DELAWARE
|
87-0419571
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
Incorporation
or Organization)
|
Identification
No.)
|
6701
Democracy Boulevard, Suite 202, Bethesda,
Maryland
|
20817
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
ITEM
NUMBER AND CAPTION
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PAGE
|
|
PART
I
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3
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|
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||
Item
1.
|
Description
of Business
|
3
|
Item
2.
|
Description
of Property
|
3
|
Item
3.
|
Legal
Proceedings
|
34
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
36
|
|
||
PART
II
|
36
|
|
Item
5.
|
Market
for Common Equity, Related Stockholder Matters and Small Business
Issuer
Purchases of Equity Securities
|
36
|
Item
6.
|
Management’s
Discussion and Analysis or Plan of Operation
|
40
|
Item
7.
|
Financial
Statements
|
|
Item
8.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
60
|
Item 8A. | Controls and Procedures |
60
|
Item 8B. |
Other
Information
|
60
|
|
||
PART
III
|
|
|
|
||
Item
9.
|
Directors
and Executive Officers of the Registrant
|
60
|
Item
10.
|
Executive
Compensation
|
60
|
Item
11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
60
|
Item
12.
|
Certain
Relationships and Related Transactions
|
60
|
Item
13.
|
Exhibits
|
61
|
Item
14.
|
Principal
Accountant Fees and Services
|
65
|
Wireless
Networks
|
Our
broadband wireless network deployment efforts are being conducted
by our
wholly owned subsidiary, NeoReach, Inc., (“NeoReach”), and its subsidiary,
Kite Networks, Inc. (formerly, NeoReach Wireless, Inc.). This segment
also
includes the operations of Kite Broadband, LLC (“Kite Broadband”), a
wireless broadband Internet service provider located in Ridgeland,
Mississippi.
|
Voice Services
|
Our
voice services segment is led by CloseCall America, Inc. (“CloseCall”), a
Competitive Local Exchange Carrier (“CLEC”, which is a term applied under
the Telecommunications Act of 1996 to local telephone companies
which
compete with incumbent local telephone companies) based in Stevensville,
Maryland; American Fiber Network, Inc. (“AFN”), a CLEC based in Kansas
City, Kansas; and Davel Communications, Inc. (“Davel”), an independent
payphone provider based in Cleveland, Ohio. CloseCall offers our
customers
a full array of telecommunications products and services including
local,
long-distance, 1-800-CloseCall anytime/anywhere calling, digital
wireless,
high-speed telephone (voice over IP), and dial-up and DSL Internet
services. AFN is licensed to provide local access, long distance
and/or
Internet services throughout the United States. Davel is one of
the
largest independent payphone operators in the United
States.
|
Internet Services
|
Our
Internet services segment is led by DFW Internet Services, Inc.
(“DFW”,
doing business as Nationwide Internet), an Internet services provider
(“ISP”) based in Irving, Texas, its acquired Internet service provider
subsidiaries and InReach Internet, Inc. (“InReach”), a full service ISP
located in Stockton, California that we acquired on November 1,
2005. Our
Internet services segment provides dial-up and broadband Internet
access, web-hosting services, and related Internet services to
business
and residential customers in over 40 states.
|
Corporate
|
Our
corporate reporting segment serves as the holding company of the
operating
subsidiaries that are divided among the other three business reporting
segments, provides senior executive and financial management, and
performs
corporate-level accounting, financial reporting, and legal functions.
Occasionally, its employees may provide services to customers resulting
in
the recognition of consulting service
revenues.
|
|
|
|
|
|||||
Business
Segment
|
|
|
2006
|
|
2005
|
|
||
|
|
|
|
|
|
|
||
Voice
Services
|
|
|
$
|
72,356,453
|
|
$
|
32,009,084
|
|
Internet
Services
|
|
|
|
16,940,513
|
|
|
13,884,060
|
|
Wireless
Networks
|
|
|
|
9,716,501
|
|
|
-
|
|
Corporate
|
|
|
|
-
|
|
|
615,000
|
|
Total
Revenues
|
|
|
$
|
99,013,467
|
|
$
|
46,508,144
|
|
|
|
|
|
|||||
Business
Segment
|
|
|
2006
|
|
2005
|
|
||
|
|
|
|
|
|
|
||
Voice
Services
|
|
%
|
|
73.1
|
%
|
|
68.8
|
%
|
Internet
Services
|
|
|
|
17.1
|
|
|
29.9
|
|
Wireless
Networks
|
|
|
|
9.8
|
|
|
-
|
|
Corporate
|
|
|
|
-
|
|
|
1.3
|
|
Total
Revenues
|
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
-
|
create
a standard regulatory scheme for all public payphone service
providers;
|
-
|
establish
a per call compensation plan to ensure that all payphone service
providers
are fairly compensated for each and every completed intrastate
and
interstate call, except for 911 emergency and telecommunications
relay
service calls;
|
-
|
terminate
subsidies for LEC payphones from LEC regulated rate-base
operations;
|
-
|
prescribe,
at a minimum, nonstructural safeguards to eliminate discrimination
between
LECs and IPPs and remove the LEC payphones from the LEC’s regulated asset
base;
|
-
|
provide
for the RBOCs to have the same rights that IPPs have to negotiate
with
Location Owners over the selection of interLATA carrier services,
subject
to the FCC’s determination that the selection right is in the public
interest and subject to existing contracts between the Location
Owners and
interLATA carriers;
|
-
|
provide
for the right of all PSPs to choose the local, intraLATA and interLATA
carriers subject to the requirements of, and contractual rights
negotiated
with, Location Owners and other valid state regulatory
requirements;
|
-
|
evaluate
the requirement for payphones which would not normally be installed
under
competitive conditions but which might be desirable as a matter
of public
policy, and establish how to provide for and maintain such payphones
if it
is determined they are required;
and
|
-
|
preempt
any state requirements which are inconsistent with the FCC’s regulations
implementing Section 276.
|
Finance,
accounting legal and administration
|
24
employees
|
|
Retail
operations (includes CloseCall America, Inc. and the
call centers)
|
161 employees
|
|
Wireless
networks (includes Kite Broadband, LLC and NeoReach
Wireless, Inc.)
|
76
employees
|
|
Business
operations (includes Davel Communications, Inc and American Fiber
Network, Inc.)
