SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
MOBILEPRO CORP.
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(Exact Name of Registrant as Specified in Charter)
Delaware 002-97869-D 87-0419571
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
3204 Tower Oaks Blvd., Suite 350
Rockville , MD 20852
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(Address of principal executive offices) (Zip Code)
(301) 230-9125
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(Registrant's telephone number)
Securities registered pursuant to section 12(b) of the Act:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
NONE NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK
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(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part 10-KSB or any amendment to this
Form 10-KSB. { }
State issuer's revenues for its most recent fiscal year: $0.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified date within the past 60
days: As of July 11, 2002, the aggregate market price of the voting stock held
by non-affiliates was approximately $2,545,231.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of July 11, 2002, the Company had
outstanding 18,001,935 shares of its common stock, par value $0.001.
Transitional Small Business Disclosure Format (Check one): Yes No X
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TABLE OF CONTENTS
ITEM NUMBER AND CAPTION PAGE
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PART I............................................................................................................4
ITEM 1. DESCRIPTION OF BUSINESS............................................................................4
BUSINESS....................................................................................................4
CORPORATE HISTORY...........................................................................................5
BUSINESS STRATEGY BEFORE THE MOBILEPRO MERGER...............................................................6
BUSINESS STRATEGY AFTER THE MOBILEPRO MERGER AND BEFORE THE NEOREACH MERGER.................................6
BUSINESS STRATEGY AFTER THE NEOREACH MERGER.................................................................6
MARKET/INDUSTRY PROJECTIONS.................................................................................7
FINANCIAL FUNDING NEEDS AND USE OF FUNDS....................................................................8
PRODUCTS AND SERVICES.......................................................................................8
MARKETING AND COMPETITION...................................................................................8
RESEACH AND DEVELOPMENT.....................................................................................9
INTELLECTUAL PROPERTY.......................................................................................9
GOVERNMENT APPROVALS........................................................................................9
RECENT DEVELOPMENTS.........................................................................................9
ITEM 2. DESCRIPTION OF PROPERTY...........................................................................10
ITEM 3. LEGAL PROCEEDINGS.................................................................................10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................................10
PART II..........................................................................................................11
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..........................................11
MARKET FOR COMMON STOCK....................................................................................12
TRANSFER AGENT.............................................................................................12
DIVIDEND POLICY............................................................................................13
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.........................................13
RECENT SALES OF SECURITIES.................................................................................13
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.........................................16
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION.....................................................16
LIQUIDITY AND CAPITAL RESOURCES............................................................................17
NEW ACCOUNTING PRONOUNCEMENTS..............................................................................17
INFLATION..................................................................................................17
PLAN OF OPERATION..........................................................................................17
EMPLOYEES..................................................................................................18
FORWARD-LOOKING INFORMATION................................................................................18
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................................22
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..............39
PART III.........................................................................................................39
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.............................................................39
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE....................................................41
ITEM 10. EXECUTIVE COMPENSATION.........................................................................42
COMPENSATION OF DIRECTORS..................................................................................43
OTHER COMPENSATION ARRANGEMENTS............................................................................43
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................43
PRINCIPAL STOCKHOLDERS.....................................................................................43
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................45
INVESTORS RIGHTS AGREEMENT.................................................................................45
NEOREACH PURCHASE AGREEMENT................................................................................46
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...............................................................47
a) Exhibits................................................................................................47
b) Reports on Form 8-K.....................................................................................48
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS
The Company is a development stage company whose business focus has been
recently redirected towards solutions supporting the third generation ("3G")
wireless market, through NeoReach, Inc., the Company's wholly-owned subsidiary
("NeoReach").
NeoReach is a development stage company designing state-of-the-art modem
solutions to support 3G wireless communications systems. 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.
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 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.
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 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 PDA's and laptop plug-in cards.
These solutions are based on proprietary technology developed by NeoReach.
Distinguishing design features include a superior multi-channel base station
support and multi-mode handset compatibility with W-CDMA, GSM and GPRS network
standards.
NeoReach has filed five 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. NeoReach
initiated product research and design in 2000 and entered into a contract with
Samsung during 2001, which provided NeoReach with important co-development
technical resources and expertise. If NeoReach's modem
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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.
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.
Currently 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 the
Company.
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 ("CraftClick Merger Agreement"). 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 the Company
entered into with Dungavel on June 1, 2001 as part of the merger with
CraftClick.
On February 19, 2002, the Company 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 the
Company 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 the Company's voting securities at that
time. On February 28, 2002, Mr. Scott Smith resigned as the President, CEO and
Chairman of the Company, and Mr. Lozinsky became the President and CEO of the
Company. On May 10, 2002, Mr. Arne Dunhem became the Company's President, CEO
and Chairman and Mr. Lozinsky became our Senior Vice President.
