As filed with the Securities and Exchange Commission on October 17, 2002
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Registration No. _____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MOBILEPRO CORP.
(Name of Registrant in Our Charter)
DELAWARE 3570 87-0419571
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
3204 TOWER OAKS BOULEVARD, SUITE 350 ARNE DUNHEM
ROCKVILLE, MARYLAND 20852 3204 TOWER OAKS BOULEVARD, SUITE 350
(301) 230-9125 ROCKVILLE, MARYLAND 20852
(Address and telephone number of Principal (301) 230-9125
Executive Offices and Principal Place of (Name, address and telephone number of agent
Business) for service)
Copies to:
Clayton E. Parker, Esq. Ronald S. Haligman, Esq.
Kirkpatrick & Lockhart LLP Kirkpatrick & Lockhart LLP
201 S. Biscayne Boulevard, Suite 2000 201 S. Biscayne Boulevard, Suite 2000
Miami, Florida 33131 Miami, Florida 33131
(305) 539-3300 (305) 539-3300
Telecopier No.: (305) 358-7095 Telecopier No.: (305) 358-7095
Approximate date of commencement of proposed sale to the public: AS
SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) PRICE (1) FEE
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Common stock, par value $0.001 per share, to be
acquired pursuant to Equity Line of Credit 31,235,294 Shares $0.10 $3,123,529.40 $287.36
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Common stock, par value $0.001 per share,
previously issued as a commitment fee
pursuant to Equity Line of Credit 764,706 Shares $0.10 $76,470.60 $7.04
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Common stock, par value $0.001 per share,
previously issued 3,614,557 Shares $0.10 $361,455.70 $33.25
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Common stock, par value $0.001 per share,
underlying convertible debentures 2,000,000 Shares $0.10 $200,000.00 $18.40
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TOTAL 37,614,557 Shares $0.10 $3,761,455.70 $346.05
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. For the purposes
of this table, we have used the average of the closing bid and asked prices
as of October 15, 2002.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
Subject to completion, dated October ___, 2002
MOBILEPRO CORP.
37,614,557 SHARES OF COMMON STOCK
This prospectus relates to the sale of up to 37,614,557 shares of our
common stock by certain persons who are, or will become, stockholders of
Mobilepro. All of the shares of common stock are being offered for sale by the
selling stockholders at prices established on the Over-the-Counter Bulletin
Board during the term of this offering. These prices will fluctuate based on the
demand for the shares of common stock.
The selling stockholders consist of:
o Cornell Capital Partners, L.P., who intends to sell up to an
aggregate amount of 34,000,000 shares of common stock, which
includes 31,235,294 pursuant to an Equity Line of Credit, 2,000,000
shares underlying convertible debentures and 764,706 shares issued
as a commitment fee pursuant to the Equity Line of Credit.
o Westrock Advisors, Inc., an unaffiliated registered broker-dealer
retained by Mobilepro in connection with the Equity Line of Credit,
intends to sell 19,608 shares recorded as a placement agent fee.
o Other selling stockholders, which intend to sell up to 3,594,949
shares of common stock.
Cornell Capital is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Equity Line of Credit Agreement. Cornell Capital will pay Mobilepro 91% of the
market price of our common stock. The 9% discount on the purchase of the common
stock to be received by Cornell Capital will be an underwriting discount. In
addition, Cornell Capital Partners, L.P. is entitled to retain 3% of the
proceeds raised by us under the Equity Line of Credit.
Our common stock is quoted on the Over-the-Counter Bulletin Board under
the symbol "MOBL."
Brokers or dealers effecting transactions in these shares should
confirm that the shares are registered under applicable state law or that an
exemption from registration is available.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 5.
With the exception of Cornell Capital, which is an "underwriter" within
the meaning of the Securities Act of 1933 in connection with the sale of common
stock under the Equity Line of Credit Agreement, no underwriter or any other
person has been engaged to facilitate the sale of shares of common stock in this
offering. This offering, including the shares of common stock to be issued
pursuant to the conversion of the convertible debentures and the shares of
common stock issued to the selling shareholders other than Cornell Capital, will
terminate sixty days after Cornell Capital has advanced $10.0 million or
twenty-four months after the effective date of the accompanying Registration
Statement, whichever occurs first. None of the proceeds from the sale of stock
by the selling stockholders will be placed in escrow, trust or any similar
account.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is ___________ ___, 2002.
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................1
THE OFFERING..................................................................2
SUMMARY FINANCIAL INFORMATION.................................................3
RISK FACTORS..................................................................5
FORWARD-LOOKING STATEMENTS...................................................12
SELLING STOCKHOLDERS.........................................................13
DILUTION.....................................................................15
CAPITALIZATION...............................................................16
EQUITY LINE OF CREDIT........................................................17
PLAN OF DISTRIBUTION.........................................................19
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....................21
DESCRIPTION OF BUSINESS......................................................25
MANAGEMENT...................................................................34
DESCRIPTION OF PROPERTY......................................................39
LITIGATION PROCEEDINGS.......................................................39
PRINCIPAL SHAREHOLDERS.......................................................40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................42
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS..............................................43
DESCRIPTION OF SECURITIES....................................................44
EXPERTS......................................................................45
LEGAL MATTERS................................................................45
AVAILABLE INFORMATION........................................................45
FINANCIAL STATEMENTS........................................................F-1
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We intend to distribute to our shareholders annual reports containing
audited financial statements. Our audited financial statements for the fiscal
year March 31, 2002, were contained in our Annual Report on Form 10-KSB.
PROSPECTUS SUMMARY
OUR COMPANY
Mobilepro is a development stage company whose business focus has been
recently redirected towards solutions supporting a new generation, or third
generation ("3G"), wireless market, through NeoReach, Inc., Mobilepro's
wholly-owned subsidiary.
NeoReach is a development stage company designing state-of-the-art
modem solutions to support 3G wireless communications systems, currently per the
worldwide W-CDMA standard. 3G technology features integrated voice and data,
access to high-speed Internet and intranet applications, interactive e-mail,
data exchange, global roaming and full motion video transmission--all delivered
to a mobile device such as a cellular phone, PDA or laptop. NeoReach is
designing advanced modems that are intended to support these services and that
may be utilized in base stations supporting the wireless networks that offer
these services and in customer handsets and other wireless devices utilized in
connection with such wireless networks. We believe that the demand for faster
networks supporting information-rich applications is rising, pushing the
wireless communications industry toward a third generation of services that are
expected to result in higher productivity, greater transmission speed and
seamless access around the world.
Selection of network standards and government policies regarding
spectrum availability and licensing will drive adoption of 3G services at
different rates in different regions of the world. Europe and Japan have
centralized systems that are based on a single network operator standard,
W-CDMA, while operators in the United States have begun to deploy systems that
are based on two different 3G standards, CDMA2000 and W-CDMA. Wireless operators
in Europe and Japan have recently begun to roll out 3G services and are expected
to continue to roll out 3G services through 2005, while operators in the United
States are expected to begin to roll out 3G services in late 2002 or 2003.
We believe that the worldwide number of deployed base stations may
double in the five-year period between 2001 and 2005. Cahners In-Stat Group
estimates in its report for the year 2000 that, during that period,
approximately 286,000 new base stations will be placed into service each year,
yielding annualized revenue of $56 billion, and that revenue from semiconductors
for base station applications will grow from approximately $6.5 billion to
nearly $10 billion. Cahners also indicates in its report that China represents
the largest market and growth opportunity for new base station deployment.
NeoReach is designing advanced modem solutions for base stations and
handsets utilized in connection with the delivery of 3G services. NeoReach's
base station solution targets smaller systems called Micro- and Pico Cell base
stations, while NeoReach's handset modem solution targets handsets, PDA's and
laptop plug-in cards. These solutions are based on proprietary technology
developed by NeoReach. If NeoReach's modem solutions are commercially
successful, we expect to leverage our 3G technology to extend our product line
to include miniaturized base stations for use in high-density areas and 3G
handsets.
ABOUT US
Our principal office is located at 3204 Tower Oaks Boulevard, Suite
350, Rockville, Maryland 20852, telephone number (301) 230-9125.
1
THE OFFERING
This offering relates to the sale of common stock by certain persons
who are, or will become, our stockholders. The selling stockholders consist of:
Cornell Capital Partners, which intends to sell up to an aggregate
amount of 34,000,000 shares of common stock.
o Westrock Advisors, Inc., an unaffiliated registered broker-dealer
retained by the Company in connection with the Equity Line of
Credit, intends to sell 19,608 shares recorded as a placement agent
fee.
o Other selling stockholders, which intend to sell up to 3,594,949
shares of common stock.
Pursuant to the Equity Line of Credit, we may, at our discretion,
periodically issue and sell to Cornell Capital shares of common stock for a
total purchase price of $10.0 million. Cornell Capital will purchase the shares
of our common stock for a 9% discount to the prevailing market price of our
common stock. In addition, Cornell Capital is entitled to retain 3% of the
proceeds raised by us under the Equity Line of Credit. Cornell Capital intends
to sell any shares purchased under the Equity Line of Credit at the then
prevailing market price. This prospectus relates to the shares of our common
stock to be issued under the Equity Line of Credit, as well as shares of common
stock issued as a commitment fee pursuant to the Equity Line of Credit, shares
of common stock to be acquired pursuant to the conversion of convertible
debentures previously purchased from our company, and shares of common stock
previously issued pursuant to certain consulting agreements and shares issued to
Westrock Advisors, Inc., an unaffiliated registered broker-dealer, as a
placement agent fee in connection with the Equity Line of Credit.
Common Stock Offered 37,614,557 shares by selling stockholders (the number of
shares being registered in this offering will represent
approximately 71% of the total number of shares of common
stock outstanding upon their issuance).
Offering Price Market price.
Common Stock Outstanding Before the Offering(1) 19,516,788 shares.
Use of Proceeds We will not receive any proceeds of the shares offered by
the selling stockholders. Any proceeds we receive from the
sale of our common stock under the Equity Line of Credit
will be used for general corporate purposes.
Risk Factors The securities offered hereby involve a high degree of risk
and immediate substantial dilution. See "Risk Factors" and
"Dilution."
Over-the-Counter Bulletin Board Symbol MOBL
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(1) This table excludes outstanding options and preferred stock, which, if
exercised or converted into shares of common stock, would result in
Mobilepro issuing an additional 2,403,480 shares of common stock.
2
SUMMARY FINANCIAL INFORMATION
The following information was taken from Mobilepro's financial
statements for the three-month periods ended June 30, 2002 (unaudited) and June
30, 2001 (unaudited) and the years ended March 31, 2002 (audited) and March 31,
2001 (audited) appearing elsewhere in this filing. This information should be
read in conjunction with such financial statements and the notes thereto. In
management's opinion all adjustment (consisting of normal recurring items)
considered necessary for a fair presentation have been included.
FOR THE FOR THE
THREE MONTHS THREE MONTHS FOR THE FOR THE
ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2002 JUNE 30, 2001 MARCH 31, 2002 MARCH 31, 2001
(UNAUDITED) (UNAUDITED)** (AUDITED) (AUDITED)
STATEMENT OF OPERATION DATA:
Revenues $ $ 299,994 $ $ --
Cost Of Sales -- -- -- --
-------------- ------------- ------------ ------------
Gross Profit -- 299,994 -- --
-------------- ------------- ------------ ------------
Total Operating Expenses 1,261,438 563,861 3,147,119 1,009,193
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Loss Before Other Income (1,261,438) (263,867) (3,147,119) (1,009,193)
Other Income (Expenses)
Interest Income -- 1,334 56 --
Forgiveness of Debt -- -- 276,738 --
Other Expense (50,228) -- (27,608) --
Interest Expense -- -- (469) --
-------------- ------------- ------------ ------------
Total Other Income (Expenses) (50,228) 1,334 248,717 --
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Net Loss Before Provision For Income Taxes (1,311,666) (262,533) (2,898,402) (1,009,193)
Provision For Income Taxes -- -- -- --
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Net Loss Applicable To Common Shares $ (1,311,666) $ (262,533) $ (2,898,402) $ (1,009,193)
============== ============= ============ ============
Net Loss Per Basic And Diluted Shares $(0.10) $(0.06) $(0.44) $(0.11)
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Weighted Average Shares Outstanding 12,905,121 4,614,921 6,462,746 8,750,000*
============== ============= ============ ============
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** Includes operations of Neoeach, Inc. prior to the merger with Mobilpro Corp.
* After reorganization.
3
JUNE 30, 2002 MARCH 31, 2002 MARCH 31, 2001
(UNAUDITED) (AUDITED) (AUDITED)
---------- ---------- ----------
BALANCE SHEET DATA:
Current Assets
Cash and Cash Equivalents $ 2,592 $ 154 $ 27
Prepaid Expenses 57,500 -- --
---------- ---------- ----------
Total Current Assets 60,092 154 27
Fixed Assets, net of depreciation 50,821 -- --
Total Assets $110,913 154 27
========== ========== ==========
Liabilities
Due To Officer 277,617 44,262
Short-Term Debt 187,000 75,000
Accounts Payable And Accrued Expenses 708,429 187,663
---------- ----------
Total Current Liabilities 1,173,046 306,925 35,820
---------- ---------- ----------
Long-Term Debt 350,000 -- --
Total Liabilities 1,523,046 -- --
Stockholders' Deficit
Preferred Stock 35 35 40
Common Stock 18,002 4,176 48,805
Additional Paid-In Capital 3,789,091 3,596,613 8,479,480
Deficit Accumulated During Development Stage (5,219,261) (3,907,595) (8,479,480)
---------- ---------- ----------
Total Stockholders' Deficit (1,412,133) (306,771) (35,793)
---------- ---------- ----------
Total Liabilities And Stockholders' Deficit $ 110,913 $ 154 $ 27
========== ========== ==========
4
RISK FACTORS
We are subject to various risks which may materially harm our business,
financial condition and results of operations. YOU SHOULD CAREFULLY CONSIDER THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS FILING
BEFORE DECIDING TO PURCHASE OUR COMMON STOCK. IF ANY OF THESE RISKS OR
UNCERTAINTIES ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING
RESULTS COULD BE MATERIALLY HARMED. IN THAT CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE
We have historically lost money. In the three months ended June 30,
2002, we sustained net losses of $1.3 million. In the year ended March 31, 2002
and year ended March 31, 2001, we sustained net losses of $2.9 million and $1.0
million, respectively. Future losses are likely to occur. Accordingly, we may
experience significant liquidity and cash flow problems if we are not able to
raise additional capital as needed and on acceptable terms. No assurances can be
given that we will be successful in reaching or maintaining profitable
operations.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO CONTINUE OUR OPERATIONS
Our operations have relied almost entirely on external financing to
fund our operations. Such financing has historically come from a combination of
borrowings from and sale of common stock to third parties and funds provided by
certain officers and directors. Over the next two years we anticipate that, in
addition to the $10 million available to us under the Equity Line of Credit, we
will need to raise additional capital to fund our anticipated operating expenses
and future expansion. We anticipate that these additional funds will be in the
range of $10 million to $15 million, depending on the anticipated expansion of
our business operations. Among other things, external financing will be required
to cover our operating costs. We cannot assure you that financing whether from
external sources or related parties will be available if needed or on favorable
terms. The sale of our common stock to raise capital may cause dilution to our
existing shareholders. If additional financing is not available when required or
is not available on acceptable terms, we may be unable to fund our operations
and expansion, successfully promote our brand name or products, develop or
enhance our technology, take advantage of business opportunities or respond to
competitive pressures, any of which could have a material adverse effect on our
business, results of operations and financial condition and the value of your
investment. Any of these events would be materially harmful to our business and
may result in a lower stock price.
THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE
TO RECURRING LOSSES AND WORKING CAPITAL SHORTAGES, WHICH MEANS THAT WE MAY NOT
BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING
The report of our independent accountants on our March 31, 2002
financial statements, as noted in Note 4 and our March 31, 2001 financial
statements, as noted in Note 2 included an explanatory paragraph indicating that
there is substantial doubt about our ability to continue as a going concern due
to our lack of any revenue-generating activities and substantial operating
losses. As a result of our acquisition of NeoReach effective in April 2002, we
have continued to incur substantial debt obligations. We anticipate that we will
incur net losses for the immediate future. We expect our operating expenses to
increase significantly, and, as a result, we will need to generate increased
monthly revenue if we are to continue as a going concern. To the extent that
revenue does not grow at anticipated rates, we do not obtain additional funding,
or that increases in our operating expenses precede or are not subsequently
followed by commensurate increases in revenue, or that we are unable to adjust
operating expense levels accordingly, we may not have the ability to continue on
as a going concern. Our financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
THE PRICE OF OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY
FLUCTUATE SIGNIFICANTLY
Prior to this offering, there has been a limited public market for our
common stock and there can be no assurance that an active trading market for our
common stock will develop. As a result, this could adversely affect our
shareholders' ability to sell our common stock in short time periods, or
possibly at all. Our common stock has experienced, and is likely to experience
in the future, significant price and volume fluctuations which could adversely
affect the market price of our common stock without regard to our operating
5
performance. In addition, we believe that factors such as quarterly fluctuations
in our financial results and changes in the overall economy or the condition of
the financial markets could cause the price of our common stock to fluctuate
substantially.
OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO RESELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS
Our common stock is deemed to be "penny stock" as that term is defined
in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny
stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are 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
o In issuers with 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 with average revenues of less than $6.0 million for the
last three years.
Broker/dealers dealing in penny stocks are required to provide
potential investors with a document disclosing the risks of penny stocks.
Moreover, broker/dealers are required to determine whether an investment in a
penny stock is a suitable investment for a prospective investor. These
requirements may reduce the potential market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to sell shares to third parties or to otherwise dispose of
them. This could cause our stock price to decline.
WE MAY NOT BE SUCCESSFUL IN INTEGRATING THE BUSINESS AND TECHNOLOGY OF NEOREACH
WITH THAT OF OUR COMPANY
We acquired NeoReach, Inc. effective April 2002. We may not be
successful in integrating the business and technology of NeoReach with the
business and operations of Mobilepro. Our failure to integrate successfully
could materially adversely affect our operating results, financial condition and
the trading price of our stock. Also, our integration efforts may divert our
management time and resources from necessary aspects of our business and
operations.
WE MAY NOT BE SUCCESSFUL IN INTEGRATING THE MANAGEMENT TEAM OF NEOREACH WITH
THAT OF OUR COMPANY
Mr. Daniel Lozinsky became our President and Chief Executive Officer in
February 2002 after he acquired 64.8% of our voting securities. After the
acquisition of NeoReach in April 2002, Mr. Arne Dunhem, replaced Mr. Lozinsky as
our President and Chief Executive Officer and Mr. Lozinsky became our Senior
Vice President. Our success depends to a significant extent on the leadership
and vision of Messrs. Dunhem and Lozinsky. Prior to the merger, Messrs. Lozinsky
and Dunhem had no experience working together. Failure to successfully integrate
the management teams of the two companies could adversely affect the business
and results of operations of Mobilepro. Our future success also depends on our
ability to identify, attract, hire, retain and motivate other well-qualified
managerial, technical, sales and marketing personnel. There can be no assurance
that these professionals will be available in the market or that we will be able
to meet their compensation requirements.
WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE A LIMITED OPERATING HISTORY UPON
WHICH YOU CAN BASE YOUR INVESTMENT DECISION
We had a major shift in our business strategy in June 2001. It was not
until June 2001 that we focused on the integration and marketing of complete
mobile information solutions that satisfy the needs of mobile professionals. We
acquired NeoReach, another development stage company, in April 2002. We only
very recently redirected our focus towards solutions supporting the 3G wireless
market. We have a limited operating history upon which to evaluate our business
plan and prospects. In addition, our business prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development. We cannot be sure that we will be
successful in addressing these issues, and, if we are unsuccessful at doing so,
our business, results of operations and financial condition could be materially
and adversely affected.
6
OUR BUSINESS REVENUE GENERATION MODEL IS UNPROVEN AND COULD FAIL
Our revenue model is new and evolving, and we cannot be certain that it
will be successful. Our ability to generate revenue depends, among other things,
on our ability to leverage NeoReach's technology in the 3G wireless
communications market. The potential profitability of this business model is
unproven. Accordingly, we cannot assure you that our business model will be
successful or that we can sustain revenue growth or achieve or sustain
profitability.
WE FACE INTENSE COMPETITION FROM COMPANIES THAT HAVE MANY ADVANTAGES COMPARED TO
OUR COMPANY
We currently face significant competition in the telecommunications
industry, and expect that this competition will continue, particularly with
respect to the market within the telecommunications industry for wireless modem
technology. Our competitors include Qualcomm, Nokia, Ericsson, Siemens,
Motorola, Samsung and PrairieComm among others. Many of these competitors have
advantages, including:
o existing rights to competing and emerging technologies;
o adapt more swiftly to new or emerging technologies;
o longer operating histories and presence in key markets;
o take advantage of acquisitions and other opportunities more
efficiently;
o greater name recognition; and
o greater financial, sales and marketing, manufacturing,
distribution, technical and other resources.
As a result of these factors, these companies may be more successful
than we are in the telecommunications industry and the wireless modem technology
market.
IF WE ARE NOT ABLE TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE WIRELESS
COMMUNICATIONS INDUSTRY, OUR FUTURE GROWTH AND OPERATING RESULTS WILL SUFFER
Our ability to compete effectively with our competitors depends on the
following factors, among others:
o the performance of our modem technology in a manner that meets
customer expectations;
o the success of our efforts to develop effective channels of
distribution for our products;
o 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;
o general conditions in the wireless communications industry;
o the success of our efforts to develop, improve and satisfactorily
address any issues relating to our modem technology; and
o the timely delivery and successful implementation of new
technologies deployed in connection with any 3G services offered by
the national and international wireless communications service
providers.
CONSOLIDATIONS IN THE WIRELESS COMMUNICATIONS INDUSTRY COULD ADVERSELY AFFECT
OUR BUSINESS TO INCLUDE A REDUCTION OR ELIMINATION OF OUR PROPORTIONATE SHARE OF
THE EMERGING MARKET
The wireless communications industry has experienced consolidation of
participants, and this trend may continue. If wireless carriers consolidate with
companies that utilize technologies that are similar to or compete with our
wireless modem technology, our proportionate share of the emerging market for
wireless modem technologies may be reduced or eliminated.
7
MANAGEMENT OF THE COMPANY CONTROLS 66.6% OF OUR COMMON STOCK ON A FULLY DILUTED
BASIS, AND THEY WILL HAVE THE ABILITY TO CONTROL MATTERS REQUIRING STOCKHOLDER
APPROVAL
As a result, these management stockholders will have significant
influence in matters requiring stockholder approval, including the election and
removal of directors, the approval of significant corporate transactions, such
as any merger, consolidation or sale of all or substantially all of the
Company's assets, and the control of the management and affairs of the Company.
Accordingly, such concentration of ownership may have the effect of delaying,
deferring or preventing a change in control of our Company, impeding a merger,
consolidation, takeover or other business combination involving the Company or
discouraging a potential acquirer from attempting to obtain control of the
Company, which in turn could have an adverse effect on your investment.
OUR PROJECTS ARE EXPECTED TO REQUIRE SUBSTANTIAL UP-FRONT COSTS BEFORE ANY
REVENUES WILL BE REALIZED
A significant portion of our revenue is expected to be derived from
substantial long-term projects which require significant up-front expense to us.
There can be no assurance that revenues will be realized until the projects are
completed or certain significant milestones are met. Our failure, or any failure
by a third-party with which we may contract, to perform services or deliver
products on a timely basis could result in a substantial loss to us.
In addition, difficulty in completing a project could have a material
adverse effect on our reputation, business and results of operations. In certain
instances, we may be dependent on the efforts of third parties to adequately
complete our portion of a project and, even if our products and processes
perform as required, a project may still fail due to other components of the
project supplied by third parties.
WE MAY NOT BE ABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS WHICH
ARE THE FOUNDATION OF OUR BUSINESS
We regard certain aspects of our products, processes, services and
technology as proprietary. We have taken steps to protect them with patents,
copyrights, trademarks, restrictions on disclosure and other methods. Despite
these precautions, we cannot be certain that third parties will not infringe or
misappropriate our proprietary rights or that third parties will not
independently develop similar products, services and technology. Any
infringement, misappropriation or independent development could harm our
business and future financial results.
We have filed patent applications with respect to our wireless modern
technology, but these may not be issued to us, and if issued, may not protect
our intellectual property from competition which could seek to design around or
invalidate these patents. Our failure to adequately protect our proprietary
rights in our products, services and technology could harm our business by
making it easier for our competitors to duplicate our services.
