. There are no assurances that the Company will be able to raise the maximum amount in the Private Placement Offering. NOTE 12 - GOING CONCERN The Company has not generated significant profits to date and has had difficulty repaying some of its debt. The Company's continuation as a going concern depends upon its ability to obtain additional sources of capital and financing. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The following discussion of our financial condition and results of our operations should be read in conjunction with the Financial Statements and Notes thereto. This document contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. Statements contained herein that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include, but are not limited to, (i) the Company's ability to obtain additional financing; (ii) the Company's ability to deploy its high-speed network in a timely fashion; (iii) the Company's ability to keep pace with technological changes in its industry; and (iv) the Company's ability to attract and retain its customers. In addition, significant fluctuations in quarterly results may occur as a result of the timing of customer demand for the Company's high-speed services and the timing of the installation of the Company's networks. Additional factors that would cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in the Company's filings with the Securities and Exchange Commission, including those factors discussed under the caption "Risk Factors" in the Company's most recent Annual Report on Form 10-KSB/A. The Company undertakes no obligation to publicly release the revisions in such forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events or circumstances, except as otherwise required by securities and other applicable laws. Plan of Operation The Company is a wireless broadband Internet service provider located in Fort Stockton, Texas. In addition, the Company is also a traditional Internet service provider. The Company currently provides services to customers in over 100 cities throughout Southwest Texas and Kansas. The Company was designed to deliver efficient, reliable and cost effective solutions to bringing high-speed Internet access to rural markets within the United States. The Company believes it has positioned itself to meet the Internet access needs of organizations and consumers which require broadband access to the Internet in its operating area, but do not have access to cable or DSL from the traditional service providers. The Company offers broadband Internet service through a network of point-to-point and point-to-multipoint wireless networks. The Company uses terrestrial circuits to connect the Internet backbone and then distributes the signal through a series of towers and repeaters to customer premise equipment (CPE) located at the subscriber's residence or business. Also, by utilizing the expertise of the Company's Network Engineers, the Company delivers value added services to its subscribers by offering network integration services. This service is provided by selling, installing and maintaining the hardware necessary for virtual private networks (VPN's), Voice over IP (VoIP) and data integration services. The Company will focus its primary marketing efforts on providing wireless broadband access services to customers located in rural areas of Texas and Kansas and then throughout the United States. The Company will also focus on cities of less than 150,000 inhabitants. As the Company positions itself as a high quality service provider, it targets to offer network reliability complemented by quality customer support. As part of its business strategy, the Company plans to continue to make acquisitions of complementary companies, products and technologies. In order to implement these strategies and to fund its operations and repay its indebtedness, the Company will need to raise substantial capital over the next year. Please see discussion below under "Liquidity and Capital Resources." The Company will focus its effort on customer satisfaction by attracting and retaining a core team of professionals. We plan to increase our staffing levels only as required by our operation. We currently have no plans to significantly increase the number of our employees. Discontinued Operations The Company discontinued all of the operations of the Fremont businesses in late 1998 and 1999, due to lack of capital, bad debt and unprofitability. Any assets were liquidated or written off. Debts were settled or negotiated. No operating results of the prior Fremont businesses are included in this discussion or in the operating statements of the Company due to such discontinuance. 18 Results of Operations Results of operations for the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003. For the three months ended June 30, 2004, the Company generated $473,586 in equipment sales and $786,479 in Internet service revenue. For the three months ended June 30, 2003, the Company generated $72,794 in equipment sales revenue, and $1,304,325 in Internet service revenue. For the six month periods of 2004 and 2003, equipment sales were $715,636 and $95,216, respectively. Internet service revenue was $1,572,884 and $1,771,125 for the six months in 2004 and 2003, respectively. The increase in equipments sales is primarily from the acquisitions expanding our customer base. The decrease in internet service revenue reflects some large community network service grants that were recognized in the second quarter of 2003. This source of revenue was limited and was approximately $799,000 in that quarter compared to no revenue from community service network grants in the second quarter of 2004. For the six month periods of 2004 and 2003, the revenue from community service network grants was $122,000 and $799,000, respectively. Without this revenue source in the 2003 periods, the comparison with 2004 reflects an increase in subscriber revenue and other internet income due primarily from the acquisitions expanding our customer base. The cost of sales for the three months in 2004 for equipment sales revenue was $362,473 which consists of purchasing equipment and accessories. The cost of sales for the three months in 2004 for Internet sales was $333,779 which consists of telephone lines, installation costs, rental costs, and service costs. The gross profit margin for equipment sales was 23% for the three months ended June 30, 2004 compared to 1% for the three months ended in June 30, 2003. The increase in the Company's gross profit margin for equipment sales for the three months ended June 30, 2004 as compared to the three months ended June 30, 2003 was due to the mix of sales with an increase of services sales resulting in a higher profit margin than equipment sales. The gross profit margin for Internet sales was 58% for the three months ended June 30, 2004 compared to 79% for the three months ended June 30, 2003. The higher margin in the quarterly and six month gross profit in 2003 is the result of some large community network service grants in the second quarter of 2003. There was very little additional cost incurred by the Company to perform the services under these grants and the corresponding gross margins reflect that. These grants are considered to be isolated opportunities for the Company and the Company has not received any additional grants in 2004. The Company incurred total operations expenses of $1,428,602 for the three months ended June 30, 2004 compared to $910,584 for the three months ended June 30, 2003, a total increase of 57%. The major components of the expenses were as follows:
General and Administrative Expenses: Three Months Ended Three Months Ended Percentage June 30, 2004 June 30 ,2003 Change ------------- ------------- ------ Advertising and promotion $ 24,205 $ 32,364 (25)% Legal and professional 274,012 57,425 377% Auto and travel 84,987 73,088 16% Commissions and contract labor 38,185 67,761 (44)% Office expenses and supplies 48,411 24,071 101% Salary and wages 653,098 455,885 43% Utilities 34,781 25,545 36% Amortization and depreciation: 248,579 80,759 208%
The increase in the Company's expenses for three months ended June 30, 2004 compared to the same period in 2003 was primarily due to (i) an increase in legal and professional fees primarily due to the Company's merger with Fremont, the ongoing costs of operating as a public company, and the litigation with the former owner of Momentum; (ii) an increase in office expenses related to the growth in the number of personnel over the past 12 months; (iii) an increase in salaries and wages due to the hiring of additional staff from the Company's acquisition of additional companies, and due to the increase in staff required to manage the public company; and (iv) the increase of the depreciation and amortization costs with the acquisition of new companies. The Company believes that while the trend of losses may continue, 2004 expenses reflect investment in future operational capabilities as a company and management believes that revenues will increase without substantial expense increase. The Company has already taken steps to reduce the number of employees and to decrease operating expenses. The lawsuit involving Momentum has prevented the Company from making such changes to this operation even though the results from that operation are reported on the Company's books. The Company sustained a net loss of $1,040,200 for the three months ended June 30, 2004 as compared to net income of $95,314 for the same period in 2003. The net loss per share was ($0.02) for three months ended June 30, 2004 and earnings per share were $0.00 for the same period in 2003. 19 Liquidity and Capital Resources At June 30, 2004, we had working capital deficit of $2,627,474, due primarily to the current status of the $1,315,000 in debentures and another $1,345,000 in short-term loans. The debentures were repaid as of August 6, 2004 from funds raised in a Private Placement Offering that is still in progress as of August 16, 2004. Some of the remaining short-term debt may be retired depending on the success of the Private Placement Offering. We have historically sustained our operations and funded our capital requirements with the funds received from working capital loans received from various financial institutions, as well as the private placement of equity securities and debentures, as more fully described below. The Company is also applying for low interest loans and grants from various Federal agencies who are promoting the proliferation of broadband services throughout rural America. We believe that the Company qualifies for these loans and grants, but there is no guarantee that we will receive any funds from this effort. In order to reduce the number of shares outstanding, certain officers and founders of the Company contributed an aggregate of 16,628,790 shares to the Company that were subsequently cancelled on July 7, 2004. These officers were also awarded stock options to purchase up to 16,628,790 shares of the Company's common stock with escalating strike prices beginning at $0.25 per share. As of June 30, 2004, we had $86,602 in cash and $140,941 in accounts receivable that could be used in connection with funding our operations. However, the Private Placement Offering has generated additional cash reserves for the Company as of August 16, 2004. While the final amount to be received from this offering is unclear presently, we believe that we will receive additional funds to add to our cash reserves which should be sufficient to continue our operations over the next twelve months. If adequate funds are not available, we may be unable to repay the remaining short-term indebtedness or to grow and expand our business, in which case, there would be substantial doubt about our ability to continue as a going concern. As we generally obtain most of our funding from operations, a decrease in revenue could negatively impact our short and long term liquidity. We believe that the impact of inflation on our operations since our inception has not been material. In March 2004, the Company issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, plus late penalties, and warrants to purchase an aggregate of 6,575,000 shares of the Company's common stock at an exercise price of $0.20 per share. Under the terms of the debentures, the noteholders had the option to convert the principal balance of the debentures, in whole or in part, into shares of the Company's common stock at a conversion price equal to $0.20 per share. These debentures matured on April 11, 2004, and the Company was unable to pay off the debentures at maturity. The Company agreed with the noteholders to extend the maturity date to August 11, 2004 and to reduce the conversion price of the debentures to $0.10 per share. The Company paid off the debt of $1,315,000 and interest of $142,668 with the proceeds of a Private Placement Offering on August 6, 2004. At June 30, 2004 the principal balance outstanding under these agreements was $1,315,000, with accrued interest and penalties $142,668. Pursuant to a letter agreement between the Company and the noteholders, the warrants are now exercisable for $0.05 per share. We may need to obtain additional capital in the future. If the need arises, we may attempt to obtain funding through the use of various types of short-term funding, loans or working capital financing arrangements from banks or financial institutions. We may also be required to raise additional capital in public or private equity markets. Our ability to raise additional capital in public or private markets will depend primarily upon prevailing market conditions and the demand for our products and services. No assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on terms acceptable to the Company. Please review "Note 5. - Debt" to the financial statements in this filing for a discussion of the Company's debt. ITEM 3. CONTROLS AND PROCEDURES Evaluation of Internal and Disclosure Controls The Company's principal executive and principal financial officers have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of the quarter ended June 30, 2004 and have concluded that such disclosure controls and procedures are adequate and effective based upon their evaluation as of such date to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the periods specified by the SEC's rules and forms. 