On March 21, 2002, the Company entered into an Agreement and Plan of Merger with
NeoReach, pursuant to which a newly-formed, wholly-owned subsidiary of the
Company merged into NeoReach in a tax-free transaction. The merger was
consummated on April 23, 2002. As a result of the merger, NeoReach is now a
wholly-owned subsidiary of the Company.
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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 sales. The strategy was for the Company 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 (See "Financial Statements and Supplementary Data").
The Company is developing advanced modem solutions for both the base stations
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 the Company's own, proprietary technology. Distinguishing design
features include a superior multi-channel base station support and multi-mode
handset compatibility with W-CDMA, GSM and GPRS network standards.
The Company has solved core modem development issues with its architecture
without having to license and pay expensive, ongoing royalties to other vendors.
The Company has filed five 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.
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Product research and design was initiated in 2000. A contract with Samsung
during 2001 provided important, co-development technical resources and expertise
during the critical design phase. The base station modem will be ready for the
field evaluation with commercial release planned for fourth quarter 2002 with
commercial ASIC modems mid 2003. The handset ASIC modem is planned for mid/end
2003 market availability.
The long-term product vision is founded on product line extensions that leverage
the current technology and expertise in 3G. The first of these potential future
products is the Pico Cell Node-B, a miniaturized version of a complete base
station for use in high-density areas such as in larger office buildings,
shopping malls, train- and bus-stations and in city-centers. The second
potential future product is the 3G handsets themselves. These will be added to
the development schedule after market success with the modem solutions is
demonstrated and based on the market timing and future competitive landscape.
The Company 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. 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.
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. In the U.S., two different 3G
standards will be deployed by U.S. wireless operators, 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
Owing to the vast number of these 3G networks that eventually will be deployed
worldwide, and the present rate in which they are planned for commercial
availability, the market for 3G-enabled base stations (network systems that
enable communications to and from the consumer handsets) and 3G-enabled handsets
and other mobile devices is huge.
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.
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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. The expected lifetime
of the handsets is expected to contract from 18 months to 12 months, further
driving new demand.
FINANCIAL FUNDING NEEDS AND USE OF FUNDS
The Company will need additional financing and may use a private placement
offering or debt financing to raise such additional funds, 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; and
4) General working capital purposes.
We have initiated a private placement offerings as of this filing but we cannot
give any assurances that we will be successful in raising any capital.
PRODUCTS AND SERVICES
The Company is developing products for the 3G markets. Its product line will
initially comprise of pico base station modems and handset modems ASICs. These
products are not currently available in the market. The Company believes that
its products will be first to market and will offer unique value to the
manufacturers and the marketplace in general. The Company currently has
prototypes available of modems for the micro cell base station.
The product line extensions can include RF CMOS, and Pico cell Node-B.
There are no assurances that our products, once developed, will be accepted or
marketable to our intended customers.
MARKETING AND COMPETITION
MARKETING
The Company intends to sell products and services through direct and indirect
sales channels. The Company intends to have a direct sales force in North
America, Europe and Asia. 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, the Company intends to sells product
through OEM agreements with other manufacturers. Any OEM relationships will
enable the Company's 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.
The Company cannot assure you that its marketing efforts will be successful.
COMPETITION
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
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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. 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.
RESEACH 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
2001, respectively. None of the cost of such activities were borne directly by
customers. We have no individual people engaged in research and development
activities.
INTELLECTUAL PROPERTY
As of March 31, 2002, the Company had five patent applications pending with the
U.S. Patent and Trademark Office ("PTO") in the area of "Smart Antenna"
technology. On April 29, 2002 the Company announced that two of the five patents
filed previously have been allowed.
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 PDAs.
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.
The remaining three patent applications, currently still under review at the
PTO, involve innovations that may greatly enhance 3G wireless network operators'
capacities to support larger numbers of simultaneous subscribers, to offer
greatly expanded coverage areas, and to maintain the high quality of the
communication channels.
In addition for its wireless business solutions provider business, the Company
also has 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".
GOVERNMENT APPROVALS
We believe that the only government approval that is required is that the
device(s) must adhere to certain the Federal Communications Commission ("FCC")
section requirements because it does in fact contain a radio transmitter. We
believe that government approval from FCC will be required for both our future
RF CMOS product and for our future potential Node-B pico cell since both will
contain radio tranmitters that will radiate radio frequency emission in a
frequency spectrum that is normally under license requirements. Any potential
contract manufacturer we utilize will handle this for the Company.
