NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The company was incorporated under the
laws of the State of Oregon on August 29, 1989 as Sunburst Resources Inc. The Company’s products are developed for use in
the military, maritime and commercial markets to be used internationally. WiFi Wireless utilizes GPS (Global Positioning Satellites)
for tracking products used in the shipping and transportation industries as well as applications using current UHF frequencies
enabling WiFi hardware to provide a greater range of service from the POP (“Point of Presence”) versus the conventional
wi-fi (802.11) retail space application.
WiFi Wireless, Incorporated provides
an expanded network technology to the traditional wi-fi (802.11) system. Currently, wi-fi (802.11) systems are confined to “Hot
Spot” locations within a limited radius. WiFi Wireless focuses on “Space-Time” technology applications by using
current UHF frequencies that enable WiFi Wireless’ hardware to provide 10 miles of service from the POP Point of Presence,
rather than the conventional wi-fi (802.11) retail space application. WiFi Wireless utilized a base station antenna with a capacity
that will allow up to 25,000 simultaneous users without degradation in performance. Business franchises can now be part of the
WiFi Wireless network by providing a POP site in one central location, instead of multiple, costly, small networks at a fraction
of the price of current T-Span charges affiliated with standard “Hot Spot” networks.
The Company has a calendar year end
for reporting purposes. The Company’s website address is
www.wifiwirelessinc.net
. The Company’s principal office
location is 65 Enterprise, Aliso Viejo, CA, 92656.
Development Stage Company
The Company is in the development stage
as more fully defined in Statement No. 7 of the Financial Accounting Standards Board. The Company is in the business of researching,
developing and commercializing new technologies. The Company will be devoting all of its resources to the research, development
and commercialization of its technologies.
In a development stage company, management
devotes most of its activities to preparing the business for operations. Planned principal activities have not yet begun. The ability
of the Company to emerge from the development stage with respect to any planned principal business activity is dependent upon its
successful efforts to raise additional equity financing and/or attain profitable operations. There is no guarantee that the company
will be able to raise any equity financing or sell any of its products at a profit. There is, therefore, doubt regarding the Company’s
ability to continue as a going concern.
WiFi WIRELESS, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Use of Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ
materially from these estimates. On an ongoing basis, we expect to evaluate our estimates, including those related to the accounts
receivable and sales allowances, fair values of marketable and non-marketable securities, fair values of intangible assets and
goodwill, useful lives of intangible assets, property and equipment, fair values of options to purchase our common stock, and income
taxes, among others. We expect to base our estimates on historical experience and on various other assumptions that are believed
to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ materially from those estimates. Significant accounting policies and estimates underlying the accompanying financial
statements include:
It is reasonably possible that the estimates
may change in the future.
Cash and Cash Equivalents
The Company considers all highly liquid
debt instruments with original maturities not exceeding three months to be cash equivalents.
Property, Equipment and Depreciation
Property and equipment are recorded
at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial
statement purposes. The Company uses other depreciation methods (generally accepted) for tax purposes where appropriate. Amortization
of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated
useful lives of the improvements.
The estimated useful lives of property
and equipment are as follows:
|
Office Equipment
|
3 – 10 years
|
|
R & D Equipment
|
3 – 10 years
|
Long-Lived Assets Including Goodwill
and Other Acquired Intangible Assets
The Company reviews property and equipment
and intangible assets, excluding goodwill, for impairment whenever events or changes in circumstances indicate the carrying amount
of an asset may not be recoverable. Recoverability of these assets is measured by comparison of carrying amounts to the future
undiscounted cash flows the assets are expected to generate. If property and equipment and intangible assets are considered to
be impaired, the impairment to be recognized equals the amount by which, the carrying value of the asset exceeds its fair market
value. The Company has made no adjustments to long-lived assets in any of the years presented.
WiFi WIRELESS, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets, the Company tests goodwill, if any, for impairment at least annually or more frequently if
events or changes in circumstances indicate that this asset may be impaired.
SFAS No. 142 also requires that intangible
assets with definite lives be amortized over their estimated useful lives and reviewed for impairment whenever events or changes
in circumstances indicate an asset’s carrying value may not be recoverable in accordance with SFAS No. 144, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Intangibles
Intangibles consist of software, including
purchased software, and development of new software products and enhancements to existing software products. Until technological
feasibility is established, costs associated with software development, including costs associated with the acquisition of intellectual
property relating to software development is expensed as incurred. After technological feasibility is established and until the
products are available for sale, software development costs are capitalized and amortized over the greater of the amount computed
using (a) the ratio that current gross revenue for the product bears to the total of current and anticipated future gross revenue
for that product or (b) the straight-line method over the estimated economic life of the product including the period being reported
on. The amortization period has been determined as the life of the product, which is three years.