|
53
employees
|
|
|
Price
Per Share
|
||||||
|
High
|
Low
|
|||||
2004
|
|
|
|||||
April
1, 2004 - June 30, 2004
|
$
|
0.28
|
$
|
0.10
|
|||
July
1, 2004 - September 30, 2004
|
$
|
0.27
|
$
|
0.14
|
|||
October
1, 2004 - December 31, 2004
|
$
|
0.24
|
$
|
0.15
|
|||
2005
|
|
|
|||||
January
1, 2005 - March 31, 2005
|
$
|
0.24
|
$
|
0.17
|
|||
April
1, 2005 - June 30, 2005
|
$
|
0.38
|
$
|
0.15
|
|||
July
1, 2005 - September 30, 2005
|
$
|
0.36
|
$
|
0.24
|
|||
October
1, 2005 - December 31, 2005
|
$
|
0.26
|
$
|
0.17
|
|||
2006
|
|
|
|||||
January
1, 2006 - March 31, 2006
|
$
|
0.30
|
$
|
0.18
|
|||
April
1, 2006 - June 22, 2006
|
$
|
0.24
|
$
|
0.18
|
Business
Segment
|
|
2006
|
|
2005
|
|
||
|
|
|
|
|
|
||
Voice
Services
|
|
$
|
72,356,453
|
|
$
|
32,009,084
|
|
Internet
Services
|
|
|
16,940,513
|
|
|
13,884,060
|
|
Wireless
Networks
|
|
|
9,716,501
|
|
|
-
|
|
Corporate
|
|
|
-
|
|
|
615,000
|
|
Total
Revenues
|
|
$
|
99,013,467
|
|
$
|
46,508,144
|
|
Business
Segment
|
|
2006
|
|
2005
|
|
||
|
|
|
|
|
|
||
Voice
Services
|
|
|
73.1
|
%
|
|
68.8
|
%
|
Internet
Services
|
|
|
17.1
|
|
|
29.9
|
|
Wireless
Networks
|
|
|
9.8
|
|
|
-
|
|
Corporate
|
|
|
-
|
|
|
1.3
|
|
Total
Revenues
|
|
|
100.0
|
%
|
|
100.0
|
%
|
Acquired
Company
|
|
2006
|
|
2005
|
|
Increase
|
|
|||
|
|
|
|
|
|
|
|
|||
Davel
|
|
$
|
40,305,697
|
|
$
|
17,461,532
|
|
$
|
22,844,165
|
|
CloseCall
(includes Affinity and US1)
|
|
|
27,029,379
|
|
|
14,766,531
|
|
|
12,262,848
|
|
Kite
Broadband
|
|
|
9,669,091
|
|
|
-
|
|
|
9,669,091
|
|
AFN
|
|
|
6,229,981
|
|
|
-
|
|
|
6,229,981
|
|
InReach
|
|
|
2,279,990
|
|
|
-
|
|
|
2,279,990
|
|
Total
Revenues
|
|
$
|
85,514,138
|
|
$
|
32,228,063
|
|
$
|
53,286,075
|
|
Fiscal
Quarter
|
|
2006
|
|
2005
|
|
Decrease
|
|||
|
|
|
|
|
|
|
|||
First
|
|
$
|
11,138,906
|
|
$
|
14,137,713
|
|
$
|
(2,998,807)
|
Second
|
|
|
11,059,855
|
|
|
14,586,122
|
|
|
(3,526,267)
|
Third
|
|
|
10,084,268
|
|
|
15,283,842
|
|
|
(5,199,574)
|
Fourth
|
|
|
8,022,668
|
|
|
11,083,788
|
|
|
(3,061,120)
|
Total
Davel Revenues
|
|
$
|
40,305,697
|
|
$
|
55,091,465
|
|
$
|
(14,785,768)
|
|
For
the Year Ended March 31, 2006
|
|
|
|
|
Net
Income
|
$
|
860,502
|
Add
non-EBITDA items included in net results:
|
|
|
Depreciation
and amortization
|
|
2,830,662
|
Interest
expense, net
|
|
-
|
Goodwill
impairment and restructuring costs
|
|
-
|
Adjusted
EBITDA for Davel
|
$
|
3,891,164
|
Type
of Debt
|
|
2006
|
|
2005
|
||
|
|
|
|
|
||
Notes
payable to Cornell Capital
|
|
$
|
705,396
|
|
$
|
310,060
|
SEDA
draw discounts
|
410,016
|
375,150
|
||||
Convertible
debenture (including discount amortization of $348,443)
|
|
|
1,393,738
|
|
|
--
|
Airlie
bridge loan
|
|
|
381,225
|
|
|
1,144,186
|
Other,
net
|
|
|
(51,981
|
)
|
|
9,167
|
Interest
Expense, net
|
|
$
|
2,838,394
|
|
$
|
1,838,563
|
|
|
2006
|
|
2005
|
|
||
|
|
|
|
|
|
||
Net
loss
|
|
$
|
(10,176,407
|
)
|
$
|
(5,359,722
|
)
|
Add
non-EBITDA items included in net results:
|
|
|
|
|
|
||
Depreciation
and amortization
|
|
|
4,310,742
|
|
|
2,067,213
|
|
Interest
expense, net
|
|
|
2,838,394
|
|
|
1,838,563
|
|
Goodwill
impairment, litigation settlement and restructuring
charges
|
|
|
6,349,247
|
|
|
--
|
|
Adjusted
EBITDA
|
|
$
|
3,321,976
|
|
$
|
(1,453,946
|
)
|
•
|
our
success in withstanding the continued shift from dial-up ISP service
to
broadband ISP service;
|
|
|
|
|
•
|
the
performance of our products, services and technology in a manner
that
meets customer expectations;
|
|
|
|
|
•
|
the
success of our efforts to develop effective channels of distribution
for
our products;
|
|
|
|
|
•
|
our
ability to price our products that are of a quality and at a price
point
that is competitive with similar or comparable products offered
by our
competitors;
|
|
|
|
|
•
|
the
success of our efforts to develop, improve and satisfactorily address
any
issues relating to our technology;
|
|
|
|
|
•
|
our
ability to effectively compete with companies that have substantially
greater market presence and financial, technical, marketing and
other
resources than us including (i) local ISPs, (ii) national and regional
ISPs, (iii) established online services; (iv) nonprofit or educational
ISPs; (v) national telecommunications companies; (vi) Regional
Bell
Operating Companies (“RBOCs”); (vii) competitive local exchange carriers;
and (viii) cable operators;
|
|
|
|
|
•
|
our
ability to adapt to the consolidation of existing ISPs with or
into larger
entities, or entry of new entities into the Internet services market,
would likely result in greater competition for the Company;
|
|
|
|
|
•
|
our
ability to collect dial around compensation owed to our pay telephone
business from third party payors; and
|
|
|
|
|
•
|
the
continued erosion of coin revenues in our pay telephone business
resulting
from the penetration of wireless technologies and prepaid calling
cards.
|
|
•
|
|
Difficulties
in integrating the operations, technologies, products and personnel
of the
acquired companies;
|
|
•
|
|
Diversion
of management’s attention from normal daily operations of the business;
|
|
•
|
|
Difficulties
in entering markets in which we have no or limited direct prior
experience
and where competitors in such markets have stronger market positions;
|
|
•
|
|
Initial
dependence on unfamiliar partners;
|
|
•
|
|
Insufficient
revenues to offset increased expenses associated with acquisitions;
and
|
|
•
|
|
The
potential loss of key employees of the acquired companies.
|
|
•
|
|
Issue
common stock that would dilute our current stockholders’ percentage
ownership;
|
|
•
|
|
Assume
liabilities;
|
|
•
|
|
Record
goodwill and non-amortizable intangible assets that will be subject
to
impairment testing on a regular basis and potential periodic impairment
charges;
|
|
•
|
|
Incur
amortization expenses related to certain intangible assets;
|
|
•
|
|
Incur
large and immediate write-offs, and restructuring and other related
expenses; or
|
|
•
|
|
Become
subject to litigation.
|
|
•
|
It
is traded at a price of less than $5.00 per share;
|
|
|
|
|
•
|
It
is not traded on a “recognized” national exchange;
|
|
|
|
|
•
|
Its
price is not quoted on the Nasdaq automated quotation system
(Nasdaq-listed stock must still have a price of not less than $5.00
per
share); or
|
|
|
|
|
•
|
Its
issuer has net tangible assets less than $2.0 million (if the issuer
has
been in continuous operation for at least three years) or $5.0
million (if
in continuous operation for less than three years), or has average
annual
revenues of less than $6.0 million for the last three years.
|
|
(a) |
The
following exhibits are filed as part of this registration
statement:
|
Exhibit
No.
|
Description
|
|
Location
|
|
2.1
|
Agreement
and Plan of Merger, dated as of March 21, 2002, by and among Mobilepro
Corp., NeoReach Acquisition Corp. and NeoReach, Inc.
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on April 5, 2002
|
|
2.2
|
Agreement
and Plan of Merger, dated as of January 20, 2004, by and among
Mobilepro
Corp., DFWI Acquisition Corp., DFW Internet Services, Inc., Jack
W. Beech,
Jr. and Jack W. Beech, Sr.
|
|
Incorporated
by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
8-K filed on February 4, 2004
|
|
2.3
|
Agreement
and Plan of Merger, dated as of March 1, 2004, by and among DFW
Internet
Services, Inc., DFW Internet Acquisition Corp., Internet Express,
Inc., J.
Glenn Hughes and Loretta Hughes
|
|
Incorporated
by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
8-K filed on April 29, 2004
|
|
2.4
|
Agreement
and Plan of Merger, dated as of April 21, 2004, by and among DFW
Internet
Services, Inc., DFWA Acquisition Corp., August.Net Services, LLC,
Louis G.
Fausak, Andrew K. Fullford, John M. Scott, Dennis W. Simpson, Andrew
T.