RECENT DEVELOPMENTS
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On May 31, 2002, the Company entered into an equity line of credit arrangement
(the "Equity Line") with Cornell Capital Partners, LP ("Cornell"). The Equity
Line provides, generally, that Cornell 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 the Company's discretion. Any shares of Common Stock sold under the
Equity Line 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. The Company is 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.
In addition, 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 "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. If, at the time of conversion, the Common Stock is listed on the Nasdaq
Bulletin Board System, Nasdaq SmallCap Market, or American Stock Exchange, the
conversion price will be 120% of the closing bid price. If, at the time of
conversion, the Common Stock is not listed on any of the foregoing markets, the
conversion price will be 80% of the closing bid price of the Common Stock as
furnished by the National Association of Securities Dealers, Inc. 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. 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.
ITEM 2. DESCRIPTION OF PROPERTY
Our offices are located at 3204 Tower Oaks Blvd., Suite 350, Rockville , MD
20852. We believe that this facility is adequate to meet our needs in the
foreseeable future. In the event our business expands, we believe we will have
to find new offices.
We currently employ one person. Subsequent to the period of this report and
effective with the merger with Neoreach, the Company currently employs nine
people. If the business grows as we plan, we anticipate that we will need
additional persons to fill administrative, sales and technical positions.
ITEM 3. LEGAL 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Board of Directors announced that the close of business on
November 1, 2001 was the record date for the determination of stockholders
entitled to notice about the proposal authorizing the reverse stock split of the
outstanding common stock, par value $.001 par value, of the Company at the rate
of one new share for each 200 issued and outstanding shares of common stock and
the subsequent restoration of the authorized capital of the Company to
50,000,000 shares of common stock, $.001 par value, 5,000,000 shares of
preferred stock, $.001 par value and 35,425 shares of Series A Convertible
Preferred Stock, $.001 par value ("Recapitalization") and the approval of the
Mobilepro 2001 Equity Performance Plan ("Equity Performance Plan").
On October 31, 2001, the Board of Directors approved the Recapitalization and
the Equity Performance Plan and authorized the Company's officers to obtain
written consents from the holders of the outstanding voting securities of the
Company to approve the Recapitalization and the Equity Performance Plan.
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On November 1, 2001, stockholders owning of record an aggregate of 9,605,393
shares of the Company's common stock, representing approximately 53.7% of the
outstanding voting securities of the Company, executed and delivered to the
Company a written consent authorizing and approving the Recapitalization and
approving the Plan. Under Section 228 of the Delaware General Corporation Law,
and the certificate of incorporation and by-laws of the Company, any action
required or permitted to be taken at an annual or special meeting of
stockholders of a Delaware corporation may be taken without a meeting, without
prior notice and without a vote, is signed by the holders of outstanding stock
entitled to vote thereon having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
consent to the Recapitalization and approval of the Equity Performance Plan must
be given, and was given on or about November 2, 2001, to those stockholders who
have not consented in writing to the action and who, if the action had been
taken at a meeting, would otherwise have been entitled to notice of the meeting.
The purpose of the Mobilepro Corp. 2001 Equity Performance Plan ("Equity
Performance Plan") is to enable the Company to offer to its employees, officers,
directors and consultants whose past, present and/or potential contributions to
the Company and its Subsidiaries have been, are or will be important to the
success of the Company, an opportunity to acquire a proprietary interest in the
Company. The various types of long-term incentive awards that may be provided
under the Equity Performance Plan will enable the Company to respond to changes
in compensation practices, tax laws, accounting regulations and the size and
diversity of its businesses.
In effecting the Recapitalization, a majority of the Stockholders, in their
written consent authorizing and approving the Recapitalization, and the Board of
Directors of the Company approved the following Certificate of Amendment of the
Certificate of Incorporation of Mobilepro Corp.:
FIRST: The name of the Corporation is Mobilepro Corp.
SECOND: The Certificate of Incorporation of the Corporation is hereby amended by
deleting the first paragraph of Article FOURTH in its entirety and by
substituting the following two new paragraphs at the beginning of Article FOURTH
in lieu thereof:
"FOURTH: That as of the effective date of this Certificate of
Amendment of the Certificate of Incorporation of the Corporation
("Amendment") each 200 shares of the Corporation's common stock that
is issued and outstanding shall be changed, without any further
action, into one fully paid and non-assessable share of the
Corporations common stock, fractional shares to be rounded up.