Revenue Recognition
As the Company is continuing development
of its technologies, no significant revenues have been earned to date. The Company recognizes revenues at the time of delivery
of the product to the customers.
Research and Development costs
charged to Expense as Incurred
Expenditures for research activities
relating to product development and improvement are charged to expense as incurred. Such expenditures amounted to $253,120 since
inception.
Stock Issued in Exchange For Services
The valuation of the common stock issued in exchange for services
is valued at an estimated fair market value as determined by the officers and directors for the Company based upon other sales
and issuances of the Company’s common stock within the same general time period.
Accounting Standards Codification
In September 2009, the Financial Accounting
Standards Board (“FASB”) issued ASC 105, formerly FASB Statement No. 168, the FASB Accounting Standards Codification
(“Codification”) and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”), a replacement
of FASB Statement No. 162 (“SFAS 168”). SFAS 168 establishes the Codification as the single source of authoritative
GAAP in the United States, other than rules and interpretive releases issued by the SEC. The Codification is a reorganization of
current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes instead two levels of guidance —
authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature that is not included in the Codification
will become non-authoritative. The FASB’s primary goal in developing the Codification is to simplify user access to all authoritative
GAAP by providing all the authoritative literature related to a particular accounting topic in one place. The Codification was
effective for interim and annual periods ending after September 15, 2009. As the Codification was not intended to change or alter
existing GAAP, it did not have a material impact on the Company’s consolidated financial statements.
WiFi WIRELESS, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Effect of Recent Accounting Pronouncements
The Company reviews new accounting standards
as issued. No new standards had any material effect on these consolidated financial statements. The accounting pronouncements issued
subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential
effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a
material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement
of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent
to June 30, 2012 through the date these financial statements were issued.
Litigation
The Company may be subject to various
claims and pending or threatened lawsuits in the normal course of business. Management believes that the outcome of any such lawsuits
would not have a materially adverse effect on the Company’s financial position, results of operations or cash flows.
Legal Costs
Legal costs are expensed as incurred.
Advertising and Promotional Expenses
Advertising and promotional costs are
expensed as incurred.
Retired Administrative Staff
In April 2008, WiFi Wireless, Inc. retired
our internal administrative staff in order to achieve a reduction in overhead expenses. However, WiFi continues to maintain its
office sites. WiFi maintained financial stability and continued current on all of its monthly expenses with an ongoing loan agreement
with a privately held LLC. After April 2008, the company outsourced all administrative work on a per-job basis, and submits these
expenses for payment through an LLC loan agreement.
WiFi WIRELESS, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
General Comment on Contingencies
Certain conditions may exist as of the
date the Financial Statements are issued, which may result in a loss to the company but which will only be resolved when one or
more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities,
and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that
are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates
the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s Financial Statements. If the assessment indicates that a potentially material
loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
NOTE 2 – GOING CONCERN
WiFi Wireless’ financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments
in the normal course of business for the foreseeable future. Since inception in August 1989, WiFi Wireless has accumulated losses
aggregating $4,809,551 of which $1,982,799 is related to stock-based payments for services.
Management’s plans for WiFi Wireless’
continued existence include selling additional stock or borrowing additional funds to pay overhead expenses while current marketing
efforts continue to raise its prospects of future sales. There is no guarantee that either of these efforts will be successful
in the future.
NOTE 3 – RELATED PARTY TRANSACTIONS
Related Parties Reimburse the
Company for Operating Expenses – Loan from Shareholder
A major shareholder reimburses the Company
for certain operating expenses. These expenses generally consist of salaries and related benefits paid to corporate personnel,
rent, data processing services, and other corporate facilities costs. The Company provides engineering, marketing, administrative,
accounting, information management, legal, and other services during their operations. All amounts paid by the shareholder are
recorded under shareholder loans and are payable under the specific terms of the loan. As of September 30, 2012, the amount of
shareholder loans payable was $348,327.
Patents – Intangible Assets
/ Affiliated Company
The Company plans to utilize certain
technology patents for use in its operations. These patents are controlled and owned by an affiliated company. The Company is dependent
on certain patents from an affiliated company for the development of its products. These patents are pending as of September 30,
2012.