Fausak, and Gayane Manasjan
|
|
Incorporated
by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
8-K filed on April 29, 2004
|
|
2.5
|
Agreement
and Plan of Merger, dated as of June 3, 2004, by and among Mobilepro
Corp., DFW Internet Services, Inc., DFWS Acquisition Corp., ShreveNet,
Inc. and the stockholders identified therein
|
|
Incorporated
by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
8-K filed on June 8, 2004
|
|
2.6
|
Asset
Purchase Agreement, dated as of June 21, 2004, by and between Crescent
Communications, Inc. and DFW Internet Services, Inc.
|
|
Incorporated
by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
8-K filed on June 22, 2004
|
|
2.7
|
Agreement
and Plan of Merger, dated July 6, 2004, by and among the Company,
DFW
Internet Services, Inc., DFWC Acquisition Corp., Clover Computer
Corp. and
Paul Sadler
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on July 8, 2004
|
|
2.8
|
Agreement
and Plan of Merger, dated July 14, 2004, by and among DFW Internet
Services, Inc., DFWT Acquisition Corp., Ticon.net, Inc. and the
stockholders identified therein
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on July 15, 2004
|
|
2.9
|
Agreement
and Plan of Merger, dated July 30, 2004, by and among the Company,
Affinity Acquisition Corp., C.L.Y.K., Inc. and the stockholders
identified
therein
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on August 20, 2004
|
|
2.10
|
Amendment
No. 1 to Agreement and Plan of Merger, dated December 28, 2004,
by and
among the Company, Affinity Acquisition Corp., C.L.Y.K., Inc. and
the
stockholders identified therein
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on January 21, 2005
|
|
2.11
|
Asset
Purchase Agreement, dated as of August 13, 2004, by and among Web
One,
Inc., DFW Internet Services, Inc. and Jeff McMurphy
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on August 19, 2004
|
|
2.12
|
Agreement
and Plan of Merger, dated August 31, 2004, by and among the Company,
MVCC
Acquisition Corp. and CloseCall America, Inc.
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on October 19, 2004
|
|
2.13
|
Amendment
No. 1 to Agreement and Plan of Merger, dated September 30, 2004,
by and
among the Company, MVCC Acquisition Corp. and CloseCall America,
Inc.
|
|
Incorporated
by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K
filed on October 19, 2004
|
|
2.14
|
Loan
Purchase Agreement and Transfer and Assignment of Shares, dated
September
3, 2004, by and among the Company, Davel Acquisition Corp., Davel
Communications, Inc. and certain stockholders identified
therein
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on September 9, 2004
|
|
2.15
|
Agreement
and Plan of Merger, dated September 15, 2004, by and among the
Company,
DFWW Acquisition Corp., World Trade Network, Inc. and Jack
Jui
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on September 15, 2004
|
|
2.16
|
Agreement
and Plan of Merger, dated September 16, 2004, by and among the
Company,
DFW Internet Services, Inc., DFWR Acquisition Corp., The River
Internet
Access Co. and the stockholders identified therein
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on September 17, 2004
|
|
2.17
|
Agreement
and Plan of Merger by and among Registrant, NeoReach, Inc., Transcordia
Acquisition Corp., Transcordia, LLC and its Unit Holders, dated
April
2005
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Form 10-QSB filed August
15, 2005
|
|
2.18
|
Agreement
and Plan of Merger by and among Registrant, NeoReach, Inc., NeoReach
Wireless, Inc., Evergreen Open Broadband Corporation, and Certain
Shareholders
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Form 10-QSB filed August
15, 2005
|
|
2.19
|
Agreement
and Plan of Merger, dated June 30, 2005, by and among the Company,
AFN
Acquisition Corp., American Fiber Network, Inc. and the individuals
and
entities identified therein
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on July 6, 2005
|
|
2.20
|
Agreement
and Plan of Merger, dated October 31, 2005, by and among the Company,
InReach Internet, Inc., InReach Internet, LLC, and Balco Holdings,
Inc.
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on November 7, 2005
|
|
3.1
|
Certificate
of Incorporation, dated April 20, 2001, of Registrant
|
|
Incorporated
by reference to Exhibit 3.1 to the Registrant’s Registration Statement on
Form S-8 filed on May 11, 2001
|
|
3.2
|
Certificate
of Amendment of Certificate of Incorporation of Mobilepro Corp
dated
November 16, 2001.
|
|
Incorporated
by reference to Exhibit 3.1 to the Registrant’s Registration Statement on
Form S-8 filed on December 4, 2001
|
|
3.3
|
Certificate
of Amendment to Certificate of Incorporation of Mobilepro Corp.
dated
March 11, 2003
|
|
Incorporated
by reference to Exhibit 3.11 to the Registrant’s Registration Statement on
Form SB-2 filed on May 6, 2003
|
|
3.4
|
By-Laws
of Registrant
|
|
Incorporated
by reference to Exhibit 3.2 to the Registrant’s Registration Statement on
Form S-8 filed on May 11, 2001
|
|
4.1
|
2001
Equity Performance Plan
|
|
Incorporated
by reference to Exhibit 4.1 to the Registrant’s Registration Statement on
Form S-8 filed on December 4, 2001
|
|
4.2
|
Amended
and Restated 2001 Equity Performance Plan
|
|
Incorporated
by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form
10-KSB filed on June 29, 2004
|
|
4.3
|
Registration
Rights Agreement, dated September 16, 2004, by and among the Company
and
the persons and entities identified therein
|
|
Incorporated
by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
4.4
|
Registration
Rights Agreement, dated November 15, 2004, by and among the Company
and
the persons and entities identified therein
|
|
Incorporated
by reference to Exhibit 10.3 to the Registrant’s Current Report on Form
8-K filed on November 17, 2004
|
|
4.5
|
Form
of Warrant issued on November 15, 2004
|
|
Incorporated
by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
8-K filed on November 17, 2004
|
|
4.6
|
Registration
Rights Agreement, dated June 30, 2005, by and among the Company
and the
persons and entities identified therein
|
|
Incorporated
by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
filed on July 6, 2005
|
|
4.7
|
Registration
Rights Agreement, dated November 1, 2005, by and among the Company
and the
persons and entities identified therein
|
|
Incorporated
by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
filed on November 7, 2005
|
|
10.1
|
Memorandum
of Understanding between NeoReach, Inc., and RF Microelectronics
Laboratory of Information and Communications University, South
Korea dated
July 31, 2002 for opportunities to cooperate in research, particularly
in
RF-CMOS ASICs development for RF transceiver of third generation
W-CDMA
standard
|
|
Incorporated
by reference to Exhibit 10.2 to the Registrant’s amended Quarterly Report
on Form 10-QSB/A filed on October 4, 2002
|
|
10.2
|
Termination
Agreement dated November 26, 2003, between Arne Dunhem and Mobilepro
Corp.
|
|
Incorporated
by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form
10-Q filed on February 13, 2004
|
|
10.3
|
Amendment
No. 1 to Termination Agreement, dated December 30, 2003, between
Arne
Dunhem and Mobilepro Corp.
|
|
Incorporated
by reference to Exhibit 10.17 to the Post-Effective Amendment to
Registrant’s Registration Statement on Form SB-2 filed on May 13,
2004.
|
|
10.4
|
Amendment
No. 2 to Termination Agreement, dated April 8, 2004, between Arne
Dunhem
and Mobilepro Corp.
|
|
Incorporated
by reference to Exhibit 10.18 to the Post-Effective Amendment to
Registrant’s Registration Statement on Form SB-2 filed on May 13,
2004
|
|
10.5
|
Amendment
No. 3 to Termination Agreement, dated May 2, 2004, between Arne
Dunhem and
Mobilepro Corp.
|
|
Incorporated
by reference to Exhibit 10.19 to the Post-Effective Amendment to
Registrant’s Registration Statement on Form SB-2 filed on May 13,
2004
|
|
10.6
|
Executive
Employment Agreement, dated December 15, 2003, between Jay O. Wright
and
the Company
|
|
Incorporated
by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form
10-QSB filed on February 13, 2004
|
|
10.7
|
Executive
Employment Agreement, dated April 15, 2004 between Jay O. Wright
and the
Company
|
|
Incorporated
by reference to Exhibit 10.15 to the Amendment to Registrant’s
Registration Statement on Form SB-2 filed on May 14, 2004
|
|
10.8
|
Amended
and Restated Executive Employment Agreement, dated June 9, 2004
between
Jay O. Wright and the Company
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on June 15, 2004
|
|
10.9
|
Executive
Employment Agreement, dated February 20, 2004 between Kurt Gordon
and the
Company
|
|
Incorporated
by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form
10-KSB filed on June 29, 2004
|
|
10.10
|
Standby
Equity Distribution Agreement, dated May 13, 2004 between the Company
and
Cornell Capital
|
|
Incorporated
by reference to Exhibit 10.20 to the Registrant’s Registration Statement
on Form SB-2 filed on May 14, 2004
|
|
10.11
|
Registration
Rights Agreement, dated May 13, 2004 between the Company and Cornell
Capital
|
|
Incorporated
by reference to Exhibit 10.21 to the Registrant’s Registration Statement
on Form SB-2 filed on May 14, 2004
|
|
10.12
|
Placement
Agent Agreement, dated May 13, 2004 between the Company and Newbridge
Securities Corporation
|
|
Incorporated
by reference to Exhibit 10.22 to the Registrant’s Registration Statement
on Form SB-2 filed on May 14, 2004
|
|
10.13
|
Escrow
Agreement, dated May 13, 2004 between the Company and Cornell
Capital
|
|
Incorporated
by reference to Exhibit 10.23 to the Registrant’s Registration Statement
on Form SB-2 filed on May 14, 2004
|
|
10.14
|
Consulting
Agreement by and among Mobilepro Corp., DFW Internet Services,
Inc., Beech
Holdings, Inc., and Jack W. Beech, Jr.
