Item
|
Description
|
|
||
|
PART
I - FINANCIAL INFORMATION
|
||||
|
ITEM
1.
|
|
|||
|
ITEM
2.
|
|
|||
|
ITEM
3.
|
|
|||
|
|
||||
|
PART
II - OTHER INFORMATION
|
||||
|
ITEM
1.
|
|
|||
|
ITEM
2.
|
|
|||
|
ITEM
3.
|
|
|||
|
ITEM
4.
|
|
|||
|
ITEM
5.
|
|
|||
|
ITEM
6.
|
|
Calypso Wireless, Inc - Recent Material EventPART
I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The
preparation of financial statements in conformity with generally accepted
accounting principles require the appropriate application of certain accounting
policies, many of which require us to make estimates and assumptions about
future events and their impact on amounts reported in the financial statements,
and related notes. Since future events and their impact cannot be determined
with certainty, the actual results will inevitably differ from our estimates.
Such differences could be material to the financial statements.
We
believe application of accounting policies, and the estimates inherently
required by the policies, are reasonable. These accounting policies and
estimates are periodically reevaluated, and adjustments are made when the facts
and circumstances dictate a change. Our accounting policies are more fully
described in note 1 to the notes to consolidated financial statements,
contained in this Form 10-QSB.
The
company’s financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The company is in the development stage and has
primarily been involved in research and development and capital raising
activities; as such the company has incurred losses from operations in 2006 and
year to date 2007. As a result the company has a need for capital to continue
its operations, and it will need to raise additional funds to implement its
business plan. Management believes that actions presently being taken to obtain
additional debt and/or equity financing will provide the opportunity to continue
as a going concern. Our Auditor’s opinion letter for the year ended December 31,
2006 included a modification related to our ability to continue as a going
concern.
The
Registrant's financial statements for the three and nine month periods ended
September 30, 2007 and 2006, as restated, are attached to this quarterly
report.
Consolidated
Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATION
Forward-Looking Statements;
Market Data
As used
in this Quarterly Report, the terms "we", "us", "our" "CLYW" and the "Company"
means Calypso Wireless, Inc., a Delaware corporation, and its subsidiaries,
Industria de Telecomunicaciones Americanas ATEL, S.A. To the extent that we make
any forward-looking statements in the "Management's Discussion and Analysis of
Financial Condition or Plan of Operations" in this Quarterly Report, we
emphasize that forward-looking statements involve risks and uncertainties and
our actual results may differ materially from those expressed or implied by our
forward-looking statements. Important factors to consider in evaluating such
forward-looking statements include (i) changes in external factors or in our
internal budgeting process which might impact trends in our results of
operations; (ii) unanticipated working capital or other cash requirements; (iii)
changes in our business strategy or an inability to execute our strategy due to
unanticipated changes in the industries in which we operate; and (iv) various
competitive market factors that may prevent us from competing successfully in
the marketplace. Our forward-looking statements in this Quarterly Report reflect
our current views about future events and are based on assumptions and are
subject to risks and uncertainties. Generally, forward-looking statements
include phrases with words such as "expect", "anticipate", "intend", "plan",
"believe", "seek", "estimate" and similar expressions to identify
forward-looking statements.
Company
History
Calypso
Wireless, Inc. (the "Company", "we", "Calypso" or Calypso Wireless), formerly
Kleer-Vu Industries, Inc. (Kleer-Vu), was incorporated in the State of Delaware
on March 22, 1983. The Company operates as a holding company with three
subsidiaries, Industria de Telecomunicaciones Americanas ATEL, S.A. (American
Telecom Industries ATEL, S.A.), which was incorporated in 1997 under the Laws of
the Republic of Costa Rica; Sleipner, S. A. which was incorporated in 2003 under
the laws of Switzerland and doing business in Milan, Italy; and Calypso
Technology Holdings, Inc which was incorporated in 2006 in the State of
Florida.
