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WIRELESS ATTACHMENTS, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD-LOOKING STATEMENT NOTICE
When used in this report, the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," "intend," and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 regarding events, conditions, and financial trends that may affect the
Company's future plans of operations, business strategy, operating results, and
financial position. Persons reviewing this report are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties. Further, persons reviewing this report are
advised that actual results may differ materially from those included within the
forward-looking statements because of various factors such as:
º the Company's lack of revenues and earnings to date and its possible
inability to achieve meaningful revenues or earnings in the future;
º the Company has limited assets and working capital and may not be able to
continue in operation without the infusion of additional capital;
º our expectation to incur losses for at least the next 18 months
º we may need to raise additional funds and these funds may not be available
to us when we need them in which case we may need to change our business
plan, sell or merge our business or face bankruptcy;
º the speculative nature of the Company's proposed operations;
º our dependence upon our management's efforts and/or the loss of any or all
of our management;
º our management team's limited experience in our industry;
º the fact that we have not developed a product, may not succeed in
developing a product and, if developed, such product may not be
commercially viable;
º our dependence on strategic partners for development, manufacture and
distribution of our planned products;
º we may be unable to adequately protect or enforce our intellectual property
rights, which may have a detrimental effect on our business;
º our lack of market research and a marketing organization; and
º our dependence on our license agreement with Apple, Inc.
OUR HISTORY AND BUSINESS
History
Wireless Attachments, Inc. ("WAI," "we" or the "Company") incorporated in the
State of Colorado on September 22, 2010, under the name Wireless Attachments,
Inc.
Since September 22, 2010, WAI has been in the research and development phase. We
expect to be in the research and development phase for at least the next 12
months. We intend to develop solar cloth membranes and solar charging units for
outdoor active wear that convert sunlight into electrical power and that can be
used for charging and operating mobile devices such as the iPhone and iPod.
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On November 5, 2010, Apple, Inc. granted the Company a non-exclusive license to
design, develop, manufacture and sell accessories that are made for Apple's iPod
and iPhone. Our operations are materially dependent on our license agreement
with Apple, Inc. and Apple, Inc. may approve or disapprove any proposed product
for any reason and may terminate the license for any or no reason upon 60 days
notice.
Product Development
The Company intends to develop and market two types of products: (1)
Photovoltaic Cloth Membranes ("PCMs") that will work in conjunction with (2)
Solar Charging Units ("SCUs"), which we also intend to develop. On October, 4,
2012, Apple approved our product plan and assigned our initial product a product
identification number. We intend to conduct research and development in-house
and through partnerships or under contracts with other companies. At this time,
we do not have any research and development contracts with other companies.
Initially, we plan to engage outside developers to assist in the development of
our planned products. Our current thoughts on how to develop our products may
change during the development process and the technologies, devices and
materials we may expect to use in the development of our proposed products may
change accordingly.
Currently, the Company is researching the materials, processes and technologies
for consideration in the manufacture of its planned PCMs and SCUs. We anticipate
being in this phase of our research and development for at least the next six
months. After we exit this stage of research and development, we expect it will
take an additional three to six months to create working prototypes. We must
submit these prototypes to Apple, Inc. for approval and certification. Our
license agreement with Apple, Inc. requires certification by Apple, Inc. of the
prototypes and then again when we have production ready products. Apple launched
a pilot program called "One Touch" that empowers Apple's authorized test labs to
perform all requisite compliance testing. Apple is rolling out One Touch in
phases based on accessory functionality. Under the One Touch model, we will
submit two production-ready samples to one of Apple's third party test labs. The
Company hopes to have samples ready for Apple's test lab in 12 months. At the
time we submit the production ready products, we must also submit a product plan
of distribution to Apple, Inc. to achieve certification. There is no guarantee
that Apple, Inc. will approve our production ready products and plan of
distribution. Without this certification, the Company would not have products to
market, and the Company may have to cease all operations.
Our access to PCM and SCU technologies is no greater than other developers
intent on developing the same or similar products. Accordingly, we have no
special access to potential PCM and SCU technologies that would provide a
developmental advantage. Because we are in the initial concept of product
development, our selection of any technology is preliminary and may change as
the product development process continues.