|
|
Incorporated
by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
8-K filed on February 4, 2004
|
|
10.15
|
Executive
Employment Agreement dated June 10, 2004 between Kevin Kuykendall
and
Mobilepro Corp.
|
|
Incorporated
by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form
10-KSB filed on June 29, 2004
|
|
10.16
|
Amended
and Restated Executive Employment Agreement dated October 14, 2004,
between Kevin Kuykendall and the Company
|
|
Incorporated
by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.17
|
Development
Agreement by and among the Company, NeoReach, Inc. and Information
and
Communications University*
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.18
|
Promissory
Note issued by the Company to Cornell Capital on August 23,
2004
|
|
Incorporated
by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.19
|
Security
Agreement between the Company and Cornell Capital dated August
23,
2004
|
|
Incorporated
by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.20
|
Promissory
Note issued by the Company to Cornell Capital on August 25,
2004
|
|
Incorporated
by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.21
|
Security
Agreement between the Company and Cornell Capital dated August
25,
2004
|
|
Incorporated
by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.22
|
Letter
Agreement between the Company and Cornell Capital dated August
27,
2004
|
|
Incorporated
by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.23
|
Promissory
Note issued by the Company to Cornell Capital on August 27,
2004
|
|
Incorporated
by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
8-K filed on October 19, 2004
|
|
10.24
|
Security
Agreement between the Company and Cornell Capital dated August
27,
2004
|
|
Incorporated
by reference to Exhibit 10.3 to the Registrant’s Current Report on Form
8-K filed on October 19, 2004
|
|
10.25
|
Promissory
Note issued by the Company to Cornell Capital on September 22,
2004
|
|
Incorporated
by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.26
|
Security
Agreement between the Company and Cornell Capital dated September
22,
2004
|
|
Incorporated
by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form
10-QSB filed on November 15, 2004
|
|
10.27
|
Executive
Employment Agreement by and among the Company, CloseCall America,
Inc. and
Tom Mazerski
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on October 19, 2004
|
|
10.28
|
Executive
Employment Agreement dated November 2, 2004, between Geoffrey Amend
and
the Company
|
|
Incorporated
by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form
10-QSB filed on February 14, 2005
|
|
10.29
|
Executive
Employment Agreement dated December 1, 2004, between Bruce Sanguinetti
and
the Company
|
|
Incorporated
by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form
10-QSB filed on February 14, 2005
|
|
10.30
|
Credit
Agreement, dated November 15, 2004, by and among the Company, Davel
Acquisition Corp. and Airlie Opportunity Master Fund, Ltd.
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on November 17, 2004
|
|
10.31
|
Executive
Employment Agreement dated December 15, 2004, between John Dumbleton
and
the Company
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on December 17, 2004
|
|
10.32
|
Employment
Agreement dated February 28, 2005 between Davel Communications,
Inc. and
Tammy L. Martin
|
|
Incorporated
by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.33
|
Amendment
No. 1 to Employment Agreement between Davel Communications, Inc.
and Tammy
L. Martin, dated April 20, 2005
|
|
Incorporated
by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.34
|
Amendment
No. 2 to Employment Agreement between Davel Communications, Inc.
and Tammy
L. Martin, dated May 26, 2005
|
|
Incorporated
by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.35
|
Amended
and Restated Executive Employment Agreement, dated June 16, 2005
between
Jay O. Wright and the Company
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on June 20, 2005
|
|
10.36
|
Amended
and Restated Executive Employment Agreement, dated June 16, 2005
between
Kurt Gordon and the Company
|
|
Incorporated
by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.37
|
Amended
and Restated Executive Employment Agreement, dated June 16, 2005
by and
among the Company, CloseCall America, Inc. and Tom Mazerski
|
|
Incorporated
by reference to Exhibit 10.33 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.38
|
Amended
and Restated Executive Employment Agreement, dated June 16, 2005,
between
Geoffrey Amend and the Company
|
|
Incorporated
by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.39
|
Securities
Purchase Agreement, dated as of May 13, 2005, by and between the
Company
and Cornell Capital
|
|
Incorporated
by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.40
|
Secured
Convertible Debenture, issued on May 13, 2005 by the Company to
Cornell
Capital
|
|
Incorporated
by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.41
|
Amended
and Restated Collateral Assignment of Intellectual Property Rights,
made
as of May 13, 2005, by and among the Company, the Company subsidiaries
identified therein and Cornell Capital
|
|
Incorporated
by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.42
|
Amended
and Restated Security Agreement, dated May 13, 2005, by and among
the
Company, the subsidiaries identified therein and Cornell
Capital
|
|
Incorporated
by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.43
|
Investor
Registration Rights Agreement, dated as of May 13, 2005 by and
between the
Company and Cornell Capital
|
|
Incorporated
by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.44
|
Amended
and Restated Guaranty Agreement, dated as of May 13, 2005, made
by each of
the direct and indirect subsidiaries of the Company in favor Cornell
Capital
|
|
Incorporated
by reference to Exhibit 10.40 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.45
|
Warrant
issued by the Company to Cornell Capital
|
|
Incorporated
by reference to Exhibit 10.41 to the Registrant’s Annual Report on Form
10-KSB filed on June 28, 2005
|
|
10.46
|
Executive
Employment Agreement dated September 1, 2005, between James L.
Magruder,
Jr. and the Company
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed September 9, 2005
|
|
10.47
|
Master
Agreement for Services between Sprint Communications Company L.P.
and Kite
Broadband, LLC, dated May 20, 2005*
|
|
Incorporated
by reference to Exhibit 2.1 to the Registrant’s Form 10-QSB filed November
14, 2005
|
|
10.48
|
Agreement
between the City of Tempe and NeoReach, Inc. for the Use of City
Property
in Connection with the Operation of a WiFi Network, dated August
17,
2005
|
|
Provided
herewith
|
|
10.49
|
Executive
Employment Agreement dated February 1, 2006, between Jerry M.
Sullivan, Jr. and the Company
|
|
Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed February 13, 2005
|
|
21.1
|
Subsidiaries
of Registrant
|
|
Provided
herewith
|
|
23.1
|
Consent
of Bagell, Josephs, Levine & Company, L.L.C.
|
|
Provided
herewith
|
|
31.1
|
Certification
by Jay O. Wright, Chief Executive Officer, pursuant to Rule
13a-14(a)
|
Provided herewith
|
||
31.2
|
Certification
by Richard H. Deily, Principal Financial Officer, pursuant to
Rule 13a-14(a)
|
Provided herewith
|
||
32.1
|
Certification
by Jay O. Wright and Richard H. Deily, pursuant to 18 U.S.C. Section
1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002**
|
Provided herewith
|
99.1
|
Press
Release dated December 28, 2005 regarding corporate
restructuring
|
|
Incorporated
by reference to Exhibit 99.1 to the Registrant's Current Report
on Form
8-K filed January 1, 2006.
|
|
MOBILEPRO CORP. | ||
|
|
|
By: | /s/ Jay O. Wright | |
Name: Jay O. Wright |
||
Title: Chief Executive Officer | ||
Date: November 9, 2006 |
SIGNATURE
|
TITLE
|
DATE
|
/s/
Jay O. Wright
|
Chief
Executive Officer,
|
November
9, 2006
|
Jay
O. Wright
|
Principal
Executive Officer and Director
|
|
/s/
Richard H. Deily
|
Chief Accounting
Officer, Principal
|
November
9, 2006
|
Richard
H. Deily
|
Financial
and Principal Accounting Officer
|
|
/s/
Christopher W. MacFarland
|
Director
|
November
9, 2006
|
Christopher
W. MacFarland
|
||
/s/
Michael O’Neil
|
Director
|
November
9, 2006
|
Michael
O’Neil
|
||
/s/
Donald H. Sledge
|
Director
|
November
9, 2006
|
Donald
H. Sledge
|
||
/s/
Jerry M. Sullivan, Jr.
