Full Letter
September 18, 2018
By Electronic Mail
Airborne Shareholders
Re: Airborne Wireless Network (ABWN, now ABWND)
Dear Shareholders:
You each represent one of approximately 40-50 shareholders of Airborne Wireless Network
(“Airborne”) who have contacted Wolf Popper. We have spent a great deal of time looking
into the situation, and this email will give you our conclusions and some background of our
analysis that led to these conclusions.
Before I start with our analysis and conclusion, please keep in mind a couple of things:
(1) We do not represent you; we are not your attorneys; there is no attorney/client
relationship between any of you and us related to Airborne; and
(2) Some other law firm or lawyer might have an entirely different analysis of the
situation and might reach a different conclusion.
In general, in doing our analysis, we looked at these questions: (1) what has been going on
at the company that caused the extreme reverse stock splits and reduction in share value?;
(2) who, if anyone, profited by these actions?; (3) what claim or claims, if any, could be
asserted?; and (3) if there is some kind of a case to be brought, are there sufficient assets
available to collect against should we obtain a judgment? Here is our analysis, and after the
analysis, our conclusion:
What Has Been Going On?
As most, if not all, of you know, the company has not been profitable. The following
language (or similar language) is from Airborne’s SEC Form 10-Qs, which were filed on
July 10, 2018, April 9, 2018, and (a shorter versions) on January 9, 2018. I’ve emphasized
some of the key language:
The Company’s financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America (“U.S.
GAAP”), which contemplates the Company’s continuation as a going concern. The
Company incurred operating losses of $54,547,357 during the period ended May
31, 2018 and has an accumulated deficit of $91,676,186 as of May 31, 2018.
Airborne Shareholders
September 18, 2018
Page 2
There are no assurances that the Company will be able to either (1) achieve a level
of revenues adequate to generate sufficient cash flow from operations; or (2) obtain
additional financing through either private placement, public offerings and/or bank
financing necessary to support its working capital requirements. To the extent that
funds generated from operations and any private placements, public offerings
and/or bank financing are insufficient, the Company will have to raise additional
working capital. No assurance can be given that additional financing will be
available, or if available, will be on terms acceptable to the Company. If adequate
working capital is not available to the Company, it may be required to curtail or
cease its operations.
Due to uncertainties related to these matters, there exists a substantial doubt
about the ability of the Company to continue as a going concern. The
accompanying unaudited interim financial statements do not include any
adjustments related to the recoverability or classification of asset-carrying amounts
or the amounts and classification of liabilities that may result should the Company
be unable to continue as a going concern.1
What this “going concern” language means in layman’s terms is: absent some kind of
unlikely scenario, the company is on the verge of bankruptcy. And, to be clear, if the
company files for bankruptcy, it is likely that all equity (everyone’s stock) will end up
being worthless.
Presumably to stave off bankruptcy, and presumably because they had no other financing
options, the company entered into a series of market-price-based convertible debt
transactions at very unfavorable terms. These transactions are sometimes referred to as
“toxic” or “death spiral” convertibles. (Attached as Exhibit A is an article by the SEC
concerning these types of transactions.) The company, between September 2017 and April
2018, entered into ten groups of these transactions with ten different lenders using various
terms, but all included the ability to convert to shares below market value (most permitted
conversion at 30% below market value, not a fixed value) (Attached as Exhibit B is a
sample agreement). All of these transactions were disclosed in SEC filings and raised
$8,050,182 for the company.2 While there was no particular disclosure or disclosures that
1 Airborne’s May 24, 2018 registration statement for its unit offering included similar language and also
described “[m]aterial weaknesses in [the company’s] internal controls.”
2 Significantly, the company disclosed, in its May 24, 2018 registration statement, that it would need an
additional $400 million in financing to execute its business plan:
To date, we have relied primarily on private placements of our common stock and warrants and
convertible securities to purchase common stock to fund our operations. We will require additional
financing in the near and long term to fully execute our business plan, including the completion of
Airborne Shareholders
September 18, 2018
Page 3
explained the drops in the stock price after the reverse stock split on August 24th, based on
the terms of the agreements and the high volume, it seems almost certain that the lenders
were converting and selling their shares, causing significant downward pressure.
Who, if Anyone, Profited by These Actions?
Other than the lenders, themselves, it doesn’t appear that any individual personally profited
by doing these convertible deals. Management appears to have done them as a desperate
measure to stave off bankruptcy, apparently hoping they could get enough funds to keep
going long enough to find an entity to buy the company or otherwise save the day. (Maybe
they are still trying to do this.) These insiders also own a significant number of shares (but
not a majority of the shares) and were also diluted by the transactions and the reverse stock
splits, and suffered the same reduction in their shares’ value with the drop in the stock
price. It doesn’t appear that their stock holdings were treated any differently than anyone
else’s. According to SEC filings, none of the insiders sold any of their shares.3 Also, their
employment compensation is modest. They aren’t pulling out substantial amounts of
money to pay themselves.
What Claim or Claims, if any, Could Be Asserted
Unless it could be shown (which we don’t believe it can) that the insiders individually
profited somehow by these transactions (other than continuing to draw their modest
salaries) or that they, individually or as a group, are majority and/or controlling
shareholders (which it doesn’t appear they are), we do not see a claim against them for
breach of fiduciary duty. As to the lenders, unless we could show that they are acting as a
group to control the company (which we think is very unlikely), there would be no
fiduciary relationship between them and the shareholders and, thus, no claim for breach of
fiduciary duty against them. Last, we know that insiders made some modestly optimistic
statements about the company at certain points. It would potentially be a securities fraud
claim to make materially false and misleading statements, however, we think it unlikely
that these statements rise to that level and, as indicated above, there is a lot of disclosure
about the company’s difficult financial condition, and all of the convertible debt deals were
our next airborne test of the system involving the two Cessnas and 20 commercial aircraft as well as
to cover our operational costs while we obtain all relevant certifications, negotiate relevant
agreements and otherwise fully develop and commercialize Infinitus. We estimate that to fully
complete development of Infinitus and commence commercialization we will require over $400
million of additional financing, assuming we can progress on our current timetable. Any material
delays would result in us requiring additional financing. (emphasis added.)
3 Some of you have indicated in emails to me that you believe that the insiders have taken your money when
you bought your shares. Of course, the money you spent when you bought your shares went only to those
who sold you those shares on the market and, as indicated above, none of the insiders sold shares.
Airborne Shareholders
September 18, 2018
Page 4
disclosed. As I indicated above, another attorney or law firm might have a different
opinion about this.
Are There Assets Available to Collect Against?
While we believe a successful claim would not be likely here, according to the company’s
most recent balance sheet, it has $4.7 million in assets (including $4.1 million in cash) and
$15 million in liabilities. Thus, even if successful, collectability would be a significant
issue.
Conclusion
As I stated at the beginning of this letter, we do not represent you; we are not your
attorneys; there is no attorney/client relationship between any of you and us related to
Airborne. Also, some other law firm or lawyer might have an entirely different analysis of
the situation and might reach a different conclusion. Based on the analysis provided here,
and the fact that Wolf Popper is paid in cases only if we are successful, we will not be filing
a class action lawsuit, or any other lawsuit, against or related to Airborne based on what we
have learned about the present facts. Of course, if the facts change, we will reevaluate our
conclusion.
I know that many, if not all, of you will be disappointed by our conclusion. That being
said, please feel free to contact me in the future if you are aware of a situation that you
believe would appropriately be brought as a class action.
WOLF POPPER LLP
By: ___________________________
Carl L. Stine