The
Company is a result of a business combination on October 4, 2002, between
Kleer-Vu Industries, Inc., a public shell company, and Calypso Wireless, Inc., a
privately held development stage company incorporated in the State of Florida in
1998. Kleer-Vu acquired all of the outstanding capital stock of Calypso
Wireless, Inc. by issuing 90,000,000 shares of its restricted common stock. For
accounting purposes, the acquisition has been treated as the recapitalization of
Calypso Wireless, Inc., with Calypso Wireless, Inc. being deemed the acquirer of
Kleer-Vu in a reverse merger. At the conclusion of the merger, Calypso Wireless,
Inc. stockholders held 99.8% of the combined company. The Company is a
development stage company. The company has been in the development stage since
inception of its wholly owned subsidiary; Industria de Telecomunicaciones
Americanas ATEL, S.A. (American Telecom Industries ATEL, S.A.) which was
incorporated in 1997 under the Laws of the Republic of Costa Rica. American
Telecom Industries ATEL, S.A. began its research and development activities in
1997. In July, 2006, Calypso Wireless acquired a 16.8% interest in RV Technology
Ltd. (RV Technology). RV Technology is a limited company under the laws of Hong
Kong. The company is privately held. In October, 2006 Calypso acquired Sleipner
S. A. to obtain software to complement ASNAP. In September, 2006 the board of
Directors authorized the creation of a wholly owned subsidiary Calypso
Technology Holding, Inc. which was incorporated in Florida to explore a proposed
contract with VoipTel to propose on a contract in Argentina that would have
Calypso providing a dual mode device operating on GSM and Wi-Fi in 802.11a
standard (5Ghz). Calypso Technology Holdings received $10,000 Buenos Aires
VoipTel the prime bidder to travel to Argentina and assist in the proposal
to the Argentina government officials. VoipTel has not received the frequencies
required to proceed with any work. There was no other activity in Calypso
Technology Holdings.
Calypso
Wireless received a patent for its technology (U.S. Patent Number: 6,680,923) on
January 20, 2004. Our patent covers a communication and system method for
establishing communication with any one of a variety or different wireless
communication devices. The ASNAP™ technology enables seamless session
transparency of all sessions, voice/video/data across antennae on dual mode cell
phones, WiFi and macro-cellular, as well as across devices-residential,
enterprise to macro networks (cellular phones, WiFi enabled PCs/TVs/Stereos,
Satellite devices, and wireline devices). Additionally the ASNAP™ patent covers
Revenue Settlements with in-building networks to macro-network
carriers.
Overview
Calypso Wireless’ has developed and
patented technology that spans voice, video and data session transparency across
macro-cellular networks and wireless local area
networks. During 2007, Calypso began the development of
a test unit with a large US based network company. in Boca Raton,
Florida. Upon completion of the test unit, using the Calypso ASNAP
technology, the companies expect to conduct a field trial with a large GSM
wireless carrier. Further, the Company has been in
discussion with companies regarding licensing. It is now shifting
from pure research and development to beginning to work with companies regarding
licenses. This was previously reported as the new business model for
Calypso.
Fixed-mobile
convergence (FMC) technology allows individuals to unite their mobile and
business or home communications under a single phone number and voicemail system
by using a combination of software, hardware and wireless services to register
multiple handsets with a system. Proponents of FMC include mobile OEMs such as
Motorola, Nokia and Sony Ericsson along with carriers such as AT&T Wireless,
Cingular Wireless and T-Mobile all of which are supporting a mobile-centric
model. Unlicensed Mobile Access (UMA) would allow cellular GSM (Global System
for Mobile Communications) and GPRS (General Packet Radio Service) transmissions
to travel over broadband networks operating in unlicensed radio bands. Dual-mode
handsets would be able to seek out public and private wireless broadband
internet networks (Wi-Fi and potentially WiMAX) and switch transmissions over to
those networks to improve coverage or reduce airtime costs.
Facilities
January
1, 2007 Calypso entered into a lease to occupy office space at 2500 N. W.