|
President,
Chief Operating Officer, and
|
November
9, 2006
|
Jerry
M. Sullivan, Jr.
|
Director
|
|
Page(s)
|
|||
Report
of Independent Registered Public Accounting Firm
|
F-1
|
||
Consolidated
Balance Sheets as of March 31, 2005 and 2006
|
F-2
to F-3
|
||
Consolidated
Statements of Operations for the Years
|
|||
Ended March 31, 2005 and 2006
|
F-4
|
||
Consolidated
Statements of Changes in Stockholders’ Equity
|
|||
for the Years Ended March 31, 2005 and 2006
|
F-5
|
||
Consolidated
Statements of Cash Flows for the Years Ended
|
|||
March 31, 2005 and 2006
|
F-6
to F-7
|
||
Notes
to Consolidated Financial Statements
|
F-8
to F-28
|
ASSETS
|
|||||||
2005
|
2006
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
4,669,787
|
$
|
5,397,881
|
|||
Restricted
cash
|
429,954
|
352,200
|
|||||
Accounts
receivable, net
|
12,658,313
|
10,481,632
|
|||||
Prepaid
expenses and other current assets
|
2,511,697
|
3,399,864
|
|||||
Total
Current Assets
|
20,269,751
|
19,631,577
|
|||||
FIXED
ASSETS, NET OF ACCUMULATED DEPRECIATION
|
13,193,056
|
15,859,254
|
|||||
OTHER
ASSETS
|
|||||||
Goodwill,
net of impairment
|
32,579,099
|
47,788,167
|
|||||
Customer
contracts and relationships, net of amortization
|
2,965,456
|
8,777,502
|
|||||
Other
intangible assets, net of amortization
|
1,511,005
|
449,999
|
|||||
Deferred
financing fees, net of amortization
|
1,026,667
|
146,667
|
|||||
Other
assets
|
1,277,897
|
1,337,887
|
|||||
39,360,124
|
58,500,222
|
||||||
TOTAL
ASSETS
|
$
|
72,822,931
|
$
|
93,991,053
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
2005
|
2006
|
||||||
CURRENT
LIABILITIES
|
|||||||
Current
portion of convertible debenture
|
$
|
—
|
$
|
4,500,000
|
|||
Notes
payable
|
25,535,263
|
3,964,959
|
|||||
Accounts
payable and accrued expenses
|
19,863,088
|
17,707,471
|
|||||
Deferred
revenue
|
3,470,731
|
4,343,754
|
|||||
Total
Current Liabilities
|
48,869,082
|
30,516,184
|
|||||
LONG-TERM
LIABILITIES
|
|||||||
Convertible
debenture, net of unamortized debt discount and
|
|||||||
current
portion
|
—
|
9,995,243
|
|||||
Notes
payable and other long-term liabilities, net of current
maturities
|
999,196
|
650,419
|
|||||
Total
Long-Term Liabilities
|
999,196
|
10,645,662
|
|||||
TOTAL
LIABILITIES
|
49,868,278
|
41,161,846
|
|||||
MINORITY
INTERESTS
|
600,000
|
—
|
|||||
STOCKHOLDERS'
EQUITY
|
|||||||
Preferred
stock, $.001 par value, 20,035,425 shares authorized,
|
|||||||
35,378
shares issued and outstanding at March 31, 2005 and 2006
|
35
|
35
|
|||||
Common
stock, $.001 par value, 1,500,000,000 shares authorized,
|
|||||||
355,918,011
and 560,666,949 shares issued and outstanding
|
|||||||
at
March 31, 2005 and 2006
|
355,918
|
560,667
|
|||||
Additional
paid-in capital
|
43,195,250
|
83,641,462
|
|||||
Accumulated
deficit
|
(21,196,550
|
)
|
(31,372,957
|
)
|
|||
Total
Stockholders' Equity
|
22,354,653
|
52,829,207
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
72,822,931
|
$
|
93,991,053
|
|||
2005
|
2006
|
||||||
REVENUES
|
$
|
46,508,144
|
$
|
99,013,467
|
|||
OPERATING
COSTS AND EXPENSES
|
|||||||
Cost
of services (exclusive of depreciation and amortization)
|
22,551,240
|
49,082,244
|
|||||
Payroll,
professional fees and related expenses
|
12,586,034
|
19,496,724
|
|||||
Advertising
and marketing expenses
|
1,610,285
|
3,067,702
|
|||||
Office
rent and expenses
|
952,475
|
2,285,139
|
|||||
Other
general and administrative expenses
|
10,262,056
|
21,646,277
|
|||||
Depreciation
and amortization
|
2,067,213
|
4,310,742
|
|||||
Goodwill
impairment charges
|
—
|
4,446,544
|
|||||
Settlement
of litigation and other claims
|
—
|
1,077,000
|
|||||
Restructuring
charges
|
—
|
825,703
|
|||||
Total
Operating Costs and Expenses
|
50,029,303
|
106,238,075
|
|||||
OPERATING
LOSS
|
(3,521,159
|
)
|
(7,224,608
|
)
|
|||
INTEREST
EXPENSE, NET
|
(1,838,563
|
)
|
(2,838,394
|
)
|
|||
MINORITY
INTERESTS IN NET INCOME OF
|
|||||||
CONSOLIDATED
SUBSIDIARIES
|
—
|
(113,405
|
)
|
||||
NET
LOSS BEFORE PROVISION FOR INCOME TAXES
|
(5,359,722
|
)
|
(10,176,407
|
)
|
|||
Provision
for Income Taxes
|
—
|
—
|
|||||
NET
LOSS APPLICABLE TO COMMON SHARES
|
$
|
(5,359,722
|
)
|
$
|
(10,176,407
|
)
|
|
NET
LOSS PER SHARE
|
|||||||
Basic
|
$
|
(0.0185
|
)
|
$
|
(0.0248
|
)
|
|
Diluted
|
$
|
(0.0185
|
)
|
$
|
(0.0248
|
)
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|||||||
SHARES
OUTSTANDING
|
289,933,904
|
411,157,718
|
|||||
Additional
|
||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Accumulated
|
Stockholders'
|
||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
BALANCE
- MARCH 31, 2004
|
35,378
|
$
|
35
|
220,493,159
|
$
|
220,493
|
$
|
15,902,619
|
$
|
(15,836,828
|
)
|
$
|
286,319
|
|||||||||
Shares
issued under the $10 million Equity Line of Credit
|
—
|
—
|
10,000,000
|
10,000
|
4,031,691
|
—
|
4,041,691
|
|||||||||||||||
Shares
issued pursuant to settlement agreement
|
—
|
—
|
2,000,000
|
2,000
|
88,000
|
—
|
90,000
|
|||||||||||||||
Shares
issued for services related to SB-2 filing
|
—
|
—
|
8,000,000
|
8,000
|
1,752,000
|
—
|
1,760,000
|
|||||||||||||||
Shares
issued for cash
|
—
|
—
|
2,446,037
|
2,446
|
82,053
|
—
|
84,499
|
|||||||||||||||
Shares
issued for consulting services
|
—
|
—
|
600,000
|
600
|
30,400
|
—
|
31,000
|
|||||||||||||||
Shares
issued in acquisition of ShreveNet, Inc.
|
—
|
—
|
878,816
|
879
|
189,121
|
—
|
190,000
|
|||||||||||||||
Shares
issued in acquisition of Affinity Telecom
|
—
|
—
|
5,000,000
|
5,000
|
—
|
—
|
5,000
|
|||||||||||||||
Shares
issued in acquisition of CloseCall America, Inc.
|
—
|
—
|
39,999,999
|
40,000
|
9,960,000
|
—
|
10,000,000
|
|||||||||||||||
Warrants
issued in acquisition of Davel Communications, Inc.
|
—
|
—
|
—
|
—
|
333,500
|
—
|
333,500
|
|||||||||||||||
Terminated
put agreement with prior Affinity Telecom shareholders
|
—
|
—
|
—
|
—
|
995,000
|
—
|
995,000
|
|||||||||||||||
Shares
issued in acquisition of the assets of Web One, Inc.