The Company has been exploring the use of thin-film technologies for use in the
manufacture of its products, including dye-sensitized solar cells (also known as
Gratzel cells). Gratzel cells use a molecular dye that absorbs sunlight and
converts the photons' energy into electricity. Historically, a major problem
with Gratzel cells has been their use of organic liquid electrolytes that leak
and corrode the cells reducing cell life.
Professor John Badding of Penn State University has been researching a
silicon-based optical fiber with solar-cell capabilities that can be scalable to
many meters in length. The research opens the door to the possibility of weaving
together solar-cell silicon wires to create flexible, curved, or twisted solar
fabrics. Professor Badding's team has built a new optical fiber that is thinner
than the width of a human hair and integrates electronic components, bypassing
the need to integrate fiber-optics with chips. Professor Badding was quoted on
Penn State's web site in December of 2012 as saying "Long, fiber-based solar
cells give us the potential to do something we couldn't really do before: We can
take the silicon fibers and weave them together into a fabric with a wide range
of applications such as power generation, battery charging, chemical sensing,
and biomedical devices." The Company does not have a relationship with Professor
Badding, but believes that Professor Badding's research may influence the
Company's product development.
At the conclusion of our product development, the Company will refine its market
research, model cost of goods sold by projecting out the availability and costs
of raw materials and the costs associated with outsourcing manufacturing and
third party logistics and develop a detailed sales and marketing plan and
associated costs. We have not developed a functioning product and we have not
yet obtained objective evidence that our planned products can reliably perform
the functions or provide the benefits described in this report.
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Growth Strategy
The Company plans to partner with contract manufacturers that already have the
equipment and capability to produce our planned PCM and SCU products on a
contract basis. We intend to derive revenue from direct sales of our PCMs and
SCUs to manufacturers of cloth-based consumer products.
The Company does not plan to develop its own suite of end-user clothing and
bags, but rather to create PCMs and SCUs that can be incorporated into
merchandise created by manufacturers of active wear, bags and other cloth-based
consumer products. Our primary initial focus will be developing PCMs and SCUs
that can be used by outdoor and sporting clothing manufacturers. There can be no
assurance, however, that we will be able to develop such PCMs or SCUs or, if we
are able to develop them, that we will be successful in marketing them at a
profit.
Market
We intend initially to market and sell our products only in the United States,
where we believe that the market for our products is limited. The available
market research data that we have located and our assumptions behind our
estimate of market size are discussed below. Because we are unable to find U.S.
market forecasts or estimates for our intended products, we have necessarily
made assumptions in estimating the range of the potential market size for those
products. Our assumptions are also set forth below. We have researched markets
for other solar products (not necessarily related to charging units for mobile
phones and products similar to iPods) and have extrapolated information from
those data and research. The forecasting of market size for relatively new
products, however, is, by its nature, not an exact process, and there can be no
assurance that our assumptions are valid or that our estimates will prove to be
accurate. Moreover, the aggregate potential market size for our intended
products is no indication of our potential revenues or unit sales.
As the market for solar products has grown, we have seen corresponding growth in
the solar battery charger market. Some examples of different chargers that use
solar energy are (1) digital camera battery chargers, (2) chargers for cell
phones and iPods, (3) backpacks made with photovoltaic components, (4) chargers
for hearing aid batteries (5) and chargers for laptop computers. The Company
could not find any data or research reports that specifically addressed the
market for solar powered chargers for the Apple iPod and iPhone. However, by
examining other data and research materials from a broader range of solar
product markets, we have tried to estimate the U.S. market for solar powered
chargers for the Company's proposed target market, as described below.
On October 25, 2012, Apple reported it had sold 26.9 million iPhones during the
fourth quarter for a total of 125 million iPhones for the fiscal year ending
September 29, 2012, and 5.3 million iPods during the third quarter for a total
of 35 million iPods for fiscal 2013. Gartner reported on November 14, 2012 and
based on third quarter 2012 reports, Apple is third (behind Samsung and Nokia)
in the global mobile phone market - with a 5.5% market share. Apple's market
share dropped from 6.9% reported by CNET in August of 2012 and based on second
quarter 2012 reports. However, Apple increased its market share from 3.9% in the
same period in 2011 primarily due to sales of the iPhone 4S and expansion into
foreign markets. Nokia, Motorola, LG, HTC and BlackBerry maker - Research in
Motion - all saw their market share drop year over year for the third quarter,
while Apple, Samsung, ZTE, Huawei Device and TCL Communication watched their
market share rise. ABI Research estimates the overall mobile phone accessories
market at $36 billion for 2012 and is projecting aftermarket mobile phone
accessories sales in excess of $50 billion by 2015.