20 There were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation of such officers, nor were there any significant deficiencies or material weaknesses in the Company's internal controls requiring corrective action. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 1, 2003, Partners Alliance Group, Inc. ("PAG"), pursuant to that certain Asset Purchase Agreement, purchased the assets of Momentum in exchange for the issuance of shares of PAG. On November 10, 2003, Momentum filed a complaint against PAG in district state court for the State of Texas seeking rescission of the purchase agreement and restoration of the parties to their earlier positions prior to June 1, 2003, as if no agreement existed. Momentum's complaint alleges that PAG breached its contract as a result of the failure to deliver shares of common stock of PAG as required pursuant to the Asset Purchase Agreement. The court issued an injunction requiring that any revenue generated from the subject assets be placed in escrow and utilized to pay any outstanding invoices in connection with the use of the assets. In addition, the court also ordered mediation, which did not produce a resolution. On January 7, 2004, Momentum filed a Petition in Bankruptcy. The Bankruptcy Petition stayed all matters pending in state district court and all proceedings were transferred to the Bankruptcy court in Austin Texas. All legal issues are currently pending before the Bankruptcy Court. The management of the Company believes that Momentum's lawsuit is without merit and intends to vigorously defend this matter. ITEM 3. DEFAULTS UPON SENIOR SECURITIES In March 2004, the Company issued convertible debentures to a number of noteholders, in the aggregate principal amount of $1,315,000, at an interest rate of 10%, plus late penalties, and warrants to purchase an aggregate of 6,575,000 shares of the Company's common stock at an exercise price of $0.20 per share. Under the terms of the debentures, the noteholders had the option to convert the principal balance of the debentures, in whole or in part, into shares of the Company's common stock at a conversion price equal to $0.20 per share. These debentures matured on April 11, 2004, and the Company was unable to pay off the debentures at maturity. The Company agreed with the noteholders to extend the maturity date to August 11, 2004 and to reduce the conversion price of the debentures to $0.10 per share. The Company paid off the debt of $1,315,000 and interest of $142,668 with the proceeds of a Private Placement Offering on August 6, 2004. At June 30, 2004 the principal balance outstanding under these agreements was $1,315,000, with accrued interest and penalties $142,668. Pursuant to a letter agreement between the Company and the noteholders, the warrants are now exercisable for $0.05 per share. ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following documents are filed as part of this report:
- -------------- -------------------------------------------------------------------------------------------------- EXHIBIT NO. DESCRIPTION - -------------- -------------------------------------------------------------------------------------------------- 4.1 Form of Subscription Agreement by and between the Company and each investor party thereto, entered into by the parties thereto as of July 23, 2004 and August 4, 2004 - -------------- -------------------------------------------------------------------------------------------------- 4.2 Form of Common Stock Purchase Warrant by and between the Company and each holder thereto, issued on July 23, 2004 and August 4, 2004 - -------------- -------------------------------------------------------------------------------------------------- 4.3 Form of Common Stock Purchase Warrant by and between the Company and Casimir Capital, LP, issued on July 23, 2004 and August 4, 2004 - -------------- -------------------------------------------------------------------------------------------------- 4.4 Form of Letter Agreement, dated as of July 29, 2004, by and between the Company and the holders of convertible debentures of the Company - -------------- -------------------------------------------------------------------------------------------------- 4.5 Letter Agreement, dated as of July 7, 2004, by and between the Company and Alex J. Gonzalez - -------------- -------------------------------------------------------------------------------------------------- 4.6 Letter Agreement, dated as of July 7, 2004, by and between the Company and Joe Chris Alexander - -------------- -------------------------------------------------------------------------------------------------- 4.7 Letter Agreement, dated as of July 7, 2004, by and between the Company and Ronald J. Marosko, Jr. - -------------- -------------------------------------------------------------------------------------------------- 4.8 Letter Agreement, dated as of July 7, 2004, by and between the Company and Jaime R. Velasco - -------------- -------------------------------------------------------------------------------------------------- 10.1 Form of Registration Rights Agreement by and between the Company and each investor party thereto, entered into by the parties thereto as of July 23, 2004 and August 4, 2004 - -------------- -------------------------------------------------------------------------------------------------- 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - -------------- -------------------------------------------------------------------------------------------------- 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - -------------- -------------------------------------------------------------------------------------------------- 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - -------------- -------------------------------------------------------------------------------------------------- 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - -------------- --------------------------------------------------------------------------------------------------
(b) Reports on Form 8-K (1) We filed a Current Report on Form 8-K dated June 16, 2004 in which we reported under Item 5 the following: a. Certain officers contributed 16,628,790 common shares to the Company. b. The saleback of certain assets related to Strategic Abstract & Title Corporation, in which the Company cancelled 3,791,210 common shares. c. The employment agreements of certain officers of the Company. d. The grant of stock options to certain officers. e. The extension of the maturity date of the debentures. f. The announcement of a new CFO for the Company and the change of status of another officer. 21 SIGNATURES In accordance with requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WIRELESS FRONTIER INTERNET, INC. By: /s/ Alex Gonzalez ------------------------------------------- Name: Alex Gonzalez Title: Chairman and Chief Executive Officer Date: August 18, 2004 22 EX-4.1 2 kl08054_ex4-1.txt Exhibit 4.1 FORM OF WIRELESS FRONTIER INTERNET, INC. SUBSCRIPTION AGREEMENT Wireless Frontier Internet, Inc. 104 West Callaghan Street Fort Stockton, Texas 79735 Attention: Alex Gonzalez, Chairman and CEO Ladies and Gentlemen: 1. Subscription. The undersigned (the "Purchaser"), intending to be legally bound, hereby agrees to purchase from Wireless Frontier Internet, Inc. (the "Company") investment units (the "Units") in the amount set forth on the signature page hereof. Each Unit consists of one (1) share (the "Shares") of common stock, par value $0.001 per share, of the Company (the "Common Stock") and (ii) one five-year warrant (the "Warrant") in the form annexed to the Memorandum (as defined below), as Exhibit B to purchase one-half of one share (the "Warrant Shares") of Common Stock. The offering price per Unit shall be equal to $0.15 per Unit. The total amount of gross proceeds from the sale of Units in the Offering shall be a and a maximum of $5,000,000 of Units. The Shares and Warrants are collectively referred to herein as the "Securities". The terms of the Offering are more completely described in the Company's Confidential Private Placement Memorandum dated June 18, 2004 (the "Memorandum"), as amended and supplemented, and such terms are incorporated herein in their entirety. Certain terms used but not otherwise defined herein shall have the respective meanings provided in the Memorandum. 2. Payment. The Purchaser encloses herewith a check payable to, or will immediately make a wire transfer payment to "Independence Bank as Escrow Agent for Wireless Frontier Internet, Inc." in the full amount of the purchase price of the Units being subscribed for. Such funds will be held for the Purchaser's benefit, and will be returned promptly, without interest, penalty, expense or deduction if this Subscription Agreement is not accepted by the Company or the Offering is terminated pursuant to its terms or by the Company. Together with the check for, or the wire transfer of, the full purchase price, the Purchaser is delivering a completed and executed signature page of this Subscription Agreement and a fully completed Accredited Investor Certification in the form contained herein. 3. Acceptance of Subscription. The Purchaser understands and agrees that the Company and the Placement Agent reserve the right to accept or reject this or any other subscription for Units, in whole or in part, and in any order, notwithstanding prior receipt by the Purchaser of notice of acceptance of this subscription. The Company shall have no obligation hereunder until the Company shall execute and deliver to the Purchaser an executed copy of this Subscription Agreement. If this subscription is rejected in whole or the Offering is terminated, all funds received from the Purchaser will be returned without interest, penalty, expense or deduction, and this Subscription Agreement shall thereafter be of no further force or effect. If this subscription is rejected in part, and in any order, the funds for the rejected portion of this subscription will be returned without interest, penalty, expense or deduction, and this Subscription Agreement will continue in full force and effect to the extent this subscription was accepted. 