We own several Internet domain names, including www.mobilepro.com and
www.neoreach.com. The regulation of domain names in the United States and in
foreign countries may change. Regulatory bodies could establish additional
top-level domains or modify the requirements for holding domain names, any or
all of which may dilute the strength of our name. We may not acquire or maintain
our domain name or additional common names in all of the countries in which our
marketplace may be accessed, or for any or all of the top-level domains that may
be introduced. The relationship between regulations governing domain names and
laws protecting proprietary rights is unclear. Therefore, we may not be able to
prevent third parties from acquiring domain names that infringe or otherwise
decrease the value of our trademarks and other proprietary rights.
We may have to resort to litigation to enforce our intellectual
property rights, protect our trade secrets, determine the validity and scope of
the proprietary rights of others, or defend ourselves from claims of
infringement, invalidity or unenforceability. Litigation may be expensive and
divert resources even if we win. This could adversely affect our business,
financial condition and operating results such that our revenue will decrease,
and we could lose some of our customers and employees.
OTHER PARTIES MAY ASSERT THAT OUR TECHNOLOGY INFRINGES ON THEIR INTELLECTUAL
PROPERTY RIGHTS
Technology-based industries, such as ours, are characterized by an
increasing number of patents and frequent litigation based on allegations of
patent infringement. From time to time, third parties may assert patent,
copyright and other intellectual property rights to technologies that are
important to us. While there currently are no outstanding infringement claims
pending by or against us, we cannot assure you that third parties will not
assert infringement claims against us in the future, that assertions by such
parties will not result in costly litigation, or that they will not prevail in
any such litigation. In addition, we cannot assure you that we will be able to
8
license any valid and infringed patents from third parties on commercially
reasonable terms or, alternatively, be able to redesign products on a
cost-effective basis to avoid infringement. Any infringement claim or other
litigation against or by us could have a material adverse effect on us.
WE MAY NOT BE SUCCESSFUL IN DEVELOPING THE TECHNOLOGY NECESSARY FOR OUR PRODUCTS
AND PROCESSES
Our ability to commercialize our products is dependent on the
advancement of our existing technology. In order to obtain and maintain market
share we will continually be required to make advances in technology. We cannot
assure you that our research and development efforts will result in the
development of such technology on a timely basis or at all. Any failures in such
research and development efforts could result in significant delays in product
development and have a material adverse effect on us. We cannot assure you that
we will not encounter unanticipated technological obstacles which either delay
or prevent us from completing the development of our products and processes.
CERTAIN OF OUR PRODUCTS AND SERVICES ARE REGULATED BY THE GOVERNMENT, WHICH MAY
IMPOSE BURDENSOME REGULATIONS ON US
We believe that governmental approval may be required of our products
because they contain radio transmitters that radiate radio frequency emissions
in a frequency spectrum that is normally under license requirements. However,
because of the uncertainties surrounding the applicability of these rules to our
current or future business activities, we cannot be sure that we have been and
will remain in compliance with all applicable laws and regulations. Our failure
to comply with all applicable laws and regulations may result in the revocation
or denial of required licenses and approvals, government or private legal
action, civil and criminal liability and indemnification liability to third
parties, among other consequences. Such consequences could have a material
adverse effect on us.
We rely upon, and contemplate that we will continue to rely upon,
corporate partners to comply with applicable regulatory requirements. We cannot
assure you that such regulations will not materially adversely affect us by
jeopardizing the projects in which we are participating, by imposing burdensome
regulations on the users of our products, by imposing sanctions that directly
affect us, or otherwise. Changes in the regulatory environment relating to the
industries in which we compete could have a material adverse effect on us. We
cannot predict the effect that future regulation or regulatory changes may have
on our business.
WE MAY NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES, WHICH COULD
RENDER OUR PRODUCTS AND PROCESSES OBSOLETE
The wireless communications industry is characterized by rapid
technological change, changes in customer requirements and preferences, frequent
introduction of products and services embodying new technologies and the
emergence of new industry standards and practices that could render our existing
technology and systems obsolete. Our future success will depend on our ability
to enhance and improve the responsiveness, functionality, accessibility and
features of our products. We expect that our marketplace will require extensive
technological upgrades and enhancements to accommodate many of the new products
and services that we anticipate will be added to our marketplace. We cannot
assure you that we will be able to expand and upgrade our technology and
systems, or successfully integrate new technologies or systems we develop in the
future, to accommodate such increases in a timely manner.
WE MAY NOT EFFECTIVELY MANAGE THE GROWTH NECESSARY TO EXECUTE OUR BUSINESS PLAN,
WHICH COULD ADVERSELY EFFECT THE QUALITY OF OUR OPERATIONS AND OUR COSTS
In order to achieve the critical mass of business activity necessary to
successfully execute our business plan, we must significantly increase the
number of strategic partners and customers that use our technology. This growth
will place significant strain on our personnel, systems and resources. We cannot
be sure that we will manage our growth effectively, and our failure to do so
could have a material adverse effect on our business, financial condition and
operating results. We also expect that we will continue to hire employees,
including technical, management-level employees, and sales staff for the
foreseeable future. This growth will require us to improve management,
technical, information and accounting systems, controls and procedures. We may
not be able to maintain the quality of our operations, control our costs,
continue complying with all applicable regulations and expand our internal
management, technical information and accounting systems in order to support our
desired growth.
9
DELAWARE LAW AND OUR CHARTER MAY INHIBIT A TAKEOVER OF OUR COMPANY THAT
STOCKHOLDERS MAY CONSIDER FAVORABLE
Provisions of Delaware law, such as its business combination statute,
may have the effect of delaying, deferring or preventing a change in control of
our company. In addition, our Certificate of Incorporation authorizes the
issuance of blank check preferred stock (that is, preferred stock which our
board of directors can create and issue without prior stockholder approval) with
rights senior to those of our common stock. These provisions may have the effect
of delaying or preventing changes of control or management of our company, even
if such transactions would have significant benefits to our stockholders. As a
result, these provisions could limit the price some investors might be willing
to pay in the future for shares of our common stock.
RISKS RELATED TO THIS OFFERING
EXISTING SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION FROM OUR SALE OF
SHARES UNDER THE EQUITY LINE OF CREDIT AND THE SALE OF CONVERTIBLE DEBENTURES
The sale of shares pursuant to the conversion of debentures and
pursuant to the Equity Line of Credit will have a dilutive impact on our
stockholders. As a result, our net income per share could decrease in future
periods, and the market price of our common stock could decline. In addition,
the lower our stock price is the more shares of common stock we will have to
issue under the Equity Line of Credit to draw down the full amount. If our stock
price is lower, then our existing stockholders would experience greater
dilution. For example, if we assume that we will issue 136,986,301 shares of
common stock (provided that we amend our Articles of Incorporation to increase
our authorized common stock) under the Equity Line of Credit at an assumed
offering price of $0.073 (approximately 91% of our lowest closing bid price for
the five trading days before October 11, 2002) and fully utilized the $10.0
million available under the Equity Line of Credit, then new shareholders would
experience dilution of $0.02 per share.
THE INVESTOR UNDER THE LINE OF CREDIT WILL PAY LESS THAN THE THEN-PREVAILING
MARKET PRICE OF OUR COMMON STOCK
The common stock to be issued under the Equity Line of Credit will be
issued at a 9% discount to the lowest closing bid price on the Over-the-Counter
Bulletin Board or other principal market on which our common stock is traded for
the five consecutive trading days after the notice date. These discounted sales
could cause the price of our common stock to decline.
THE SELLING STOCKHOLDERS INTEND TO SELL THEIR SHARES OF COMMON STOCK IN THE
MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE
The selling stockholders intend to sell in the public market the shares
of common stock being registered in this offering. That means that up to
37,614,557 shares of common stock, the number of shares being registered in this
offering, may be sold. The number of shares being registered in this offering
represents approximately 71% of the total number of shares of common stock
outstanding upon their issuance. Such sales may cause our stock price to
decline.
THE SIGNIFICANT DOWNWARD PRESSURE ON THE PRICE OF OUR STOCK CAUSED BY THE SALE
OF MATERIAL AMOUNTS OF COMMON STOCK UNDER THE ACCOMPANYING REGISTRATION
STATEMENT COULD ENCOURAGE SHORT SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE
TO THE FURTHER DECLINE OF OUR STOCK PRICE
The significant downward pressure on our stock price caused by the sale
of stock registered in this offering could encourage short sales by third
parties. Such short sales could place further downward pressure on our stock
price.
OUR COMMON STOCK HAS BEEN RELATIVELY THINLY TRADED AND WE CANNOT PREDICT THE
EXTENT TO WHICH A TRADING MARKET WILL DEVELOP
Before this offering, our common stock has traded on the
Over-the-Counter Bulletin Board. Our common stock is thinly traded compared to
larger more widely known companies in our industry. Thinly traded common stock
can be more volatile than common stock trading in an active public market. We
cannot predict the extent to which an active public market for the common stock
will develop or be sustained after this offering.
10
THE PRICE YOU PAY IN THIS OFFERING WILL FLUCTUATE AND MAY BE HIGHER OR LOWER
THAN THE PRICES PAID BY OTHER PEOPLE PARTICIPATING IN THIS OFFERING
The price in this offering will fluctuate based on the prevailing
market price of the common stock on the Over-the-Counter Bulletin Board.
Accordingly, the price you pay in this offering may be higher or lower than the
prices paid by other people participating in this offering.
11
FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in this prospectus
may contain forward-looking statements. This information may involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend" or "project" or the negative of these words or other
variations on these words or comparable terminology.
This prospectus contains forward-looking statements, including
statements regarding, among other things, (a) our projected sales and
profitability, (b) our growth strategies, (c) anticipated trends in our
industry, (d) our future financing plans and (e) our anticipated needs for
working capital. These statements may be found under "Management's Discussion
and Analysis or Plan of Operations" and "Business," as well as in this
prospectus generally. Actual events or results may differ materially from those
discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under "Risk Factors" and
matters described in this prospectus generally. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this prospectus will in fact occur.
12
SELLING STOCKHOLDERS
The following table presents information regarding the selling
stockholders. Pursuant to the Equity Line of Credit, Cornell Capital has agreed
to purchase up to $10.0 million of our common stock. Other than Westrock
Advisors, Inc., none of the stockholders are broker-dealers or affiliates of
broker-dealers and none of the selling stockholders have held a position or
office, or had any other material relationship, with us, except as follows:
o Cornell Capital is the investor under the Equity Line of Credit and
the holder of $250,000 of convertible debentures. All investment
decisions of Cornell Capital Partners are made by its general
partner, Yorkville Advisors, LLC. Mark Angelo, the managing member
of Yorkville Advisors, LLC, makes the investment decisions on
behalf of Yorkville Advisors.
o Westrock Advisors, Inc., an unaffiliated registered broker-dealer,
is the placement agent retained by the Company in connection with
the Equity Line of Credit. Greg Martino, President of Westrock
Advisors, Inc., makes the investment decisions on behalf of
Westrock Advisors. Westrock Advisors, Inc. received shares of our
common stock in the ordinary course of business and to our
knowledge, at the time Westrock Advisors, Inc. received its shares
to be resold in this Prospectus, it had no agreements or
understandings, directly or indirectly, with any person to
distribute the shares.
o Arne Dunhem is our Chief Executive Officer and Chairman of the
Board of Directors.
o Daniel Lozinsky is our former Chief Executive Officer and is
currently a Director.
o Kyung (Ken) Min is a Senior Vice President of NeoReach, Inc., our
wholly-owned subsidiary.
o Parag Sheth is a Senior Vice President of NeoReach, Inc., our
wholly-owned subsidiary.
The table follows:
PERCENTAGE OF SHARES TO BE PERCENTAGE OF
SHARES BENEFICIALLY OUTSTANDING SHARES ACQUIRED UNDER OUTSTANDING SHARES
OWNED BEFORE BENEFICIALLY OWNED THE EQUITY LINE SHARES TO BE SOLD BENEFICIALLY OWNED
SELLING STOCKHOLDER OFFERING(1) BEFORE OFFERING(2) OF CREDIT IN THE OFFERING(3) AFTER OFFERING
------------------- ----------- ------------------ --------- ------------------ --------------
Cornell Capital Partners, L.P. 2,000,000(4) 9.3% 31,235,294 34,000,000 0.0%
Westrock Advisors, Inc. 19,608 * 0 19,608 0.0%
Daniel Lozinsky 6,928,694 35.5% 0 410,000 33.4%
Kyung (Ken) Min 2,833,152 14.5% 0 200,000 13.5%
Arne Dunhem 2,811,763(5) 14.3% 0 200,000 13.2%
INFe, Inc. (6) 659,853 3.4% 0 659,853 0.0%
Dr. Kim Hyo Hwan 566,669 2.9% 0 170,000 2.0%
Joann Smith 500,000 2.6% 0 500,000 0.0%
Choe Ik Joon 299,000 1.5% 0 150,000 *
Won, Jong Il 250,000 1.3% 0 75,000 *
Parag Sheth 250,000 1.3% 0 250,000 0.0%
Dr. Dae H. Bang 240,000 1.2% 0 240,000 0.0%
Jason Noh 83,334 * 0 25,000 *
Palm USA(7) 150,000 * 0 45,000 *
Choe Ik Hyun 90,000 * 0 27,000 *
Kyung C. Min 25,002 * 0 7,501 *
Englewood Equities(8) 151,500 * 0 45,450 *
Sang Y. Park 45,000 * 0 45,000 0.0%
Sung J. Rhee 83,334 * 0 25,000 *
Kun Sang Yi 83,334 * 0 83,334 0.0%
Dr. Kevin Sohn 81,667 * 0 24,500 *
Jin Soo Han 41,667 * 0 41,667 0.0%
Sang Joon Kwak 25,002 * 0 7,501 *
Byung Il Min 25,002 * 0 7,501 *
Jihyun Janet Lee-Lim 41,667 * 0 12,500 *
Jeeny Uh (Harry Uh) 12,918 * 0 3,875 0.0%
Phd. Ahn Kyu H. 33,336 * 0 10,001 *
Frederick J. Canzonetta 18,336 * 0 5,501 *
13
PERCENTAGE OF SHARES TO BE PERCENTAGE OF
SHARES BENEFICIALLY OUTSTANDING SHARES ACQUIRED UNDER OUTSTANDING SHARES
OWNED BEFORE BENEFICIALLY OWNED THE EQUITY LINE SHARES TO BE SOLD BENEFICIALLY OWNED
SELLING STOCKHOLDER OFFERING(1) BEFORE OFFERING(2) OF CREDIT IN THE OFFERING(3) AFTER OFFERING
------------------- ----------- ------------------ --------- ------------------ --------------
Dr. Charles H. Chung 63,336 * 0 19,001 *
Dr. Eugene Ko / Hye Ryun Ko 46,668 * 0 14,000 *
Wallenstein & Wagner, Ltd. (9) 20,764 * 0 20,764 0.0%
Douglas J. Tucker 30,000 * 0 30,000 0.0%
Thomas Richfield 150,000 * 0 150,000 0.0%
Francene Goodman 60,764 * 0 60,000 *
Triple Crown Consulting(10) 30,000 * 0 30,000 0.0%
-----------------------------------------
* Less than 1%.
(1) The shares represented in this column represent outstanding shares of
common stock, as well as shares of common stock that may be obtained
upon conversion or exercise of outstanding options, warrants and
convertible debentures within 60 days of October 11, 2002.
(2) Percentage of outstanding shares is based on 19,516,788 shares of
common stock outstanding as of October 11, 2002, together with shares
deemed beneficially owned by each such shareholder. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock that may be
obtained within 60 days of October 11, 2002 are deemed to be
beneficially owned by the person holding such securities that are
convertible or exchangeable into shares of common stock for the purpose
of computing the percentage of ownership of such person, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(3) Mobilepro cannot predict the actual number of shares of common stock
that will be issued pursuant to the Equity Line of Credit or upon the
conversion of the debentures, in part, because the purchase price of
the shares under the Equity Line of Credit and the conversion price of
the shares under the debentures will fluctuate based on prevailing
market conditions and Mobilepro has not determined the total amount of
advances under the Equity Line of Credit that it intends to draw.
Therefore, the number of shares of common stock registered in
connection with the Equity Line of Credit and upon the conversion of
debentures is based on Mobilepro's good-faith estimate of the maximum
number of shares that Mobilepro will issue with respect thereto based
upon current market prices of the company's common stock. The number of
shares of common stock available under the Equity Line of Credit may be
increased by any unused shares of common stock not used upon the
conversion of debentures and the number of shares of common stock
available pursuant to the conversion of debentures may be increased by
any unused shares of common stock available under the Equity Line of
Credit.
(4) Includes 2,000,000 shares of common stock that may be acquired within
60 days of October 11, 2002 pursuant to the conversion of convertible
debentures. Does not include 764,706 shares of common stock that
Cornell Capital received as a commitment fee pursuant to an Equity Line
of Credit Agreement, dated May 31, 2002, which do not vest until
seventy-five days after the accompanying registration statement has
been declared effective by the Securities and Exchange Commission.
(5) Includes options to purchase 210,519 shares of common stock owned by
Mr. Dunhem.
(6) Mr. Thomas Richfield makes the investment decisions on behalf of INFe,
Inc.
(7) Mr. Jin Soo Han makes the investment decisions on behalf of Palm USA.
(8) Mr. Won Jong II makes the investment decisions on behalf of Englewood
Equities.
(9) Mr. Michael Lake makes the investment decisions on behalf of
Wallenstein & Wagner, Ltd.
(10) Mr. Benjamin Kaplan makes the investment decisions on behalf of Triple
Crown Consulting.
14
DILUTION
Since this offering is being made solely by the selling stockholders
and none of the proceeds will be paid to us, our net tangible book value will be
unaffected by this offering. Our net tangible book value, however, will be
impacted by the common stock to be issued under the Equity Line of Credit.
Our net tangible book value as of June 30, 2002 was ($1,412,133) or
($0.08) per share of common stock. Net tangible book value is determined by
dividing our tangible book value (total tangible assets less total liabilities)
by the number of outstanding shares of our common stock.
For example, if we assume that we had issued 20,000,000 shares of
common stock under the Equity Line of Credit at an assumed offering price of
$0.50 per share, less commitment fees of $300,000 and $85,000 of other offering
expenses, our net tangible book value as of June 30, 2002 would have been
$8,202,867 or $0.22 per share. This represents an immediate increase in net
tangible book value to existing shareholders of $0.30 per share and an immediate
dilution to new shareholders of $0.28 per share, or $56%. The following table
illustrates the per share dilution:
Assumed public offering price per share $0.50
Net tangible book value per share before this offering $(0.08)
Increase attributable to new investors $0.30
-----------
Net tangible book value per share after this offering 0.22
-----------
Dilution per share to new shareholders $0.28
===========
The offering price of our common stock under the Equity Line of Credit
is based on 91% of the lowest closing bid price on the Over-the-Counter Bulletin
Board or other principal market on which our common stock is traded for the five
consecutive trading days after the notice date. In order to give prospective
investors an idea of the dilution per share they may experience, we have
prepared the following table showing the dilution per share at various assumed
offering prices. Mobilepro is registering 23,235,294 shares of common stock
under the Equity Line of Credit and the convertible debentures. Accordingly,
Mobilepro would need to register additional shares of common stock in order to
fully utilize the $10.0 million available under the Equity Line of Credit at
certain of the prices set forth below.
ASSUMED NO. OF SHARES TO BE DILUTION PER SHARE TO
OFFERING PRICE ISSUED NEW INVESTORS
$1.000 10,000,000 0.707
$0.750 13,333,333 0.488
$0.500 20,000,000 0.284
$0.400 25,000,000 0.209
$0.250 40,000,000 0.109
$0.100 100,000,000 0.031
$0.073 136,986,301 $0.020
15
CAPITALIZATION
The following table sets forth the total capitalization of Mobilepro as
of June 30, 2002.
JUNE 30, 2002
-------------
Total liabilities $ 1,523,046
Stockholders' deficit:
Preferred stock, $0.001 par value, 5,000,000
shares authorized and 35,425 shares issued and
outstanding 35
Common stock, $0.001 par value; 50,000,000 shares
authorized and 18,001,935 issued and
outstanding 18,002
Additional paid-in capital 3,789,091
Deficit accumulated during the development stage (5,219,261)
-----------
Total stockholders' deficit (1,412,133)
-----------
Total liabilities and stockholders' deficit $110,913
===========
16
EQUITY LINE OF CREDIT
SUMMARY. On October 16, 2002, we entered into an Equity Line of Credit
("EQUITY LINE OF CREDIT") with Cornell Capital Partners, L.P. ("CORNELL
CAPITAL"). Pursuant to the Equity Line of Credit, we may, at our discretion,
periodically sell to Cornell Capital shares of common stock for a total purchase
price of up to $10.0 million. For each share of common stock purchased under the
Equity Line of Credit, Cornell Capital will pay 91% of the lowest closing bid
price on the Over-the-Counter Bulletin Board or other principal market on which
our common stock is traded for the five consecutive trading days after the
notice date. Cornell Capital is a private limited partnership whose business
operations are conducted through its general partner, Yorkville Advisors, LLC.
Further, Cornell Capital Partners, L.P. will retain 3% of each advance under the
Equity Line of Credit. We previously issued 764,706 shares of our common stock
to Cornell Capital as a commitment fee pursuant to a prior Equity Line of Credit
Agreement, dated May 31, 2002 that was subsequently terminated, that fully vest
seventy-five days after the accompanying registration statement has been
declared effective by the Securities and Exchange Commission. The effectiveness
of the sale of the shares under the Equity Line of Credit is conditioned upon us
registering the shares of common stock with the Securities and Exchange
Commission. The costs associated with this registration will be borne by us. In
addition, we have engaged Westrock Advisors, Inc., an unaffiliated registered
broker-dealer, to act as our exclusive placement agent in connection with the
Equity Line of Credit and we have issued 19,608 shares of our common stock to
Westrock Advisors, Inc. pursuant to such arrangement.
EQUITY LINE OF CREDIT EXPLAINED. Pursuant to the Equity Line of Credit,
we may periodically sell shares of common stock to Cornell Capital to raise
capital to fund our working capital needs. The periodic sale of shares is known
as an advance. We may request an advance every 5 trading days. A closing will be
held 7 trading days after such written notice at which time we will deliver
shares of common stock and Cornell Capital will pay the advance amount.
We may request advances under the Equity Line of Credit once the
underlying shares are registered with the Securities and Exchange Commission.
Thereafter, we may continue to request advances until Cornell Capital has
advanced $10.0 million or twenty-four months after the effective date of the
accompanying Registration Statement, whichever occurs first. We are limited to a
maximum of $450,000 in any 30-day period. We are only entitled to an advance if
our common stock has an active bid at all times during the 5-trading-day period.
In no event will the number of shares issuable to Cornell Capital pursuant to an
advance exceed 9.9% of the then-outstanding common stock of our company. We are
entitled to receive advances under the Equity Line of Credit provided that: (i)
the accompanying registration statement has previously become effective and
remain effective on the date of delivery by us of an advance notice; (ii) we
have obtained all permits and qualifications required by any applicable state
law with respect to the offer and sale of shares of our common stock under the
Equity Line of Credit; (iii) no fundamental changes to the information set forth
in accompanying registration statement exist which would require us to file a
post-effective amendment to the accompanying registration statement; and (iv)
the trading of our common stock is not suspended by the Securities and Exchange
Commission or the principal trading exchange or market for our common stock.
We cannot predict the actual number of shares of common stock that will
be issued pursuant to the Equity Line of Credit, in part, because the purchase
price of the shares will fluctuate based on prevailing market conditions and we
have not determined the total amount of advances we intend to draw. Nonetheless,
we can estimate the number of shares of our common stock that will be issued
using certain assumptions. Assuming we drew down the entire $10.0 million
available under the Equity Line of Credit in a single advance (which is not
permitted under the terms of the Equity Line of Credit) and the purchase price
was equal to $0.073 per share, then we would issue 136,986,301 shares of our
common stock to Cornell Capital. These shares would represent approximately
87.5% of our outstanding common stock upon issuance. Mobilepro is registering
33,235,294 shares of common stock for the sale under the Equity Line of Credit
and the conversion of debentures. As of October 11, 2002, Mobilepro has
50,000,000 shares of common stock authorized under our Articles of Incorporation
and 19,516,788 shares of common stock issued and outstanding. Accordingly,
Mobilepro would need to amend its Articles of Incorporation to increase our
authorized common stock and register additional shares of common stock in order
to fully utilize the $10.0 million available under the Equity Line of Credit at
certain of the prices set forth below. We anticipate amending our Articles of
Incorporation in the next few months in order to increase our authorized common
stock to accommodate all of the shares under the Equity Line of Credit being
registered in the accompanying registration statement.