79th
Ave., Doral, FL 33122, Suite 220. The terms are $3600 per month from January 1,
2007 to December 31, 2008. This new lease reduces operating costs.
Results of
Operations
Three Months and Nine Months
Ended September 30, 2007 Compared to Three and Nine Months Ended September 30,
2006
The third
quarter of 2007 was devoted to pursuing contracts for licensing. The
Company is having considerable difficulty in obtaining contracts due to the Daic
judgment.
Revenues: During the three
month and nine month period ended September 30, 2007 and 2006, the Company did
not generate any revenues related to the sale of its products.
Operating expenses: Operating
expenses incurred for the three and nine month periods ended September 30, 2007,
were $901,421 and $1,816,278 compared to $1,439,044 and $4,127,820 for the three
and nine months ended September 30, 2006. Operating expenses, for the three
month period ended September 30, 2007, is in line with the reduced expenses over
the last year and consist primarily of depreciation and amortization - non-cash
expenditures. Expenses for the nine month period ending September 30,
2007 have been substantially reduced due to cost reductions over the past
year. Cash operating expenses were primarily for significantly
reduced staff and rent.
Net Loss and Loss Per Share:
The Company's net loss for the three and nine months ended September 30, 2007,
were $901,421 and $1,816,278 compared to $1,439,044 and $4,127,820 for the three
and nine month periods ended September 30, 2006. For the three and nine months
ended September 30, 2007, the net loss per share was $0.00 and $0.01 compared to
$0.01 and $0.03 for the three and nine months ended September 30, 2006. The net
loss for the nine months ended September 30, 2007 is substantially reduced from
September 30, 2006 and includes $677,438 of depreciation
and amortization and $473,531 in loss on sale of assets, both noncash
expenses.
Off-Balance Sheet
Arrangements: The Company had no off-balance sheet arrangements for the
three month period ended September 30, 2007
Liquidity and Capital
Resources
At
September 30, 2007, we had a working capital deficit of $1,293,899 compared to a
negative working capital of $1, 008,986 at June 30, 2007, as restated, and
$1,090,835 at December 31, 2006, as restated. The Company's cash position at
September 30, 2007 was $11,950 compared to $13,562 at June 30, 2007 and $4,609
at December 31, 2006, as restated. Calypso did not generate any revenue in this
quarter from operations. Through September 30, 2007, the Company has raised
$160,000 in private placement offerings for working capital purposes and
received loans of $528,500. The Company has experienced
difficulty attracting investment due to the Daic lawsuit. However the
company has received approximately $315,000 in convertible debt collateralized
by the patents during the period November to date.
ITEM 3. CONTROLS AND
PROCEDURES
Evaluation of disclosure controls
and procedures. As of September 30, 2007, the Company's chief executive
officer and chief financial officer conducted an evaluation regarding the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the
evaluation of these controls and procedures, our chief executive officer and
chief financial officer concluded that our disclosure controls and procedures
were not effective as of the end of the period covered by this
report.
Changes in internal controls.
During the quarterly period covered by this report, no changes occurred in our
internal control over financial reporting that materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On
November 5, 2004, Drago Daic d/b/a Tribeca Inc, filed a lawsuit against the
Company alleging that the Company delivered restricted shares rather than
registered shares in a stock purchase; that he was assigned an interest in a
lawsuit and the Company refused to acknowledge his interest; that he was hired
to assist in obtaining the grant of a patent in exchange for 4,500,000 shares.