4. Representations and Warranties. (A) The Purchaser hereby represents and warrants to, and acknowledges and agrees with, the Company as follows: (a) Neither the Securities, nor the Warrant Shares, are registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws. The Purchaser understands that the Securities are being offered to it in reliance upon specific exemptions from the registration requirements of the Securities Act, and that the Company is relying upon the truth and accuracy of, and the Purchaser's compliance with, the representations, warranties and agreements of the Purchaser contained in this Subscription Agreement to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Securities; (b) The Purchaser has received the Memorandum and all other documents it deems relevant in making an informed decision to purchase the Securities, has carefully reviewed them and understands the information contained therein, and the Purchaser, prior to the execution of this Subscription Agreement, has had access to the same kind of information which would be available in a registration statement filed by the Company under the Securities Act; (c) Neither the Securities and Exchange Commission nor any state securities commission has approved the Units or any of the Securities or the Warrant Shares, or passed upon or endorsed the merits of the Offering or confirmed the accuracy or determined the adequacy of the Memorandum. The Memorandum has not been reviewed by any Federal, state or other regulatory authority; (d) All documents, records and books pertaining to the investment in the Units (including, without limitation, the Memorandum) that the Purchaser deems relevant in making an informed decision to purchase the Securities have been made available for inspection by the Purchaser; (e) The Purchaser has had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the offering of the Units and the business, financial condition, results of operations and prospects of the Company, and all such questions have been answered to the full satisfaction of the Purchaser; (f) In evaluating the suitability of an investment in the Company, the Purchaser has not relied upon any representation or other information (oral or written) other than as stated in the Memorandum and this Subscription Agreement; (g) The Purchaser is unaware of, is in no way relying on, and did not become aware of the offering of the Units through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, in connection with the offering and sale of the Units and is not subscribing for Units and did not become aware of the offering of the Units through or as a result of any seminar or meeting to which the Purchaser was invited by, or any solicitation of a subscription by, a person not previously known to the Purchaser in connection with investments in securities generally; (h) The Purchaser has taken no action which would give rise to any claim by any person for brokerage commissions, finders' fees or the like relating to this Subscription Agreement or the transactions contemplated hereby (other than amounts to be paid by the Company to the Placement Agent); (i) The Purchaser has such knowledge and experience in financial, tax, and business matters, and, in particular, investments in securities, so as to enable it to utilize the information made available to them in connection with the offering of the Units to evaluate the merits and risks of an investment in the Units and the Company and to make an informed investment decision with respect thereto; (j) The Purchaser is not relying on the Company or any of its employees or agents with respect to the legal, tax, economic and related considerations as to an investment in the Units, and the Purchaser has relied on the advice of, or has consulted with, only his own advisors as it deems necessary or advisable; (k) The Purchaser is acquiring the Units solely for the Purchaser's own account for investment and not with a view to resale, assignment or distribution thereof, in whole or in part. The Purchaser has 2 no agreement or arrangement, formal or informal, with any person to sell or transfer all or any part of the Units, Securities contained in the Units, or the Warrant Shares, and the Purchaser has no plans to enter into any such agreement or arrangement; (l) The Purchaser must bear the substantial economic risks of the investment in the Units indefinitely because none of the Securities may be sold, hypothecated or otherwise disposed of unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available. Legends shall be placed on the securities included in the Units to the effect that they have not been registered under the Securities Act or applicable state securities laws and appropriate notations thereof will be made in the Company's stock books. Stop transfer instructions will be placed with the transfer agent of the securities constituting the Units. Although the Company has the contractual obligation to register for resale the Shares and the Warrant Shares (as set forth in the Registration Rights Agreement, substantially in the form attached to the Memorandum as Exhibit C (the "Registration Rights Agreement")), there can be no assurance that such registration will be completed within the time frames required by the Company, or at all. It is not anticipated that there will be any market for resale of the Units, the Securities or the Warrant Shares, and the Units, the Securities and the Warrant Shares will not be freely transferable at any time in the foreseeable future, if at all; (m) The Purchaser has adequate means of providing for the Purchaser's current financial needs and foreseeable contingencies and has no need for liquidity of the investment in the Units for an indefinite period of time; (n) The Purchaser is aware that an investment in the Units involves a number of very significant risks and has carefully read and considered the matters set forth under the caption "Risk Factors" in the Memorandum; (o) The Purchaser meets the requirements of at least one of the suitability standards for an "accredited investor" as set forth on the Accredited Investor Certification contained herein; (p) The Purchaser: (i) if a natural person, represents that the Purchaser has reached the age of 21 and has full power and authority to execute and deliver this Subscription Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, limited liability company or partnership, association, joint stock company, trust, unincorporated organization or other entity, such entity was not formed for the specific purpose of acquiring the Units, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Subscription Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the securities constituting the Units, the execution and delivery of this Subscription Agreement has been duly authorized by all necessary action, this Subscription Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; and (iii) if executing this Subscription Agreement in a representative or fiduciary capacity, it has full power and authority to execute and deliver this Subscription Agreement in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, limited liability company or limited liability partnership, or other entity for whom the Purchaser is executing this Subscription Agreement, and such individual, ward, partnership, trust, estate, corporation, limited liability company or partnership, or other entity has full right and power to perform pursuant to this Subscription Agreement and make an investment in the Company, and that this Subscription Agreement constitutes a legal, valid and binding obligation of such entity. The execution and delivery of this Subscription Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the Purchaser is a party or by which it is bound; (q) The Purchaser has had the opportunity to obtain any additional information that it deemed necessary to verify the accuracy of the information contained in the Memorandum and all documents received or reviewed in connection with the purchase of the Units and has had the opportunity to have representatives of the Company provide it with such additional information regarding the terms and conditions of 3 this particular investment and the financial condition, results of operations, business and prospects of the Company deemed relevant by the Purchaser and all such requested information has been provided to its full satisfaction; (r) The Purchaser represents to the Company that any information which the undersigned has heretofore furnished or furnishes herewith to the Company is complete and accurate and may be relied upon by the Company in determining the availability of an exemption from registration under Federal and state securities laws in connection with the offering of Units as described in the Memorandum. The Purchaser further represents and warrants that it will notify and supply corrective information to the Company immediately upon the occurrence of any change therein occurring prior to the Company's issuance of the securities contained in the Units; provided, that the Purchaser shall provide to the Company a completed copy of any purchaser questionnaires reasonably requested by the Company in connection with the preparation by the Company of any registration statement covering the resale of the Shares and the Warrant Shares as provided in the Registration Rights Agreement; (s) The Purchaser has a sufficient net worth to sustain a complete loss of its entire investment in the Company in the event such a loss should occur. The Purchaser's overall commitment to investments which are not readily marketable is not excessive in view of its net worth and financial circumstances and the purchase of the Units will not cause such commitment to become excessive. The investment is a suitable one for the Purchaser; (t) The Purchaser's principal executive offices (if an entity) or home address (if an individual) are in the jurisdiction set forth immediately below the Purchaser's name on the signature pages hereto; (u) The Purchaser understands that the components of the Units shall bear a restrictive legend in substantially the following form: "THE UNITS AND THEIR COMPONENTS OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL." (v) The Purchaser acknowledges that it may not, except in compliance with the Securities Act, and the rules and regulations promulgated thereunder, and such other securities or Blue Sky laws as may be applicable, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Securities or engage in any Short Sale (as defined below); (w) Neither the Purchaser nor any affiliate of the Purchaser (as defined in Rule 405 of the Securities Act (each a "Purchaser/Affiliate") and which (i) had knowledge about the transactions contemplated hereby, (ii) has or shares discretion relating to the Purchaser's investments or trading or information concerning Purchaser's investments, including the Units, or (iii) is subject to the Purchaser's review or input concerning such 4 Purchaser/Affiliate's investments or trading) has or will, directly or indirectly, during the period beginning on the date on which the Purchaser was first notified that the Company intended to engage in the transactions contemplated by this Agreement and ending on the date that the Company files a Current Report on Form 8-K or issues a press release describing the material terms of the transaction contemplated by this Subscription Agreement engage (A) in any "short sale" (as defined in Rule 3b-3 promulgated under the Exchange Act), including, without limitation, the maintaining of any short position with respect to, establishing or maintaining a "put equivalent position" (within the meaning of Rule 16a-1(h) under the Exchange Act) with respect to, entering into any swap, derivative transaction or other arrangement (whether any such transaction is to be settled by delivery of Common Stock, other securities, cash or other consideration) that transfers to another, in whole or in part, any of the economic consequences of ownership, or otherwise dispose of, any of the Securities by the Purchaser or (B) in any hedging transaction which establishes a net short position with respect to the Securities (clauses (A) and (B) together, a "Short Sale"); except for (1) Short Sales by a Purchaser/Affiliate which was, prior to the date on which the Purchaser was first notified that the Company intended to engage in the transactions contemplated by this Agreement, a market maker for the Common Stock, provided that such Short Sales are in the ordinary course of such Purchaser/Affiliate's business and are in compliance with the Securities Act, and the rules and regulations promulgated thereunder, and such other securities or Blue Sky laws as may be applicable or (2) Short Sales by a Purchaser/Affiliate which by virtue of the procedures of the Purchaser are made without knowledge of the transactions contemplated in this Agreement and were not induced or encouraged by the Purchaser. (B) The Company hereby represents and warrants to, and acknowledges and agrees with, the Purchaser as follows: (a) Subsidiaries. The Company has no direct or indirect subsidiaries (each a "Subsidiary," and collectively, "Subsidiaries") except as described in the SEC Reports (as defined below). All the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights, and the Company owns all of the issued and outstanding shares of capital stock of each Subsidiary, except as described in the SEC Reports or the Memorandum. (b) Organization and Qualification. Each of the Company and the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation of any of the provisions of its certificate of incorporation, bylaws or other organizational or charter documents. (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the Offering. The execution and delivery of this Subscription Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, other than the Required Approvals (as defined below). This Subscription Agreement, when executed and delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and general principles of equity. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, by-laws or other organizational or charter documents. (d) No Conflicts. The execution, delivery and performance of this Subscription Agreement by the Company and the consummation by the Company of the Offering do not and will not: (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) subject to obtaining the Required Approvals (as defined below), conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, 5 order, judgment, injunction, decree or other restriction of any court or governmental authority as currently in effect to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate (a) adversely affect the legality, validity or enforceability of the Offering, (b) have or result in or be reasonably likely to have or result in a material adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (c) adversely impair the Company's ability to perform fully on a timely basis its obligations under this Subscription Agreement (any of (a), (b) or (c), a "Material Adverse Effect"). (e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Subscription Agreement, other than (i) the filing with the Securities and Exchange Commission (the "Commission") of the Registration Statement required to be filed pursuant to the Registration Rights Agreement, (ii) the filing with the Commission of a Form D pursuant to Regulation D of the Securities Act, and (iii) applicable state securities law Blue Sky filings (collectively, the "Required Approvals"). (f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with this Subscription Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance upon purchase of the Common Stock and of the shares underlying the Warrants. The Securities conform to the description contained in the Memorandum. Assuming the accuracy of the Purchaser's representations and warranties set forth in Section 4(A), no registration under the Securities Act is required for the offer and sale of the Units by the Company to the Purchaser as contemplated hereby. The issuance and sale of the Units hereunder does not contravene the rules and regulations of the trading market for the Common Stock and no shareholder approval is required for the Company to fulfill its obligations pursuant to this Offering. (g) Capitalization. As of immediately prior to the First Closing, the number of shares and type of all authorized, issued and outstanding capital stock of the Company shall consist of 100,000,000 shares of Common Stock, of which 45,077,386 shares shall be issued and outstanding. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the Offering. Except as a result of the purchase and sale of the Securities which may be issued in connection with this Offering and except for options and shares of capital stock issued or issuable under the Company's option plans, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser and other purchasers in the Offering) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. (h) SEC Reports; Financial Statements. The Company has filed (i) all reports required to be filed by it under the Securities Act; (ii) all annual reports on Form 10-KSB and all quarterly reports on Form 10-QSB required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, in order for it to satisfy its filing requirements under the Exchange Act for the periods to which each such report relates, in each case commencing with the fiscal quarter ended September 30, 2003 (or such shorter period as the Company was required by law to file such material); (iii) an annual report on Form 10-KSB, covering the fiscal years ended December 31, 1998, 1999, 2000, 2001 and 2002, which was filed with the SEC on May 28, 2004; (iv) a quarterly report on Form 10-QSB, covering the fiscal quarters ended March 31, June 30 and September 30, 1999, which was filed with the SEC on May 28, 2004; (v) a quarterly report on Form 10-QSB, covering the fiscal quarters ended March 31, June 30 and September 30, 2000, which was filed with the SEC on May 28, 2004; (vi) a quarterly report on Form 10-QSB, covering the fiscal quarters ended March 31, June 30 and September 30, 2001, which was 6 filed with the SEC on May 28, 2004; (vii) a quarterly report on Form 10-QSB, covering the fiscal quarters ended March 31, June 30 and September 30, 2002, which was filed with the SEC on May 28, 2004; and (viii) a quarterly report on Form 10-QSB, covering the fiscal quarters ended March 31 and June 30, 2002, which was filed with the SEC on May 28, 2004 (the foregoing materials, as amended, where applicable, being collectively referred to herein as the "SEC Reports"). The Company has made available to the Purchaser a copy of all SEC Reports filed within the 10 days preceding the date hereof. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. (i) Material Changes. Except for the proposed Offering, since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports: (i) there has been no event, occurrence or development that has had a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders except in the ordinary course of business consistent with prior practice, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock except consistent with prior practice or pursuant to existing Company stock option or similar plans, and (v) the Company has not issued any equity securities to any officer, director or Affiliate of the Company, except pursuant to existing Company stock option or similar plans. The term "Affiliate of the Company" means (A) any person or entity directly or indirectly controlling, controlled by or under common control with the Company; (B) any person or entity owning or controlling ten percent (10%) or more of the outstanding voting securities of the Company; or (C) any officer or director of the Company. (j) Litigation. Except as set forth in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action") which: (i) adversely affects or challenges the legality, validity or enforceability of this Subscription Agreement or the Securities or (ii) would, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws. The Company does not have pending before the Commission any request for confidential treatment of information. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. (k) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any material indenture, loan or credit 7 agreement or any other material agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), which default or violation would have or result in a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, except in each case as would not, individually or in the aggregate, have or result in a Material Adverse Effect. (l) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. (m) Listing and Maintenance Requirements. The Company has not, in the 12 months preceding the date hereof, received notice from the principal trading market for the Common Stock to the effect that the Company is not in compliance with the listing or maintenance requirements of such market. (n) Internal Accounting Controls/Sarbanes-Oxley Act of 2002. The Company is in material compliance with the requirements of the Sarbanes-Oxley Act of 2002 applicable to it as of the date hereof. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such disclosures controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities. The Company's certifying officers have evaluated the effectiveness of the Company's controls and procedures as of the end of the period covered by its most recent periodic report (such date, the "Evaluation Date"). The Company presented in its most recently filed periodic report the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company's internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Exchange Act). (o) Disclosure. The Company confirms that, neither the Company nor any other person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchaser will rely on the foregoing representations and covenants in effecting transactions in securities of the Company. The disclosure provided to the Purchaser regarding the Company, its business and the transactions contemplated hereby, furnished by or on behalf of the Company, including all of the SEC Reports (as amended, where applicable) relating to the periods completed in the 24 months preceding the date hereof, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that the Purchaser makes or has made no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Subscription Agreement. 5. Irrevocability; Binding Effect. The Purchaser hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Purchaser, except as required by applicable law, and that this Subscription Agreement shall survive the death or disability of the Purchaser and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns. If the Purchaser is more than one person, the obligations of the Purchaser hereunder shall be joint and several and the covenants, agreements, representations, warranties, and acknowledgments herein shall be deemed to 8 be made by and be binding upon each such person and such person's heirs, executors, administrators, successors, legal representatives and permitted assigns. 6. Amendment and Modification. This Subscription Agreement shall not be amended or modified, except by an instrument in writing signed by the Company and, in the case of the Purchaser, the holders of at least sixty-six and two-thirds percent (66-2/3%)-in-interest of the Shares issued in the Closings. 7. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, sent by nationwide overnight courier or delivered against receipt to the party to whom it is to be given (a) if to Company, at the address set forth above, or (b) if to the Purchaser, at the address set forth on the signature page hereof (or, in either case, to such other address as the party shall have furnished in writing in accordance with the provisions of this Section). Any notice or other communication given by certified mail shall be deemed given at the time that it is signed for by the recipient except for a notice changing a party's address which shall be deemed given at the time of receipt thereof. Any notice or other communication given by nationwide overnight courier shall be deemed given the next business day following being deposited with such courier. 8. Assignability. This Subscription Agreement and the rights, interests and obligations hereunder are not transferable or assignable by the Purchaser and the transfer or assignment of the Units, the components thereof, or the underlying securities shall be made only in accordance with all applicable laws. 9. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York relating to contracts entered into and to be performed wholly within such State. 10. Blue Sky Qualification. The purchase of Units under this Subscription Agreement is expressly conditioned upon the exemption from qualification of the offer and sale of the Units from applicable Federal and state securities laws. The Company shall not be required to qualify this transaction under the securities laws of any jurisdiction and, should qualification be necessary, the Company shall be released from any and all obligations to maintain its offer, and may rescind any sale contracted, in such jurisdiction. 11. Use of Pronouns. All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons referred to may require. 12. Miscellaneous. (a) This Agreement and its exhibits and schedules constitutes the entire agreement between the Purchaser and the Company with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings, if any, relating to the subject matter hereof. The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party (and, in the case of the Purchaser, by the holders of at least sixty-six and two-thirds percent in interest of the Shares issued in the Closings) entitled to the benefits of such terms or provisions. The parties acknowledge that the provisions of the Registration Rights Agreement are incorporated by reference and made a part hereof, and that Purchaser's signature hereto will operate to be effective as Purchaser's signature to the Registration Rights Agreement. (b) The Purchaser's and Company's covenants, agreements, representations and warranties made in this Agreement and the Memorandum shall survive the execution and delivery hereof and delivery of the Securities contained in the Units. (c) Each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated. 9 (d) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. (e) Each provision of this Subscription Agreement shall be considered separable and, if for any reason any provision or provisions hereof are determined to be invalid or contrary to applicable law, such invalidity or illegality shall not impair the operation of or affect the remaining portions of this Subscription Agreement. (f) Paragraph titles are for descriptive purposes only and shall not control or alter the meaning of this Subscription Agreement as set forth in the text. 10 Accredited Investor Certification Name of Investor:____________________ - --------------------------------- Initial or Check the appropriate item(s) The undersigned further represents and warrants as indicated below by the undersigned's initials: A. Individual investors: (Please initial one or more of the following statements) 1. I certify that I am an accredited investor because I have had individual income (exclusive of any income earned by my spouse) of more than $200,000 in each of the most recent two years and I reasonably expect to have an individual income in excess of $200,000 for the current year. 2. I certify that I am an accredited investor because I have had joint income with my spouse in excess of $300,000 in each of the most recent two years and reasonably expect to have joint income with my spouse in excess of $300,000 for the current year. 3. I certify that I am an accredited investor because I have an individual net worth, or my spouse and I have a joint net worth, in excess of $1,000,000. 