|
—
|
—
|
1,500,000
|
1,500
|
298,500
|
—
|
300,000
|
|||||||||||||||
Terminated
put agreement with prior DFW Internet Services, Inc.
shareholders
|
—
|
—
|
—
|
—
|
250,000
|
—
|
250,000
|
|||||||||||||||
Shares
issued under the $100 million Standby Equity Distribution
Agreement
|
—
|
—
|
65,000,000
|
65,000
|
9,282,366
|
—
|
9,347,366
|
|||||||||||||||
Net
loss for the year
|
—
|
—
|
—
|
—
|
—
|
(5,359,722
|
)
|
(5,359,722
|
)
|
|||||||||||||
BALANCE
- MARCH 31, 2005
|
35,378
|
35
|
355,918,011
|
355,918
|
43,195,250
|
(21,196,550
|
)
|
22,354,653
|
||||||||||||||
Shares
issued under the $100 million Standby Equity Distribution
Agreement
|
—
|
—
|
95,000,000
|
95,000
|
22,055,740
|
—
|
22,150,740
|
|||||||||||||||
Issuance
of warrant in connection with convertible debenture
|
—
|
—
|
—
|
—
|
853,200
|
—
|
853,200
|
|||||||||||||||
Financing
fee related to convertible debenture
|
—
|
—
|
—
|
—
|
(1,295,000
|
)
|
—
|
(1,295,000
|
)
|
|||||||||||||
Shares
issued for consulting and investment banking services
|
—
|
—
|
447,172
|
447
|
82,053
|
—
|
82,500
|
|||||||||||||||
Acquisition
of WazAlliance
|
—
|
—
|
933,334
|
933
|
134,400
|
—
|
135,333
|
|||||||||||||||
Acquisition
of Evergreen Broadband
|
—
|
—
|
1,505,360
|
1,505
|
229,568
|
—
|
231,073
|
|||||||||||||||
Acquisition
of AFN
|
—
|
—
|
10,000,000
|
10,000
|
1,490,000
|
—
|
1,500,000
|
|||||||||||||||
Acquisition
of InReach Internet
|
—
|
—
|
3,669,725
|
3,670
|
796,330
|
—
|
800,000
|
|||||||||||||||
Acquisition
of Kite Broadband and Kite Networks
|
—
|
—
|
90,000,000
|
90,000
|
15,570,000
|
—
|
15,660,000
|
|||||||||||||||
Settlement
with former owners of Affinity Telecom
|
—
|
—
|
(1,685,000
|
)
|
(1,685
|
)
|
(335,315
|
)
|
—
|
(337,000
|
)
|
|||||||||||
Common
stock registration costs
|
—
|
—
|
—
|
—
|
(34,419
|
)
|
—
|
(34,419
|
)
|
|||||||||||||
Conversion
of notes payable and debentures
|
—
|
—
|
4,046,732
|
4,047
|
900,487
|
—
|
904,534
|
|||||||||||||||
Exercise
of common stock warrant
|
—
|
—
|
831,615
|
832
|
(832
|
)
|
—
|
—
|
||||||||||||||
Net
loss for the year
|
—
|
—
|
—
|
—
|
—
|
(10,176,407
|
)
|
(10,176,407
|
)
|
|||||||||||||
BALANCE
- MARCH 31, 2006
|
35,378
|
$
|
35
|
560,666,949
|
$
|
560,667
|
$
|
83,641,462
|
$
|
(31,372,957
|
)
|
$
|
52,829,207
|
|||||||||
2005
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
loss
|
$
|
(5,359,722
|
)
|
$
|
(10,176,407
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
provided
by (used in) operating activities:
|
|||||||
Goodwill
impairment charges
|
—
|
4,446,544
|
|||||
Depreciation
and amortization
|
2,067,213
|
4,310,742
|
|||||
Restructuring
charges
|
—
|
825,703
|
|||||
Noncash
interest expense
|
375,150
|
752,565
|
|||||
Minority
interests
|
—
|
113,405
|
|||||
Investments
received for services
|
(450,000
|
)
|
—
|
||||
Other
|
31,000
|
32,019
|
|||||
Changes
in assets and liabilities
|
|||||||
(Increase)
decrease in accounts receivable
|
(307,335
|
)
|
2,356,109
|
||||
(Increase)
decrease in other current assets
|
916,786
|
(658,878
|
)
|
||||
(Increase)
in other assets
|
(384,910
|
)
|
(767,296
|
)
|
|||
Increase
(decrease) in accounts payable and
|
|||||||
and
accrued expenses
|
3,141,501
|
(4,038,760
|
)
|
||||
Increase
(decrease) in deferred revenue
|
609,979
|
(54,635
|
)
|
||||
5,999,384
|
7,317,518
|
||||||
Net
cash provided by (used in) operating activities
|
639,662
|
(2,858,889
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Acquisition
of intangible assets
|
(1,192,608
|
)
|
(6,778,129
|
)
|
|||
Cash
paid for acquisitions
|
(32,960,500
|
)
|
(4,297,252
|
)
|
|||
Cash
received in acquisition of subsidiaries
|
5,827,223
|
314,124
|
|||||
Capital
expenditures, net
|
(2,109,338
|
)
|
(4,814,174
|
)
|
|||
Net
cash (used in) investing activities
|
(30,435,223
|
)
|
(15,575,431
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Proceeds
from common stock issuances
|
13,098,406
|
22,616,456
|
|||||
Proceeds
from the issuance of the convertible debenture
|
—
|
15,500,000
|
|||||
Retirement
of acquisition bridge loan
|
—
|
(13,000,000
|
)
|
||||
Borrowings/(payments)
under other notes payable, net
|
19,411,335
|
(8,271,567
|
)
|
||||
Investment
by minority interests
|
—
|
3,612,525
|
|||||
Debt
financing fees
|
—
|
(1,295,000
|
)
|
||||
Net
cash provided by financing activities
|
32,509,741
|
19,162,414
|
|||||
2005
|
2006
|
||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
$
|
2,714,180
|
$
|
728,094
|
|||
CASH
AND CASH EQUIVALENTS - BEGINNING OF YEAR
|
1,955,607
|
4,669,787
|
|||||
CASH
AND CASH EQUIVALENTS - END OF YEAR
|
$
|
4,669,787
|
$
|
5,397,881
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW
|
|||||||
INFORMATION:
|
|||||||
Cash
paid during the year for interest
|
$
|
533,050
|
$
|
1,651,670
|
|||
SUPPLEMENTAL
DISCLOSURE OF NONCASH
|
|||||||
ACTIVITIES:
|
|||||||
Issuance
of common stock for:
|
|||||||
Acquisition
of Kite Broadband
|
$
|
—
|
$
|
15,660,000
|
|||
Acquisition
of AFN
|
$
|
—
|
$
|
1,500,000
|
|||
Acquisition
of InReach
|
$
|
—
|
$
|
800,000
|
|||
Acquisition
of Evergreen
|
$
|
—
|
$
|
231,073
|
|||
Acquisition
of WazAlliance
|
$
|
—
|
$
|
135,333
|
|||
Investment
banker retainer fee
|
$
|
—
|
$
|
58,500
|
|||
Debt
financing fees paid in common stock
|
$
|
1,760,000
|
$
|
—
|
|||
Goodwill
recorded in acquisitions
|
$
|
32,785,618
|
$
|
18,336,791
|
|||
Amortization
of SEDA deferred financing fees
|
$
|
—
|
$
|
880,000
|
|||
Liability
for common stock to be issued
|
$
|
300,000
|
$
|
53,167
|
|||
Assignment
of bridge debentures receivable
|
$
|
1,000,000
|
$
|
—
|
|||
Adjustment
to minority interest