You should be aware that there is an inverse relationship between our
stock price and the number of shares to be issued under the Equity Line of
Credit. That is, as our stock price declines, we would be required to issue a
greater number of shares under the Equity Line of Credit for a given advance.
This inverse relationship is demonstrated by the following table, which shows
the number of shares to be issued under the Equity Line of Credit at a recent
price of $0.40 per share and discounts to the recent price. This table does not
17
take into account any shares of our common stock that would be issued upon
conversion of options, warrants, promissory notes and debentures.
Purchase Price: $0.40 $0.30 $0.20 $0.10 $0.05
No. of Shares(1): 25,000,000 33,333,333 50,000,000 100,000,000 200,000,000
Total Outstanding(2): 44,516,788 52,850,121 69,516,788 119,516,788 219,516,788
Percent Outstanding(3): 56.2% 63.1% 72.0% 83.7% 91.1%
----------------------
(1) Represents the number of shares of common stock to be issued to Cornell
Capital at the prices set forth in the table.
(2) Represents the total number of shares of common stock outstanding after
the issuance of the shares to Cornell Capital.
(3) Represents the shares of common stock to be issued as a percentage of
the total number shares outstanding.
The proceeds used under the Equity Line of Credit will be used for
general corporate purposes, for an expansion of the product offering and for
development of sales and marketing channels. We cannot predict the total amount
of proceeds to be raised in this transaction, in part, because we have not
determined the total amount of the advances we intend to draw. However, we
expect to incur expenses of approximately $85,000 consisting primarily of
professional fees incurred in connection with this registration.
In connection with the Equity Line of Credit, we previously issued
764,706 shares of our common stock to Cornell Capital as a commitment fee and
Cornell Capital is entitled to retain 3% of each advance under the Equity Line
of Credit. The 764,706 shares of our common stock issued as a commitment fee
will not fully vest until seventy-five days after the accompanying registration
statement has been declared effective by the Securities and Exchange Commission.
In addition, we have issued 19,608 shares of our common stock to Westrock
Advisors, Inc., an unaffiliated broker-dealer, as a placement agent fee in
connection with the Equity Line of Credit.
18
PLAN OF DISTRIBUTION
The selling stockholders have advised us that the sale or distribution
of our common stock owned by the selling stockholders may be effected directly
to purchasers by the selling stockholders or by pledgees, donees, transferees or
other successors in interest, as principals or through one or more underwriters,
brokers, dealers or agents from time to time in one or more transactions (which
may involve crosses or block transactions) (i) on the over-the-counter market or
in any other market on which the price of our shares of common stock are quoted
or (ii) in transactions otherwise than on the over-the-counter market or in any
other market on which the price of our shares of common stock are quoted. Any of
such transactions may be effected at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at varying prices
determined at the time of sale or at negotiated or fixed prices, in each case as
determined by the selling stockholders or by agreement between the selling
stockholders and underwriters, brokers, dealers or agents, or purchasers. If the
selling stockholders effect such transactions by selling their shares of our
common stock to or through underwriters, brokers, dealers or agents, such
underwriters, brokers, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of common stock for whom they may act as agent
(which discounts, concessions or commissions as to particular underwriters,
brokers, dealers or agents may be in excess of those customary in the types of
transactions involved). The selling stockholders and any brokers, dealers or
agents that participate in the distribution of the common stock may be deemed to
be underwriters, and any profit on the sale of common stock by them and any
discounts, concessions or commissions received by any such underwriters,
brokers, dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.
Cornell Capital is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Equity Line of Credit agreement. Cornell Capital will pay us 91% of the lowest
closing bid price on the Over-the-Counter Bulletin Board or other principal
trading market on which our common stock is traded for the 5 days immediately
following the notice date. The 9% discount on the purchase of the common stock
to be received by Cornell Capital will be an underwriting discount. In addition,
Cornell Capital will retain 3% of the gross proceeds raised in the Equity Line
of Credit, which constitutes underwriter compensation. In connection with the
Equity Line of Credit, we previously issued 764,706 shares of our common stock
to Cornell Capital as a commitment fee, which constitutes underwriter
compensation. These shares will not fully vest until seventy-five days after the
accompanying registration statement has been declared effective by the
Securities and Exchange Commission. We have issued 19,608 shares of our common
stock to Westrock Advisors, Inc., an unaffiliated registered broker-dealer, as a
placement agent fee in connection with the Equity Line of Credit.
Cornell Capital has been in business less than three years. Cornell
Capital is a private equity fund whose principal business function is to provide
equity and debt financing to publicly traded companies through such vehicles,
which include, but are not limited to, equity lines of credit and convertible
debentures. Cornell Capital does not have any material relationships with the
promoters of Mobilepro.
Brokers or dealers effecting transactions in these shares should
confirm that the shares are registered under applicable state law or that an
exemption from registration is available.
We will pay all the expenses incident to the registration, offering and
sale of the shares of common stock to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents. We
have agreed to indemnify the selling stockholders and their controlling persons
against certain liabilities, including liabilities under the Securities Act. We
estimate that the expenses of the offering to be borne by us will be
approximately $85,000 as well as 3.0% of the gross proceeds received under the
Equity Line of Credit that will be retained by Cornell Capital. We intend to pay
these expenses from the proceeds we anticipate receiving under the Equity Line
of Credit. We will not receive any proceeds from the sale of any of the shares
of common stock by the selling stockholders. We will, however, receive proceeds
from the sale of common stock under the Equity Line of Credit.
19
The selling stockholders should be aware that the anti-manipulation
provisions of Regulation M under the Exchange Act will apply to purchases and
sales of shares of common stock by the selling stockholders, and that there are
restrictions on market-making activities by persons engaged in the distribution
of the shares. Under Regulation M, the selling shareholders or their agents may
not bid for, purchase, or attempt to induce any person to bid for or purchase,
shares of our common stock of Mobilepro while such selling shareholders are
distributing shares covered by this prospectus. Accordingly, except as noted
below, the selling shareholders are not permitted to cover short sales by
purchasing shares while the distribution is taking place. Cornell Capital can
cover any short positions only with shares received from us under the Equity
Line of Credit. The selling stockholders are advised that if a particular offer
of common stock is to be made on terms constituting a material change from the
information set forth above with respect to the Plan of Distribution, then to
the extent required, a post-effective amendment to the accompanying registration
statement must be filed with the Securities and Exchange Commission.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF MOBILEPRO AND THE NOTES THERETO APPEARING
ELSEWHERE IN THIS FILING. STATEMENTS IN THIS MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION AND ELSEWHERE IN THIS PROSPECTUS THAT ARE NOT
STATEMENTS OF HISTORICAL OR CURRENT FACT CONSTITUTE "FORWARD-LOOKING
STATEMENTS."
OVERALL OPERATING RESULTS
We had no revenues for the quarter ended June 30, 2002. Our operating
expenses for the quarter ended June 30, 2002 were approximately $1,261,438. Our
primary expense was incurred for professional fees and compensation expenses of
$1,178,959 compared with $415,055 for the three months ended June 30, 2001. Of
this amount, $835,047 of common stock in lieu of cash was issued in connection
with consulting fees and expenses for services rendered as a part of the reverse
triangular merger with NeoReach, Inc. and entering into the Equity Line of
Credit with Cornell Capital Partners, L.P. These consulting fees and expenses
are not anticipated to be recurring. Approximately $300,000 in expenses was for
on-going compensation expenses.
We incurred approximately $70,004 for legal fees rendered in connection
with the registration of our common stock with the Securities and Exchange
Commission, our public reporting compliance filings, and general legal for
general corporate matters. The remaining expenses included general
administrative expenses of operating a start up business.
We had no sales from our wireless business solutions provider
operations for the years ended March 31, 2002 and 2001. However, our general and
administrative expenses were $3,147,119 for the year ended March 31, 2002 and
$1,009,193 for the year ended March 31, 2001, which resulted in substantial
operating losses for each respective year. Operating losses were $3,147,119 and
$1,009,193 for the years ended March 31, 2002 and 2001, respectively. We had
other income, including income from the forgiveness of debt of $248,717 and $0
for the years ended March 31, 2002 and 2001, respectively. The areas where we
expended the most funds for the years ended March 31, 2002 and 2001,
respectively, were for payroll, professional fees, consulting fees, and
marketing expenses. Due to our large operating losses and the fact that we did
not have adequate capital to continue to operate, we pursued alternative
business opportunities in the first quarter of 2002.
OPERATING LOSSES
Our net operating loss for the quarter ended June 30, 2002 was
approximately $1,311,666. These losses were incurred primarily as a result of
the aforementioned incurred expenses.
We have accumulated deficits of approximately $5,219,261 as of June 30,
2002. There will be limitations on the amount of net operating loss
carryforwards that can be used due to the change in the control of the
management of the Company. No tax benefit has been reported in the financial
statements, because we believe there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards is offset by a valuation allowance of the same amount.
Our net losses after taxes and other income/expenses were $2,898,402
for the year ended March 31, 2002 and $1,009,193 for the year ended March 31,
2001.
We have accumulated deficits of approximately $3,907,595 as of March
31, 2002. There will be limitations on the amount of net operating loss
carryforwards that can be used due to the change in the control of the
management of Mobilepro. No tax benefit has been reported in the financial
statements, because we believe there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards is offset by a valuation allowance of the same amount.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2002, we had a total Stockholders' Deficit of
approximately $1,412,133 and do not currently have any revenues, liquidity or
capital resources as we move forward with our business plan. Our independent
auditors have issued an audit opinion as of March 31, 2002 that raises
substantial doubt as to our ability to continue as a going concern. We will need
additional financing in order to implement our business plan and continue
business. Other than the Equity Line of Credit (as described below), we do not
have a source for any additional financing and we cannot give any assurances
that we will be able to secure any financing. The traditional markets for
21
raising capital have become extremely more difficult in the last year largely
due to a depressed economy, large well-known business failures and the events of
September 11, 2001.
On May 31, 2002, we entered into a Securities Purchase Agreement with
Cornell Capital Partners, L.P. Cornell Capital purchased $250,000 of our
convertible debentures. The Securities Purchase Agreement contemplates the sale
of up to an additional $250,000 of debentures. The debentures mature in two
years and bear interest at 4% annually. At our option, the entire principal
amount and all accrued interest can be either (a) paid to Cornell Capital at
maturity or (b) converted to shares of our common stock. Cornell Capital, at its
option, is entitled to voluntarily convert the debentures unto shares of our
common stock. The conversion price per share is equal to either an amount equal
to one hundred twenty percent of the closing bid price of the our common stock
on May 31, 2002 or eighty percent of the average of the four day lowest closing
bid prices of the our common stock for the five trading days immediately
proceeding conversion day. The proceeds from the sale of these debentures were
used for working capital to support continued operations and marketing.
On October 16, 2002, we entered into an Equity Line of Credit Agreement
with Cornell Capital. Cornell Capital, subject to certain terms and conditions,
will purchase up to $450,000 of Mobilepro's common stock each thirty days
thereafter during the term of the agreement or an aggregate of $10.0 million.
The term of the agreement is twenty-four months, subject to termination at the
sole discretion of Mobilepro and subject to certain events. The purchase price
of the shares of common stock will be equal to a price based upon the future
market price of our common stock with a fixed 9% discount to the then-current
market price. For each share of common stock purchased under the Equity Line of
Credit, Cornell Capital will pay 91% of the lowest closing bid price on the
Over-the-Counter Bulletin Board or other principal market on which our common
stock is traded for the five consecutive trading days after the notice date. The
effectiveness of the sale of the shares under the Equity Line of Credit is
conditioned upon us registering the shares of common stock with the Securities
and Exchange Commission. There can be no assurance of the amount of proceeds we
will receive, if any, under the Equity Line of Credit Agreement with Cornell
Capital.
NEW ACCOUNTING PRONOUNCEMENTS
We have adopted FASB Statement 128. It is not expected that we will be
impacted by other recently issued standards. FASB Statement 128 presents new
standards for computing and presenting earnings per share (EPS). The Statement
is effective for financial statements for both interim and annual periods ending
after December 15, 1997.
FASB Statement 131 presents news standards for disclosures about
segment reporting. We do not believe that this accounting standard applies to us
as all of our operations are integrated for financial reporting and
decision-making purposes.
INFLATION
Our results of operations have not been affected by inflation and we do
not expect inflation to have a significant effect on its operations in the
future.
PLAN OF OPERATION
This plan of operation does not reflect the financial information of
our prior business operations as a wireless business solutions provider business
and are reflective of our new business strategy.
1. We generated revenue in September 2002 by the sale of our currently
available base station modems (version 1.0) for shipment to prospective
customers. These modems are currently available in board format. Continued
product development will evolve the base station modems from the boards to ASICs
(Application Specific Integrated Circuit).
2. Product development plans include defining specifications for the
next version of the base station board subsequently leading to base station
modem ASICs. We believe that the timeline below demonstrates the current
anticipated product delivery schedule, and the anticipated costs associated with
the achieving the milestones. This schedule could change depending on challenges
faced in engineering and development.
22
----------------------------------------- ----------- ----------- -------------- ----------
APRIL AUGUST OCTOBER DECEMBER
2003 2003 2003 2003
----------------------------------------- ----------- ----------- -------------- ----------
Base Station Modem ASIC Prototype Beta GA (general
availability)
----------------------------------------- ----------- ----------- -------------- ----------
RF CMOS Prototype Beta GA
----------------------------------------- ----------- ----------- -------------- ----------
Handset ASIC Prototype
----------------------------------------- ----------- ----------- -------------- ----------
Financial Resources Needed - Cumulative $7M $10M $15M
----------------------------------------- ----------- ----------- -------------- ----------
3. The next generation (version 2.0) of our base station modem board
will incorporate up to 256 channels - up from the currently offered 4 channels.
In addition to the base station modem, we intend to develop RF-CMOS (Radio
Frequency Complementary Metal Oxide Semiconductor) chipsets for the wireless
markets. These chipsets will be designed to support the GSM (Global System for
Mobile Communications) and the WCDMA (Wide Band Code Division Multiple Access)
markets. Product development cycle of these chipsets is typically 12 to 14
months. We anticipate that we will outsource the manufacturing of the chipsets
to a third party, essentially categorizing us as a Fab-less developer of
semiconductors.
4. The sales cycle for our products is about 6 to 9 months. Currently
we are offerings our board to potential prospects. Our primary markets are
Europe and Asia with North America being the secondary market. We intend to
build a sales team in these regions to support our customers. In addition to
investing in a direct sales force, we will continue to try to develop business
relationships with potential partners who can serve as an indirect sales channel
for our products.
5. Typical price points for the version 1.0 of the board begin at
$10,000.
6. As a result of the Plan, we expect a significant increase in the
number of employees by mid 2003 to possibly over 50 employees.
We will need additional financing and may use the proceeds received
from the Equity Line of Credit, a potential private placement offering or
potential debt financing to raise such additional funds, which we anticipate to
be used for the following purposes:
1) Complete the design and development of advanced modems for
both the base station and handset markets:
a. Invest in laboratory facilities including test and simulation
equipment.
b. Acquire or license certain intellectual property related to the
development of modems and communications semiconductor and component technology.
2) Develop plans for third party manufacturing to support our business
goals.
3) Expand our product offerings to include RF CMOS development.
4) Develop direct and indirect sales and marketing channels for our
products and services:
a. Develop business partnerships that embrace Mobilepro as their
modem supplier for their advanced cellular handsets and user equipment.
b. Develop plans for extending our solution offerings for use in
additional global markets such as Asia and Europe.
5) Pay-down certain debt, such as a convertible debenture from Cornell
Capital. We intend to pay-off debt owed to Mr. Daniel Lozinsky, a Director, and
Mr. Arne Dunhem, an officer and Director, during 2003.
6) General working capital purposes.
23
RESEARCH AND DEVELOPMENT ACTIVITY
Every new product in the high tech industry requires some resources
dedicated to research and development. Mobilepro's products are no different.
Creating new products such as the RF-CMOS will require us to dedicate some
percentage of our efforts to research and development activities. We have
announced an agreement with International Communications University in South
Korea. In conjunction with this university, we will perform research and
development for the RF-CMOS market. We believe that this joint effort may reduce
the time necessary to produce a commercial product.
We have developed the technology for the Base Station modems and we
will focus on evolving this technology for efficiencies.
We intend to acquire or license additional intellectual property from
other sources, as opportunities develop to complement our own developed
technology. We have not yet engaged negotiations to acquire such technology
neither identified the entity controlling the technology.
We have also announced a strategic technology alliance with Prime
Circuits, Inc. of Maryland, a semiconductor development company. As part of the
alliance, we will gain access to technical knowledge, personnel and low power
semiconductor technology. This solution targets the consumer handsets and
network transmission base stations to support 3G communications. As of October
11, 2002, material terms of a contract have not been developed.
24
DESCRIPTION OF BUSINESS
THE COMPANY
Mobilepro is a development stage company whose business focus has been
recently redirected towards developing solutions supporting the third generation
("3G") wireless market, through NeoReach, Inc., Mobilepro's wholly-owned
subsidiary.
NeoReach is a development stage company developing 3G-semiconductors in
three product families:
o Modem and baseband technology and semiconductor chips for 3G
network base stations (also called Node B)
o Modem and baseband technology and semiconductor chips for 3G
handsets and other user equipment
o Radio Frequency CMOS (RF-CMOS, Radio Frequency Complementary Metal
Oxide Semiconductor) chipsets for the wireless markets, to include
both handsets and base stations.
NeoReach is focusing its initial efforts on developing the technology
for the base stations. The first delivery to a customer of a base station modem
prototype board has been initiated.
Handsets - each 3G compatible handset manufactured requires a modem as
one of its components in order to communicate with the various base stations in
the wireless network.
To provide a complete 3G network infrastructure across a typical
geographical area, three types of base stations (also called Node B) are
required for deployment:
o MACRO CELLS - Provide a signal over a very large geographical area
where signal volume is low and may cover a range of 20 - 30 miles
to include an entire city, town or community or low populated areas
outside of cities.
o MICRO CELLS - Provide a signal over a medium size area and may
cover a range of 1 - 5 miles to include a part of a city, community
or business area where call volume is higher than areas covered by
a Macro Cell.
o PICO CELLS - Provide a signal over a very small area and may cover
a range of 300 yards - 0.5 mile to provide coverage for high volume
call areas such as shopping malls, train and bus stations,
airports, office buildings and dense city centers where call volume
could be extremely high.
NeoReach will be exclusively focused on solutions for the Micro- and
Pico-Cell Base Stations since the market size and required quantity of these
units is expected to be much greater than for the Macro-cells.
Our state-of-the-art modem solutions support the 3G wireless
communications systems as defined by the worldwide W-CDMA standard and, in a
later development stage, the GSM (Global System for Mobile Communication)
standard. The W-CDMA specifications standard has been defined by the official
Third Generation Partnership Project (3GPP) such that the base station modem
will properly communicate with the corresponding handset modems over the
so-called air-interface.
The NeoReach modem solution has been developed to align directly with
the factors driving the market:
1) NETWORK CONVERGENCE - EASILY TRANSMIT VOICE AND DATA - The Node B
modem will be designed using both Frequency Division Duplex (FDD) and Time
Division Duplex (TDD). We believe that these two technologies that are part of
the 3GPP specifications are ideal for transmitting both voice and data.
2) COMPETITIVE COST ADVANTAGES - REDUCE OPERATING COSTS THROUGH HIGH
BASE STATION MODEM CAPACITY - NeoReach will offer a dense multi-channel modem
with up to 256 channels. Operators may service more customers with the same base
station.
25
3) PRODUCT PERFORMANCE - MAXIMIZE PERFORMANCE THROUGH SMART ANTENNA
PROCESSING - NeoReach will enhance Pico Base Station capacity by supporting
built-in directional antennae and external omni-directional antennae. We believe
that this may result in supporting more users per sector and lower error rates.
4) WIDER COVERAGE AREA - SERVICE LARGER AREAS AT LOWER COSTS - NeoReach
will offer modems with greater coverage capacity (3 miles vs. the typical 0.6
miles) thereby enabling operators to service larger areas using Micro and Pico
Base Stations instead of installing a more expensive Macro Base Station.
5) TECHNOLOGY COMPATIBILITY - GREATER ROI - Flexible Architecture that
we believe will enable easy upgrades and modifications, thereby lengthening
product life.
A handset, or also called cell phone or User Equipment, typically
consists of six elements; the case, the display, the key buttons, a
Microprocessor Control Unit (MCU), the modem and base band processing unit, and
finally the radio frequency transceiver unit. NeoReach will develop and provide
the modem solution including the baseband processing. This is a semiconductor
chip installed on a printed circuit board inside of the handset. NeoReach also
intends to develop and provide the complete radio frequency transceiver as a
semiconductor chip, the RF-CMOS chip.
The RF-CMOS chip is a highly complex and integrated complete receiver
and transmitter system, also called a transceiver, for a handset or other user
devices such as PDA's and laptops and for the smaller Pico-Cell base stations.
The various handsets in existence today has a radio frequency transceiver built
with many individual components such as integrated circuits, transistors,
capacitors, resistors, and coils. Most of these various components with be
integrated into the single RF-CMOS chip of a size approximately 1/4 inch by 1/4
inch. The RF-CMOS chip is initially intended for the W-CDMA and GSM standards.
3G technology features integrated voice and data, access to high-speed
Internet and intranet applications, interactive e-mail, data exchange, global
roaming and full motion video transmission--all delivered to a mobile device
such as a cellular phone, PDA or laptop. NeoReach is designing advanced modems
that are intended to support these services and that may be utilized in base
stations supporting the wireless networks that offer these services and in
customer handsets and other wireless devices utilized in connection with such
wireless networks. These modems will be based on proprietary technology already
developed by NeoReach. We will continue to develop distinguishing design
features that will include a multi-channel base station support and multi-mode
handset compatibility with W-CDMA and GSM network standards.
NeoReach intends to use third-party manufacturing for its products.
Because of this approach, the Company does not expect to make any significant
purchase of plants or equipment. The Company has initiated some preliminary
discussions with contract manufacturers for product development, prototyping and
production agreements for its planned ASIC chips and modems systems. None of
these agreements have been finalized as of this date and no assurances can be
given that any agreements will be forthcoming.
NeoReach has signed a Memorandum of Understanding with RF
Microelectronics, part of Information and Communications University of South
Korea for the co-development of the RF CMOS chip.
The current generation of digital wireless networks primarily in use
today is referred to as second generation, or 2G services. We believe that the
demand for faster networks supporting information-rich applications is rising,
pushing the wireless communications industry toward a third generation of
services that are expected to result in higher productivity, greater
transmission speed and seamless access around the world.
Selection of network standards and government policies regarding
spectrum availability and licensing will drive adoption of 3G services at
different rates in different regions of the world. Europe and Japan have
centralized systems that are based on a single network operator standard,
W-CDMA, while operators in the United States have begun to deploy systems that
are based on two different 3G standards, CDMA2000 and W-CDMA. Wireless operators
in Europe and Japan have recently begun to roll out 3G services and are expected
to continue to roll out 3G services through 2005, while operators in the United
States are expected to begin to roll out true 3G services in late 2003 or 2004.
We believe that the worldwide number of deployed base stations, a
transmission and reception station for cellular traffic, also referred to as a
cell site, may double in the five-year period between 2001 and 2005. Cahners
In-Stat Group estimates in its report for the year 2000 that, during that
period, approximately 286,000 new base stations will be placed into service each
year, yielding annualized revenue of $56 billion, and that revenue from
semiconductors for base station applications will grow from approximately $6.5
billion to nearly $10 billion. Cahners also indicates in its report that China
represents the largest market and growth opportunity for new base station
deployment.
26
On-time market availability of 3G-enabled handsets is critical to the
roll-out of 3G services. Morgan Stanley estimates in its report dated March 26,
2002 that approximately 3.7 million handsets will be needed to support the 3G
demand in 2002 and that the number of handsets needed to support the 3G demand
will grow to nearly 75 million by 2006.
NeoReach has filed six patent applications for its W-CDMA smart antenna
processing approaches. Smart antennae technology combines multiple antenna
elements with signal processing capabilities to optimize its radiation and/or
reception pattern automatically in response to the signal environment. In one
application, the processing may double the capacity, i.e. the number of
simultaneous user channels at a time, of the base station. The technology may
also improve and make the communication more stable with less interference or
interruption of the communication with the handset from the base station. We
intend to pursue other patents to protect its intellectual property rights in
various modem design and implementation areas. NeoReach initiated product
research and design in 2000 and was involved with co-development activities with
a Korean electronics corporation during 2001, which provided NeoReach with
important technical experience, know-how, and expertise in the area of W-CDMA
core-technology to satisfy the W-CDMA specifications.