The Company disputes the claims. The company never issued
any shares to Mr. Daic; at the time Mr. Daic alleges and interest in litigation
the Company was not pursing litigation against anyone; the
Company never signed a contract for assistance with the patent and
the Company used its attorneys Malloy & Malloy to obtain such patent. The
Daic lawsuit is based on unsigned agreements and alleged
oral contracts. In Texas, drafts, all of which are unsigned, verbal
contracts may be enforceable. No court has ever decided the Daic case on the
merits. The Company had retained outside counsel and had diligently defended the
case. At some point there were problems scheduling depositions for witnesses and
other issues complicated the case, including the Company’s outside counsel
withdrawing as counsel shortly prior to the scheduled trial date. At the time,
our former CEO, Mr. Cristian Turrini, was Vice President and his duties and
responsibilities included, among things handling legal affairs on behalf
of the Company, assumed responsibility for the administration of the
case on behalf of the Company. Due to a purported scheduling issue, Mr. Turrini,
who later become our CEO until his termination in December 2007,
, failed to appear in Court on the trial date and failed to retain
new counsel in time for the trial date. As a result of Mr. Turrini’s above-noted
failures, the Court entered a default judgment in favor of the
Plaintiffs in the amount of approximately $83 million. In general terms, damages
were based on the price of the stock at the time it was allegedly promised to
Daic, approximately $6.00, plus treble damages. The judgment awarded Plaintiffs
an additional approximately $34 million in attorney’s fees for a total judgment
of $117,000,000. Thereafter, the Company engaged an attorney who
filed a petition for a Bill of Review, in the following matter Calypso Wireless, Inc. v. Drago
Daic, Cause No. 2007-22571 in the 151st District Court of Harris County,
Texas. This allows the Company to challenge the validity of the
judgment on the merits. The parties have engaged in settlement
discussions; however Mr. Daic filed a Motion for Summary Judgment and a Motion
for Turnover. On February 12, 2008, Mr. Daic’s Motion for Summary
Judgment, the court did not rule on the motion. The judge did not
grant the Company’s Motion for Continuance and the trial is set for March 3,
2008. The Company will continue its efforts to settle the matter
prior to trial. However, there can be no assurance that the Company will prevail
in the trial or the amount of damages that may be granted to Plaintiffs if the
Company does not prevail. The Company is in discussions with parties who may
invest the funds required to settle the Daic lawsuit subject to Mr Daic's
aggrement. If these discussions are not successful, the company may be forced to
consider other options which may include bankruptcy.
On
October 6, 2006, Robert Leon, the Company's former Chief Technology Officer,
commenced an action against the Company seeking additional compensation and
reimbursement of certain expenses. On September 23, 2006, the Company agreed to
a Stipulated Settlement Agreement, General Release and Proposed Order for the
payment of $70,000 and issuance of 150,000 shares of stock. The shares have been
issued, however payment of the cash portion has not been made. The amount is
accrued in the financial statements as presented.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
During
the third quarter of 2007, the Company did not issue any unregistered
shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
ITEM 5. OTHER INFORMATION
On
November 18, 2007, the Board of Directors appointed Ms. Cheryl L. Dotson to the
Board of Directors.
On
December 3, 2007, pursuant to the Board's resolution to terminate Mr.
Turrini passed in November, the Registrant's Board of Directors appointed George
Schilling as interim president and chief executive officer. Mr.
Schilling previously served as the Registrant's president and chief
executive officer of the Registrant from December 2004 through August
2005.
On
December 6, 2007, the Registrant's board of directors terminated Mr.
Cristian Turrini as the Registrant’s chief executive officer and president. The
termination was the result of an internal investigation, with the assistance of
outside counsel, that disclosed that Mr. Turrini breached the terms of his
employment agreement and breached his fiduciary duty to the Registrant by, among
other things, authorizing the issuance of shares without board approval to
two entities, Baxter Technologies and Voice to Phone. The issuance of the shares
to the two entities was without the approval of and in direct contravention of
the directives of the Registrant’s Board of Directors. Our auditors have been
informed of the reasons for the termination.