WiFi WIRELESS, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Companies under Common Control
May Experience Change in Operations
The Company’s majority shareholder
also controls other entities whose operations are similar to those of the Company. Although there were no transactions between
the Company and these entities as of September 30, 2012, the majority shareholder is, nevertheless, in a position to influence
the sales volume of the company for the benefit of the other entities that are under his control.
NOTE 4 – INCOME TAXES
Deferred income taxes reflect the tax
effect of the temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and
the amounts used for tax purposes. The components of the net deferred income tax assets are as follows:
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
CURRENT
|
|
$
|
-0-
|
|
|
DEFERRED
|
|
$
|
1,610,066
|
|
|
Allowance for realization
|
|
$
|
1,610,066
|
|
|
Total Deferred Income Tax Benefit
|
|
$
|
-0-
|
|
Realization of the Deferred Income
Tax Asset is Dependent on Generating Future Taxable Income
Background
Deferred tax assets arise when a company’s
financial statements recognize charges or expenses that, for income tax purposes, will not be allowed as deductions until future
periods. For example, when a corporation incurs an expense in its financial statements, such as certain restructuring type charges,
that it is not allowed to deduct on its federal tax return until paid in the future, the future tax benefit of that expense is
generally recorded in the income statement as a reduction of income tax expense and in the balance sheet as a tax asset. The same
general treatment applies to the carry forward of unused net operating losses and unused tax credits. Deferred tax assets are often
netted with deferred tax liabilities when presented in the balance sheet and are referred to as net deferred tax assets.
Under FAS 109, Accounting for Income
Taxes, a net deferred tax asset may only be carried on the balance sheet at its full value if it is more likely than not that the
deductions, losses, or credits giving rise to such deferred tax asset will be used in the future. If the more likely than not test
is not met, then a valuation allowance is required to be recorded against the net deferred tax asset.
WiFi WIRELESS, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
A valuation allowance creates a charge
to income tax expense in the income statement and a reduction of an asset on the balance sheet, in the period it is recorded. Common
practice would support a determination that a corporation with two or more consecutive years of significant losses is presumed
to fail the more likely than not test. Because of the Company’s losses in recent years the Company has examined the value
of its deferred tax assets and felt it was appropriate to record a valuation allowance against a major portion of them. The valuation
allowance essentially reduced the Company’s deferred tax asset to zero. The effect was to reverse the benefit of those deferred
tax assets that were recorded in prior years’ income statements and balance sheets. Consequently, these tax benefits will
be available in the future to reduce our income tax expense when we have positive income to use the tax benefits, or we have sufficient
deferred tax liabilities to absorb the tax assets.
Realization of the deferred income tax
asset is dependent on generating sufficient taxable income in future years. Although realization is not assured, management believes
it is more likely than not that all of the deferred income tax assets will be realized. The amount of the deferred income tax assets
considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.
As of December 31, 2011, the Company’s
net operating loss carry forwards for income tax purposes were approximately $4,735,489. If not utilized, they will start to expire
in twenty years or 2026 for federal purposes and ten years or 2016 for state purposes.
NOTE 5 – COMMITMENTS AND
CONTINGENCIES
The Company leases certain business
facilities on a month-to-month basis. The Company also rents various equipment on an “as-needed” basis. Current year
lease expense for both facilities and equipment are as follows:
|
Current Year to Date
|
|
Amount
|
|
|
|
|
|
|
|
Facilities
|
|
$
|
3,767
|
|
|
Equipment
|
|
|
7,107
|
|
|
TOTAL LEASE EXP
|
|
$
|
10,874
|
|
The Company is utilizing, through what
is currently a month-to-month rental agreement, a 38-foot tour bus which will be used to market and promote new products and services
as they are brought to market. Monthly rental payments have been disbursed thru July 2012. The Company is contemplating a purchase
or long term lease of this vehicle, however at this time that transaction has not occurred.
NOTE 6 – CHANGE IN SECURITIES
During the period from July 1, 2012
to September 30, 2012 the Company did not issue any shares of common stock. The Company did not retire any shares of common stock
during this period.
WiFi WIRELESS, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
As of September 30, 2012, there were 59,350,466 shares of
common stock issued and outstanding, of which 13,940,568 shares are restricted and 45,409,898 shares are non-restricted. Total
shares authorized are 100,000,000.
INFORMATION AND DISCLOSURE STATEMENT
SEPTEMBER 30, 2012