As of the effective date of this Amendment, after the reverse stock
split set forth above, the total number of shares of capital stock of
all classes which the Corporation shall have authority to issue
55,035,425 shares, of which 50,000,000 shares shall be common stock,
par value $.001 per share ("Common Stock"), 5,000,000 shares shall be
preferred stock, par value $.001 per share ("Preferred Stock") and
35,425 shares shall be the Series A Convertible Preferred Stock, par
value $.001 per share.
("Series A Convertible Preferred Stock")."
THIRD: The foregoing Amendment of Certificate of Incorporation was duly approved
by the Corporation's Board of Directors in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware and
thereafter was duly adopted by the consent of the holders of a majority of the
outstanding voting stock of the Corporation in accordance with the provisions of
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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MARKET FOR COMMON STOCK
Our Common Stock is traded in the over-the-counter market and quoted on OTC EBB
under the symbol "MOBL" and quoted in the pink sheets published by the National
Quotations Bureau. From time to time, a very small number of securities
broker-dealers published only intermittent quotations for the Common Stock, and
there was no continuous, consistent trading market. The trading volume in the
Common Stock has been and is extremely limited. During the above period, the
limited nature of the trading market created the potential for significant
changes in the trading price for the Common Stock as a result of relatively
minor changes in the supply and demand for Common Stock and perhaps without
regard to our business activities. Because of the lack of specific transaction
information and our belief that quotations during the period were particularly
sensitive to actual or anticipated volume of supply and demand, we do not
believe that such quotations during this period are reliable indicators of a
trading market for the Common Stock.
As of July 11, 2002, there were approximately 531 holders of record of our
Common Stock, which does not take into account those shareholders whose
certificates are held in the name of broker-dealers or other nominees.
TRANSFER AGENT
The transfer agent for our Common Stock is Interwest Transfer Co., 1981 East
Murray-Holladay Rd., P. O. Box 17136, Salt Lake City, Utah 84117.
Subject to the above limitations, we believe that during the six fiscal quarters
preceding the date of this filing, the high and low share prices for the Common
Stock during each quarter are as set forth in the table below. The quotations
reflect inter-dealer share prices, without retail mark-up, mark-down, or
commission and may not represent actual transactions. The share prices were
obtained from OTC Bulletin Board NASDAQ Trading & Market Services. These high
and low share prices do reflect the effects both of the 1 for 100 share reverse
stock split, which occurred on May 8, 2001 and of the 1 for 200 share reverse
stock split, which occurred on November 6, 2001.
QUARTER ENDED HIGH LOW
--------------------------------------------- ------------- ------------------
>
March 31, 2002 4.00 1.05
December 31, 2001 38.00 4.00
September 30, 2001 790.00 12.00
June 30, 2001 400.00 30.00
--------------------------------------------- ------------- ------------------
March 31, 2001 3,750.00 312.50
December 31, 2000 10,625.00 625.00
September 30, 2000 40,000.00 7,500.00
June 30, 2000 77,500.00 17,500.00
--------------------------------------------- ------------- ------------------
March 31, 2000 57,500.00 30,000.00
December 31, 1999 75,000.00 25,000.00
--------------------------------------------- ------------- ------------------
The ability of an individual shareholder to trade their shares in a particular
state may be subject to various rules and regulations of that state. A number of
states require that an issuer's securities be registered in their state or
appropriately exempted from registration before the securities are permitted to
trade in that state. Our shares are subject to the provisions of Section 15 (g)
and Rule 15g-9 of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), commonly referred to as the "penny stock" rule. Section 15 (g)
sets forth certain requirements for transactions in penny stocks and Rule
15g-9(d)(1) incorporates the definition of penny stock as that used in Rule
3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
the NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
Since our shares are a penny stock, trading in the shares will be
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subject to additional sales practice requirements on broker-dealers who sell
penny stocks to persons other than established customers and accredited
investors, generally persons with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in our Common Stock and may affect the ability of
shareholders to sell their shares.
DIVIDEND POLICY
Subject to the provisions of the Certificate of Incorporation, the Board of
Directors may, out of funds legally available therefore at any regular or
special meeting, declare dividends upon the capital stock of the corporation as
and when they deem expedient. Before declaring any dividend there may be set
apart out of any funds of the corporation available for dividends, such sum or
sums as the Board of Directors from time to time in their discretion deem proper
for working capital or as a reserve fund to meet contingencies or for equalizing
dividends or for such other purposes as the Board of Directors shall deem
conducive to the interests of the corporation.