On or
about March 1, 2007, Calypso entered into an Executive Employment Agreement with
Turrini (the “Agreement”) pursuant to which Turrini was appointed as Calypso’s
CEO and President, having previously served as Vice President, and
earlier served as executive assistant to the General Counsel. The
Agreement provided, among other things, that Turrini could not: act in any way
that would be detrimental to Calypso; commit any act that constituted a conflict
of interest; and authorize the issuance of any shares without the prior approval
of the Board of Directors. Notwithstanding the express terms of his Agreement,
Turrini materially breached the Agreement by the following acts, among
others:
(i) on or
about May 15, 2007, without Board authorization or knowledge, Turrini caused
Calypso to enter into a Patent Purchase Agreement with Voice to Phone (the
“Patent Agreement”), which provided that Voice to Phone assign to Calypso
its interest in the Patents in consideration
for Calypso issuing 5,000,000 shares of Calypso common
stock . Calypso’s Board never authorized and had no prior knowledge that Turrini
caused Calypso to enter into the Patent Agreement. In addition, we
believe that Turrini and Michael Brennan are control shareholders of Voice
to Phone and that Turrini organized Voice to Phone in order to divert assets
from Calypso to Turrini and Brennan to the detriment of Calypso.
(ii)
Without the knowledge of the Calypso Board, Turrini, acting on behalf of Voice
to Phone, acquired the Patents from Baxter Technologies PTE LTD (“Baxter”) in
consideration for issuing Baxter 1,000,000 shares of Calypso common stock and
paying Baxter $75,000. On or about April 30, 2007, Baxter assigned the Patents
to Voice to Phone. Turrini, acting on behalf of Voice to Phone, then assigned
the Patents to Calypso for 5,000,000 shares of Calypso common stock, all without
Board of Directors’ knowledge or approval.
(iii) On
August 31, 2007, in furtherance of the scheme involving the Patent Agreement,
Turrini, without Board authorization or knowledge, improperly
authorized and directed Calypso’s transfer agent, Continental Stock Transfer
& Trust Company (“Continental”) to issue 1,200,000 shares of common stock to
Baxter and 2,800,000 shares to Voice to Phone. In order to induce Continental to
issue the 4,000,000 shares, Turrini provided Continental with a document
containing the forged signature of Cheryl L. Dotson, Calypso’s CFO.
(iv) On
or about November 15, 2007, Calypso learned that Turrini had personally profited
from the assignment of the Patents to Calypso. On November 16,
2007, Calypso’s Board passed a resolution authorizing Ms. Dotson, its
CFO, to close Calypso’s account at Bank of America, on
which both Turrini and Mr. John Dalton were signatories, and to open a new
account at Bank of America, with Ms. Dotson the CFO, as the sole
signatory.
(v) On
November 18, 2007, Turrini was advised by Calypso’s Board of Directors that
Calypso had begun an internal investigation into his acts and omissions,
including material breaches of his Employment Agreement. Turrini, at
the same time, was expressly advised that he was no longer authorized to take
any action on behalf of Calypso, as CEO or in any other capacity. Immediately
after receiving this notice, Turrini, without Board authorization or knowledge,
falsely represented to Bank of America that he was an authorized signatory on
the newly opened BOA Account, and sought to withdraw funds from the BOA Account.
In furtherance of this withdrawal attempt, Turrini submitted to Bank of America,
a filing he made with the Florida Secretary of State, without authorization of
Calypso’s Board, naming himself, and two others, as officers and/or directors of
Calypso Wireless, Inc., a Florida corporation. This Florida
corporation s a company separate and distinct from the Registrant,
Calypso Wireless, Inc., a Delaware corporation that is a publicly
traded reporting company, under the symbol CLYW. As a direct result of Turrini’s
actions, Bank of America froze the newly opened BOA Account, and advised Calypso
that it would not release the freeze on the BOA Account until it received a
Court order directing it to do so. Further, Mr. Turrini opened an
unauthorized bank account at Washington Mutual. The Registrant does
not yet have access to the October bank statement details of the Bank America
Account or the statements for the Washington Mutual account. The
Registrant is is taking legal action to obtain these records.
(vi) On
November 25, 2007, Calypso’s Board passed a resolution authorizing Turrini’s
termination as CEO and President, for cause, for the reasons set forth above,
among other reasons. By letter dated December 6, 2007, Calypso terminated
Turrini as CEO and President.