Qualcomm is the leading provider of wireless modem technology,
marketing a wide variety of products worldwide. Qualcomm products have all been
designed for the CDMA standard and only recently has the company announced it
will now also build to the W-CDMA standard. Other companies developing modems
include Nokia, Ericsson, Siemens, Motorola and Samsung. A large number of
smaller companies around the world specialize in various niche technologies
addressing the wireless market to include the modems for the handsets. These
include PrairieComm and InterDigital in the U.S., Yozan in Japan, Sierra
Wireless in Canada and Xircom in Germany.
The Company is located at Mobilepro Corp., 3204 Tower Oaks Blvd., Suite
350, Rockville, Maryland 20852.
CORPORATE HISTORY
Mobilepro is a development stage company and currently trades on the
Bulletin Board under the stock symbol "MOBL". The following is a brief history
of Mobilepro.
Mobilepro was incorporated on July 14, 2000 and was focused on the
integration and marketing of complete mobile information solutions that satisfy
the needs of mobile professionals.
The company with which Mobilepro merged in June of 2001 was first
organized in June 1988 as Bud Corp. Bud Corp. changed its name to Tecon, Inc. in
July 1992, then to Buyit.com, Inc. in May 1999 and finally to CraftClick.com,
Inc. on January 4, 2000. CraftClick's business strategy and focus was to become
the premier destination for buyers and sellers of arts and crafts products and
supplies through the use of Internet websites. Due to the lack of adequate
funding and the lack of generating enough Internet traffic to achieve
profitability, CraftClick began to cease business operations in October 2000.
CraftClick subsequently disposed of substantially all of its assets in February
2001 when secured creditors foreclosed on outstanding loans made to CraftClick.
In April 2001, CraftClick reorganized pursuant to a Plan of Merger
wherein its domicile was changed from Utah to Delaware, and the common stock was
subject to a reverse split on the basis of 1 new share for every 100 shares
outstanding. On June 6, 2001, CraftClick and Mobilepro entered into an Agreement
and Plan of Merger dated June 1, 2001. Under the CraftClick Merger Agreement,
Mobilepro merged with and into CraftClick, with CraftClick being the surviving
corporation. On July 9, 2001, the name of the surviving corporation was changed
to Mobilepro Corp.
On November 19, 2001, Mobilepro implemented a 200 for 1 reverse stock
split of its common stock. There were no fractional shares issued. Concurrent
with the reverse stock split, Mobilepro issued 3,000,000 new shares of common
stock to Dungavel, Inc., pursuant to an Investor Rights Agreement, which
Mobilepro entered into with Dungavel on June 1, 2001 as part of the merger with
CraftClick.
On February 19, 2002, Mobilepro entered into a Stock Purchase Agreement
with Mr. Daniel Lozinsky and Dungavel, Inc., and another Stock Purchase
Agreement with Mr. Daniel Lozinsky, Ms. Joann Smith and Mr. Scott Smith.
Dungavel, Inc., Ms. Joann Smith and Mr. Scott Smith were all significant
stockholders of Mobilepro at the time. Pursuant to these two stock purchase
agreements, Mr. Lozinsky acquired an aggregate of 2,057,733 shares of Mobilepro
common stock, representing approximately 64.7% of Mobilepro's voting securities
at that time. On February 28, 2002, Mr. Scott Smith resigned as the President,
CEO and Chairman of Mobilepro, and Mr. Lozinsky became the President and CEO of
Mobilepro. On May 10, 2002, Mr. Arne Dunhem became Mobilepro's President, CEO
and Chairman and Mr. Lozinsky became our Senior Vice President.
27
On March 21, 2002, Mobilepro entered into an Agreement and Plan of
Merger with NeoReach, Inc., a private Delaware company, pursuant to which a
newly-formed, wholly-owned subsidiary of Mobilepro merged into NeoReach in a
tax-free transaction. NeoReach is a development stage company designing state of
the art modem solutions to support third generation (3G) wireless communications
systems. The merger was consummated on April 23, 2002. As a result of the
merger, NeoReach is now a wholly-owned subsidiary of Mobilepro. On April 23,
2002, the Company issued 12,352,129 shares of its common stock in a one-for-one
tax-free stock exchange to the holders of NeoReach's common stock pursuant to
the Agreement. This was a cash-less transaction and there were no payments or
finder's fees involved. The Board of Directors determined the consideration to
be a fair compensation to the NeoReach shareholders. The issuance of the shares
were valued at a fair value of $ 6,546,628, based on the last trading price of
$0.53 and assuming there was actual active trading of our stock at that time.
The Company believes the issuance of the stock to be exempt from registration
under Section 4(2) of the Securities Act. The related parties from both the
Company and NeoReach were Messrs. Daniel Lozinsky, Arne Dunhem, Scott Smith and
Ken Min. Mr. Daniel Lozinsky who was a controlling stockholder of Mobilepro also
owned approximately 32.5% of NeoReach.
BUSINESS STRATEGY BEFORE THE MOBILEPRO MERGER
CraftClick was formed to be the premier arts and crafts destination on
the Internet. We intended to build an online arts and crafts community that
offered amateur and professional craftspeople worldwide a wealth of arts and
crafts related content. We acquired 16 online arts and crafts related web sites.
We shipped our products through a fulfillment center located in the Midwestern
United States. Orders placed with us were transmitted electronically to our
fulfillment center using EDI protocol. Our fulfillment center then shipped the
order directly to the end customer.
While our sales increased substantially for the year ended March 31,
2001 as compared to the year ended March 31, 2000, we did not have adequate
capital funding in order to continue as a going-concern in this business
segment. As such, we discontinued the arts and crafts business in October 2000.
As previously mentioned, there was a change of control and business strategy in
June 2001.
BUSINESS STRATEGY AFTER THE MOBILEPRO MERGER AND BEFORE THE NEOREACH MERGER
Mobilepro was formed to position ourselves as a provider of wireless
business solutions for the mobile business professional workforce. We intended
to develop complete mobile information solutions that include products and
services such as wireless handheld devices and Web based enterprise
applications. As a solutions provider, we intended to bundle the service and the
hardware device into a single offering. None of the products or services were
fully developed and were not available for sale. The strategy was for Mobilepro
to develop the overall designs of both the hardware and the software of the
devices but to outsource the actual manufacturing and the detailed software
development to existing device providers. We intended to distribute the devices
with the bundled software through various distribution channels including direct
sales and alliance partners with co-marketing and referrals. The Web based
services were to be developed jointly with strategic development partners and
maintained and operated jointly with ISP and Web-hosting partners. The
applications that drove the demand for this strategy was the ever increasing use
of E-mail for business correspondence and the need for mobile professionals at
all levels of an organization to access corporate data and applications from
outside their offices.
We had no sales for the year ended March 31, 2002, and we did not have
adequate capital funding in order to continue as a going-concern in this
business segment. As such, we discontinued the wireless business solutions
provider business in March of 2002. As previously mentioned, there was a change
of control and business strategy in March 2002.
The audited financial statements included elsewhere in this filing
contain only the operations of the wireless business solutions provider business
and are not reflective of the new business strategy adopted by the new majority
owners.
BUSINESS STRATEGY AFTER THE NEOREACH MERGER
We are a development stage company and therefore, the following
business strategy contains forward-looking information and we can give no
assurances that we will be able to accomplish these goals, generate sufficient
revenues to be profitable, obtain adequate capital funding or continue as a
going concern. Our independent auditors have issued a going-concern opinion for
the year ended March 31, 2002 and March 31, 2001.
Mobilepro is attempting to develop advanced modem solutions for both
the base stations (also called Node-B) and the handsets to capitalize on the
approaching 3G wave. The base station solution targets smaller systems called
Micro- and Pico Cell base stations. The handset modem solution also targets
PDA's and laptop plug-in cards. They are based on Mobilepro's own, proprietary
28
technology. Distinguishing design features include a multi-channel base station
support and multi-mode handset compatibility with W-CDMA and GSM network
standards.
Mobilepro has solved core modem development issues with its
architecture without having to license and pay expensive, ongoing royalties to
other vendors. The core modem technology development is the interpretation and
implementation of the international W-CDMA standards specifications defined by
the Third Generation Partnership Project (3GPP) such that the base station modem
will properly communicate with the corresponding handset modem over the so
called air-interface. The issues range from identifying ways to enable
multi-channel support to solving smart antenna processing problems. This
accomplishment is attributed to the depth and breadth of experience of our
company in cellular and wireless communications technologies, network operation
and system development, ASIC and handset design and manufacturing, and 3G
network standards.
The modem features that have already been developed for the base
station (Node-B) modem include:
o Node-B Rake Receiver (4 Channels), functions include Finger
Correlator, Channel Estimator & Compensator, Frequency Estimator &
Compensator, SIR Measurement, Tracking Loop, Rake Combiner
o Node-B Symbol Level Processing (Transmitter and Receiver)
o Node-B Preamble and Traffic Searchers
o Node-B Transmitter (4 Channels)
o Completed Functional Tests
o Voice and Image demonstration platforms
o Additional features being developed are:
o Node-B Rake Receiver (with up to 256 Channels)
o Node-B Transmitter (with up to 256 Channels)
o Node-B Physical Layer Procedure
o Node-B Physical Layer Measurements
Mobilepro has filed six patent applications for its W-CDMA smart
antenna processing approaches and will pursue other patents to protect its
intellectual property rights in various chief modem design and implementation
areas.
Product research and design was initiated in 2000. We believe that the
four-channel version of the base station modem will be ready for field
evaluation during the fourth quarter 2002 with commercial ASIC multi-channel
modems mid 2003. ASIC means an Application Specific Integrated Circuit, i.e. a
semiconductor chip that will be designed and developed by the Company but will
be manufactured under an out-source agreement with a plant most likely in
Taiwan. This is also called Fab-less manufacturing of a semiconductor chip. The
handset ASIC modem is planned for mid/end 2003 market availability.
NeoReach intends to use third-party manufacturing for its products.
Because of this approach, the Company does not expect to make any significant
purchase of plants or equipment. The Company has initiated some preliminary
discussions with contract manufacturers for product development, prototyping and
production agreements for its planned ASIC chips and modems systems. None of
these agreements have been finalized as of this date and no assurances can be
given that any agreements will be forthcoming.
NeoReach has signed a Memorandum of Understanding with RF
Microelectronics, part of Information and Communications University of South
Korea for the co-development of the RF CMOS chip.
The long-term product vision is founded on product line extensions that
leverage the current technology and expertise in 3G. We intend to add new
products to the development schedule if market success with the modem solutions
is demonstrated and based on the market timing and future competitive landscape.
Mobilepro believes it can be successful in the 3G wireless modem market
for two key reasons: 1) capitalizing on an early-to-market advantage with
advanced capabilities; and, 2) maintaining narrowly focused product and market
strategy on its two core solutions. We believe that all the other vendors must
rationalize 3G development, sales and marketing resources among a larger product
line and among an installed base of customers utilizing other products for which
upgrades are expected and required.
29
MARKET/INDUSTRY PROJECTIONS
MARKET OUTLOOK FOR THIRD GENERATION SERVICES
The current generation of digital wireless networks primarily in use
today is referred to as second generation, or 2G services. Demand for faster
networks supporting information-rich applications are on the horizon, pushing
the industry toward the third generation of services delivering higher
productivity, greater transmission speed and seamless access around the world.
Marketplace players with different motivations are all driving the push
toward 3G services. Manufacturers are motivated by the lure of new revenue
streams from new 3G equipment. Wireless operators worldwide are motivated to
capture first to market advantage and to relieve their frequency spectrum
shortage. Regulators are motivated to gain new license revenue from operators.
And finally, consumers and businesses are motivated by the ability to combine
wireless mobility with content and multi-media messaging.
Markets in which both wireless and Internet penetration is high are
well positioned for 3G services. Selection of network standards and government
policies regarding spectrum availability and licensing will drive adoption at
different rates in different regions of the world.
Europe and Japan centralize on a single network operator standard,
W-CDMA, and wireless operators there have recently begun to roll out 3G services
on a schedule that builds throughout 2002-2005. The U. S. will deploy two
standards - CDMA and W-CDMA, and full rollout is projected by industry analysts
to begin in late 2003, although some limited operation may start in 2002.
MARKET SIZE AND OPPORTUNITY
We believe that the worldwide number of deployed base stations will
more than double in the five-year period between 2001 and 2005. During that
time, slightly more than 286,000 new base stations will be placed into service
each year, yielding annualized revenue of $56 billion, according to research
reports published by Cahners In-Stat Group. Further, China is projected to
represent the largest market and growth opportunity for new base station
deployment.
In terms of revenue potential, Cahners estimates the 2001 revenues from
semiconductors for the base station applications at approximately $6.5 billion
to grow to nearly $10 billion by 2005.
On-time market availability of 3G-enabled handsets is critical to the
roll-out of the services. Morgan Stanley, in published research reports,
estimates that in 2002 alone, approximately 3.7 million handsets will be needed
to support demand. This increases to nearly 75 million units in 2006. Going
forward, handset replacement volume will continually expand due to customer
exposure to more choices in new phone features, prices and services. It is
generally assumed in the industry that the expected lifetime of the handsets is
expected to be reduced from 18 months to 12 months, further driving new demand.
This is a result of the customers loosing, dropping or otherwise damaging their
handsets causing them to buy or otherwise acquire a new one.
FINANCIAL FUNDING NEEDS AND USE OF FUNDS
We will need additional financing and may use a private placement
offering or debt financing in addition to the Equity Line of Credit to raise
such additional funds, intended to be used for the following:
1) Investment in laboratory facilities including test and simulation
equipment;
2) Acquisition or licensing of certain intellectual property related to
the development of modems and communications semiconductor and component
technology;
3) Pay-down certain debt, including, but not limited to, debt owed to
Mr. Daniel Lozinsky, a Director of Mobilepro and Mr. Arne Dunhem, President,
Chief Executive Officer and a Director of Mobilepro; and
4) General working capital purposes.
30
PRODUCTS AND SERVICES
We are developing products for the 3G markets, currently per the
worldwide W-CDMA standard. Our product line will initially comprise of Pico base
station modems and handset modems ASICs. These products are not currently
available in the market. We believe that our products will be some of the first
to market and will offer special value to the manufacturers and the marketplace
in general. We currently have prototypes available of modems for the micro cell
base station.
The product line extensions will include RF CMOS chip set (Radio
Frequency CMOS). The RF CMOS is a highly complex and miniaturized chip of a size
less than 1/4 inch by 1/4 inch that is a complete radio and transmitter system.
The chip is specialized for the 1.9 GHz/2.1 GHz frequency bands used in Europe
and Asia for the new 3G W-CDMA networks and may be used in both smaller
pico-cell base stations and in 3G handsets. Future similar versions of the RF
CMOS chip may be developed for the similar 3G frequency bands used in the USA
and Canada and may also be developed for Wireless-LAN applications, although
operating in the 5 GHz frequency band. We intend to co-develop the product
jointly together with the RF Microelectronics Lab at the Information and
Communications University in South Korea.
MARKETING AND COMPETITION
MARKETING
Mobilepro intends to sell products and services through direct and
indirect sales channels. We intend to have a direct sales force in North
America, Europe and Asia. We intend that the sales organization will have
directors in each of these areas of the world. The technical support team will
support the direct sales team. Target customers include manufacturers of base
stations and other infrastructure equipment.
In addition to a direct sales channel, we intend to sell products
through OEM agreements with other manufacturers. OEM means Original Equipment
Manufacturer. Any OEM relationships will enable our products to be embedded into
the base stations. The business development team will be responsible for
initiating the relationships with the OEM partners and the sales team supports
them on an ongoing basis.
COMPETITION
The markets for our products are intensely competitive and subject to
rapid technological advancement. We must identify and capture future market
opportunities to offset the price erosion that characterizes our industry. We
may not be able to develop new products at competitive pricing and performance
levels. Even if we are able to do so, we may not complete a new product and
introduce it to market in a timely manner. Our customers may substitute use of
our products in their next generation equipment with those of current or future
competitors.
Qualcomm is the leading provider of wireless modem technology,
marketing a wide variety of products worldwide. Qualcomm products have all been
designed for the CDMA standard and only recently has the company announced it
will now also build to the W-CDMA standard. Other companies developing modems
for the base stations in addition to the handsets include bigger companies such
as Nokia, Ericsson, Siemens, Motorola and Samsung. Several smaller companies
around the world specialize in various niche technologies addressing the
wireless market to include the modems for the handsets. These include
PrairieComm and InterDigital in the U.S., Yozan in Japan, Sierra Wireless in
Canada and Xircom in Germany. Over the next few years, we expect additional
competitors, some of which may also have greater financial and other resources,
to enter the market with new products. In addition, we are aware of
venture-backed companies that focus on specific portions of our range of
products. These companies, individually or collectively, could represent future
competition for many design wins and subsequent product sales.
RESEARCH AND DEVELOPMENT
Our product development efforts are focused on defining the
functionality of the product and developing services for it. We believe the
innovation and design of our product will play an important role in our success.
We intend to identify and respond to the needs of our customers by introducing
new designs with an emphasis on innovations in the functionality, simplicity and
ease of use of our products and services.
We estimate that the amount of time spent during the last two years on
research and development activities uniquely for our product and services was
approximately $2,715 and $446,359 for the fiscal years ended March 31, 2002 and
31
2001, respectively. None of the cost of such activities were borne directly by
customers. As of August 15, 2002, we had seven individual people engaged in
research and development activities.
INTELLECTUAL PROPERTY
As of June 30, 2002, we had filed a total of six patent applications
which were pending with the U.S. Patent and Trademark Office (PTO) in the area
of "Smart Antenna" technology. On April 29, 2002, we announced that two of our
six previously filed patents have been allowed which means that they have been
or are being issued.
One allowed and awaiting issue notification patent application is
"Smart Antenna with Adaptive Convergence Parameter" with PTO Docket
#3228-003-64, involves intellectual property that can enhance the performance of
conventional smart antenna processing technology if used for 3G wireless
communications.
A second allowed and issued patent application is "A Smart Antenna With
No Phase Calibration For CDMA Reverse Link" with PTO Docket #3228-004-64,
delivers automatic, low-cost improvements to the smart antenna processing
technology.
A third allowed and issued patent application is "PN Code Acquisition
With Adaptive Antenna Array and Adaptive Threshold for DS-CDMA Wireless
Communication" with PTO Docket #3228-002-64, would provide an improvement to the
quality of the communications channel.
The remaining three patent applications, currently still under review
at the PTO, involve innovations that deliver increased capacity in 3G wireless
networks, expansion of the coverage areas, and that maintain high quality of the
communication channels. The patent applications include "New Cellular
Architecture" with PTO Docket # 3228-001-64, "Direction of Arrival Angel
Tracking Algorithm For Smart Antennas" with PTO Docket #3228-005-64, and
"Improvement of PN Code Chip Time Tracking with Smart Antenna" with PTO Docket
#3228-007-64.
In addition, we also have two other patent applications pending which
are referred to as "Wireless Communication System and Method of Providing
Wireless Communication Service" with specific descriptions to include "Device
and Method for Changing the Orientation and Configuration of a Display of an
Electronic Device" and "Electronic Device Having Multiple Service
Functionality". Both of these pending patent applications relate to the business
of the Company before the merger with NeoReach.
GOVERNMENTAL APPROVALS
We do not believe that there is a need for any specific government
approval for any of our modem solutions since these do not include any radio
transmitter and do not radiate any radio frequency signals. Our RF CMOS product
will be sold to OEM customers who will integrate the product into their own
products that may be required to adhere to certain Federal Communications
Commission section requirements because it does in fact contain a radio
transmitter. We believe that the OEM customers will obtain any required
licensing.
RECENT DEVELOPMENTS
On October 16, 2002, we entered into an equity line of credit
arrangement with Cornell Capital Partners, LP. The Equity Line of Credit
provides that Cornell Capital will purchase up to $10 million of common stock
over a two-year period, with the timing and amount of such purchases, if any, at
our discretion. Any shares of common stock sold under the Equity Line of Credit
will be priced at a 9% discount to the lowest closing bid price of the common
stock during the five-day period following the Company's notification to Cornell
that it is drawing down on the Equity Line. We are not permitted to draw down
more than $450,000 in any 30-day calendar period. In addition, there are certain
other conditions applicable to the Company's ability to draw down on the Equity
Line including the filing and effectiveness of a registration statement
registering the resale of all shares of common stock that may be issued to
Cornell under the Equity Line and the Company's adherence with certain
covenants. At the time of each draw down, the Company is obligated to pay
Cornell a fee equal to three percent of amount of each draw down.
32
On May 31, 2002, the Company entered into a Securities Purchase
Agreement with certain investors pursuant to which the Company issued and sold
$250,000 of convertible debentures. The Securities Purchase Agreement
contemplates the sale of up to an additional $250,000 of Debentures. The
Debentures accrue interest at the rate of four percent per year. The Debentures
must be repaid two years following their issuance or, at the Company's election,
converted into shares of common stock. In addition, at any time, the holders of
the Debentures may elect to convert their debt into common stock. The conversion
price per share is equal to either an amount equal to one hundred twenty percent
of the closing bid price of the our common stock as of May 31, 2002 or eighty
percent of the average of the four day lowest closing bid prices of the our
common stock for the five trading days immediately preceding date of conversion.
The Debentures also provide the Company with certain redemption rights which, if
exercised, will require the Company to issue common stock warrants to the
Debenture holders. The shares of common stock to be issued upon any conversion
of the Debentures are being registered in this offering.
EMPLOYEES
As of October 11, 2002, Mobilepro employs 7 full-time employees.
Mobilepro has no collective bargaining agreements with its employees. Mobilepro
believes that our employee relationships are satisfactory.
33
MANAGEMENT
Our present directors and executive officers are as follows:
NAME AGE POSITION TERM
EXPIRES
Arne Dunhem 52 President, Chief Executive Officer and 2003
Chairman
Daniel Lozinsky 41 Senior Vice-President and Director 2003
Kyung (Ken) Min 46 Senior Vice-President of NeoReach, Inc. 2003
Parag Sheth 35 Senior Vice-President of NeoReach, Inc. 2003
The following is a brief description of the background of our directors
and executive officers.
BACKGROUND INFORMATION
ARNE DUNHEM. Mr. Arne Dunhem was appointed a Director and Treasurer of
Mobilepro in February 2002. Mr. Dunhem has over twenty-eight years general
management and engineering experience with large complex multinational
corporations, large international organizations as well as early stage
technology companies. He has been instrumental in arranging more than $300
million in investor and vendor financing commitments and is knowledgeable in
business, management, information systems, network operations and engineering.
Between July 2001 and January 2002, Mr. Dunhem was working as a strategic
business consultant and was in January 2002 hired by NeoReach, Inc. as its
President & CEO. From November 1998, to June 2001, Mr. Dunhem was the President
and CEO of Erbia, Inc. a long-distance communications company. Mr. Dunhem
directed this company from its start-up phase through the sale of the operation
to another company. From January 1998 to October 1998, Mr. Dunhem was a
strategic business consultant. From 1993 until September 1997, Mr. Dunhem was
the Chairman of Tele8 Kontakt AB, a Swedish nationwide start-up wireless
operator. Also from 1993 to December 1997, Mr. Dunhem was the Chairman of
Nordiska Tele8 AB of Sweden, a long-distance and local telephone service
company. Mr. Dunhem directed this company from its start-up phase through full
operation and eventually the sale of the companies. From September 1989 to April
1990, Mr. Dunhem was the Executive Vice President, Engineering & Operations of
Comvik Skyport AB, a Swedish telecommunications company providing satellite and
data communications services. During the period September 1978 through June
1989, Mr. Dunhem was with INTELSAT, Washington, D.C., an international satellite
communications organization, where he served in capacities from staff engineer
to program manager and had responsibilities for building-up some of the world's
largest command, control and monitoring networks. Mr. Dunhem has also been with
the Saab-Scania corporation and the Swedish Telecom. Mr. Dunhem earned his M.Sc.
in 1974 in space telecommunications from Chalmers University of Technology,
Sweden.
DANIEL LOZINSKY. Mr. Daniel Lozinsky, Senior Vice-President and
Director of Mobilepro, was appointed a Director of Mobilepro in February 2002.