Batteries and solar chargers are used primarily in the off-grid solar markets,
but also in on-grid markets, where the customer requires power during periods
that the electricity grid is unavailable. GSMA, an association that represents
mobile operators with connections across 219 countries, released a report in
October of 2009 that estimated the global market for off-grid charging solutions
for all types of mobile phones at $2.3 billion. The worldwide on-grid segment
grew by 20% in 2009, and the off-grid market grew 23% in 2009, faster than
on-grid for the first time in 15 years but on a much smaller base.
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The Company was unable to ascertain from this report (or any other source) the
U.S. portion of the off-grid charging market for mobile phones. According to the
2011 U.S. Solar Market Insight Report prepared by the Solar Energy Industries
Association and GTM Research, the U.S. market's share of global PV installations
rose from 5% to 7% in 2011. The report went on to say, "we forecast U.S. market
share to increase steadily over the next five years, ultimately reaching nearly
15% in 2016."
From these data, WAI has estimated a U. S. market for solar charging solutions
for mobile phones and other portable devices in 2013 between $93 million and
$206 million. We estimated the low end of the 2013 market size by multiplying
the U.S. 2011 market share of PV installations (7%) by the compounded annual
growth rate in the U.S. market share of those installations projected by GTM
Research (17.98%) for two years (from 2011 to 2013) and multiplied that figure
by the GSMA's 2009 estimate of the market size for off-grid charging solutions
($2.3 billion). Finally, we multiplied that result by the growth rate in the
off-grid market in 2009 of 23% (discounted to 20% from 2009 to 2010 to account
for the lagging economy and further discounted to 15% from 2010 to 2011 to
account for the continued lagging economy). We then applied to the resulting
number a discount factor of 70% to account for (i) the widespread availability
of cheaper and more convenient on-grid charging solutions within the U.S. market
and (ii) the fact that there are mobile phones other than Apple products. The
70% discount factor also represents the fact that the Company will be offering
solutions for iPods and not just iPhones. We estimated the high end of the 2013
market size by multiplying the number of projected 2012 iPhone and iPod sales
times the average selling price of $43.69 of solar charging solutions that we
found currently available in the marketplace and multiplied that product by our
estimate of U.S. adopters of solar energy charging solutions of 3%. We
anticipate that the percentage of U.S. adopters of solar energy charging
solutions will be smaller than in other countries with fewer on-grid resources
and due to the availability in the U.S. of cheaper and more convenient on-grid
solutions. Due to the inherent uncertainties in the published estimates and
projections that we have relied on (including inherent uncertainties associated
with predicting future events in general), our own assumptions, and the fact
that we have extrapolated data from the larger PV installation market to the
market for PV battery charging solutions for portable products, there can be no
assurance that our estimate of the potential U.S. market for our intended
products will prove to be accurate.
Backpacks, brief cases and bags with built-in flexible solar panels are already
available in today's marketplace. Bags with photovoltaic panels are used to
power personal electronics and laptop computers. We believe the market for solar
charging solutions will continue to grow and by developing cloth membranes that
are not only washable, but pliable, that active wear manufacturers and other
OEM's of cloth-based merchandise will find our membranes a unique solution to
gaining new market share. It is our intent to create cloth membranes with solar
panels that are not quite as noticeable, bulky and unattractive as current
solutions. We expect to create a more elegant and efficient solution than those
products already in the marketplace. By creating solar-charging cloth membranes
that can be sewn into outdoor clothing and sportswear, we expect our customers
will be able to create consumer products for those individuals that want to live
an active lifestyle and remain connected.
Competition
In general, the accessory market for iPhones and iPods is highly competitive. We
will be competing with those companies that develop solar chargers and power
accessories for Apple's products, such as Better Energy Systems, Inc. and
Earthtech Products. More specifically, we believe we will be competing with
those companies developing photovoltaic materials, like Konarka Technologies and
Solarmer Energy, Inc., that are licensed or sold to OEM's.