4. I am a director or executive officer of Wireless Frontier Internet, Inc. B. Partnerships, corporations, trusts or other entities: (Please initial one of the following statements). The undersigned hereby certifies that it is an accredited investor because it is: 1. a bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Exchange Act; 2. an insurance company as defined in Section 2(a)(13) of the Securities Act; 3. an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that act; 4. a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; 5. a plan established and maintained by a state or its political subdivisions, and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with total assets in excess of $5,000,000; 6. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act of 1974, whose investments decisions are made by a plan fiduciary, as defined in Section 3(21) of that act, which is either a bank, savings and loan association or an insurance company (as defined in Section 3(a) of the Securities Act) or an investment adviser registered as such under the Investment Advisers Act of 1940; 7. a self-directed employee benefit plan, including an Individual Retirement Account, with investment decisions made solely by persons that are accredited investors; 8. an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, not formed for the specific purpose of acquiring the Units, with total assets in excess of $5,000,000; 9. a corporation, partnership, limited liability company, limited liability partnership, other entity, or a Massachusetts or similar business trust, not formed for the specific purpose of acquiring the Units, with total assets excess of $5,000,000; 10. a trust, not formed for the specific purpose of acquiring the Units, with total assets exceed $5,000,000, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D of the Securities Act; or 11. an entity (including a revocable grantor trust but other than a conventional trust) in which each of the equity owners qualifies as an accredited investor as defined above. 11 Wireless Frontier Internet, Inc. SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT EXECUTION OF THIS AGREEMENT BY ANY PURCHASER SHALL BE DEEMED TO CONSTITUTE EXECUTION OF THE REGISTRATION RIGHTS AGREEMENT ANNEXED HERETO AS EXHIBIT A BY SUCH PURCHASER. Subscriber hereby elects to subscribe under the Subscription Agreement for a total of $__________ of Unit(s) (NOTE: to be completed by subscriber): Date (NOTE: To be completed by subscriber): _______________, 2004. If the purchaser is an INDIVIDUAL, or if the purchasers are INDIVIDUALS who have purchased as JOINT TENANTS, as JOINT TENANTS with RIGHT OF SURVIVORSHIP, as TENANTS IN COMMON, or as COMMUNITY PROPERTY: ___________________________ ___________________________ Print Names(s) Social Security Number(s) ___________________________ ___________________________ Signature(s) of Investor(s) Joint Signature ___________________________ ___________________________ Date Address If the purchaser is a PARTNERSHIP, CORPORATION, TRUST, LIMITED LIABILITY COMPANY or LIMITED LIABILITY PARTNERSHIP: ___________________________ ___________________________ Name of Partnership, Federal Taxpayer Corporation, Trust, Limited Identification Number Liability Company or Limited Liability Partnership Address: By:___________________________ ___________________________ Name: ________________________ State of Organization Title:________________________ SUBSCRIPTION FOR ___ UNITS ACCEPTED AND AGREED TO this ___ day of _______ 2004. Wireless Frontier Internet, Inc. By:__________________________________ Name: Title: EX-4.2 3 kl08054_ex4-2.txt Exhibit 4.2 THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT. COMMON STOCK PURCHASE WARRANT To Purchase ___________________ Shares of Common Stock of Wireless Frontier Internet, Inc. THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, [____________________] (the "Holder"), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after ________, 2004 (the "Initial Exercise Date") and on or prior to the close of business on the fifth anniversary of the Initial Exercise Date (the "Termination Date") but not thereafter, to subscribe for and purchase from Wireless Frontier Internet, Inc., a Delaware corporation (the "Company"), up to ______________ shares (the "Warrant Shares") of Common Stock, par value $0.001 per share, of the Company (the "Common Stock"). The purchase price of one share of Common Stock (the "Exercise Price") under this Warrant shall be $0.15 subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. This Warrant is one of a series of similar warrants (the "Warrants") issued pursuant to those certain Subscription Agreements, dated the Initial Exercise Date, by and among the Company and the Holder and the Company and certain other investors (each, a "Subscription Agreement" and collectively, the "Subscription Agreements"), providing for the issuance of Common Stock and Warrants by the Company to the Holder and such other investors. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Subscription Agreements. 1 1. Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company. 2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant in accordance with the terms hereof, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 3. Exercise of Warrant. (a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier's check drawn on a United States bank or by means of a cashless exercise pursuant to Section 3(c), the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased hereunder shall be delivered to the Holder within three (3) trading days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. If the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 3(a) by the third trading day after the date of exercise, then the Holder will have the right to rescind such exercise. (b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. (c) If at any time after one year from the date of issuance of this Warrant there is no effective registration statement registering the resale of the Warrant Shares by the Holder, this Warrant may also be exercised, in whole or in part, at any time prior to 2 the Termination Date at which time there is no effective registration statement registering the resale of the Warrant Shares by the Holder, by means of a "cashless exercise" in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where: (A) = the closing bid price on the trading day preceding the date of such election; (B) = the Exercise Price of the Warrants, as adjusted; and (X) = the number of Warrant Shares issuable upon exercise of the Warrants in accordance with the terms of this Warrant. 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price. 5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. 6. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof. 7. Transfer, Division and Combination. (a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. 3 (b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. (c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7. (d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants. (e) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions and reasonably acceptable to the Company) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act. 8. No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 4 11. Adjustments of Exercise Price and Number of Warrant Shares. (a) The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) Exercise Price Adjustment. If the Company at any time prior to the third anniversary of the Initial Exercise Date shall issue, or be deemed to have issued, Additional Shares of Common Stock (as hereinafter defined) without consideration or for consideration per share of Common Stock less than the then applicable Exercise Price (the "Dilutive Price") in effect immediately prior to such issuance, then forthwith upon the occurrence of any such event (the "Dilutive Event") the Exercise Price shall be reduced so that the Exercise Price in effect immediately following the Dilutive Event will equal (i) in the event the Dilutive Event shall occur at any time prior to the first anniversary of the Initial Exercise Date, the Dilutive Price; and (ii) in the event the Dilutive Event shall occur at any time on or after the first anniversary of the Initial Exercise Date and prior to the third anniversary of the Initial Exercise Date, a fraction, (x) the numerator of which shall be (1) the total number of shares of Common Stock Outstanding immediately prior to the issuance of such Additional Shares of Common Stock, plus (2) the number of shares of Common Stock which the consideration, if any, received by the Company for the total number of such Additional Shares of Common Stock so issued upon such issuance would purchase at the Exercise Price in effect immediately prior to such issuance, and (y) the denominator of which shall be (1) the number of shares of Common Stock Outstanding immediately prior to the issuance of such Additional Shares of Common Stock, plus (2) the number of such Additional Shares of Common Stock so issued. For the avoidance of doubt, in no event shall the Exercise Price be adjusted pursuant to this Section 11(b) as a result of any issuances of Additional Shares of Common Stock at any time on or after the third anniversary of the Initial Exercise Date. For purposes of this Section 11(b), "Common Stock Outstanding" as of a given date shall be the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding. 5 (c) As used herein: "Additional Shares of Common Stock" shall mean all shares of Common Stock issued or deemed to be issued by the Company after the date hereof which represent a Dilutive Event. If the Company issues any Options or Convertible Securities (as hereinafter defined), the maximum number of shares of Common Stock issuable thereunder, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, if the consideration per share of such Additional Shares of Common Stock (as hereinafter determined) is less than the then-applicable Exercise Price, until such time as such Options or Convertible Securities shall terminate or be exercised or converted into Common Stock, at which time the number of shares of Common Stock actually thereupon issued shall be deemed to be Additional Shares of Common Stock. The Company shall be deemed to have issued the maximum number of shares of Common Stock potentially underlying any Options or Convertible Securities. Notwithstanding the foregoing, no issuance or deemed issuance nor Common Stock or options or warrants to purchase Common Stock issued to (i) officers, directors or employees of or consultants to the Company pursuant to any compensation agreement, plan or arrangement or the issuance of Common Stock upon the exercise of any such options or warrants, provided such securities were issued prior to the date hereof or pursuant to a stock option plan that was approved by the board of directors (ii) upon conversion of existing convertible securities outstanding as of the date hereof; (iii) upon exercise of outstanding warrants existing as of the date hereof, this Warrant or any other Warrants; (iv) an institution or bank lender in connection with a loan transaction or equipment lease; and (v) to any persons or entities as consideration for an acquisition by the Company of any entity or business, or other similar transaction, approved by the board of directors shall be deemed the issuance of Additional Shares of Common Stock. "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. "Convertible Securities" shall mean any evidences of indebtedness, shares (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Common Stock. (d) With respect to Options and Convertible Securities, "Consideration" per share of Additional Shares of Common Stock shall be determined by adding (x) the aggregate consideration received upon issuance of the Options or Convertible Securities and (y) the minimum possible consideration per share that would be received per share upon the exercise, conversion or exchange of such Options or Convertible Securities for shares of Common Stock, divided by the number of shares receivable upon the exercise or conversion thereof. 6 (e) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant this Section 11, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. 12. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 13. Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 14. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which 7 notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. 15. Notice of Corporate Action. If at any time: (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or, (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially affected thereby, as for example in the case of a merger to effect a change of domicile), the Company shall give to Holder (i) at least 20 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d). 16. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares 8 upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 17. Miscellaneous. (a) Jurisdiction. This Warrant shall constitute a contract under the laws of New York, without regard to its conflict of law, principles or rules. (b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws. (c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 9 (d) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement. (e) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. (f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. (h) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. (i) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. (j) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. ******************** 10 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. Dated: _____________, 2004 Wireless Frontier Internet, Inc. By:_______________________________________ Name: Title: 11 NOTICE OF EXERCISE To: Wireless Frontier Internet, Inc. (1) The undersigned hereby elects to purchase ________ Warrant Shares of Wireless Frontier Internet, Inc. pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price, together with all applicable transfer taxes, if any. (2) Payment shall take the form of (check applicable box): [ ] in lawful money of the United States; or [ ] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 3(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3(c). (3)___Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: Name: ___________________________________ Address: ___________________________________ SS or Tax ID number: ___________________________________ The Warrant Shares shall be delivered to the following: _____________________________________ _____________________________________ _____________________________________ [Warrant holder] By: ______________________________ Name: Title: Dated: ___________________________ ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is _______________________________________________________________. _______________________________________________________________ Dated: ______________, _______ Holder's Signature: _____________________________ Holder's Address: _____________________________ _____________________________ Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-4.3 4 kl08054_ex4-3.txt Exhibit 4.3 THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT. COMMON STOCK PURCHASE WARRANT To Purchase ______ of Common Stock of Wireless Frontier Internet, Inc. THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Casimir Capital LP (the "Holder"), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after ______ __, 2004 (the "Initial Exercise Date") and on or prior to the close of business on the fifth anniversary of the Initial Exercise Date (the "Termination Date") but not thereafter, to subscribe for and purchase from Wireless Frontier Internet, Inc., a Delaware corporation (the "Company"), up to ______ shares (the "Warrant Shares") of Common Stock, par value $0.001 per share, of the Company (the "Common Stock"). The purchase price of one share of Common Stock (the "Exercise Price") under this Warrant shall be $0.15 subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. This Warrant is one of a series of similar warrants (the "Warrants") issued pursuant to those certain Subscription Agreements, dated the Initial Exercise Date, by and among the Company and the Holder and the Company and certain other investors (each, a "Subscription Agreement" and collectively, the "Subscription Agreements"), providing for the issuance of Common Stock and Warrants by the Company to the Holder and such other investors. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Subscription Agreements. 1 1. Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company. 2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant in accordance with the terms hereof, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 3. Exercise of Warrant. (a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier's check drawn on a United States bank or by means of a cashless exercise pursuant to Section 3(c), the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased hereunder shall be delivered to the Holder within three (3) trading days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. If the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 3(a) by the third trading day after the date of exercise, then the Holder will have the right to rescind such exercise. (b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. (c) This Warrant may also be exercised, in whole or in part, at any time on or after the Initial Exercise Date by means of a "cashless exercise" in which the Holder 2 shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where: (A) = the closing bid price on the trading day preceding the date of such election; (B) = the Exercise Price of the Warrants, as adjusted; and (X) = the number of Warrant Shares issuable upon exercise of the Warrants in accordance with the terms of this Warrant. 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price. 5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. 6. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof. 7. Transfer, Division and Combination. (a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. (b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice 3 specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. (c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7. (d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants. (e) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions and reasonably acceptable to the Company) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act. 8. No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 11. Adjustments of Exercise Price and Number of Warrant Shares. 4 (a) The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) Exercise Price Adjustment. If the Company at any time prior to the third anniversary of the Initial Exercise Date shall issue, or be deemed to have issued, Additional Shares of Common Stock (as hereinafter defined) without consideration or for consideration per share of Common Stock less than the then applicable Exercise Price (the "Dilutive Price") in effect immediately prior to such issuance, then forthwith upon the occurrence of any such event (the "Dilutive Event") the Exercise Price shall be reduced so that the Exercise Price in effect immediately following the Dilutive Event will equal (i) in the event the Dilutive Event shall occur at any time prior to the first anniversary of the Initial Exercise Date, the Dilutive Price; and (ii) in the event the Dilutive Event shall occur at any time on or after the first anniversary of the Initial Exercise Date and prior to the third anniversary of the Initial Exercise Date, a fraction, (x) the numerator of which shall be (1) the total number of shares of Common Stock Outstanding immediately prior to the issuance of such Additional Shares of Common Stock, plus (2) the number of shares of Common Stock which the consideration, if any, received by the Company for the total number of such Additional Shares of Common Stock so issued upon such issuance would purchase at the Exercise Price in effect immediately prior to such issuance, and (y) the denominator of which shall be (1) the number of shares of Common Stock Outstanding immediately prior to the issuance of such Additional Shares of Common Stock, plus (2) the number of such Additional Shares of Common Stock so issued. For the avoidance of doubt, in no event shall the Exercise Price be adjusted pursuant to this Section 11(b) as a result of any issuances of Additional Shares of Common Stock at any time on or after the third anniversary of the Initial Exercise Date. For purposes of this Section 11(b), "Common Stock Outstanding" as of a given date shall be the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding. (c) As used herein: 5 "Additional Shares of Common Stock" shall mean all shares of Common Stock issued or deemed to be issued by the Company after the date hereof which represent a Dilutive Event. If the Company issues any Options or Convertible Securities (as hereinafter defined), the maximum number of shares of Common Stock issuable thereunder, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, if the consideration per share of such Additional Shares of Common Stock (as hereinafter determined) is less than the then-applicable Exercise Price, until such time as such Options or Convertible Securities shall terminate or be exercised or converted into Common Stock, at which time the number of shares of Common Stock actually thereupon issued shall be deemed to be Additional Shares of Common Stock. The Company shall be deemed to have issued the maximum number of shares of Common Stock potentially underlying any Options or Convertible Securities. Notwithstanding the foregoing, no issuance or deemed issuance nor Common Stock or options or warrants to purchase Common Stock issued to (i) officers, directors or employees of or consultants to the Company pursuant to any compensation agreement, plan or arrangement or the issuance of Common Stock upon the exercise of any such options or warrants, provided such securities were issued prior to the date hereof or pursuant to a stock option plan that was approved by the board of directors (ii) upon conversion of existing convertible securities outstanding as of the date hereof; (iii) upon exercise of outstanding warrants existing as of the date hereof, this Warrant or any other Warrants; (iv) an institution or bank lender in connection with a loan transaction or equipment lease; and (v) to any persons or entities as consideration for an acquisition by the Company of any entity or business, or other similar transaction, approved by the board of directors shall be deemed the issuance of Additional Shares of Common Stock. "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. "Convertible Securities" shall mean any evidences of indebtedness, shares (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Common Stock. (d) With respect to Options and Convertible Securities, "Consideration" per share of Additional Shares of Common Stock shall be determined by adding (x) the aggregate consideration received upon issuance of the Options or Convertible Securities and (y) the minimum possible consideration per share that would be received per share upon the exercise, conversion or exchange of such Options or Convertible Securities for shares of Common Stock, divided by the number of shares receivable upon the exercise or conversion thereof. (e) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant this Section 11, the number of Warrant Shares that may be purchased 6 upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. 12. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 13. Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 14. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other 7 securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. 15. Notice of Corporate Action. If at any time: (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or, (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially affected thereby, as for example in the case of a merger to effect a change of domicile), the Company shall give to Holder (i) at least 20 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d). 16. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as 8 provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 17. Miscellaneous. (a) Jurisdiction. This Warrant shall constitute a contract under the laws of New York, without regard to its conflict of law, principles or rules. (b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws. (c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. (d) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement. 