Daniel Lozinsky has 17 years of management and software development experience
with small and large multinational corporations. Mr. Lozinsky was between March
2001 and October 2001 President and CEO of VCmed Inc. a scientific medical
start-up company that was attempting to bring to the market Cancer Research
technology developed at MIT and Harvard, which allowed for early detection not
otherwise available. Mr. Lozinsky was between February 1999 and February 2001
working as a business advisor to include public relations firms for
international business. Prior to that Mr. Lozinsky was between April 1995 and
January 1999 senior software engineer of AOL, Host Systems internet department,
that allowed to meet AOL's growing Internet demands during the highest AOL's
growth period between 1996 and 1999, when the company grew from 4 million to 21
million users. He was working for AOL's MIS (BISY) department between April 1995
and June 1996. Prior to that Mr. Lozinsky was employed as a senior software
engineer at Eastman Kodak Corporation in Rochester NY between September 1989 and
April 1995. He was an internal software consultant to multiple Kodak's lines of
business. Mr. Lozinsky worked on Kodak PhotoCD system that is widely available
now and allows scanning film into digital format and printing to paper or CD. He
specifically worked for CD writer devices and testing firmware software
components that he developed for the system. During those years he worked for
Kodak's Mass Memory Division that manufactured and sold optical drives and
jukeboxes to commercial companies and government offices. Working as a designer
and developer of software and, occasionally as a support engineer, he
participated in winning for Kodak and delivering large government contracts to
include ADMAPS to US NAVY Printing and Publishing. During that project Mr.
Lozinsky worked both in Rochester and at the Navy Technology Pilot Lab at Port
Hueneme, Ca. Prior to that, between August 1987 and September 1988, Mr. Lozinsky
worked as a programmer analyst for PaineWebber Strategic Technology Department,
on the PaineWebber Backup System to the Maine Network at the Weehaken Center in
NJ. Prior to that, during August 1985 and May 1987, Mr. Lozinsky worked as a
programmer and systems analyst for Merrill Lynch, Real Time Pricing Group that
34
delivers NYSE financial data to different departments of Merrill Lynch. Mr.
Lozinsky holds MS/CS from Stevens Institute of Technology in Hoboken NJ, January
1989. He also holds BS/CS from Polytechnic Institute of NY, January 1984.
KYUNG (KEN) MIN. Kyung (Ken) Min, Senior Vice President, New
Technologies of NeoReach, Inc. is a seasoned professional with twenty years of
experience in the cellular and digital communications industries. Mr. Min has
specialized in the areas of business development, marketing, systems integration
and engineering. Mr. Min has had extensive experience in designing and marketing
emerging technologies including GSM, CDMA, PCS, W-CDMA, Pico cells, and
satellite communications. During his eleven years with Motorola from May 1981 to
June 1992, Mr. Min served as Senior Product Manager of the Cellular Business
Marketing and Sales unit developing wireless devices, including base stations,
and forming strategic alliances to ensure on-time and on-budget product market
entry. Mr. Min spent more than three years between July 1992 and December 1995
as the General Manager for Telecommunications R&D at Samsung Electronics,
heading the development of IS-95 CDMA. From January 1996 to June 1998, Mr. Min
directed the PCS unit at Hyundai Electronics where he managed two-hundred
engineers and technical marketing staff. Mr. Min represented Samsung and Hyundai
in the CDMA Development Group steering committee from 1994-1998. Mr. Min served
between October 1998 and February 2000 with Hughes Network Systems as the
Technical Director for mobile satellite projects with responsibilities for
project management and system integration. As the founder in February 2000 of
NeoReach, Mr. Min now serves in a capacity where he can most effectively
capitalize on his experience in engineering and business development. Mr. Min
earned his Master of Engineering at the Institution of Illinois Technology and
holds a bachelor's degree in Computer Science from the University of Illinois.
PARAG SHETH. Parag Sheth, Senior Vice President, Marketing and Business
Development, joins the Company with a background of more than fourteen years as
a leading person in the marketing and business development field. After his
experience between July 1996 and March 1998 as the Director of Sales at Data
Labs (later acquired by Lucent Technologies), Mr. Sheth served between March
1998 and June 2000 as the VP of Marketing at Siemens Information and
Communications Networks where he coordinated a global marketing campaign for
their broadband products, introducing a solutions sales approach, refocusing
technical sales and customer support, and increasing sales by an impressive 400%
in six months. In the same position between July 2000 and December 2000 with
Woodwind Communications, a Voice over Broadband (VoB) product manufacturer, Mr.
Sheth contributed to the firm's acquisition by VINA technologies by creating a
unique product brand in a saturated market while positioning the company with
partners. He also devised and implemented a successful public relations campaign
to generate widespread media coverage and secure analyst validation. While
between January 2001 and June 2002 working at Vibrant Solutions in Corporate
Communications and Product Marketing, Mr. Sheth led the marketing teams in
achieving measurable returns for the company that included four awards
nominations and the "Hot Start-up 2002 Award" from Telecommunications Magazine.
NeoReach welcomes Mr. Sheth's expertise in spearheading the creation and
implementation of company strategy and vision, product launch, and the
development of internal and external communications programs. Mr. Sheth has a
BSEE from the State University of New York, Buffalo and an AAS degree from
Rockland Community College.
35
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the annual
and long-term compensation for services in all capacities for the fiscal years
ended March 31, 2002, 2001 and 2000, paid to our most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S) OPTIONS COMPENSATION(1)
--------------------------- ---- ------ ----- -------- ------- ---------------
Daniel Lozinsky 2002 $0 -- -- -- $140,250
Former Chief Executive Officer and 2001 $0 -- -- -- --
Chairman 2000 $0 -- -- -- --
Arne Dunhem 2002 $0 -- -- -- $195,250
Chief Executive Officer and 2001 $0 -- -- -- --
Chairman 2000 $0 -- -- -- --
Scott R. Smith 2002 $53,652 -- -- -- $80,000
Former Chief Executive Officer and 2001 $218,750(2) -- -- -- --
Former Director 2000 $0 -- -- -- --
Kyung (Ken) Min 2002 $0 -- -- -- --
Sr. Vice President of NeoReach, Inc. 2001 $0 -- -- -- --
2000 $0 -- -- -- --
Parag Sheth 2002 $0 -- -- -- --
Sr. Vice President of NeoReach, Inc. 2001 $0 -- -- -- --
2000 $0 -- -- -- --
-------------------------
(1) All of the amounts in this column were paid in the form of stock. The
amounts listed represent the fair market value of the stock on the date
of grant.
(2) The compensation for the period ended March 31, 2001 was earned while
Mr. Smith was an employee of Mobilepro Corp, a private company, prior
to its reverse merger dated June 6, 2001. This amount was accrued and
Mr. Smith took no cash payments for salary while at Mobilepro Corp, a
private company. In February 2002 in connection with the Stock Purchase
Agreement among Mr. Daniel Lozinsky and Dungavel, Inc., and in
connection with the Stock Purchase Agreement among Mr. Daniel Lozinsky,
Ms. Joann Smith and Mr. Scott Smith, Mr. Smith forgave the payment of
this accrued amount. Part of the compensation Mr. Smith received for
his forgiveness of the accrued salary was 25,000 shares of Mobilepro's
common stock, valued on the date of issuance at $26,250. This amount is
included in the All Other Compensation column of this table. As of
March 31, 2002, Mobilepro does not owe Mr. Smith any accrued salary
amount.
36
The following table sets forth certain information concerning the
number and value of securities underlying exercisable and unexercisable stock
options as of the fiscal year ended March 31, 2002 by our executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE MARCH 31, 2002(1) MARCH 31, 2002(1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------- ------------------------- -------------------------
None Exercisable -- Exercisable --
Unexercisable -- Unexercisable --
-------------------------
(1) The value of unexercised in-the-money options at fiscal year end is
calculated using the last sale price of $1.05 per share as of March 31,
2002, the last trading day of fiscal year 2001 as reported on the
Over-the-Counter Bulletin Board.
COMPENSATION OF DIRECTORS
We have no standard arrangement pursuant to which our Directors are
compensated for services provided as a Director.
EMPLOYMENT AGREEMENTS
There are no existing employment agreements between Mobilepro and any
employees. However, there are employment agreements between the subsidiary
NeoReach, Inc. and Arne Dunhem, Kyung (Ken) Min and Parag Sheth. The employment
agreement between the subsidiary NeoReach, Inc. and Scott R. Smith terminates on
August 18, 2002.
Effective January 4, 2002, NeoReach, Inc. entered into an Employment
Agreement with Arne Dunhem. Pursuant to the Employment Agreement, Mr. Dunhem
serves as President and Chief Executive Officer of NeoReach. The initial term of
the Employment Agreement is from January 4, 2002 until April 4, 2004 and will
automatically renew for a one year term unless NeoReach or Mr. Dunhem delivers
written notice to the other party prior to March 29, 2004. Thereafter the
Employment Agreement will automatically renew for successive one year terms
unless NeoReach or Mr. Dunhem provide the other party with written notice 30
days prior to the expiration of the applicable term. Mr. Dunhem's Employment
Agreement provides for base cash compensation of $180,000 per year. In addition,
NeoReach and Mr. Dunhem (through the Board of Directors) will mutually agree
upon performance milestones and an associated bonus structure that will, upon
satisfaction of such performance milestones, enable Mr. Dunhem to earn a minimum
additional amount per year of $20,000. In addition, NeoReach granted Mr. Dunhem
an option to acquire such number of shares of NeoReach's common stock, par value
$0.01 per share, as is equal to 10% of NeoReach's outstanding shares of common
stock on the effective date of Mr. Dunhem's Employment Agreement (after giving
effect to the issuance by NeoReach of shares of common stock pursuant to that
certain Term Sheet dated January 2, 2002 by and between NeoReach and Daniel
Lozinsky). Seventy percent of the shares of common stock granted to Mr. Dunhem
pursuant to the Employment Agreement vested immediately on the date of grant,
15% of the shares of common stock granted Mr. Dunhem vested on April 5, 2002 and
the remaining shares of common stock granted to Mr. Dunhem will vest on January
5, 2003. The option was granted pursuant to the terms and conditions of the
NeoReach's 2000 Stock Incentive Plan and the form of option grant agreement used
in connection therewith. The exercise price of the option is equal to the fair
market value of the NeoReach's common stock on the date of grant.
Effective January 4, 2002, NeoReach entered into an Employment
Agreement with Kyung Min. Pursuant to the Employment Agreement, Mr. Min serves
as Senior Vice President, New Technologies of NeoReach. The initial term of the
Employment Agreement is for one year and will automatically renew for successive
one year terms unless NeoReach or Mr. Min delivers written notice to the other
party with 30 days written notice prior to the expiration of the applicable
term. Mr. Min's Employment Agreement provides for base cash compensation of
$150,000 per year. In addition, NeoReach and Mr. Min (through the Board of
Directors) will mutually agree upon performance milestones and an associated
bonus structure that will, upon satisfaction of such performance milestones,
enable Mr. Min to earn a minimum additional amount per year of $20,000. In
addition, NeoReach agreed to grant Mr. Min an option to purchase a number of
shares of NeoReach's common stock to be determined by the Board of Directors at
a later date. Mr. Min's Employment Agreement provides that the option will be
granted pursuant to the terms and conditions of the NeoReach 2000 Stock
Incentive Plan and the form of option grant agreement used in connection
therewith.
37
Effective July 1, 2002, NeoReach entered into an Employment Agreement
with Parag Sheth. Pursuant to the Employment Agreement, Mr. Sheth serves as
Senior Vice President of Marketing and Business Development. The Employment
Agreement does not specify the term. Mr. Sheth is an at-will employee of
NeoReach. Mr. Sheth's Employment Agreement provides for base cash compensation
of $180,000 per year. Mr. Sheth is eligible for a discretionary cash bonus in an
amount equal to 50% of Mr. Sheth's then-current salary, provided that NeoReach
meets or exceeds certain milestones established in NeoReach's management bonus
plan prepared each year and Mr. Sheth must be an employee of NeoReach through
the end of applicable bonus year.
2001 EQUITY PERFORMANCE PLAN
On November 1, 2001, the Board of Directors approves the Mobilepro
Corp. 2001 Equity Performance Plan under which employees, officers, directors
and consultants are eligible to receive grants of stock options. Mobilepro has
reserved a total of 1,000,000 shares of common stock under the 2001 Equity
Performance Plan. It is presently administered by Mobilepro's Board of
Directors. Subject to the provisions of the 2001 Equity Performance Plan, the
Board of Directors has full and final authority to select the individuals to
whom options will be granted, to grant the options and to determine the terms
and conditions and the number of shares issued pursuant thereto.
INDEMNIFICATION
As permitted by the provisions of the General Corporation Law of the
State of Delaware, Mobilepro has the power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation if such officer or director acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interest of Mobilepro. Any such person may be indemnified against expenses,
including attorneys' fees, judgments, fines and settlements to the extent they
have been on the merits or otherwise in defense of any action, suit or
proceeding. Further, Mobilepro does not maintain liability insurance on behalf
of its officers, directors, employees and agents. Any indemnitee is entitled to
such indemnification in advance of any final proceeding. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"ACT") may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
38
DESCRIPTION OF PROPERTY
Our offices are located at 3204 Tower Oaks Boulevard, Suite 350,
Rockville, Maryland 20852. We believe that this facility is adequate to meet our
needs in the near future. In the event our business expands, we believe we will
have to find new offices. The offices consisting of approximately 5,680 square
feet of office space are sub-leased from PrimeWire, Inc. with a monthly rental
rate of $11,356. The current sub-lease agreement will terminate on September 30,
2002 and we have initiated a re-negotiation with the landlord directly. We
signed and executed a month-by-month lease agreement with the landlord directly
on September 26, 2002. We have also initiated discussions with other potential
new office locations at lower monthly rental rate.
LITIGATION PROCEEDINGS
We are not a party to any material legal proceedings, and no material
legal proceedings have been threatened by or, to the best of our knowledge,
against us.
39
PRINCIPAL SHAREHOLDERS
BENEFICIAL OWNERS
COMMON STOCK. As of October 11, 2002, other than (i) the persons
identified in the following table and (ii) the directors and executive officers
identified in the table under "Directors and Executive Officers" section below,
no person owned beneficially more than five percent (5%) of our common stock.
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS TITLE OF CLASS OWNED OF CLASS(1)
---------------- -------------- ----- -----------
Cornell Capital Partners, LP Common Stock 2,000,000(2) 9.3%
101 Hudson Street, Suite 3606
Jersey City, New Jersey 07302
-----------------------
(1) Applicable percentage of common stock is based on 19,516,788 shares
outstanding, plus any securities convertible or exchangeable into
shares of common stock for the purpose of computing the percentage of
ownership of such person only as of October 11, 2002.
(2) This consists of debentures convertible into 2,000,000 shares of common
stock.
40
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the amount of our capital stock beneficially
owned by our directors, the executive officers named in the Summary Compensation
Table above and by all directors and executive officers as a group as of October
11, 2002. Unless otherwise indicated, beneficial ownership is direct and the
person indicated has sole voting and investment power. As of October 11, 2002,
we had 19,516,788 shares of common stock outstanding.
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS TITLE OF CLASS OWNED OF CLASS(1)
Daniel Lozinsky Common 6,928,694 35.5%
3204 Tower Oaks Boulevard, Suite 350
Rockville, MD 20852
Arne Dunhem Common 2,811,763(2) 14.3%
3204 Tower Oaks Boulevard, Suite 350
Rockville, MD 20852
Ken Min Common 2,833,156 14.5%
3204 Tower Oaks Boulevard, Suite 350
Rockville, MD 20852
Parag Sheth Common 250,000 *
3204 Tower Oaks Boulevard, Suite 350
Rockville, MD 20852
Officers and Directors as a Group Common 12,823,613(3) 65.0%
(4 Persons)
3204 Tower Oaks Boulevard, Suite 350
Rockville, MD 20852
-----------------------
* Less than 1%.
(1) Applicable percentage of ownership is based on 19,516,788 shares of
common stock outstanding as of October 11, 2002, together with
applicable options for each shareholder. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with
respect to securities. Shares of common stock subject to options that
are currently exercisable or exercisable within 60 days of October 11,
2002 are deemed to be beneficially owned by the person holding such
options for the purpose of computing the percentage of ownership of
such person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Includes options to purchase 210,519 shares of common stock at an
exercise price of $0.057 per share.
(3) Includes options to purchase 210,519 shares of common stock owned by
Mr. Dunhem.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than 10% of a
registered class of our equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other of our equity securities. Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish us copies of all Section 16(a) forms they file.
We are aware of the following instances since June 30, 2000, when an
executive officer, director or owner of more than ten percent of the outstanding
shares of our common stock failed to comply with reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934.
Mobilepro has been informed by Arne Dunhem, President, Chief Executive
Officer and a Director of Mobilepro, that during fiscal year 2002 his Form 3
reporting his acquisition of shares of common stock pursuant to the acquisition
of Neoreach was not filed on a timely basis.
Mobilepro has been informed by Daniel Lozinsky, Senior Vice-President
and a Director of Mobilepro, that during fiscal year 2001 he failed to file on a
timely basis the form required by Section 16(a) of the Securities Exchange Act
of 1934 for one transaction.
Mobilepro has been informed by Scott Smith, former Chief Executive
Officer and former Director of Mobilepro, that during fiscal year 2001 he failed
to file on a timely basis the forms required by Section 16(a) of the Securities
Exchange Act of 1934 for three transactions.
41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the period ended March 31, 2000, Mr. Peter Yollin, the Chairman,
CEO and a shareholder of our company, received advances of $13,000. These
secured advances were eliminated as part of winding up the website business.
Mr. Howard Geisler, the former secretary and director of our company
during the period January 2001 through May 2001, provided our office space on a
gratis basis.
We sold its investment of 450,706 shares of Popmail.com to meet its
financial obligations in the quarter ended September 30, 2000. The shares were
"Restricted" under Rule 144. The stock was sold to Stephen C. Wolfe, an investor
and creditor of our company at the time of the sale, for $74,650. The loss of
$425,350 was charged to the Income Statement during the period ended September
30, 2000. $225,353 of the loss was due to market value decline during the
holding period. The market value of the stock at the date of sale was $366,156.
In connection with the merger effective June 1, 2001, between Mobilepro
and Craftclick, a significant shareholder, Dungavel, Inc. was issued 250,000
shares of our common stock. Also in connection with the merger, ZDG Investments
Ltd., a Toronto investment company, was issued 1,475,000 shares of our common
stock. The stock was given for services rendered with regard to the merger. We
believe that Rob Landau is the control person of Dungavel, Inc. Mr. Landau is
also the president of ZDG Investments Ltd. The fair market value of the shares
given to Dungavel and ZDG were expensed in the amounts of $40,000 and $236,000,
respectively.
Also in connection with the merger effective June 1, 2001, between
Mobilepro and Craftclick, a significant shareholder, Dungavel, Inc. converted a
$50,000 note payable plus accrued interest into 3,000,000 shares of common stock
of our company. The note payable was originally issued by Mobilepro prior to the
merger into the public entity. The fair market value of the issued stock was
$480,000. The difference between the face value of the note and its accrued
interest was expensed in the period.
In February 2002, Mr. Daniel Lozinsky, the President of our company
loaned Mobilepro a net amount of $44,262 to pay certain creditors at 6% interest
due on demand. The officer has waived interest until April 2002.
On May 31, 2002, Mobilepro issued to Cornell Capital a convertible
debenture in the original principal amount of $250,000. The convertible
debenture is convertible into shares of our common stock as a price equal to
either 120% of the closing bid price of our common stock as of May 31, 2002, or
80% of the average of the four lowest closing bid prices of our common stock for
the five trading days immediately preceding the conversion date. If such
conversion had taken place on May 31, 2002, then the holder of the convertible
debenture would have received 452,899 shares of our common stock. The
convertible debenture accrues interest at a rate of 4% per year and is
convertible at the holder's option. The convertible debenture has a term of five
years. At Mobilepro's option, the convertible debenture may be paid in cash or
converted into shares of our common stock on the fifth anniversary unless
converted earlier by the holder.
In July 2002, we issued a total of 160,000 shares of our common stock
for the forgiveness of $39,000 of advances from Mr. Daniel Lozinsky, a Director
Mobilepro.
Two directors and officers of Mobilepro, as reflected in the June 30,
2002 financial statements, advanced the total amount of $277,617 to Mobilepro.
Daniel Lozinsky, a Director of Mobilepro, advanced to Mobilepro during the
period February 9, 2002 through June 20, 2002 a total of $155,617 as follows:
$23,262 on February 9, 2002; $25,000 on February 19, 2002; $76,355 on April 25,
2002; $15,000 on May 16, 2002; $4,000 on June 3, 2002; and $12,000 on June 20,
2002, with a repayment by Mobilepro on or before March 1, 2003 at an ordinary
market rate, not to exceed 5.00%. Arne Dunhem, the President and Chief Executive
Officer of Mobilepro, advanced to the Company during the period April 19, 2002
through May 6, 2002 a total of $122,000 as follows: $46,000 on April 19, 2002;
$40,000 on April 25, 2002; and $36,000 on May 6, 2002, with a repayment by the
Company on or before March 1, 2003 at an ordinary market rate, not to exceed
5.00%.
We believe that each of the above referenced transactions was made on
terms no less favorable to us than could have been obtained from and
unaffiliated third party. Furthermore, any future transactions or loans between
us and our officers, directors, principal stockholders or affiliates, and any
forgiveness of such loans, will be on terms no less favorable to us than could
be obtained from an unaffiliated third party, and will be approved by a majority
of our directors.
42
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
Our common stock is quoted on the Over-the-Counter Bulletin Board under
the symbol "MOBL."
The following table sets forth the range of high and low bid quotations
from the Over-the-Counter Bulletin Board and the "Pink Sheets" for each calendar
quarter for our common stock for 1999, 2000, 2001 and 2002. The high and low
share prices do reflect the effects of the 1-for-100 share reverse stock split,
which occurred on May 8, 2001, and the 1-for-200 share reverse stock split,
which occurred on November 6, 2001.
BID PRICE PER SHARE
HIGH LOW
July 23, 1999 - September 1999 $3.500 $0.500
October 1999 - December 1999 $3.000 $1.437
January 2000 - March 2000 $2.656 $1.500
April 2000 - June 2000 $3.500 $0.875
July 2000 - September 2000 $1.812 $0.375
October 2000 - December 2000 $0.406 $0.055
January 2001 - March 2001 $0.150 $0.012
April 2001 - June 2001(1) $1.600 $0.006
July 2001 - September 2001 $3.500 $0.060
October 2001 - December 2001(2) $4.000 $0.032
January 2002 - March, 2002 $4.000 $0.550
April 2002 - June 2002 $1.750 $0.250
July 2002 - September 15, 2002 $0.450 $0.140
---------------
(1) Prices after May 9, 2001 reflect a 1 for 100 reverse stock split.
(2) Prices after November 19, 2001 reflect a 1 for 200 reverse stock split.
The above prices were obtained from the Over-the-Counter Bulletin and
the "Pink Sheets." The quotations represent inter-dealer prices, without retail
mark-up, markdown or commission, and may not necessarily represent actual
transactions.
As of October 11, 2002, we believe there were approximately 531 holders
of record of our common stock.
We have not paid dividends in the past on any class of stock and we do
not anticipate paying dividends in the foreseeable future.
43
DESCRIPTION OF SECURITIES
COMMON STOCK
Mobilepro's Articles of Incorporation authorize the issuance of
50,000,000 shares of common stock, with a par value of $0.001 per share, of
which 19,516,788 shares are issued and outstanding as of October 11, 2002.
Mobilepro anticipates amending our Articles of Incorporation in the next few
months in order to increase our authorized common stock.
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the shareholders. Holders of common stock
have no cumulative voting rights.
Mobilepro does not currently anticipate paying any dividends on its
common stock. In the event of a liquidation, dissolution or winding up of
Mobilepro, the holders of shares of common stock are entitled to share pro-rata
all assets remaining after payment in full of all liabilities, subject however,
to any rights of the shareholders of preferred shares issued and outstanding at
the time of such liquidation, dissolution or winding up of Mobilepro (see
preferred stock below). Holders of common stock have no preemptive rights to
purchase Mobilepro's common stock. There are no conversion rights or redemption
or sinking fund provisions with respect to the common stock.
PREFERRED STOCK
Mobilepro's Articles of Incorporation authorize the issuance of
5,000,000 shares of preferred stock, with a par value of $0.001 per share, of
which 35,425 shares are issued and outstanding as of October 11, 2002. Each
share of Series A Preferred Stock is convertible, without additional
consideration, into one two-hundredth of a share of common stock. The holders of
the Series A Preferred Stock and the holders of our common stock vote together
as a single class on all matters presented for the vote of our stockholders.