On
December 28, 2007, Calypso Wireless, Inc. filed a lawsuit in the 17th
Judicial Circuit Court in Broward County, Florida on behalf of the Company and
therefore its shareholders against Cristian Turrini , Michael
Brennan and Voice to Phone, Inc. (collectively referred to as
“Defendants”), seeking to obtain declaratory and injunctive relief arising out
of Defendants’ fraud, breach of fiduciary duty and breach of contract. This
action also seeks monetary damages in the amount of no less than $15,000,000
resulting from the actions of Defendants.
On
January 3, 2008, Cristian Turrini, our former President and CEO, who had
been terminated “for cause” on December 6, 2007, by Calypso’s board
of directors on December 6, 2007, improperly filed a Preliminary Proxy Statement
on Form Schedule 14A. The Turrini Preliminary Proxy Statement was not filed on
the proper SEC form required for a non-management solicitation of proxies to
elect a dissident slate of directors. The Turrini Proxy Statement misleadingly
purported to be a filing furnished to our shareholders by and on behalf of
Calypso and was signed by Turrini, as Calypso’s President and Chief Executive
Officer. In fact, Mr. Turrini was no longer an officer or an employee
of the Registrant on January 3, 2008 and Turrini lacked any legal authority to
file a Proxy Statement on behalf of Calypso on Schedule 14A. The
Registrant believes that the Proxy Statement filed by Cristian Turrini, as
president, allegedly on behalf of Calypso, contains untrue statements of
material facts and fails to state material facts necessary in order to make the
statements made by Turrini, in the lights of the circumstances under which they
were made, not misleading, as follows: (i) The Turrini Proxy Statement
falsely states under Proposal 1 that the action by the board of directors in
terminating Turrini by consent was not valid under Section 141 of the
Delaware General Corporation Law because the “consent was only signed by two of
the three board members”. In fact Section 141 provides that “the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the board of directors”. In addition, the consent was signed
by all three directors.
(ii) The
Turrini Proxy Statement filed on January 3, 2008, fails to disclose the fact
that Calypso filed a lawsuit on December 28, 2007, against Turrini, Michael
Brennan and Voice to Phone, which action is related to Defendants’ fraud,
breach of fiduciary duty and breach of contract as discussed more fully
below.
(iii)
Under the subcaption “Costs of Proxy Solicitation”, the Turrini Proxy Statement
falsely discloses that “we will bear the costs of solicitation …with the
material being forwarded to the stockholders …by the Company’s officers and
other employees”. In fact, the solicitation is not by or on behalf of Calypso,
nor are any of the Company’s officers or employees involved the Turrini
solicitation.
In
addition to the malfeasance of Turrini described above and as alleged in
Calypso’s lawsuit against Turrini , he falsely represented to the SEC’s EDGAR
Filer Support staff that he was a lawful officer of Calypso, after his
termination and prior to his filing the Turrini Proxy Statement, in order to
change Calypso’s EDGAR access codes so that only Turrini could make filings with
the SEC, without authorization of Calypso’s Board. Calypso was delayed by more
than one week in order for Calypso to secure new EDGAR access codes
that were necessary for Calypso to file amendments to certain Exchange Act
reports, file correspondence in response to a comment letter from the
SEC’s Division of Corporation of Finance and file its Form 8-K disclosing much
of the above facts regarding Turrini described above.
ITEM
6. EXHIBITS
(a) The
following documents are filed as exhibits to this report on Form 10-QSB or
incorporated by reference herein. Any document incorporated by reference is
identified by a parenthetical reference to the SEC filing that included such
document.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the date indicated.
By: /s/ George
Schilling
CEO and
President
Dated:
February 15, 2008
By: /s/ Cheryl L.
Dotson
Chief
Financial Officer
Dated:
February 15, 2008
Financial
Statements
CALYPSO
WIRELESS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
Consolidated
Balance Sheets
September
30, 2007 and December 31, 2006
(Unaudited)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||