Competing developers may be able to engage in larger scale branding, advertising
and developing activities more extensively than we can. Further, with sufficient
financial backing, talented designers and developers can become competitors
within several months of establishing a business. We will compete primarily on
the basis of design, development, quality and service. Our business depends on
our ability to shape and stimulate consumer tastes and demands by developing
innovative and exciting products, as well as on our ability to remain
competitive in the areas of quality and price.
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Colorado State University ("CSU") received a $15,000 grant from the EPA as part
of a competition to design functional, good-looking and affordable solar
clothing. Eulanda Sanders and Ajoy Sarkar, associate professors in the
Department of Design and Merchandising, along with four students, are currently
developing natural-fiber outdoor clothing prototypes that harvest energy while
the wearer participates in outdoor activities. In May of 2012, Jaymi Heimbuch of
Treehugger quotes the CSU team as saying: "First, the clothing will use the most
recent research and technology to make natural fibers such as cotton and linen
as outdoor savvy as other petroleum-based textiles which are heralded by outdoor
enthusiasts for warmth, UV ray protection, comfort and moisture-wicking. Second,
the clothing will provide a solar source of energy for electronic devices,
reducing alkaline battery use." The CSU team is using UV-treated natural fiber
fabric, such as cotton or linen, rather than petroleum-based textiles. The
researchers have discovered that the right selection of fabric and weave,
thickness, weight, dyeing and finishing of natural fabrics provides excellent
protection from UV rays. The group has developed prototypes of three jackets, a
vest and two helmets -one ski helmet with Blue tooth capabilities and one for
possible military use.
On June 6, 2012, Ascent Solar Technology, Inc., headquartered in Thornton,
Colorado, announced that it had launched a charger for the Apple iPhone 4/4S
smart phone. Branded under Ascent's new EnerPlexTM line of consumer products,
the charger incorporates the company's solar cells into a protective iPhone 4/4S
case, along with a thin battery. On June 19, 2012, Ascent announced that it had
received an order for 50,000 of is solar-powered chargers and cases.
On September 11, 2012, the Chicago Tribune, published a story about Everpurse.
Everpurse produces a lightweight zippered clutch with a dedicated pocket that
keeps an iPhone charged at 50% or above for 24 hours under standard usage. The
clutch can be carried by itself or slipped into a larger bag. The Everpurse
system comes with a charging pad, roughly the length and width of a paperback,
that can fully charge the special pocket in roughly six hours. Everpurse is in
the process of raising $100,000 via the crowdfunding platform.
Recent Developments
We completed a private offering on March 15, 2011 whereby 35 investors purchased
154,800 shares of our Common Stock for an aggregate price of $15,480. We issued
these securities without registration pursuant to Rule 504 of Regulation D
promulgated under Section 3(b) of the Securities Act.
On April 24, 2012, the Board of Directors of the Company recommended to the
shareholders that it would be in the best interests of the Company to forward
split the Company's common stock, par value $.0001, on a 60 for 1 basis. Steve
S. Sinohui, the Company's sole director, Chief Executive Officer and owner of
92.82% of the shares of the Company's common stock, approved the forward split.
On July 3, 2012, September 12, 2012 and November 13, 2012, the Company's
President and controlling shareholder, Steve S. Sinohui, loaned the Company
$15,000, $5,000 and $3,500, respectively. The notes are due on December 31,
2014, unless extended, and bear no interest unless not paid, in which case
interest will be charged at a rate of 10% annually.
Need for Additional Financing
WAI intends to be researching the materials, technologies and processes
necessary to create its planned products for at least the next six months.
Thereafter, we anticipate it will take an additional three to six months to
create working prototypes. Our VP of Product Development estimates it will take
$30,000 to $50,000 to create the first prototypes of the PCM and SCU. It will be
necessary after six months for the Company to raise additional financing to fund
the development of its first prototypes, to bring the prototypes to production,
for sales and marketing, staffing and for general operating expenses.