Each holder of Series A Preferred Stock may cast a number of votes equal to the
number of shares of common stock issuable upon conversion of his Series A
Preferred Stock. The preferred stock may be issued in various series and shall
have preference as to dividends and to liquidation of the Corporation. The Board
of Directors of Mobilepro shall establish the specific rights, preferences,
voting privileges and restrictions of such preferred stock, or any series
thereof. Holders of preferred stock have no cumulative voting rights.
OPTIONS
As of October 11, 2002, we had 2,403,480 outstanding options with
exercise prices ranging from $0.057 to $1.00.
DEBENTURES
In addition, on May 31, 2002, Mobilepro issued a convertible debenture
in the original principal amount of $250,000. The convertible debenture is
convertible into shares of our common stock as a price equal to either 120% of
the closing bid price of our common stock as of May 31, 2002, or 80% of the
average of the four lowest closing bid prices of our common stock for the five
trading days immediately preceding the conversion date. If such conversion had
taken place on May 31, 2002, then the holder of the convertible debenture would
have received 452,899 shares of our common stock. The convertible debenture
accrues interest at a rate of 4% per year and is convertible at the holder's
option. The convertible debenture has a term of five years. At Mobilepro's
option, the convertible debenture may be paid in cash or converted into shares
of our common stock on the fifth anniversary unless converted earlier by the
holder.
TRANSFER AGENT AND REGISTRAR. Interwest Transfer Company is the
transfer agent and registrar for our common stock. Its address is 1981 East
Murray-Holladay Road, P. O. Box 17136, Salt Lake City, Utah 84121.
44
EXPERTS
The financial statements as of March 31, 2002 and 2001 and for each of
the two years in the period ended March 31, 2002 included in this Prospectus
have been included in reliance on the report (which contains an explanatory
paragraph relating to Mobilepro's ability to continue as a going concern as
described in Note 4 to the 2002 financial statements and Note 2 to the 2001
financial statements) of Bagell, Josephs & Company, L.L.C., independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
Kirkpatrick & Lockhart LLP, Miami, Florida, will pass upon the validity
of the shares of our common stock.
AVAILABLE INFORMATION
For further information with respect to us and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto. Statements herein concerning the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
such contract or other statement filed with the Securities and Exchange
Commission or included as an exhibit, or otherwise, each such statement, being
qualified by and subject to such reference in all respects.
Reports, registration statements, proxy and information statements, and
other information filed by us with the Securities and Exchange Commission can be
inspected and copied at the public reference room maintained by the Securities
and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Copies of these materials may be obtained at prescribed
rates from the Public Reference Section of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The
Securities and Exchange Commission maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, registration statements, proxy and
information statements and other information. You may obtain information on the
Public Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0330.
45
MOBILEPRO CORP.
FINANCIAL STATEMENTS
INDEX
Condensed Consolidated Balance Sheets as of June 30, 2002
(unaudited) and March 31, 2002 (audited) F-2
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 2002 and 2001 F-4
(unaudited) - with Cumulative Totals Since Inception
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 2002 and 2001 F-5
(unaudited) - with Cumulative Totals Since Inception
Notes to Unaudited Condensed Consolidated Financial Statements F-7
Report of Independent Certified Public Accountants F-18-19
Balance Sheet as of March 31, 2002 F-20
Statements of Operations for the Year Ended March 31, 2002
and for the Period July 14, 2000 (Inception) F-22
through March 31, 2001 - with Cumulative Totals Since Inception
Statements of Changes in Stockholders' Deficit for the Years
Ended March 31, 2002 and 2001 including the former company
Craftclick.com and the reverse acquisition that occurred as
of June 1, 2001 F-23
Statements of Cash Flows for the Year Ended March 31, 2002
and the Period July 14, 2000 (Inception) F-25
through March 31, 2001 - with Cumulative Totals
Since Inception
Notes to Financial Statements F-27
46
MOBILPRO CORP. AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
F-1
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, MARCH 31,
2002 2002
(UNAUDITED) (AUDITED)
----------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 2,592 $ 154
Prepaid expenses 57,500 -
----------- ---------
TOTAL CURRENT ASSETS 60,092 154
Fixed assets, net of depreciation 50,821 -
----------- ---------
TOTAL ASSETS $ 110,913 $ 154
=========== =========
The accompanying notes are an integral part of these financial statements.
F-2
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED
LIABILITIES AND STOCKHOLDERS' DEFICIT
JUNE 30, MARCH 31,
2002 2002
(UNAUDITED) (AUDITED)
----------- ---------
LIABILITIES
Current Liabilities:
Due to officer $ 277,617 $ 44,262
Short-term debt 187,000 75,000
Accounts payable and accrued expenses 708,429 187,663
---------- ----------
TOTAL CURRENT LIABILITIES 1,173,046 306,925
---------- ----------
LONG-TERM DEBT 350,000 -
---------- ----------
TOTAL LIABILITIES 1,523,046 306,925
---------- ----------
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value, authorized
5,000,000 shares, and 35,425 shares
issued and outstanding at June 30, 2002 and March 31,
2002, respectively 35 35
Common stock, $.001 par value, authorized 50,000,000
shares at June 30, 2002 and March 31, 2002, and
18,001,935 and 4,175,492 shares issued and
outstanding, respectively 18,002 4,176
Additional paid-in capital 3,789,091 3,596,613
Deficit accumulated during development stage (5,219,261) (3,907,595)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (1,412,133) (306,771)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 110,913 $ 154
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
MOBILEPRO CORP. AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
CUMULATIVE
TOTALS SINCE
UNAUDITED THREE UNAUDITED THREE INCEPTION(1)
MONTHS ENDED MONTHS ENDED THROUGH THREE
JUNE 30, JUNE 30, MONTHS ENDED
2002 2001 JUNE 30, 2002
---- ---- -------------
OPERATING REVENUES
Revenue $ - $ 299,994 $ -
---------- -------- ----------
OPERATING EXPENSES
Professional fees and compensation expenses 1,178,959 415,055 1,178,959
Advertising and marketing expenses 1,685 308 1,685
Research and development costs 4,496 62,839 4,496
General and administrative expenses 26,152 11,566 4,182,464
Office rent and expenses 38,437 36,566 38,437
Travel and meals expenses 7,709 33,714 7,709
Depreciation and amortization 4,000 3,813 4,000
---------- -------- ----------
TOTAL OPERATING EXPENSES 1,261,438 563,861 5,417,750
---------- -------- ----------
LOSS BEFORE OTHER INCOME (EXPENSE) (1,261,438) (263,867) (5,417,750)
OTHER INCOME (EXPENSE)
Forgiveness of debt 276,738
Interest expense (469)
Other expense (50,228) - (77,836)
Interest income - 1,334 56
---------- -------- ----------
TOTAL OTHER INCOME (EXPENSE) (50,228) 1,334 198,489
---------- -------- ----------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (1,311,666) (262,533) (5,219,261)
PROVISION FOR INCOME TAXES - - -
---------- -------- ----------
NET LOSS APPLICABLE TO COMMON SHARES $(1,311,666) $(262,533) $(5,219,261)
========== ======== ==========
NET LOSS PER BASIC AND DILUTED SHARES $ (0.10) $ (0.06) $ (0.07)
========== ======== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,905,121 4,614,921 $ 19,367,867
========== ======== ==========
(1) includes operations of Neoreach, Inc. only as an operating company as a result of the merger.
The accompanying notes are an integral part of these financial statements.
F-4
MOBILEPRO CORP. AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
CUMULATIVE
TOTALS SINCE
UNAUDITED THREE UNAUDITED THREE INCEPTION(1)
MONTHS ENDED MONTHS ENDED THROUGH THREE
JUNE 30, JUNE 30, MONTHS ENDED
2002 2001 JUNE 30, 2002
---- ---- -------------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (1,311,666) $(262,533) $ (5,219,261)
------------ --------- ------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Forgiveness of debt - - (276,738)
Depreciation 4,000 3,813 4,000
Common stock issued for services 835,047 - 4,056,706
CHANGES IN ASSETS AND LIABILITIES
(Increase) in accounts receivable - - -
(Increase) in inventory - - -
Increase in prepaid expenses and other assets (57,500) (5,678) (57,500)
Increase (decrease) in accounts payable and
and accrued expenses (62,798) 52,069 460,938
------------ --------- ------------
Total adjustments 718,749 50,204 4,187,406
------------ --------- ------------
NET CASH (USED IN) OPERATING ACTIVITIES (592,917) (212,329) (1,031,855)
------------ --------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in amounts due to related parties 233,355 - 233,355
Acquisitions of fixed assets - (2,502) -
------------ --------- ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 233,355 (2,502) 233,355
------------ --------- ------------
The accompanying notes are an integral part of these financial statements.
F-5
MOBILEPRO CORP. AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
CUMULATIVE
TOTALS SINCE
UNAUDITED THREE UNAUDITED THREE INCEPTION(1)
MONTHS ENDED MONTHS ENDED THROUGH THREE
JUNE 30, JUNE 30, MONTHS ENDED
2002 2001 JUNE 30, 2002
---- ---- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock issuances $ - $214,399 $ 100
Proceeds from borrowings, net - - 394,730
Change in officer loan, net - - 44,262
Net proceeds from issuance of notes payable 362,000 432 362,000
-------- -------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 362,000 214,831 801,092
-------- -------- -----------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 2,438 - 2,592
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 154 - 154
-------- -------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,592 $ - $ 2,746
======== ======== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
ACTIVITIES:
Issuance of common stock for:
Services $835,047 $ - $ 4,056,706
======== ======== ===========
-------------------------
(1) includes operations of Neoreach, Inc. only, as an operating company.
The accompanying notes are an integral part of these financial statements.
F-6
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The condensed consolidated unaudited interim financial
statements included herein have been prepared, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. The condensed consolidated financial
statements and notes are presented as permitted on Form 10-QSB
and do not contain information included in the Company's
annual financial statements and notes. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed
or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make
the information presented not misleading. It is suggest that
these condensed consolidated financial statements be read in
conjunction with the March 31, 2002 audited financial
statements and the accompanying notes thereto. While
management believes the procedures followed in preparing these
condensed consolidated financial statements are reasonable,
the accuracy of the amounts are in some respects dependent
upon the facts that will exist, and procedures that will be
accomplished by the Company later in the year.
These condensed consolidated unaudited financial statements
reflect all adjustments, including normal recurring
adjustments which, in the opinion of management, are necessary
to present fairly the consolidated operations and cash flows
for the periods presented.
Mobilepro Corp formerly Craftclick.com, Inc. was incorporated
under the laws of the State of California in January 1999, as
BuyIt.com, Inc. ("BuyIt"). From inception through March 31,
1999, the Company engaged in preliminary activities related to
the set up of an Internet auction business. On April 16, 1999,
the Company entered into an Agreement and Plan of
Reorganization ("Plan") with Tecon, Inc. ("Tecon"), a Utah
Corporation, wherein all of the outstanding shares and
subscriptions of BuyIt were exchanged for 8,500,000 shares
(for the outstanding shares of common stock of Tecon, and
245,997 shares (for the outstanding subscriptions) of common
stock of Tecon. At the conclusion of all the transactions
contemplated in the Plan, BuyIt shareholders and subscribers
owned 8,745,997 shares of total outstanding shares of
12,179,249, or 71.9%, The survivor in the aforementioned
combination was Tecon. However, the name of the surviving
company was changed to BuyIt.com, Inc., simultaneously with
the Plan. The combination of these two entities had been
accounted for as a purchase. The Company changed its name to
Craftclick.com, Inc., on January 4, 2000, as a result of
changing its business strategy and focus-which was to become
the premier destination for buyers and sellers of arts and
crafts products and supplies through the use of Internet
websites. However, the Company disposed of substantially all
assets in February of 2001 when secured creditors foreclosed
on loans to the Company.
F-7
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
In April 2001, Craftclick.com, Inc. reorganized pursuant to a
Plan of Merger wherein its domicile was changed from Utah to
Delaware, and the common stock was reverse split on the basis
of 1 new share for every 100 shares outstanding.
On June 6, 2001, Craftclick.com, Inc. merged with Mobilepro
Corp a Delaware corporation as of June 1, 2001. Under the
merger agreement, Mobilepro Corp merged into Craftclick.com,
Inc. with Craftclick being the surviving corporation and the
Certificate of Incorporation and By Laws of Craftclick being
the constituent documents of the surviving corporation.
In July 2001, the Company changed its name to Mobilepro Corp.
On March 21, 2002, NeoReach, Inc., a Delaware Company, and
Mobilepro Corp entered into the above Agreement and Plan of
Merger. NeoReach, Inc. is a development stage company
designing state of the art modem solutions to support third
generation (3G) wireless communications systems. On April 23,
2002 the Company consummated the purchase of its wholly-owned
subsidiary NeoReach, Inc. Mobilepro Corp exchanged 12,352,129
shares of its common stock for this purchase.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the
accounts of the Company and all of its wholly owned
subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.
DEVELOPMENT STAGE COMPANY
Mobilepro Corp is a development stage company. The Company
since April 23, 2002 devotes substantially all of its efforts
to researching and developing technology for the third
generation wireless waves. Before the acquisition of NeoReach,
Inc., Mobilepro Corp focused on the integration and marketing
of complete mobile information solutions to the business
market through strategic partnership with established firms
already delivering information technology consulting, wireless
service and vertical market application products and services.
F-8
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized when earned. For products which the
Company sells, revenue is recognized when products are
shipped. Customer payments for sales are charged to
pre-approved/authorized credit cards. Thus, the sale is not
recorded and product not shipped unless collection is
determined to be certain. The Company records accounts
receivable for the sale proceeds during the period of time
between shipping and when cash is posted in the bank.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments and
other short-term investments with an initial maturity of three
months or less to be cash equivalents.
The Company maintains cash and cash equivalent balances at
several financial institutions which are insured by the
Federal Deposit Insurance Corporation up to $100,000.
INCOME TAXES
Effective July 14, 2000, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 (the
Statement), Accounting for Income Taxes. The Statement
requires an asset and liability approach for financial
accounting and reporting for income taxes, and the recognition
of deferred tax assets and liabilities for the temporary
differences between the financial reporting bases and tax
bases of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized
or settled. The cumulative effect of this change in accounting
for income taxes as of June 30, 2002 is $0 due to the
valuation allowance established as described in Note 3.
F-9
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash
and cash equivalents, and accounts payable approximate fair
value because of the immediate or short-term maturity of these
financial instruments.
ADVERTISING COSTS
The Company expenses the costs associated with advertising as
incurred. Advertising and promotional expenses were
approximately $1,685 and $308 for the three months ended June
30, 2002 and 2001, respectively.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets.
When assets are retired or otherwise disposed of, the costs
and related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is recognized in
income for the period. The cost of maintenance and repairs is
charged to income as incurred; significant renewals and
betterments are capitalized. Deduction is made for retirements
resulting from renewals or betterments. Furniture and
equipment consist of the following at June 30, 2002:
OFFICE FURNITURE AND COMPUTER EQUIPMENT 3 TO 5 YEARS
There was $4,000 and $3,813 charged to operations for
depreciation expense for the three months ended June 30, 2002
and 2001, respectively.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net income (loss) per common share is computed
using the weighted average number of common shares
outstanding. Diluted earnings per share (EPS) includes
additional dilution from common stock equivalents, such as
stock issuable pursuant to the exercise of stock options and
warrants. Common stock equivalents were not included in the
computation of diluted earnings per share when the Company
reported a loss because to do so would be antidilutive for
periods presented.
F-10
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE OF COMMON STOCK (CONTINUED)
The following is a reconciliation of the computation for basic
and diluted EPS:
JUNE 30, JUNE 30,
2002 2001
----------- ---------
Net loss $(1,311,666) $(262,533)
Weighted average common shares outstanding
Basic 12,905,121 4,614,921
Weighted average common stock equivalents:
Stock options - -
Warrants - -
Weighted average common shares outstanding
(Diluted) 12,905,121 4,614,921
=========== =========
Options and warrants outstanding to purchase stock were not
included in the computation of diluted EPS because inclusion
would have been antidilutive.
RECLASSIFICATIONS
Certain amounts for the three months ended June 30, 2001 have
been reclassified to conform with the presentation of the June
30, 2002 amounts. The reclassifications have no effect on net
income for the three months ended June 30, 2001.
F-11
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES". SFAS No. 133 requires companies to
recognize all derivative contracts as either assets or
liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is
to match the timing of the gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in
the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of
the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. On June 30,
1999, the FASB issued SFAS No. 137, "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF THE EFFECTIVE
DATE OF FASB STATEMENT NO. 133". SFAS No. 133 as amended by
SFAS No. 137 is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. In June 2000, the FASB
issued SFAS No. 138, "ACCOUNTING FOR CERTAIN DERIVATIVE
INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES". SFAS No. 133 as
amended by SFAS No. 137 and 138 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000.
Historically, we have not entered into derivatives contracts
to hedge existing risks or for speculative purposes.
Accordingly, we do not expect adoption of the new standard to
have a material effect on our consolidated financial
statements.
In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101, "REVENUE
RECOGNITION IN FINANCIAL STATEMENTS." SAB 101 provides
guidance for revenue recognition under certain circumstances,
and is effective during the first quarter of fiscal year 2001.
SAB 101 is not expected to have a material effect on our
consolidated results of operations, financial position and
cash flows.
On March 16, 2000, the Emerging Issues Task Force issued EITF
99-19 "Recording Revenue as a Principal versus Net as an
Agent" which addresses the issue of how and when revenues
should be recognized on a Gross or Net method as the title
implies. The emerging Issues Task Force has not reached a
consensus but sites SEC Staff Accounting Bulletin 101. EITF
99-19 does not affect our consolidated financial statements.
F-12
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On July 20, 2000, the Emerging Issues Task Force issued EITF
00-14 "Accounting For Certain Sales Incentives" which
establishes accounting and reporting requirements for sales
incentives such as discounts, coupons, rebates and free
products or services. Generally, reductions in or refunds of a
selling price should be classified as a reduction in revenue.
For SEC registrants, the implementation date is the beginning
of the fourth quarter after the registrant's fiscal year end
December 15, 1999. EITF 00-14 does not affect our consolidated
financial statements.
In June 2001, the FASB issued Statement No. 142 "Goodwill and
Other Intangible Assets". This Statement addresses financial
accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses how intangible assets that are
acquired individually or with a group of other assets (but not
those acquired in a business combination) should be accounted
for in financial statements upon their acquisition. This
Statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially
recognized in the financial statements. This statement does
not affect our consolidated financial statements.
NOTE 3- GOING CONCERN
As shown in the accompanying condensed consolidated financial
statements the Company has sustained substantial net operating
losses for the year ended March 31, 2002 and the period June
30, 2002 and periods prior. There is no guarantee that the
Company will be able to raise enough capital or generate
revenues to sustain its operations.
Management has received a commitment from Cornell Capital
Partners, L.P. to provide the Company with up to $10 million
in financing under certain conditions.
Additionally, the Company is anticipating that the above
financing commitment will be sufficient enough to implement
NeoReach, Inc. its subsidiary's Plan.
F-13
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 4- STOCKHOLDERS' DEFICIT (CONTINUED)
The following details the stock transactions for the period
April 1, 2002 through June 30, 2002.
COMMON STOCK
On May 31, 2002, the Company issued 690,000 shares for banking
consulting fees at a value of $317,400 ($.46 per share) the
Company's fair value of the stock at that time.
On April 23, 2002, the Company issued 12,352,129 shares in the
exchange with its newly owned subsidiary Neoreach, Inc. at par
value $.001.
On June 10, 2002, the Company issued 784,314 shares of common
stock for consulting services valued at 517,647 ($.66 per
share).
NOTE 5- PATENTS
NeoReach, Inc. in April 2002 received notice that two of the
five filed patent applications relating to its technology
innovations have been allowed by the U.S. Patent and Trademark
Office and the review process for the other three are still
under way.
The first patent involves intellectual property that can
enhance the performance of conventional smart antenna
processing technology if used for 3G wireless communications.
Using the Neoreach proprietary approach, wireless network
operators will be able to provide 3G networks in which
subscribers will experience less interference and more stable
connections as they move around while using their handsets or
personal digital assistants (PDA's).
The second patent delivers automatic low-cost improvements to
the smart antenna processing technology. Using this NeoReach
invention, 3G network operators will be able to automatically
eliminate potential distortions throughout their full network
without having to conduct individual, time-consuming phase
calibration of each separate communication channel.
F-14
MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (UNAUDITED)
NOTE 6- COMMITMENTS
In April 2002, NeoReach, Inc. established a technology
alliance with Prime Circuits, Inc. Prime Circuits is a
privately-held semiconductor developer based in Greenbelt, MD
that specializes in ultra small, ultra low power analog,
digital and hybrid chipsets. Prime Circuits' technology is
currently in use in a number of NASA applications at Goddard
Space Flight Center.
As part of the alliance, NeoReach will gain access to
technical knowledge, personnel and low power semiconductor
technology that NeoReach believes will greatly expand its
digital modem suite. This solution targets the consumer
handsets and network transmission base stations to support 3G
communications.
On May 10, 2002 the Company announced that Arne Dunhem was
appointed the Chairman, President and CEO of Mobilepro Corp.
Mr. Dunhem has over 28 years of experience in the growth of
high technology companies, especially in the
telecommunications field.
On May 31, 2002, the Company entered into an equity line of
credit arrangement with Cornell Capital Partners, L.P. The
equity line provides generally, that Cornell will purchase up
to $10 million of common stock over a two-year period, with
the time and amount of such purchases, if any, at the
Company's discretion.
There are certain conditions applicable to the Company's
ability to draw down on the equity line including the filing
and effectiveness of a registration statement registering the
resale of all shares of common stock that may be issued to
Cornell under the equity line and the Company's adherence with
certain covenants.
The Company on May 31, 2002, entered into a Securities
Purchase Agreement with certain investors pursuant to which
the Company issued and sold $250,000 of convertible
debentures. The debentures accrue interest at the rate of four
percent (4%) per year. Holders of the debentures have certain
registration rights with respect to the resale of shares of
common stock received upon any conversion of the debentures.
F-15
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2002 AND
PERIOD JULY 14, 2000 (INCEPTION)
THROUGH MARCH 31, 2001
F-16
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2002 AND
PERIOD JULY 14, 2000 (INCEPTION) THROUGH MARCH 31, 2001
INDEX TO FINANCIAL STATEMENTS
PAGES
AUDITED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants F-18
Balance Sheet as of March 31, 2002 F-19
Statements of Operations for the year ended March 31,
2002 and for the period July 14, 2000 (Inception)
through March 31, 2001 with Cumulative Totals Since
Inception F-21
Statements of Changes in Stockholders' (Deficit) for the
years ended March 31, 2002 and 2001 including the
former company Craftclick.com, Inc. and the reverse
acquisition that occurred as of June 1, 2001 F-22
Statements of Cash Flows for the year ended March 31,
2002 and the period July 14, 2000 (Inception)
through March 31, 2001 with Cumulative Totals Since
Inception F-24
Notes to Financial Statements F-26
F-17
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Mobilepro Corp
Rockville, Maryland
We have audited the accompanying balance sheet of Mobilepro Corp. (formerly
Craftclick.Com, Inc.) (A Development Stage Company) (the "Company") as of March
31, 2002 and the related statements of operations, changes in stockholders'
(deficit), and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We have conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statements for the year ended March 31, 2002 has been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 4 to the financial statements, the Company has raised certain
issues that lead to substantial doubt about its ability to continue as a going
concern. The Company does not have any revenue generating activities and has
substantial operating deficits. Management's plans in regard to these matters
are also described in Note 4. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mobilepro Corp (A Development
Stage Company) as of March 31, 2002 and the results of its operations and their
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
The statement of operations, changes in stockholders' (deficit) and cash flows
for the period July 14, 2000 (Inception) through March 31, 2001 were audited by
Mantyla McReynolds and Associates. Mantyla McReynolds and Associates issued an
unqualified opinion on those financial statements dated July 20, 2001.
BAGELL, JOSEPHS & COMPANY, L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Certified Public Accountants
Gibbbsboro, New Jersey
July 10, 2002
F-18
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
MOBILEPRO CORP. [A DEVELOPMENT STAGE COMPANY]
We have audited the accompanying statements of operations and cash flows of
Mobilepro Corp., [a development stage company] for the nine month period from
inception [July 14, 2000] through March 31, 2001. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Mobilpro
Corp. [a development state company] for the period ended March 31, 2001, in
conformity with generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 4 certain circumstances raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Mantyla McReynolds
----------------------
Mantyla McReynolds
Salt Lake City, Utah
July 20, 2001
F-19
MOBILPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2002
ASSETS
CURRENT ASSET
Cash $ 154
-----
TOTAL ASSET $ 154
=====
The accompanying notes are an integral part of these financial statements.