9 (e) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. (f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. (h) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. (i) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. (j) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. ******************** 10 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. Dated: __________, 2004 Wireless Frontier Internet, Inc. By:_______________________________ Name: Title: 11 NOTICE OF EXERCISE To: Wireless Frontier Internet, Inc. (1) The undersigned hereby elects to purchase ________ Warrant Shares of Wireless Frontier Internet, Inc. pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price, together with all applicable transfer taxes, if any. (2) Payment shall take the form of (check applicable box): [ ] in lawful money of the United States; or [ ] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 3(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3(c). (3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: Name: _______________________________ Address: _______________________________ _______________________________ SS or Tax ID number: _____________________________ The Warrant Shares shall be delivered to the following: _____________________________________ _____________________________________ _____________________________________ [Warrant holder] By: ______________________________ Name: Title: Dated: ________________________ ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is _______________________________________________________________. _______________________________________________________________ Dated: ______________, _______ Holder's Signature: _____________________________ Holder's Address: _____________________________ _____________________________ Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-4.4 5 kl08054_ex4-4.txt Exhibit 4.4 July 29, 2004 [NAME] [ADDRESS] Re: Convertible Debenture issued on March 11, 2004 by Wireless Frontier Internet, Inc. (the "Company") to [_____________] (the "Holder") in the original principal amount of $[_________] (the "Debenture") Dear [HOLDER]: Reference is made to the Debenture. The purpose of this letter is to amend certain provisions of the Debenture and warrants to purchase shares of Common Stock of the Company, par value $.001, issued to the undersigned on March 11, 2004 (the "Warrants") pursuant to the terms hereunder. Defined terms not otherwise defined herein shall have the meanings set forth in the Debenture. The Debenture is one of a series of debentures issued to investors (the "Investors") on March 11, 2004, in the original principal amount of $[_________]. In consideration of the premises and the mutual agreements herein contained, you and the Company hereby agree as follows: (i) The undersigned hereby agrees to forbear from the exercise of any and all of its remedies under the Debenture until August 13, 2004. Notwithstanding the foregoing, pursuant to Section 9 of the Debenture, the outstanding balance of the Debenture shall continue to accrue a 3% monthly late payment penalty from April 11, 2004 until the date the Debenture is paid in full. (ii) The undersigned hereby agrees that its Debenture is hereby amended as follows: in the event the Debenture is not paid in full on or prior to August 11, 2004, the Conversion Price of the Debenture shall be reduced to $.05 (after giving effect to all stock splits effected as of the date hereof). (iii) The undersigned hereby agrees that the Warrants are hereby amended as follows: (a) The Exercise Price is hereby reduced to $.05 (after giving effect to all stock splits effected as of the date hereof). (b) In the event all amounts due under the Debenture are not paid in full on or before August 13, 2004, the Exercise Price shall be reduced by $.01 per month effective thereupon. (iv) The undersigned hereby agrees that the payment of all amounts due under its Debenture and the debentures held by the other Investors shall be shared in proportion to the amount owed to each Investor pursuant to their debenture. To the extent that any Investor receives a debenture payment in excess of the payment amount due to such Investor pursuant to such Investor's debenture, the other Investors shall immediately be notified and such excess amounts shall be paid to such parties on a pro-rata basis. If an Event of Default occurs under any Debenture and any Investor collects proceeds pursuant to its rights hereunder and under the debentures, the other Investors shall be immediately notified and such proceeds shall be shared with the other Investors on a pro-rata basis. To the extent that any Investor receives a payment that is in excess of its pro-rata portion of the payment received by all Investors, such excess payment shall be deemed to be held in trust by such Investor on behalf of the other Investors. (v) The Company has paid a nonaccountable expense allowance in an amount equal to $15,000 to Casimir Capital LP, for its expenses in connection herewith. Except as expressly amended herein, all terms and conditions of the Debenture and Warrants shall remain in full force and effect. Please do not hesitate to contact us with any questions. Very truly yours, WIRELESS FRONTIER INTERNET, INC. By: ---------------------------------- Name: Kelly E. Simmons Title: Chief Financial Officer Accepted and agreed to this ___ day of July, 2004: _____________________________ Name: Title: [if applicable] 2 EX-4.5 6 kl08054_ex4-5.txt Exhibit 4.5 July 7, 2004 Wireless Frontier Internet, Inc. 104 West Callaghan Street Fort Stockton, Texas 79735 Gentlemen: I hereby contribute to the capital stock of Wireless Frontier Internet, Inc. (the "Company") thirteen million seven hundred sixty-two thousand one hundred twenty-two (13,762,122) shares (the "Shares") of the common stock, par value $0.001 per share, of the Company held by me, pursuant to the attached Stock Power, and hereby irrevocably surrender any right, title or interest that I have to such Shares. Very truly yours, Alex J. Gonzalez EX-4.6 7 kl08054_ex4-6.txt Exhibit 4.6 July 7, 2004 Wireless Frontier Internet, Inc. 104 West Callaghan Street Fort Stockton, Texas 79735 Gentlemen: I hereby contribute to the capital stock of Wireless Frontier Internet, Inc. (the "Company") eight hundred eight-three thousand three hundred and thirty-four (883,334) shares (the "Shares") of the common stock, par value $0.001 per share, of the Company held by me, pursuant to the attached Stock Power, and hereby irrevocably surrender any right, title or interest that I have to such Shares. Very truly yours, Joe Chris Alexander EX-4.7 8 kl08054_ex4-7.txt Exhibit 4.7 July 7, 2004 Wireless Frontier Internet, Inc. 104 West Callaghan Street Fort Stockton, Texas 79735 Gentlemen: I hereby contribute to the capital stock of Wireless Frontier Internet, Inc. (the "Company") eight hundred eight-three thousand three hundred and thirty-four (883,334) shares (the "Shares") of the common stock, par value $0.001 per share, of the Company held by me, pursuant to the attached Stock Power, and hereby irrevocably surrender any right, title or interest that I have to such Shares. Very truly yours, Ronald J. Marosko, Jr. EX-4.8 9 kl08054_ex4-8.txt Exhibit 4.8 July 7, 2004 Wireless Frontier Internet, Inc. 104 West Callaghan Street Fort Stockton, Texas 79735 Gentlemen: I hereby contribute to the capital stock of Wireless Frontier Internet, Inc. (the "Company") one million one hundred thousand (1,100,000) shares (the "Shares") of the common stock, par value $0.001 per share, of the Company held by me, pursuant to the attached Stock Power, and hereby irrevocably surrender any right, title or interest that I have to such Shares. Very truly yours, Jaime R. Velasco EX-10.1 10 kl08054_ex10-1.txt Exhibit 10.1 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of _________ 2004, among Wireless Frontier Internet, Inc., a Delaware corporation (the "Company"), and the purchasers signatory hereto (each such purchaser is a "Purchaser" and all such purchasers are, collectively, the "Purchasers"). This Agreement is made pursuant to the Subscription Agreement(s), dated as of the date hereof among the Company and each of the Purchasers (the "Subscription Agreement(s)"). The signature of each Purchaser to his, her or its Subscription Agreement is deemed to be, and is effective as, such Purchasers' signature hereto. The Company and the Purchasers hereby agree as follows 1. Certain Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Subscription Agreements shall have the meanings given such terms in the Subscription Agreements. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time. "Holders" shall mean the Purchasers and any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred. "Registrable Securities" shall mean (i) Shares held by the Holders, (ii) the Warrant Shares, (iii) the Common Stock issuable upon exercise of warrants held by Casimir Capital L.P. or its assigns or designees, or (iv) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the stock referenced in (i), (ii) or (iii) above. The terms "register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement. "Registration Expenses" shall mean all expenses incurred by the Company in compliance with the registration obligation of the Company, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company. "Restricted Securities" shall mean the securities of the Company required to bear or bearing the legend set forth in Section 3 hereof. "Selling Expenses" shall mean all underwriting discounts, selling commissions and expense allowances applicable to the sale of Registrable Securities and all fees and disbursements of counsel for any Holder. 2. Restrictions on Transferability. The Securities and any other securities issued in respect of the Securities upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall not be transferred except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. Any transferee of such securities shall take and hold such securities subject to the provisions and upon the conditions specified in this Agreement. 3. Restrictive Legend. Each certificate representing the Securities, the shares of Common Stock underlying the Warrants and any other securities issued in respect of the Securities upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted or unless the securities evidenced by such certificate shall have been registered under the Securities Act) be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable state securities laws): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. Upon request of Purchaser, the Company shall remove the foregoing legend from the certificate or issue to such holder a new certificate therefor free of any transfer legend, if, with such request, the Company shall have received either an opinion of counsel in form, substance and scope reasonably acceptable to the Company, or the "no-action" letter referred to in Section 4 to the effect that any transfer by such holder of the securities evidenced by such certificate will not violate the Securities Act and applicable state securities laws, unless any such transfer legend may be removed pursuant to Rule 144 or any successor rule, in which case no such opinion or "no-action" letter shall be required. The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement or grant a security interest in some or all of the Registrable Securities and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Registrable Securities to the pledgees or secured parties. If required by the Company's transfer agent in order to effect a pledge, the Company shall cause its counsel, at no cost to the Purchasers, to issue an opinion of counsel to the Company's transfer agent. Further, no notice shall be required of such pledge. At the appropriate Purchasers' expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Registrable Securities, including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder. 2 Certificates evidencing shares of Common Stock (including shares underlying the Warrants) shall not contain any legend (i) following any sale of such shares pursuant to a registration statement or Rule 144, (ii) if such shares are eligible for sale under Rule 144(k), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), as reasonably determined by the Company and its counsel. The Company agrees that following the effective date of the registration statement required to be filed hereunder or at such time as such legend is no longer required, it will, no later than five trading days following the delivery by a Purchaser to the Company or the Company's transfer agent of a certificate representing shares of Common Stock issued with a restrictive legend, deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section. 4. Notice of Proposed Transfers. The holder of each certificate representing Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 4. Prior to any proposed transfer of any Restricted Securities, the holder thereof shall give written notice to the Company of such holder's intention to affect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient detail, and shall be accompanied by either (i) if required, a written opinion of legal counsel to the holder who shall be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act in form, substance and scope reasonable acceptable to the Company or (ii) a "no action" letter from the Commission to the effect that the distribution of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by such holder to the Company. The Company shall promptly cause its legal counsel to deliver, at no charge to the Holder, a written opinion of such legal counsel addressed to the Company's transfer agent (x) in any transaction in compliance with Rule 144 promulgated under the Securities Act, (y) in any transaction in which the Purchaser distributes Restricted Securities solely to its stockholders on a pro rata basis for no consideration or (z) in any transaction in which a holder which is a partnership or limited liability company distributes Restricted Securities solely to its partners or members, as applicable, for no consideration. For the avoidance of doubt, in no event shall such legal counsel be required to deliver any written opinion as contemplated in the preceding sentence if such legal counsel reasonably concludes that it cannot render such opinion. Each certificate evidencing the Restricted Securities transferred as above provided shall bear the restrictive legend set forth in Section 3 above. 