At this time, we are unsure of how much funding we will need once we complete
research and development, because we are unsure of the technologies we will
employ to have our planned products manufactured. However, management estimates
that we will require additional funding between $100,000 and $250,000 to fund
the development of our first prototypes, to bring the prototypes to production,
for sales and marketing, staffing and for general operating expenses.
The Company intends to use the next six months to continue its market research,
to model the cost of goods sold by projecting the availability and costs of raw
materials and the costs associated with outsourcing manufacturing and third
party logistics and to develop a complete sales and marketing plan and
associated costs. If we are unable to raise additional funds, our stock would
likely become worthless and we may be forced to abandon our business plan. As of
the date of this report, we do not have any specific plans for raising
additional funds for operations beyond the first six months.
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RESULTS OF OPERATIONS
The Company was not profitable during the year ended March 31, 2012 and has not
been profitable during the first nine months of fiscal 2013.
Three Month Periods Ended December 31, 2012 and 2011
The Company had no revenues from continuing operations for the three-month
period ended December 31, 2012 and no revenues for the same three-month period
in 2011.
General and administrative expenses for the three-month period ended December
31, 2012 were $2,423 compared to $2,957 for the same period in 2011. Expenses
consisted of general corporate administration, rent, Internet service provider,
legal and professional expenses, transfer agent fees and accounting costs.
Because of the foregoing factors, the Company realized a net loss of $2,420 for
the three months ended December 31, 2012 as compared to net loss of $2,953 for
the same period in 2011.
Nine Month Periods Ended December 31, 2012 and 2011
The Company had no revenues from continuing operations for the nine-month period
ended December 31, 2012 and no revenues for the same nine-month period in 2011.
General and administrative expenses for the nine-month period ended December 31,
2012 were $38,153 compared to $12,862 for the same period in 2011. Expenses
consisted of general corporate administration, rent, Internet service provider,
legal and professional expenses, transfer agent fees and accounting costs. The
increase in expenses was due primarily to costs associated with the required
filings of the Company's quarterly and annual reports as well as an increase in
associated accounting costs.
Because of the foregoing factors, the Company realized a net loss of $38,150 for
the nine months ended December 31, 2012 as compared to net loss of $12,850 for
the same period in 2011.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2012, the Company had assets consisting of $2,004 cash on hand.
Current liabilities consisted of accounts payable of $370.
The Company believes that current and anticipated future cash requirements for
the next three months cannot be met with the cash on hand and from revenue from
current customers. On July 3, 2012, September 12, 2012 and November 13, 2012 the
Company's President and controlling shareholder, Steve S. Sinohui, loaned the
Company $15,000, $5,000 and $3,500, respectively. The notes are due on December
31, 2014, unless extended and bear no interest unless not paid, in which case
interest will be charged at a rate of 10% annually.
WAI intends to be researching the materials, technologies and processes
necessary to create its planned products for at least the next six months.
Thereafter, we anticipate it will take an additional three to six months to
create working prototypes. Our VP of Product Development, Craig Lassen,
estimates it will take $30,000 to $50,000 to create the first prototypes of the
PCM and SCU. It will be necessary after six months for the Company to raise
additional financing to fund the development of its first prototypes, to bring
the prototypes to production, for sales and marketing, staffing and for general
operating expenses.
At this time, we are unsure of how much funding we will need once we complete
research and development, because we are unsure of the technologies we will
employ to have our planned products manufactured. However, management estimates
that we will require additional funding between $100,000 and $250,000 to fund
the development of our first prototypes, to bring the prototypes to production,
for sales and marketing, staffing and for general operating expenses.
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Additional capital may be raised through additional private financings as well
as borrowings and other resources. To the extent that additional capital is
raised through the sale of equity or equity-related securities, the issuance of
such securities could result in dilution of our stockholders. There can be no
assurance that additional funding will be available on favorable terms, if at
all. If adequate funds are not available when we need them, we may be required
to curtail our operations. No assurance can be given; however, that we will have
access to the capital markets in the future, or that financing will be available
on acceptable terms to satisfy our cash requirements needed to implement our
business strategies. Our inability to access the capital markets or obtain
acceptable financing could have a material adverse effect on our results of
operations and financial condition and could severely threaten our ability as a
going concern.
Our forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward -looking statement that involves
risks and uncertainties, and actual results could vary because of a number of
factors.
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