F-20
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2002
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Due to officer $ 44,262
Short-term debt 75,000
Accounts payable and accrued expenses 187,663
----------
TOTAL LIABILITIES 306,925
----------
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value, authorized
5,000,000 shares, and 35,425 shares
issued and outstanding 35
Common stock, $.001 par value, authorized 50,000,000
shares, and 4,175,492 shares issued and outstanding 4,176
Additional paid-in capital 3,596,613
Deficit accumulated during development stage (3,907,595)
----------
TOTAL STOCKHOLDERS' DEFICIT (306,771)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 154
==========
The accompanying notes are an integral part of these financial statements.
F-21
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2002 AND PERIOD
JULY 14, 2000 (INCEPTION) THROUGH MARCH 31, 2001
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
CUMULATIVE
TOTALS SINCE
2002 2001 INCEPTION
---- ---- ---------
REVENUES $ - $ - $ -
COST OF SALES - - -
---------- ---------- ----------
GROSS PROFIT - - -
GENERAL AND ADMINISTRATIVE EXPENSES 3,147,119 1,009,193 4,156,312
---------- ---------- ----------
LOSS BEFORE OTHER INCOME (3,147,119) (1,009,193) (4,156,312)
OTHER INCOME (EXPENSES)
Interest income 56 - 56
Forgiveness of debt 276,738 - 276,738
Other expense (27,608) - (27,608)
Interest expense (469) - (469)
---------- ---------- ----------
TOTAL OTHER INCOME (EXPENSES) 248,717 - 248,717
---------- ---------- ----------
NET LOSS BEFORE PROVISION
FOR INCOME TAXES (2,898,402) (1,009,193) (3,907,595)
Provision for income taxes - - -
---------- ---------- ----------
NET LOSS APPLICABLE TO COMMON SHARES $(2,898,402) $(1,009,193) (3,907,595)
========== ========== ==========
NET LOSS PER BASIC AND DILUTED SHARES $ (0.44) $ (0.11) $ (0.60)
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 6,462,746 8,750,000 * 6,462,746
========== ========== ==========
*After reorganization.
The accompanying notes are an integral part of these financial statements.
F-22
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS IN CHANGES OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED MARCH 31, 2002 AND 2001 INCLUDING
THE FORMER COMPANY CRAFTCLICK.COM, INC. AND THE REVERSE ACQUISITION THAT OCCURRED AS OF JUNE 1, 2001
ADDITIONAL NET
COMMON STOCK PREFERRED STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
CRAFTCLICK.COM, INC. ACTIVITY: SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIT
------------------------------ ------ ------ ------ ------ ------- ------- -------
BALANCE - MARCH 31, 2000 16,931,444 16,931 101,000 101 5,354,232 (2,848,780) 2,522,484
Issued preferred shares under PPM
April-June, 2000 38,000 38 379,962 - 380,000
Issued common and preferred shares for
debt, December 31, 2000 25,000,000 25,000 1,000 1 84,999 - 110,000
Issued common shares for assets/acquired
companies 430,000 430 - - 322,070 - 322,500
Options granted for Note Receivable 1,903,574 1,904 - - 473,096 - 475,000
Issued stock for investment 500,000 500 - - 499,500 - 500,000
Issued stock for services 4,040,000 4,040 - - 1,280,883 - 1,284,923
Net loss for year ended March 31, 2001 - - - - - (5,630,700) (5,630,700)
------------- --------- --------- ------- ------------- ------------- -------------
BALANCE - MARCH 31, 2001 48,805,018 48,805 140,000 140 8,394,742 (8,479,480) (35,793)
Stock issued in conversion of preferred
stock into common stock 6,877,678 6,878 (104,622) (105) (6,773) - -
Consolidation of shares due to corporate
change in domicile (55,125,493) (55,125) - - 55,125 - -
Issuance of common stock as part of
Craftclick acquisition of Mobilepro 8,750,000 8,750 - - (8,750) - -
Net loss Craftclick for April 1, 2001 to
May 31, 2001 - - - - - (377) (377)
The accompanying notes are an integral part of these financial statements.
F-23
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS IN CHANGES OF STOCKHOLDERS' DEFICIT (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2002 AND 2001 INCLUDING
THE FORMER COMPANY CRAFTCLICK.COM, INC. AND THE REVERSE ACQUISITION THAT OCCURRED AS OF JUNE 1, 2001
ADDITIONAL NET
COMMON STOCK PREFERRED STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIT
------ ------ ------ ------ ------- ------- -------
MOBILEPRO CORP ACTIVITY:
Recapitalization due to merger
- Craftclick - - - - (8,479,857) 8,479,857 -
Recapitalization due to merger
- Mobilepro - - 47 - 1,009,194 (1,009,194) -
Issuance of shares to cover
convertible debt 3,000,000 3,000 - - 477,000 - 480,000
Issuance of common stock for
services and salaries 2,600,000 2,600 - - 413,400 - 416,000
Issuance of common stock for services 1,500,000 1,500 - - 246,000 - 247,500
Issuance of common stock for warrants 330,000 330 - - 577,170 - 577,500
Issuance of common stock for services 25,000 25 - - 1,225 - 1,250
Reverse stock split (16,677,711) (16,678) - - 16,678 - -
Issuance of common stock for services 3,000,000 3,000 - - 237,000 - 240,000
Issuance of common stock for services 106,000 106 - - 111,194 - 111,300
Conversion of debt for issuance of
common shares 25,000 25 - - 26,225 - 26,250
Issuance of common stock for services 960,000 960 - - 527,040 - 528,000
Net loss for the year - - - - - (2,898,401) (2,898,401)
----------- ----------- -------- -------- -------------- --------------- -------------
BALANCE MARCH 31, 2002 4,175,492 $ 4,176 35,425 $ 35 $ 3,596,613 $ (3,907,595) $ (306,771)
=========== =========== ======== ======== ============== =============== =============
The accompanying notes are an integral part of these financial statements.
F-24
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 2002 AND PERIOD
JULY 14, 2000 (INCEPTION) THROUGH MARCH 31, 2001
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
CUMULATIVE
TOTALS SINCE
2002 2001 INCEPTION
---- ---- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,898,402) $(1,009,193) $(3,907,595)
----------- ----------- -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
(USED IN) OPERATING ACTIVITIES:
Forgiveness of debt (276,738) - (276,738)
Increase in accounts payable 158,435 365,301 523,736
Issued common stock for services, compensation and
conversion of debt 2,627,800 593,859 3,221,659
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (388,905) (50,033) (438,938)
----------- ----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Issued stock for cash - 100 100
Proceeds from borrowings, net 344,730 50,000 394,730
Change in officer loan, net 44,262 - 44,262
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 388,992 50,100 439,092
----------- ----------- -----------
NET INCREASE IN CASH 87 67 154
CASH BALANCE - BEGINNING OF YEAR (PERIOD) 67 - -
----------- ----------- -----------
CASH BALANCE - END OF YEAR $ 154 $ 67 $ 154
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-25
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED MARCH 31, 2002 AND PERIOD
JULY 14, 2000 (INCEPTION) THROUGH MARCH 31, 2001
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
CUMULATIVE
TOTALS SINCE
2002 2001 INCEPTION
---- ---- ---------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Issued common shares for services,
compensation and conversion of debt. $2,627,800 $ 593,859 $3,221,659
========== ========= ==========
The accompanying notes are an integral part of these financial statements.
F-26
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
NOTE 1- ORGANIZATION
Mobilepro Corp formerly Craftclick.com, Inc. was incorporated
under the laws of the State of California in January 1999, as
BuyIt.com, Inc. ("BuyIt"). From inception through March 31,
1999, the Company engaged in preliminary activities related to
the set up of an Internet auction business. On April 16, 1999,
the Company entered into an Agreement and Plan of
Reorganization ("Plan") with Tecon, Inc. ("Tecon"), a Utah
Corporation, wherein all of the outstanding shares and
subscriptions of BuyIt were exchanged for 8,500,000 shares
(for the outstanding shares of common stock of Tecon, and
245,997 shares (for the outstanding subscriptions) of common
stock of Tecon. At the conclusion of all the transactions
contemplated in the Plan, BuyIt shareholders and subscribers
owned 8,745,997 shares of total outstanding shares of
12,179,249, or 71.9%, The survivor in the aforementioned
combination was Tecon. However, the name of the surviving
company was changed to BuyIt.com, Inc., simultaneously with
the Plan. The combination of these two entities had been
accounted for as a purchase. The Company changed its name to
Craftclick.com, Inc., on January 4, 2000, as a result of
changing its business strategy and focus-which was to become
the premier destination for buyers and sellers of arts and
crafts products and supplies through the use of Internet
websites. However, the Company disposed of substantially all
assets in February of 2001 when secured creditors foreclosed
on loans to the Company.
In April 2001, Craftclick.com, Inc. reorganized pursuant to a
Plan of Merger wherein its domicile was changed from Utah to
Delaware, and the common stock was reverse split on the basis
of 1 new share for every 100 shares outstanding.
On June 6, 2001, Craftclick.com, Inc. merged with Mobilepro
Corp a Delaware corporation as of June 1, 2001. Under the
merger agreement, Mobilepro Corp merged into Craftclick.com,
Inc. with Craftclick being the surviving corporation and the
Certificate of Incorporation and By Laws of Craftclick being
the constituent documents of the surviving corporation.
In July 2001, the Company changed its name to Mobilepro Corp.
On March 21, 2002 NeoReach, Inc. a Delaware company and
Mobilepro entered into an Agreement and Plan of Merger
pursuant to which NeoReach, Inc. would become a wholly-owned
subsidiary of Mobilepro. The shares were exchanged on April
23, 2002 and the transaction was consummated. NeoReach, Inc.
Is a development stage company designing state of the art
modem solutions to support third generation (3G) wireless
communication systems.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in
the United States of America. The following summarizes the
significant accounting policies:
F-27
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEVELOPMENT STAGE COMPANY
Mobilepro Corp is a development stage company. The Company
since April 23, 2002 devotes substantially all of its efforts
to researching and developing technology for the third
generation wireless waves. Before the acquisition of NeoReach,
Inc., Mobilepro Corp focused on the integration and marketing
of complete mobile information solutions to the business
market through strategic partnership with established firms
already delivering information technology consulting, wireless
service and vertical market application products and services.
USE OF ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments and
other short-term investments with an initial maturity of three
months or less to be cash or cash equivalents.
REVENUE RECOGNITION
Revenue is recognized when earned. For products which the
Company sells, revenue is recognized when products are
shipped. Customer payments for sales are charged to
pre-approved/authorized credit cards. Thus, the sale is not
recorded and product not shipped unless collection is
determined to be certain. The Company records accounts
receivable for the sale proceeds during the period of time
between shipping and when cash is posted in the bank.
F-28
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Effective July 14, 2000, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 (the
Statement), Accounting for Income Taxes. The Statement
requires an asset and liability approach for financial
accounting and reporting for income taxes, and the recognition
of deferred tax assets and liabilities for the temporary
differences between the financial reporting bases and tax
bases of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized
or settled. The cumulative effect of this change in accounting
for income taxes as of March 31, 2002 is $0 due to the
valuation allowance established as described in Note 3.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash
and cash equivalents, and accounts payable approximate fair
value because of the immediate or short-term maturity of these
financial instruments.
ADVERTISING COSTS
The Company expenses the costs associated with advertising as
incurred. Advertising and promotional expenses were
approximately $250,000 and $-0- for the year ended March 31,
2002 and the period July 14, 2000 (Inception) through March
31, 2001, respectively.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets.
When assets are retired or otherwise disposed of, the costs
and related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is recognized in
income for the period. The cost of maintenance and repairs is
charged to income as incurred; significant renewals and
betterments are capitalized. Deduction is made for retirements
resulting from renewals or betterments. There was no
depreciation expense for the year ended March 31, 2002 and the
period July 14, 2000 (Inception) through March 31, 2001.
F-29
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net income (loss) per common share is computed
using the weighted average number of common shares
outstanding. Diluted earnings per share (EPS) includes
additional dilution from common stock equivalents, such as
stock issuable pursuant to the exercise of stock options and
warrants. Common stock equivalents were not included in the
computation of diluted earnings per share when the Company
reported a loss because to do so would be antidilutive for
periods presented.
The following is a reconciliation of the computation for basic
and diluted EPS:
MARCH 31, MARCH 31,
2002 2001
------------ ------------
Net loss $ (2,898,402) $ (1,009,193)
Weighted average common shares
Outstanding (Basic) 6,462,746 8,750,000
Weighted average common stock
Equivalents
Stock options - -
Warrants - -
Weighted average common shares
Outstanding (Diluted) 6,462,746 8,750,000
Options and warrants outstanding to purchase stock were not
included in the computation of diluted EPS for March 31, 2002
and 2001 because inclusion would have been antidilutive.
F-30
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 3- PROVISION FOR INCOME TAXES
The Company did not provide for income taxes in the years
ended March 31, 2002 and the period July 14, 2000 (Inception)
through March 31, 2001. Additionally, the Company established
a valuation allowance equal to the full amount of the deferred
tax assets due to the uncertainty of the utilization of the
operating losses in future periods.
At March 31, 2002 and 2001, the deferred tax assets consists
of the following:
2002 2001
---------- --------
Deferred taxes due to net
operating loss carryforwards $1,563,018 $403,677
Less: Valuation allowance (1,563,018) (403,677)
---------- --------
Net deferred tax asset $ - $ -
========== ========
NOTE 4- GOING CONCERN
As shown in the accompanying financial statements the Company
has sustained substantial net operating losses for the year
ended March 31, 2002 and the period July 14, 2000 (Inception)
through March 31, 2001. There is no guarantee that the Company
will be able to raise enough capital or generate revenues to
sustain its operations.
Management has received a commitment from Cornell Capital
Partners, L.P. to provide the Company with up to $10 million
in financing under certain conditions (See Note 8).
Additionally, the Company is anticipating that the above
financing commitment will be sufficient enough to implement
NeoReach, Inc. its subsidiary's Plan.
F-31
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 5- STOCKHOLDERS' DEFICIT
The beginning balances reflected as of March 31, 2000 through
June 1, 2001 are those of the former company (registrant)
Craftclick.com, Inc. On June 6, 2001 Craftclick.com, Inc. and
Mobilepro Corp merged under a reverse merger as of June 1,
2001. Upon that merger the stockholders' equity of Mobilepro
Corp (a former private company) under a recapitalization,
became that equity of the public entity. Upon the
recapitalization, 8,750,000 shares were issued to the former
Craftclick.com, Inc.'s stockholders.
Additionally from June 1, 2001 to March 31, 2002 the Company
issued 8,216,000 shares for services valued at fair market
value. There were 3,025,000 shares issued for conversion of
debt. Finally, 330,000 shares were issued because of a special
warrant.
The following details the stock transactions after the
recapitalization.
COMMON STOCK
On June 1, 2001, the Company issued 3,000,000 shares in a
conversion of debt. The issuance of shares were valued at
$480,000 (16 cents per share), the fair value of the Company's
stock at that time.
On June 1, 2001, the Company issued 2,600,000 shares for
services and compensation at a value of $416,000 (16 cents per
share), the fair value of the Company's stock at that time.
On August 1, 2001, the Company issued 330,000 shares that were
the result of the exercising of warrants. The value of
$577,500 ($1.75 per share) was the fair value of the Company's
stock at that time.
On September 6, 2001, the Company issued 1,500,000 shares for
services at a value of $247,500 (16.5 cents per share), the
fair value of the Company's stock at that time.
On October 26, 2001, the Company issued 25,000 shares for
services at a value of $1,250 (5 cents per share), the fair
value of the Company's stock at that time.
On November 19, 2001, the Company had a 1 for 200 reverse
stock split which effectively reduced their issued and
outstanding shares 16,677,711. Additionally, on that date the
Company issued 3,000,000 shares for services in conjunction
with an Investors Rights Agreement at a value of $240,000 (8
cents per share), the fair value of the Company's stock at
that time.
F-32
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 5- STOCKHOLDERS' DEFICIT (CONTINUED)
On February 15, 2002, the Company issued 106,000 shares for
services at a value of $111,300 ($1.05 per share), the fair
value of the Company's stock at that time.
On February 19, 2002, the Company issued 25,000 shares in
conversion of a note payable at a value of $26,250 ($1.05 per
share), the fair value of the Company's stock at that time.
On March 18, 2002, the Company issued 960,000 shares for
services. These shares were issued at 55 cents per share
($528,000) based on a Board Resolution on March 6, 2002.
NOTE 6- LONG-TERM DEBT
In February, 2002, as part of the Company's President's
private purchase of stock, the Company entered into two (2)
promissory notes of $37,500 each ($75,000 total) with the
seller and a related entity to the seller. These notes are due
September 1, 2002 at an annual rate of interest on the notes
of 5%. Should the Company fail to pay the notes on the due
date, interest will be charged at 15%. Interest expense for
2002 was $469.
NOTE 7- DUE TO OFFICER
The President of Mobilepro Corp loaned the Company, net
$44,262 in February 2002 to pay certain creditors at 6%
interest due on demand. The officer has waived interest until
April 2002.
NOTE 8- SUBSEQUENT EVENTS
On April 23, 2002 the Company consummated the purchase of its
wholly-owned subsidiary NeoReach, Inc. On March 21, 2002,
NeoReach, Inc., a Delaware Company, and Mobilepro Corp entered
into the above Agreement and Plan of Merger. NeoReach, Inc. is
a development stage company designing state of the art modem
solutions to support third generation (3G) wireless
communications systems. Mobilepro Corp exchanged 12,352,129
shares of its common stock for this purchase.
NeoReach, Inc. in April 2002 received notice that two of the
five filed patent applications relating to its technology
innovations have been allowed by the U.S. Patent and Trademark
Office and the review process for the other three are still
under way.
F-33
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 8- SUBSEQUENT EVENTS (CONTINUED)
The first patent involves intellectual property that can
enhance the performance of conventional smart antenna
processing technology if used for 3G wireless communications.
Using the Neoreach proprietary approach, wireless network
operators will be able to provide 3G networks in which
subscribers will experience less interference and more stable
connections as they move around while using their handsets or
personal digital assistants (PDA's).
The second patent delivers automatic low-cost improvements to
the smart antenna processing technology. Using this NeoReach
invention, 3G network operators will be able to automatically
eliminate potential distortions throughout their full network
without having to conduct individual, time-consuming phase
calibration of each separate communication channel.
In April 2002, NeoReach, Inc. established a technology
alliance with Prime Circuits, Inc. Prime Circuits is a
privately-held semiconductor developer based in Greenbelt, MD
that specializes in ultra small, ultra low power analog,
digital and hybrid chipsets. Prime Circuits' technology is
currently in use in a number of NASA applications at Goddard
Space Flight Center.
As part of the alliance, NeoReach will gain access to
technical knowledge, personnel and low power semiconductor
technology that NeoReach believes will greatly expand its
digital modem suite. This solution targets the consumer
handsets and network transmission base stations to support 3G
communications.
On May 10, 2002 the Company announced that Arne Dunhem was
appointed the Chairman, President and CEO of Mobilepro Corp.
Mr. Dunhem has over 28 years of experience in the growth of
high technology companies, especially in the
telecommunications field.
On May 31, 2002, the Company entered into an equity line of
credit arrangement with Cornell Capital Partners, L.P. The
equity line provides generally, that Cornell will purchase up
to $10 million of common stock over a two-year period, with
the time and amount of such purchases, if any, at the
Company's discretion.
There are certain conditions applicable to the Company's
ability to draw down on the equity line including the filing
and effectiveness of a registration statement registering the
resale of all shares of common stock that may be issued to
Cornell under the equity line and the Company's adherence with
certain covenants.
F-34
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002 AND 2001
NOTE 8- SUBSEQUENT EVENTS (CONTINUED)
The Company on May 31, 2002, entered into a Securities
Purchase Agreement with certain investors pursuant to which
the Company issued and sold $250,000 of convertible
debentures. The debentures accrue interest at the rate of four
percent (4%) per year. Holders of the debentures have certain
registration rights with respect to the resale of shares of
common stock received upon any conversion of the debentures.
F-35
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO PROVIDE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS ABOUT MOBILEPRO CORP. EXCEPT THE
INFORMATION OR REPRESENTATIONS CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY
ON ANY ADDITIONAL INFORMATION OR REPRESENTATIONS IF MADE.
-----------------------
This prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy any securities:
O except the common stock offered by this prospectus;
O in any jurisdiction in which the offer or
solicitation is not authorized;
O in any jurisdiction where the dealer or other
salesperson is not qualified to make the offer or
solicitation;
O to any person to whom it is unlawful to make the
offer or solicitation; or
O to any person who is not a United States resident or
who is outside the jurisdiction of the United States.
The delivery of this prospectus or any accompanying sale does not imply that:
O there have been no changes in the affairs of
Mobilepro Corp. after the date of this prospectus; or
O the information contained in this prospectus is correct after the date
of this prospectus.
-----------------------
Until __________, 2002, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters.
----------------------
PROSPECTUS
---------------------
37,614,557 SHARES OF COMMON STOCK
MOBILEPRO CORP.
___________ __, 2002
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION
Our Certificate of Incorporation provides that we will indemnify its
officers, directors, employees and agents to the fullest extent permitted by
Delaware law. Any indemnitee is entitled to such indemnification in advance of
any final proceeding. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "ACT") may be permitted to our directors,
officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered.
Securities and Exchange Commission Registration Fee $ 350
Printing and Engraving Expenses $ 12,500
Accounting Fees and Expenses $ 15,000
Legal Fees and Expenses $ 40,000
Blue Sky Qualification Fees and Expenses $ 5,000
Miscellaneous $ 12,150
--------------------
TOTAL $ 85,000
====================
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
We have issued the following shares of our common stock from March 31,
2000 through July 11, 2002. On May 11, 2001, we implemented a 1 share for 100
shares reverse stock split of our common stock. On November 19, 2001, we
implemented a 1 share for 200 shares reverse stock split of our common stock.
The issuances below have not been adjusted for these reverse stock splits, but
rather disclosed as issued.
On April 16, 1999, we had subscriptions to issue 257,666 shares of our
common stock for consideration of $386,499 at the time of the merger with Tecon.
These subscriptions were reduced to 245,997 and were exercised upon the
consummation of the merger with Tecon. Tecon also issued 1,621,621 shares of
common stock of Tecon for additional subscriptions in consideration of $600,000,
cash. Additional subscriptions were received and 215,702 common shares were
issued for $315,515. Simultaneously, we issued 10,333 common shares for business
equipment valued at $15,500. The Company believes the issuance of the stock to
be exempt from registration under Section 4(2) of the Securities Act.
At various dates during the year ended March 31, 2000, we issued
1,812,829 shares of common stock to various consultants and professionals for
services rendered. The total value of the shares has been recorded at
$1,000,000. The Company believes the issuance of the stock to be exempt from
registration under Section 4(2) of the Securities Act.
From April through June 2000, we issued 430,000 shares of common stock
for additional website business valued at $.75 per share or $322,500 and a total
of 38,000 shares of preferred stock was issued under a Private Placement
Memorandum. We believe the issuance of the stock to be exempt from registration
under Section 4(2) of the Securities Act.
In August 2000, we granted 1,903,574 common stock options valued at
$475,000 for a Note Receivable for the same amount. The options were granted
pursuant to the "2000 Stock Option Plan." As of March 31, 2001, we had granted a
total of 2,562,250 additional options pursuant to the "2000 Stock Option Plan"
not including the initial 1,903,574 common stock options vesting over a period
of up to 4 years with an exercise price of $1.00. Since these options were
granted, 1,186,000 were cancelled and 850,125 expired due to termination of
employee relationships.
II-1
On June 7, 2000 we exchanged 500,000 shares of our stock for 450,706
shares of Popmail.com in a transaction valued at $500,000. We subsequently sold
this investment to meet our financial obligations. The shares were "Restricted"
under S144. On September 15, 2000, the Popmail.com stock was sold to an
individual related party for $74,650, in a private sale to an
accredited/sophisticated investor. A loss of $425,350 was realized during the
period. Approximately $225,353 of the loss was due to market value decline
during the holding period. We believe the issuance of the stock to be exempt
from registration under Section 4(2) of the Securities Act.