5. Registration. (i) The Company shall file a registration statement on Form SB-2 or other appropriate registration document under the Securities Act for resale of Common Stock and shall use its reasonable best efforts to maintain the registration effective until the earliest to occur of (A) the date that is two years following the closing of the transactions contemplated by the Subscription Agreements; (B) the date as of which all the Shares and Warrant Shares held by the 3 Holders may be sold without regard to the volume limitations set forth in Rule 144(e) of the Securities Act; and (C) such date as of which all the Shares and Warrant Shares held by the Holders have been sold (the "Effectiveness Period"). The Company shall file such registration statement as soon as practicable following the last closing of the Offering, but in any event no later than thirty (30) days after the last closing date of the Offering, and shall cause such registration statement to become effective within the earlier of (i) the fifth trading day following the date on which the Company is notified by the Commission that such registration statement will not be reviewed or is no longer subject to further review and comments, (ii) one hundred twenty (120) days after the date of such final closing of the Offering or (iii) ninety (90) days from the date of the filing of such registration statement. (ii) Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 5 in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act. (iii) In the event that the Company fails to file the registration statement pursuant to this Section 5 within thirty (30) days after the last closing date or if such registration statement has not been declared effective within the earlier of (i) the fifth trading day following the date on which the Company is notified by the Commission that such registration statement will not be reviewed or is no longer subject to further review and comments, (ii) ninety (90) days after the date of the filing of such registration statement or (iii) one hundred twenty days (120) after the date of the final closing of the Offering (such failure to file or become effective, an "Event"), the Company shall pay to each such Holder upon the occurrence of each such Event and (y) on each monthly anniversary of the date of each such Event (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, an amount in cash, as liquidated damages and not as a penalty, equal to 2% of the aggregate purchase price paid by such Holder pursuant to its Subscription Agreement. If the Company fails to pay any liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 10% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The liquidated damages pursuant to the terms hereof shall apply on a pro-rata basis for any portion of a month prior to the cure of an Event. (iv) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a registration statement required hereunder, then the Company shall file as soon as reasonably practicable but in any case prior to the 30th day following the date such number is exceeded, an additional registration statement covering the resale by the Holders of not less than all of such Registrable Securities and the Company shall use commercially reasonable efforts to cause such registration statement to be declared effective as soon as reasonably practicable thereafter. 6. Expenses of Registration. The Company shall bear all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Agreement and all underwriting discounts, selling commissions and expense allowances applicable to the sale of any 4 securities by the Company for its own account in any registration. All Selling Expenses shall be borne by the Holders whose securities are included in such registration pro rata on the basis of the number of their Registrable Securities so registered. 7. Indemnification. (i) The Company will indemnify each Holder, each of its officers, directors, agents, employees and partners, and each person controlling such Holder, with respect to each registration, qualification or compliance effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter, and their respective counsel against all claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus prepared by the Company (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading, or any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers, directors, agents, employees and partners, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses as they are reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises primarily and directly out of or is based on any untrue statement (or alleged untrue statement) or omission (or alleged omissions) based upon written information furnished to the Company by such Holder or underwriter and stated to be specifically for use therein. (ii) Each Holder whose Registrable Securities are included in any registration, qualification or compliance effected pursuant to this Agreement will indemnify the Company, each of its directors and officers and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of the Securities Act and the rules and regulations thereunder, each other such Holder and each of their officers, directors and partners, and each person controlling such Holder, and their respective counsel against all claims, losses, damages and liabilities (or actions in respect thereof) arising primarily and directly out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and will reimburse the Company and such Holders, directors, officers, partners, persons, underwriters or control persons for any legal or any other expenses as they are reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus in reliance upon and in conformity with written information 5 furnished to the Company by such Holder and stated to be specifically for use therein; provided, however, that the obligations of such Holders hereunder shall be limited to an amount equal to the net proceeds to each such Holder sold under such registration statement or prospectus as contemplated herein. (iii) Each party entitled to indemnification under this Section 7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense; and provided further that if any Indemnified Party reasonably concludes that there may be one or more legal defenses available to it that are not available to the Indemnifying Party, or that such claim or litigation involves or could have an effect on matters beyond the scope of this Agreement, then the Indemnified Party may retain its own counsel at the expense of the Indemnifying Party; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless and only to the extent that such failure to give notice results in material prejudice to the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (iv) If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 8. Transfer or Assignment of Rights. The benefits to the Holder hereunder may be transferred or assigned by a Holder to a transferee or assignee of any of the Restricted Securities, provided that the Company is given written notice prior to the time that such right is exercised, stating the name and address of said transferee or assignee and identifying the securities with respect to which such 6 registration rights are being transferred or assigned; provided further that the transferee or assignee of such rights assumes in writing the obligations of the Holder under this Agreement. 9. Registration Procedures. In the case of the registration effected by the Company pursuant to this Agreement, the Company will keep each Holder who is entitled to registration benefits hereunder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will: (i) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of securities covered by such registration statement; (ii) Respond as promptly as reasonably possible, and in any event within twenty days, to any comments received from the Commission with respect to a registration statement or any amendment thereto. (iv) Notify the Holders as promptly as reasonably possible and (if requested by any such person) confirm such notice in writing no later than one trading day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a registration statement is proposed to be filed and (B) with respect to a registration statement or any post-effective amendment, when the same has become effective; (v) Furnish such number of prospectuses and other documents incident thereto, including supplements and amendments, as a Holder may reasonably request; and (vi) Furnish to each selling Holder, upon request, a copy of all documents filed with and all correspondence from or to the Commission in connection with any such registration statement other than nonsubstantive cover letters and the like. (vii) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a registration statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (viii) Comply with all applicable rules and regulations of the Commission. (ix) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if requested by the Commission, the controlling person thereof. 10. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of the Restricted Securities to the public without registration, the Company agrees to: 7 (i) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; and (ii) Use its reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. 11. Reporting under the Exchange Act. The Company agrees to take no action designed to, or with the effect of, causing the Company to cease to be subject to the reporting requirements of the Exchange Act for so long as a registration statement under this Agreement is required to be filed or caused to be effective, or shall be required to be or remain effective. 12. Miscellaneous. (i) Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the registration statement required to be filed hereunder other than the Registrable Securities, and the Company shall not after the date hereof enter into any agreement providing to any of its security holders any registration rights having priority over the registration rights granted to the Holders hereunder. The Company shall not file any other registration statement until the initial registration statement required hereunder is declared effective by the Commission. (ii) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the registration statement required hereunder. (iii) Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective registration statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their then- equivalents, relating to equity securities to be issued solely in connection with any acquisition of any entity or business, or equity securities issuable in connection with stock option or other employee benefit plans), then the Company shall send to each Holder written notice of such determination and, if within fifteen days after receipt of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered; provided, that, the Company shall not be required to register any Registrable Securities pursuant to this Section that are eligible for resale pursuant to Rule 144(k) promulgated under the Securities Act. (iv) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Subscription Agreement(s). (v) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior 8 written consent of the Holders of at least sixty-six and two-thirds percent (66-2/3%) of the then-outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the persons as permitted under the Subscription Agreement(s). (vi) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (vii) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. (viii) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (ix) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (x) Independent Nature of Purchasers' Obligations and Rights. The obligations of each Purchaser hereunder is several and not joint with the obligations of any other Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. ******************** 9 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. WIRELESS FRONTIER INTERNET, INC. By: ____________________________________ Name: Title: [REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE] 10 EX-31.1 11 ex31_1.txt EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Alex Gonzalez, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Wireless Frontier Internet, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (c) Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions) (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 18, 2004 By: /s/ Alex J. Gonzalez --------------------------- Alex J. Gonzalez Chief Executive Officer EX-31.2 12 ex31_2.txt EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Kelly Simmons, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Wireless Frontier Internet, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (c) Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions) (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 18, 2004 By: /s/ Kelly E. Simmons ---------------------------------- Kelly E. Simmons Chief Financial Officer EX-32.1 13 ex32_1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Wireless Frontier Internet, Inc. (the "Company") on Form 10-QSB for the fiscal quarter ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alex J. Gonzalez, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Date: August 18, 2004 By: /s/ Alex J. Gonzalez ------------------------------- Alex J. Gonzalez Chief Executive Officer EX-32.2 14 ex32_2.txt Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Wireless Frontier Internet, Inc. (the "Company") on Form 10-QSB for the fiscal quarter ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kelly E. Simmons, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Date: August 18, 2004 By: /s/ Kelly E. Simmons ----------------------------------- Kelly E. Simmons Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----