|
$
|
—
|
$
|
150,000
|
|||
|
Estimated
Useful
Lives
(in years)
|
2005
|
2006
|
|||||||
|
||||||||||
Furniture
and fixtures
|
7
|
$
|
387,861
|
$
|
698,828
|
|||||
Machinery
and equipment
|
5
|
13,584,088
|
20,561,029
|
|||||||
Leasehold
improvements
|
7
|
263,452
|
788,610
|
|||||||
Vehicles
|
5
|
287,733
|
204,205
|
|||||||
Subtotals
|
14,523,134
|
22,252,672
|
||||||||
Less
accumulated depreciation
|
(
1,330,078
|
)
|
(6,393,418
|
)
|
||||||
Fixed
assets, net
|
$
|
13,193,056
|
$
|
15,859,254
|
|
2005
|
2006
|
|||||
|
|||||||
Accounts
payable
|
$
|
10,320,246
|
$
|
10,534,520
|
|||
Accrued
location usage fees
|
3,763,596
|
2,271,060
|
|||||
Accrued
restructuring costs
|
—
|
486,311
|
|||||
Accrued
compensation
|
2,147,138
|
1,048,027
|
|||||
Accrued
interest expense
|
937,509
|
873,206
|
|||||
Other
accrued liabilities
|
2,694,599
|
2,494,347
|
|||||
Totals
|
$
|
19,863,088
|
$
|
17,707,471
|
|
Years
Ended
March
31,
|
||||||
|
2005
|
2006
|
|||||
|
|
|
|||||
Revenues
|
$
|
52,896,981
|
$
|
100,576,235
|
|||
|
|||||||
Net
loss
|
$
|
(4,989,377
|
)
|
$
|
(10,066,236
|
)
|
|
|
|||||||
Net
loss per share:
|
|||||||
Basic
|
$
|
(0.0166
|
)
|
$
|
(0.0243
|
)
|
|
Diluted
|
$
|
(0.0166
|
)
|
$
|
(0.0243
|
)
|
|
Weighted
average shares outstanding
|
299,933,904
|
413,657,718
|
|
Years
Ended
March
31,
|
||||||
|
2005
|
2006
|
|||||
|
|
|
|||||
Revenues
|
$
|
53,308,370
|
$
|
102,530,053
|
|||
|
|||||||
Net
loss
|
$
|
(5,225,053
|
)
|
$
|
(9,867,438
|
)
|
|
|
|||||||
Net
loss per share:
|
|||||||
Basic
|
$
|
(0.0178
|
)
|
(0.0239
|
)
|
||
Diluted
|
$
|
(0.0178
|
)
|
$
|
(0.0239
|
)
|
|
Weighted
average shares outstanding
|
293,603,629
|
413,298,391
|
Convertible
debenture payable to Cornell Capital
|
$
|
15,000,000
|
||
Notes
payable to Cornell Capital
|
3,600,000
|
|||
Notes
payable related to acquisitions
|
29,619
|
|||
Other
notes payable and long-term obligations
|
1,338,427
|
|||
|
19,968,046
|
|||
Less:
Unamortized debt discount on convertible debenture
|
(504,756
|
)
|
||
Less:
Amounts due within one year
|
(8,817,628
|
)
|
||
Long-term
portion of debt
|
$
|
10,645,662
|
The
year ending --
|
|
|||
March
31, 2008
|
$
|
8,433,377
|
||
March
31, 2009
|
2,712,842
|
|||
March
31, 2010
|
4,199
|
|||
|
11,150,418
|
|||
Less
- Unamortized debt discount on convertible debenture
|
(504,756
|
)
|
||
Long-term
portion of debt
|
$
|
10,645,662
|
|
Years
Ended
March
31,
|
||||||
|
2005
|
2006
|
|||||
Statutory
federal income tax rate
|
(35.0
|
)%
|
(35.0
|
)%
|
|||
State
income taxes, net of federal benefit
|
(3.0
|
)
|
(3.0
|
)
|
|||
Permanent
differences
|
0.2
|
16.9
|
|||||
Tax
credits
|
—
|
—
|
|||||
Change
in valuation allowance
|
37.8
|
21.1
|
|||||
Effective
tax rate
|
—
|
%
|
—
|
%
|
|||
|
|
March
31,
|
||||||
|
2005
|
2006
|
|||||
Net
operating loss carryforwards
|
$
|
6,033,340
|
$
|
10,657,651
|
|||
Depreciation
|
(50,051
|
)
|
(2,343,846
|
)
|
|||
Other
differences
|
—
|
(175,548
|
)
|
||||
Valuation
allowance
|
(5,983,289
|
)
|
(8,138,257
|
)
|
|||
Total
net deferred tax asset
|
$
|
—
|
$
|
—
|
|
Number
of
|
Weighted-Average
|
|||||
Stock
Options --
|
Options
|
Exercise
Price
|
|||||
|
|
|
|||||
Outstanding
- March 31, 2004
|
4,171,037
|
$
|
0.0482
|
||||
Granted
|
5,225,000
|
$
|
0.1748
|
||||
Exercised
|
(446,037
|
)
|
$
|
0.0594
|
|||
Cancelled
|
(7,225,000
|
)
|
$
|
0.1047
|
|||
Outstanding
- March 31, 2005
|
1,725,000
|
$
|
0.1920
|
||||
Granted
|
9,351,000
|
$
|
0.2330
|
||||
Exercised
|
—
|
$
|
—
|
||||
Cancelled
|
—
|
$
|
—
|
||||
Outstanding
- March 31, 2006
|
11,076,000
|
$
|
0.2260
|
||||
|
|||||||
Exercisable
- March 31, 2006
|
4,792,259
|
$
|
0.2301
|
|
Number
of
|
Weighted-Average
|
|||||
Stock
Warrants --
|
Warrants
|
Exercise
Price
|
|||||
|
|
|
|||||
Outstanding
- March 31, 2004
|
7,000,000
|
$
|
0.0190
|
||||
Granted
|
61,732,500
|
$
|
0.1326
|
||||
Exercised
|
(2,500,000
|
)
|
$
|
0.0296
|
|||
Cancelled
|
(5,000,000
|
)
|
$
|
0.1900
|
|||
Outstanding
- March 31, 2005
|
61,232,500
|
$
|
0.1172
|
||||
Granted
|
36,700,000
|
$
|
0.2458
|
||||
Exercised
|
(831,615
|
)
|
$
|
0.1700
|
|||
Cancelled
|
(2,168,385
|
)
|
$
|
0.0916
|
|||
Outstanding
- March 31, 2006
|
94,932,500
|
$
|
0.1669
|
||||
|
|||||||
Exercisable
- March 31, 2006
|
75,321,123
|
$
|
0.1584
|
Outstanding
Stock Options
|
Exercisable
Options
|
|||||||||||||||
Range
of Exercise Prices
|
Number
Outstanding
|
Weighted
Average Remaining Term
|
Weighted
Average Exercise Price
|
Number
Exercisable
|
Weighted
Average Exercise Price
|
|||||||||||
$0.01
- $0.20
|
800,000
|
7.9
|
$
|
0.12
|
800,000
|
$
|
0.12
|
|||||||||
$0.21
- $0.25
|
7,776,000
|
9.6
|
0.22
|
1,758,926
|
0.22
|
|||||||||||
$0.26
- $0.30
|
2,400,000
|
9.5
|
0.27
|
2,133,333
|
0.27
|
|||||||||||
$0.30
- $0.40
|
100,000
|
5.0
|
0.40
|
100,000
|
0.40
|
|||||||||||
Total
Options
|
11,076,000
|
9.6
|
$
|
0.23
|
4,792,259
|
$
|
0.23
|
Outstanding
Warrants
|
Exercisable
Warrants
|
|||||||||||||||
Range
of Exercise Prices
|
Number
Outstanding
|
Weighted
Average Remaining Term
|
Weighted
Average Exercise Price
|
Number
Exercisable
|
Weighted
Average Exercise Price
|
|||||||||||
$0.01
- $0.02
|
30,082,500
|
8.0
|
$
|
0.02
|
29,782,500
|
$
|
0.02
|
|||||||||
$0.03
- $0.09
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
$0.10
- $0.14
|
800,000
|
7.9
|
0.10
|
800,000
|
0.10
|
|||||||||||
$0.15
- $0.16
|
9,300,000
|
8.5
|
0.16
|
7,546,559
|
0.16
|
|||||||||||
$0.17
- $0.19
|
13,750,000
|
9.5
|
0.18
|
6,447,368
|
0.18
|
|||||||||||
$0.20
- $0.21
|
12,900,000
|
7.1
|
0.20
|
12,608,333
|
0.20
|
|||||||||||
$0.22
- $0.23
|
12,600,000
|
9.5