On March 12, 2001, we issued 4,040,000 shares of common stock for
services out of which 1,180,000 shares to Sandip Seth, 1,180,000 to Maninder
Singh, both being officers of the Company, 1,180,000 shares to Sanjay Sabnani,
350,000 shares to Cora Castillion and 150,000 shares to Amber Luke valued at a
total of $1,284,923. We believe that Sabnani, Castillion and Luke were not
affiliated with the Company. We believe the issuance of the stock to be exempt
from registration under Section 4(2) of the Securities Act.
On December 1, 2000, we issued 25,000,000 shares of common stock at
$.004 per share and 1,000 shares of Class C preferred stock at $10 per share to
creditors as settlement of $110,000 worth of debt. We believe the issuance of
the stock to be exempt from registration under Section 4(2) of the Securities
Act.
On March 16, 2001, Dungavel, Inc., a Bahamian company, contracted to
purchase the above referenced 25,000,000 shares of our common stock and 1,000
shares of our Class C Preferred Stock from the former creditors (Metropolitan
Capital Partners LLC), in a private sale to an accredited/sophisticated
investor. At the time of the sale, we believe that there was no affiliation
between Dungavel, Inc. and Metropolitan Capital Partners, LLC. The transfer of
25,000,000 shares of common stock and 1,000 shares of preferred stock by
Metropolitan Capital Partners LLC to Dungavel Inc. was not made under Rule 144.
In the acquisition agreement, Dungavel represented that it was a sophisticated,
accredited investor and was acquiring restricted securities. The only entity
from which Dungavel acquired shares of CraftClick on March 16, 2001 was
Metropolitan Capital Partners LLC, which name is stated above. The shares
continued to be restricted in the hands of Dungavel, Inc. and therefore the
certificate beared the same legend as the original certificates. The Class C
Preferred Stock is convertible at any time prior to December 31, 2001, into
11.5% of the then issued and outstanding common stock of CraftClick.com, Inc.,
computed on a fully diluted basis. Together the common stock and the Class C
Preferred Stock acquired by Dungavel, Inc. represents greater than 50% of the
voting control of CraftClick.com, Inc., on an as converted basis. The sale was
consummated as of March 27, 2001. We believe the issuance of the stock to be
exempt from registration under Section 4(2) of the Securities Act.
On April 24, 2001, the 1,000 Class C Preferred shares were converted to
6,877,678 shares of common stock. The Company believes the issuance of the stock
to be exempt from registration under Section 4(2) of the Securities Act.
On June 6, 2001, CraftClick.Com, Inc. a Delaware corporation, and
Mobilepro Corp., a Delaware corporation, entered into an Agreement and Plan of
Merger dated as of June 1, 2001. Under the Merger Agreement Mobilepro merged
with and into CraftClick, with CraftClick being the surviving corporation. The
consideration for the shares of common stock issued by CraftClick to the
shareholders of Mobilepro was all the outstanding shares of Mobilepro. The
merger of Mobilepro into CraftClick was structured as a share-for-share
exchange. The exchange ratio was negotiated without reference to the market
price of the CraftClick common stock because it was difficult to value the
merger participants and the market of a thinly traded security on the OTC
Bulletin Board. The Company issued a total of 8,750,000 shares of its common
stock in connection with the Merger. Based on the last trading price of $0.16,
the fair value of the Company's stock issued was $1,400,000. Of these shares
issued, the Company issued to Ms. Joann M. Smith an aggregate of 8,227,663
shares of common stock representing approximately 55% of our 14,907,196 issued
and outstanding shares of common stock. In addition we also issued as part of
the merger, a total of 522,337 shares of its common stock at value $83,574, to
Wallenstein & Wagner, 152,730 shares at value $24,437, Laser Modeling, Inc.
152,730 shares at value $24,437, Francine B. Goodman, 152,730 shares at value
$24,437, Denise Patterson, 38,183 shares at value $6,109, and Inform Product
Development, Inc., 25,964 shares at value $4,154. We believe that all these
parties were non-affiliated with the Company at the issuance. We believe the
issuance of the stock to be exempt from registration under Section 4(2) of the
Securities Act.
Effective June 6, 2001, in connection with the Merger, we issued
3,000,000 shares in a conversion of debt and accrued interest to Dungavel, Inc.
a Bahamian company. We believe that the controlling person of Dungavel was
Robert Landau, who we believe also had a controlling interest in Mobilepro. The
debt had a recorded value of $50,000. The issuance of shares were valued at
$480,000, the fair value of the Company's stock at that time. In September 2000,
Dungavel Inc. was issued a $50,000 convertible note by Mobilepro. At the time of
the merger of Mobilepro into CraftClick, Dungavel negotiated with Mobilepro the
conversion of the note into 3,000,000 shares of the post-merger company.
Dungavel was the controlling shareholder of CraftClick at the time of this
negotiation. The value of CraftClick and Mobilepro at the time of the merger is
difficult to determine and the negotiations for the shares to be issued to
acquire Mobilepro was made without reference to the then market price. We
II-2
believe the issuance of the stock to be exempt from registration under Section
4(2) of the Securities Act.
In May 2001, we registered 6,500,000 shares of our common stock for
future issuance under the "2001 Performance Equity Plan". Effective June 6,
2001, we issued a total of 2,600,000 shares, based on the last trading price of
$0.16, with the total fair value of $416,000 to the following parties: 250,000
shares to Dungavel Inc. for services performed in connection with the Mobilepro
merger and reorganization and re-incorporation and using the last trading price,
the fair value of the consideration was $40,000, 250,000 shares at value $40,000
to Mr. Scott R. Smith, our Chief Executive Officer for employment services,
1,475,000 shares at value $236,000 to ZDG Investments for consulting services
regarding the Mobilepro merger and reorganization and re-incorporation, 50,000
shares at value $8,000 each to Mr. Howard Geisler, Mr. Mitchell Geisler and Ms.
Cindy Roach for services as officers and directors, 25,000 shares at value
$4,000 to Weil Consulting Corp. for merger consultations and 450,000 shares at
value $72,000 to Henning Capital Ltd. for merger consultations.
On August 1, 2001, we issued 330,000 shares of its common stock
pursuant to the exercise of a special warrant that was issued as a part of the
reverse merger agreement with CraftClick.com, Inc. The conversion price of this
warrant was $330 or $0.001 per share, the par value of the common stock. The
issuance of shares was valued at $577,500, the fair value of the Company's stock
at that time. We believe the issuance of the stock to be exempt from
registration under Section 4(2) of the Securities Act.
On September 6, 2001, we issued a total of 1,500,000 shares of its
common stock under the 2001 Performance Equity Plan to Camilla Holdings for
services rendered. These services were valued at $0.165 per share or a total of
$247,500.
On October 26, 2001, we issued 25,000 shares of its common stock to
David Lake, 4,000 shares, James Sacks, 3,000 shares, Donna Villegas, 1,000
shares, Jon Lake, 1,000 shares, Mark Daugherty, 1,000 shares, Ashok Mirpuri,
5,000 shares, Sanjay Sabnani 10,000 shares. We believe they were all
non-affiliated with the Company at the time of issuance. In connection with the
reorganization/redomestication of CraftClick from a Utah corporation to a
Delaware corporation, the 25,000 shares were issued as settlement shares in
connection with the change in the terms of the preferred stock. The issuance of
shares was valued at a total of $1,250, the fair value of our stock at that
time. We believe the value of the settlements were commensurate with the value
of the stock issued. We believe the issuance of the stock to be exempt from
registration under Section 4(2) of the Securities Act.
On November 19, 2001, we had a 1 for 200 reverse stock split which
effectively reduced their issued and outstanding shares 16,677,711.
Additionally, on that date we issued 3,000,000 shares for services in
conjunction with an Investors Rights Agreement. We valued that issuance at a
value of $240,000, the fair value of our stock at that time. We believe the
issuance of the stock to be exempt from registration under Section 4(2) of the
Securities Act.
On February 15, 2002, we entered into an agreement to issue 86,000
shares of our common stock to John Madigan, 30,000 shares, Douglas Tucker,
30,000 shares, Wallenstein & Wagner, 30,000 shares, Natalie Boitehouk, 2,000
shares, Gregory Bochniak, 2,000 shares, and Stephen Jouzapaitis, 2,000 shares
for services rendered.. We believe they were all non-affiliated with the Company
at the time of issuance. The shares issued on February 15, 2002 were authorized
to be issued on February 19, 2002 by instruction letter of that date. Per the
agreement, the shares were subsequently issued on March 22, 2002. The issuance
of the shares were valued at $90,300, the fair value of our stock at that time.
We believe the value of the services provided were commensurate with the value
of the stock issued. We believe the issuance of the stock to be exempt from
registration under Section 4(2) of the Securities Act.
On February 19, 2002, we issued 25,000 shares of our common stock to
Scott R. Smith 25,000 shares were issued to Scott Smith in exchange for his
surrender of his rights to past wages and other benefits under his employment
agreement of June 2001 and cancellation of that employment agreement as an
executive and officer of our Company. The shares were valued at $26,250, the
fair value of our stock at that time. We believe the issuance of the stock to be
exempt from registration under Section 4(2) of the Securities Act.
On March 18, 2002, we issued a total of 960,000 shares of our common
stock under the "2001 Equity Performance Plan" to the following parties: 255,000
to Mr. Daniel Lozinsky, our Chief Executive Officer for employment services and
services as a director, 355,000 to Mr. Arne Dunhem for services as an officer
and director, 25,000 to Mr. Scott Smith for services as an officer and director,
and 325,000 to Jesus Gomez Romero for engineering consulting services for
advanced software related projects. These shares were issued at $0.55 per share
based on a Board Resolution fixing the Fair Market Value of the securities
pursuant to the 2001 Equity Performance Plan on and as of March 6, 2002.
II-3
On April 23, 2002, we issued 12,352,129 shares of our common stock to
the holders of NeoReach's common stock pursuant to an Agreement and Plan of
Merger, dated March 21, 2002. A newly formed, wholly-owned subsidiary of
Mobilepro merged into NeoReach, in a tax-free one-for-one share exchange
transaction. The merger was consummated on April 23, 2002. As a result of the
merger, NeoReach is now a wholly-owned subsidiary of Mobilepro. The issuance of
the shares were valued at a fair value of $6,546,628, based on the last trading
price of $0.53 and assuming there was actual active trading of our stock at that
time. We believe the issuance of the stock to be exempt from registration under
Section 4(2) of the Securities Act.
On May 31, 2002, We issued a total of 690,000 shares of its common
stock to the following parties: 450,000 shares to INFe, Inc., 150,000 shares to
Thomas Richfield, 60,000 shares to Francene Goodman, and 30,000 shares to Triple
Crown Consulting. These shares were issued for consulting services regarding the
Mobilepro-NeoReach merger. The issuance of the shares were valued at $ 317,400,
the fair value of our stock at that time. We believe the value of the services
provided were commensurate with the value of the stock issued. We believe the
issuance of the stock to be exempt from registration under Section 4(2) of the
Securities Act.
On May 31, 2002, Mobilepro issued a convertible debenture to Cornell
Capital in the original principal amount of $250,000. The convertible debenture
is convertible into shares of our common stock as a price equal to either 120%
of the closing bid price of our common stock as of May 31, 2002, or 80% of the
average of the four lowest closing bid prices of our common stock for the five
trading days immediately preceding the conversion date. If such conversion had
taken place on May 31, 2002, then the holder of the convertible debenture would
have received 452,899 shares of our common stock. The convertible debenture
accrues interest at a rate of 4% per year and is convertible at the holder's
option. The convertible debenture has a term of five years. At Mobilepro's
option, the convertible debenture may be paid in cash or converted into shares
of our common stock on the fifth anniversary unless converted earlier by the
holder.
On June 10, 2002, we issued a total of 784,314 shares of its common
stock to the following parties: 764,706 to Cornell Capital Partners, LP and
19,708 to Westrock Advisors, Inc. These shares were issued pursuant to an equity
line of credit arrangement with Cornell Capital Partners, dated May 31, 2002.
The issuance of the shares were valued at $517,647, the fair value of our stock
at that time. We believe the issuance of the stock to be exempt from
registration under Section 4(2) of the Securities Act.
On July 17, 2002, we issued a total of 160,000 shares of our common
stock for the forgiveness of $39,000 of advances from an officer of Mobilepro.
We believe the issuance of the stock to be exempt from registration under
Section 4(2) of the Securities Act.
On July 17, 2002, we issued a total of 645,000 shares of our common
stock for consulting services to be performed. We believe the issuance of the
stock to be exempt from registration under Section 4(2) of the Securities Act.
Except as otherwise noted, the securities described in this Item were
issued pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933. Each such issuance was made pursuant to individual
contracts which are discrete from one another and are made only with persons who
were sophisticated in such transactions and who had knowledge of and access to
sufficient information about Mobilepro to make an informed investment decision.
Among this information was the fact that the securities were restricted
securities.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed as part of this registration
statement:
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
2.01 Articles of Merger, dated April 20, 2001, of Incorporated by reference to Exhibit 2.1 to the
CraftClick.com, Inc. and CraftClick.com, Inc. Registrant's Registration Statement on Form S-8
filed on May 11, 2001
2.02 Plan of Merger, dated April 20, 2002, of CraftClick.com, Incorporated by reference to Exhibit 2.2 to the
Inc. with and into CraftClick.com, Inc. Registrant's Registration Statement on Form S-8
filed on May 11, 2001
II-4
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
2.03 Agreement and Plan of Reorganization, dated January 26, Incorporated by reference to Exhibit 2 to the
2000, by and among CraftClick.com, Inc., Registrant's Current Report on Form 8-K filed
Craftnetvillage.com, Inc. and all of the stockholders of on February 8, 2000
Craftnet
2.04 Agreement and Plan of Reorganization, dated April 16, Incorporated by reference to Exhibit 10.1 to
1999, by and among Tecon, Inc., Buyit.com, Inc., the the Registrant's Current Report on Form 8-K
initial Buyit.com stockholders, and the Buyit.com filed on May 6, 1999
subscribers of common stock of Buyit.com
3.01 Certificate of Amendment of Certificate of Incorporation Incorporated by reference to Exhibit 3.1 to the
of Mobilepro Corp. Registrant's Registration Statement on Form S-8
filed on December 4, 2001
3.02 Certificate of Incorporation, dated April 20, 2001, of Incorporated by reference to Exhibit 3.1 to the
CraftClick.com, Inc. Registrant's Registration Statement on Form S-8
filed on May 11, 2001
3.03 By-Laws of CraftClick.com, Inc. Incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-8
filed on May 11, 2001
3.04 Articles of Amendment regarding new class of preferred Incorporated by reference to Exhibit 3 to the
stock Registrant's Current Report on From 8-K filed
on September 27, 2000
3.05 Articles of Correction correcting authorized Series A Incorporated by reference to Exhibit 3.2 to the
and Series B preferred stock Registrant's Current Report on Form 8-K/A filed
on October 3, 2000
3.06 Certificate of Amendment effecting the name change to Incorporated by reference to Exhibit 3 to the
"Buyit.com, Inc." Registrant's Current Report on Form 8-K filed
on May 6, 1999
3.07 Articles of Incorporation, dated March 13, 1985, of Incorporated by reference to Exhibit 3.1 to the
B.U.D. Corp. Registrant's Annual Report on Form 10-KSB filed
on March 11, 1999
3.08 Articles of Amendment, dated December 20, 1986, to the Incorporated by reference to Exhibit 3.2 to the
Articles of Incorporation of B.U.D. Corp. Registrant's Annual Report on Form 10-KSB filed
on March 11, 1999
3.09 Articles of Amendment to the Articles of Incorporation, Incorporated by reference to Exhibit 3.3i to
dated March 1989, of Tecon, Inc. the Registrant's Annual Report on Form 10-KSB
filed on March 11, 1999
3.10 Articles of Amendment to the Articles of Incorporation, Incorporated by reference to Exhibit 3.3ii to
as filed on March 14, 1989 the Registrant's Annual Report on Form 10-KSB
filed on March 11, 1999
4.01 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
II-5
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
4.02 2000 Stock Option Plan Incorporated by reference to Exhibit 99.1 to
the Registrant's Registration Statement on Form
S-8 filed on August 8, 2000
5.01 Opinion re: Legality Provided herewith
10.01 Consulting Agreement, dated March 11, 2002, by and Incorporated by reference to Exhibit 10.1 to
between Mobilepro and Jesus Gomez Romero the Registrant's Registration Statement on
Form S-8 filed on April 30, 2002
10.02 Employment Agreement, dated January 4, 2002, by and Incorporated by reference to Exhibit 10.2 to
between NeoReach and Arne Dunhem the Registrant's Registration Statement on
Form S-8 filed on April 30, 2002
10.03 Employment Agreement, dated February 19, 2002, by and Incorporated by reference to Exhibit 10.3 to
NeoReach and Scott Smith the Registrant's Registration Statement on
Form S-8 filed on April 30, 2002
10.04 Agreement and Plan of Merger, dated as of March 21, Incorporated by reference to Exhibit 10.1 to
2002, by and among MobilePro Corp., NeoReach Acquisition the Registrant's Current Report on Form 8-K
Corp. and NeoReach, Inc. filed on April 5, 2002
10.05 Agreement and Plan of Merger, dated June 1, 2001, by and Incorporated by reference to Exhibit 10.1 to
between CraftClick.Com, Inc. and Mobilepro Corp. the Registrant's Current Report on Form 8-K
filed on June 20, 2001
10.06 Investor Rights Agreement, dated June 1, 2001, by and Incorporated by reference to Exhibit 10.2 to
among Dungavel Inc., CraftClick, Scott R. Smith and the Registrant's Current Report on Form 8-K
Joann M. Smith filed on June 20, 2001
10.07 Employment Agreement, dated June 6, 2001, by and between Incorporated by reference to Exhibit 10.3 to
CraftClick.com, Inc. and Scott R. Smith the Registrant's Current Report on Form 8-K
filed on June 20, 2001
10.08 Agreement dated February 23, 2001, by and among Incorporated by reference to Exhibit 10.1 to
MobilePro Corp., Jack Guiragosian, Edwin Minassian and the Registrant's Current Report on Form 8-K
David Dginguerian filed on March 7, 2001
10.09 Loan Agreement, dated November 17, 2000, by and among Incorporated by reference to Exhibit 10.2 to
Edwin Minassian, David Dginguerian, Jack Guiragosian and the Registrant's Current Report on Form 8-K
Craftclick.com, Inc. filed on March 7, 2001
10.10 Stock Purchase Agreement, dated November 27, 2000, by Incorporated by reference to Exhibit 99.1 to
and between Craftclick.com, Inc. and Metropolitan the Registrant's Current Report on Form 8-K
Capital Partners, LLC filed on December 1, 2000
10.11 Binding Memorandum of Understanding, dated September 14, Incorporated by reference to Exhibit 10 to the
2000, by and between CraftClick.com, Inc. and Russell T. Registrant's Current Report on Form 8-K filed
Murray on September 27, 2000
10.12 Asset Purchase Agreement, dated February 15, 2000, by Incorporated by reference to Exhibit 10.1 to
and between CraftClick.com, Inc. and Stamparoo.com, Inc. the Registrant's Current Report on Form 8-K
filed on March 1, 2000
II-6
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
10.13 Asset Purchase Agreement, dated February 16, 2000, by Incorporated by reference to Exhibit 10.2 to
and between CraftClick.com, Inc. and Gil Bresnick the Registrant's Current Report on Form 8-K
filed on March 1, 2000
10.14 Asset Purchase Agreement, dated February 16, 2000, by Incorporated by reference to Exhibit 10.3 to
and between CraftClick.com, Inc. and Digital Focus, Inc. the Registrant's Current Report on Form 8-K
filed on March 1, 2000
10.15 Asset Purchase Agreement, dated February 3, 2000, by and Incorporated by reference to Exhibit 10.1 to
among CraftClick.com, Inc., Art 2 Art L.L.C. and its the Registrant's Current Report on Form 8-K
Members filed on February 24, 2000
10.16 Asset Purchase Agreement, dated February 4, 2000, by and Incorporated by reference to Exhibit 10.2 to
between CraftClick.com, Inc. and Stitches to go the Registrant's Current Report on Form 8-K
Partnership filed on February 24, 2000
10.17 Asset Purchase Agreement, dated January 25, 2000, by and Incorporated by reference to Exhibit 10.2 to
between CraftClick.com, Inc. and Kirk A. Hines the Registrant's Current Report on Form 8-K
filed on February 8, 2000
10.18 Consultant Compensation Agreement, dated March 30, 1999, Incorporated by reference to Exhibit 99.1 to
by and among Tecon, Inc., Thomas J. Howells, Jeffrey D. the Registrant's Registration Statement on Form
Jenson, Duane S. Jenson, and Travis Jenson S-8 filed on April 1, 1999
10.19 Letter Agreement for Covenant Not to Sue and Compromise Incorporated by reference to Exhibit 99.3 to
and Settlement of debt, dated January 10, 1997, of the Registrant's Annual Report on Form 10-KSB
Tecon, Inc. filed on March 11, 1999
10.20 Securities Purchase Agreement, dated May 31, 2002, by Provided herewith
and between Mobilepro and Cornell Capital Partners, LP
10.21 Investor Registration Rights Agreement, dated May 31, Provided herewith
2002, by and between Mobilepro and Cornell Capital
Partners, LP
10.22 Escrow Agreement, dated May 31, 2002, by and among Provided herewith
Mobilepro, Cornell Capital Partners, LP and Wachovia,
N.A.
10.23 Form of Debenture Provided herewith
10.24 Irrevocable Transfer Agent Instructions, dated May 31,
2002, by and among Mobilepro, Interwest Transfer Co., Provided herewith
Inc. and Cornell Capital Partners, L.P.
10.25 Equity Line of Credit Agreement, dated October 16, Provided herewith
2002, by and between Mobilepro and Cornell Capital
Partners, LP
10.26 Registration Rights Agreement, dated October 16, 2002, Provided herewith
by and between Mobilepro and Cornell Capital Partners, LP
10.27 Escrow Agreement, dated October 16, 2002, by and among Provided herewith
Mobilepro, Cornell Capital Partners, LP, Butler Gonzalez
LLP and Wachovia, N.A.
II-7
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
10.28 Placement Agent Agreement, dated October 16, 2002 by Provided herewith
and among Mobilepro, Cornell Capital Partners, LP and
Westrock Advisors, Inc.
10.29 Memorandum of Understanding between Neoreach, Inc., and Incorporated by reference to Exhibit 10.2 to
RF Microelectronics Laboratory dated July 31, 2002 for the Registrant's amended Quarterly Report on
opportunities to cooperate in research, particularly in Form 10-QSB/A filed on October 3, 2002
RF-CMOS ASICs development for RF transceiver of 3G
W-CDMA standard.
10.30 Confidentiality and Non-disclosure Agreement dated April Incorporated by reference to Exhibit 10.4 to
9, 2002 between NeoReach, Inc. a Delaware corporation the Registrant's amended Annual Report on Form
and Prime Circuits, Inc. 10-KSB/A filed on October 3, 2002
10.31 License Agreement, dated September 26, 2002 by and
between GLB Montrose LLC and Neoreach, Inc. Provided herewith
16.1 Letter from Mantyla McReynolds LLC, dated June 24, 2002, Incorporated by reference to Exhibit 16.1 to
to the Securities and Exchange Commission the Registrant's Current Report on Form 8-K
filed on June 25, 2002
16.2 Letter from Mantyla McReynolds LLC, dated June 12, 2002, Incorporated by reference to Exhibit 16.1 to
to the Securities and Exchange Commission the Registrant's Current Report on Form 8-K
filed on June 20, 2002
23.1 Consent of Kirkpatrick & Lockhart LLP Provided herewith (contained in Exhibit 5.1)
23.2 Consent of Bagel, Josephs & Company, L.L.C. Provided herewith
23.3 Consent of Mantyla McReynolds, LLC Provided herewith
24.1 Power of Attorney Included on signature page
II-8
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be a bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-9
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, in Rockville, Maryland.
MOBILEPRO CORP.
By: /s/ Arne Dunhem
------------------------------------------
Name: Arne Dunhem
Title: President, Chief Executive Officer and
Chairman
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Arne Dunhem his true and lawful
attorney-in-fact and agent, with full power of substitution and revocation, for
him and in his name, place and stead, in any and all capacities (until revoked
in writing), to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully for all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or is substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Arne Dunhem Chairman October 16, 2002
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Arne Dunhem
/s/ Daniel Lozinsky Senior Vice-President and Director October 16, 2002
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Daniel Lozinsky