|
0.22
|
3,178,030
|
0.22
|
|||||||||||
$0.24
- $0.50
|
15,500,000
|
4.2
|
0.38
|
14,958,333
|
0.38
|
|||||||||||
Total
Warrants
|
94,932,500
|
7.7
|
$
|
0.17
|
75,321,123
|
$
|
0.16
|
For
the Years
Ended
March 31,
|
|||||||
|
2005
|
2006
|
|||||
Net
loss, as reported
|
$
|
(5,359,722
|
)
|
$
|
(10,176,407
|
)
|
|
Add:
Stock-based employee compensation expense included in reported net
loss
|
—
|
—
|
|||||
Deduct:
Total stock-based employee compensation expense determined under
fair
value based method for all awards
|
(1,652,185
|
)
|
(5,467,232
|
)
|
|||
|
|||||||
Pro
forma net loss
|
$
|
(7,011,907
|
)
|
$
|
(15,643,639 |
)
|
|
|
|||||||
Net
loss per share:
|
|||||||
As
reported
|
$
|
(0.0185
|
)
|
$
|
(0.0248
|
)
|
|
Pro
forma
|
$
|
(0.0242
|
)
|
$
|
(0.0380 |
)
|
|
2005
|
2006
|
|||||
Dividend
yield
|
—
|
%
|
—
|
%
|
|||
Expected
volatility
|
60
|
%
|
60
|
%
|
|||
Risk-free
interest rate
|
3.00
|
%
|
3.00
|
%
|
|||
Expected
term (in years)
|
10.00
|
10.00
|
Years
Ending
March
31,
|
Minimum
Lease Payments
|
|||
2007
|
$
|
1,499,853
|
||
2008
|
1,085,611
|
|||
2009
|
665,546
|
|||
2010
|
252,858
|
|||
2011
|
125,315
|
|||
Thereafter
|
—
|
|||
Total
Payments
|
$
|
3,629,183
|
|
Voice
|
Internet
|
Wireless
|
|||||||||||||
2005
|
Services
|
Services
|
Networks
|
Corporate
|
Total
|
|||||||||||
Revenues
|
$
|
32,009,084
|
$
|
13,884,060
|
$
|
—
|
$
|
615,000
|
$
|
46,508,144
|
||||||
Cost
of revenues (excludes depreciation and amortization)
|
15,816,901
|
6,734,339
|
—
|
—
|
22,551,240
|
|||||||||||
Other
operating expenses
|
16,707,959
|
6,460,970
|
953,976
|
1,287,945
|
25,410,850
|
|||||||||||
Depreciation
and amortization
|
1,093,620
|
225,672
|
14,588
|
733,333
|
2,067,213
|
|||||||||||
Interest
(net)
|
(87,566
)
|
113,944
|
43,927
|
1,768,258
|
1,838,563
|
|||||||||||
Net
income (loss)
|
$
|
(1,521,830
|
)
|
$
|
349,135
|
$
|
(1,012,491
|
)
|
$
|
(3,174,536
|
)
|
$
|
(5,359,722
|
)
|
||
|
||||||||||||||||
Segment
assets
|
$
|
35,166,195
|
$
|
18,119,944
|
$
|
14,240
|
$
|
19,522,552
|
$
|
72,822,931
|
||||||
Fixed
assets, net of accumulated depreciation
|
$
|
11,804,050
|
$
|
1,381,713
|
$
|
7,293
|
$
|
—
|
$
|
13,193,056
|
||||||
Goodwill,
net of impairment
|
$
|
18,543,703
|
$
|
14,035,396
|
$
|
—
|
$
|
—
|
$
|
32,579,099
|
Voice
|
Internet
|
Wireless
|
|
|
||||||||||||
2006
|
Services
|
Services
|
Networks
|
Corporate
|
Total
|
|||||||||||
Revenues
|
$
|
72,356,453
|
$
|
16,940,513
|
$
|
9,716,501
|
$
|
—
|
$
|
99,013,467
|
||||||
Cost
of revenues (excludes depreciation and amortization)
|
35,630,090
|
8,267,634
|
5,184,520
|
—
|
49,082,244
|
|||||||||||
Other
operating expenses
|
31,066,030
|
8,026,734
|
6,054,076
|
2,426,002
|
47,572,842
|
|||||||||||
Depreciation
and amortization
|
3,313,401
|
382,167
|
607,881
|
7,293
|
4,310,742
|
|||||||||||
Goodwill
impairment charges
|
1,818,910
|
2,627,634
|
—
|
—
|
4,446,544
|
|||||||||||
Restructuring
charges
|
—
|
825,703
|
—
|
—
|
825,703
|
|||||||||||
Interest,
net
|
(13,761
|
)
|
17,973
|
(48,773
|
)
|
2,882,955
|
2,838,394
|
|||||||||
Minority
interests
|
(71,037
|
)
|
—
|
184,442
|
—
|
113,405
|
||||||||||
Net
income (loss)
|
$
|
612,820
|
$
|
(3,207,332
|
)
|
$
|
(2,265,645
|
)
|
$
|
(5,316,250
|
)
|
$
|
(10,176,407
|
)
|
||
|
||||||||||||||||
Total
assets
|
$
|
50,143,424
|
$
|
18,658,080
|
$
|
23,710,779
|
$
|
1,478,770
|
$
|
93,991,053
|
||||||
Fixed
assets, net of accumulated depreciation
|
$
|
11,200,715
|
$
|
1,532,494
|
$
|
3,126,045
|
$
|
—
|
$
|
15,859,254
|
||||||
Goodwill,
net of impairment
|
$
|
20,231,278
|
$
|
15,480,956
|
$
|
12,075,933
|
$
|
—
|
$
|
47,788,167
|
InReach
|
Kite
|
Kite
|
||||||||||||||
AFN
|
Internet
|
Networks
|
Broadband
|
Totals
|
||||||||||||
Acquisition
Cost
|
||||||||||||||||
Cash
|
$
|
1,500,000
|
$
|
2,166,861
|
$
|
—
|
$
|
—
|
$
|
3,666,861
|
||||||
Common
stock
|
1,500,000
|
800,000
|
2,349,000
|
13,311,000
|
17,960,000
|
|||||||||||
Excess
of liabilities assumed over assets acquired
|
434,331
|
—
|
—
|
—
|
434,331
|
|||||||||||
Aggregate
purchase price amounts
|
$
|
3,434,331
|
$
|
2,966,861
|
$
|
2,349,000
|
$
|
13,311,000
|
$
|
22,061,192
|
||||||
Number
of Shares Issued
|
10,000,000
|
3,669,725
|
13,500,000
|
76,500,000
|
103,669,725
|
|||||||||||
Net
Assets of Acquired Companies
|
||||||||||||||||
Aggregate
purchase price amounts
|
$
|
3,434,331
|
$
|
2,966,861
|
$
|
2,349,000
|
$
|
13,311,000
|
$
|
22,061,192
|
||||||
Excess
of liabilities assumed over assets acquired
|
(434,331
|
)
|
—
|
—
|
—
|
(434,331
|
)
|
|||||||||
Net
Assets of Acquired Companies
|
$
|
3,000,000
|
$
|
2,966,861
|
$
|
2,349,000
|
$
|
13,311,000
|
$
|
21,626,861
|
||||||
Cash
and cash equivalents
|
$
|
166,962
|
$
|
297,626
|
$
|
16,489
|
$
|
—
|
$
|
481,077
|
||||||
Accounts
receivable, net
|
187,172
|
214,113
|
172,622
|
—
|
573,907
|
|||||||||||
Other
current assets
|
816,954
|
106,444
|
47,057
|
—
|
970,455
|
|||||||||||
Fixed
and other assets
|
13,730
|
482,552
|
106,790
|
—
|
603,072
|
|||||||||||
Goodwill
|
3,434,331
|
2,826,529
|
2,067,682
|
9,514,032
|
17,842,574
|
|||||||||||
Total
Assets
|
4,619,149
|
3,927,264
|
2,410,640
|
9,514,032
|
20,471,085
|
|||||||||||
Minority
Interest
|
—
|
—
|
—
|
(3,796,968
|
)
|
(3,796,968
|
)
|
|||||||||
Accounts
payable and accrued expenses
|
1,549,784
|
83,995
|
61,640
|
—
|
1,695,419
|
|||||||||||
Deferred
revenue
|
69,365
|
876,408
|
—
|
—
|
945,773
|
|||||||||||
Total
Liabilities
|
1,619,149
|
960,403
|
61,640
|
—
|
2,641,192
|
|||||||||||
Net
Assets Acquired
|
$
|
3,000,000
|
$
|
2,966,861
|
$
|
2,349,000
|
$
|
13,311,000
|
$
|
21,626,860
|
||||||