We have not paid any dividends to date. We can make no assurance that our
proposed operations will result in sufficient revenues to enable profitable
operations or to generate positive cash flow. For the foreseeable future, we
anticipate that we will use any funds available to finance the growth of our
operations and that we will not pay cash dividends to stockholders.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Equity Compensation Plan Information
(As of 3/31/02)
Number of securities to Weighted average
be issued upon exercise exercise price of Number of securities
of outstanding options, outstanding options, remaining available
Equity Compensation Plan Categories warrants and rights warrants and rights for future issuance
------------------------------------ ------------------------- -------------------------- ----------------------
Approved by security holders
- 2001 Equity Performance Plan 0 $0.00 20,000
Not approved by security holders
- None 0 0 0
==================================== ========================= ========================== ======================
Total 0 $0.00 20,000
The securities underlying the 2001 Equity Performance Plan were registered on
the Company's Form S-8 Registration Statement as filed with the Securities and
Exchange Commission on December 4, 2001 (File No. 333-74492).
RECENT SALES OF SECURITIES
COMMON STOCK
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
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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 (See
"CORPORATE HISTORY"). 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 to the Company. 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. The Company
believes 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.
The options were granted pursuant to the "2000 Stock Option Plan". As of March
31, 2001, we had granted 2,562,250 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.
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. 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. The Company believes 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
valued at $1,284,923. The Company believes 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. The Company believes 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. 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. The Company believes 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 ("CraftClick"), and
Mobilepro Corp., a Delaware corporation ("Mobilepro"), 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. In
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connection with the Merger, 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. The Company
believes the issuance of the stock to be exempt from registration under Section
4(2) of the Securities Act.
Effective June 6, 2001, in connection wih the Merger, the Company issued
3,000,000 shares in a conversion of debt and accrued interest. 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. The Company believes the
issuance of the stock to be exempt from registration under Section 4(2) of the
Securities Act.
In May 2001, the Company registered 6,500,000 shares of our common stock for
future issuance under the "2001 Performance Equity Plan". Effective June 6,
2001, the Company issued a total of 2,600,000 shares to the following parties:
250,000 shares to Dungavel Inc. for services performed in connection with the
Mobilepro merger and reorganization and re-incorporation, 250,000 to Mr. Scott
R. Smith, our Chief Executive Officer for employment services, 1,475,000 to ZDG
Investments for consulting services regarding the Mobilepro merger and
reorganization and re-incorporation, 50,000 shares each to Mr. Howard Geisler,
Mr. Mitchell Geisler and Ms. Cindy Roach for services as officers and directors,
25,000 to Weil Consulting Corp. for merger consultations and 450,000 to Henning
Capital Ltd. for merger consultations.
On August 1, 2001, the Company 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 were valued at $577,500, the fair value of the Company's
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.
On September 6, 2001, the Company 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, the Company issued 25,000 shares of its common stock of
services rendered. The issuance of shares were valued at $1,250, the fair value
of the Company's 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.
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. The Company valued that issuance
at a value of $240,000, the fair value of the Company's 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.
On December 4, 2001, the Company registered 1,000,000 shares of our common stock
for future issuance under the "2001 Equity Performance Plan". On February 15,
2002, the Company issued a total of 20,000 shares of its common stock to the
following parties: 10,000 shares to Sandy Seth and 10,000 shares to Maninder
Singh. The shares were issued for consulting services regarding items such as
assisting the Company in its understanding of historical events. The issuance of
all of the 20,000 shares were valued at $21,000, the fair value of the Company's
stock at that time.
On February 15, 2002, the Company issued 86,000 shares of its common stock of
services rendered. The issuance of the shares were valued at $90,300, the fair
value of the Company's 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.
On February 19, 2002, the Company issued 25,000 shares of its common stock for
services performed by an executive and officer of the Company. The shares were
valued at $26,250, the fair value of the Company's 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.
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On March 18, 2002, the Company issued a total of 960,000 shares of its 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 55 cents 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.
On April 23, 2002, the Company issued 12,352,129 shares of its 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 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 Company believes the issuance of the
stock to be exempt from registration under Section 4(2) of the Securities Act.
On May 31, 2002, the Company 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 Company believes the issuance of the stock to be
exempt from registration under Section 4(2) of the Securities Act.
On June 10, 2002, the Company issued a total of 784,314 shares of its common
stock to the following parties: 764,706 to Cornell Capital Partners and 19,708
to West Rock Advisors, Inc. These shares were issued pursuant to an equity line
of credit arrangement with Cornell Capital Partners, dated May 31, 2002. The
Company believes the issuance of the stock to be exempt from registration under
Section 4(2) of the Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The financial information set forth in the following discussion should be read
in conjunction with, and qualified in its entirety by, the financial statements
of the Company included elsewhere herein. These financial statements reflect
only the financial information of our prior business operations as a wireless
business solutions provider and are not reflective of our new business strategy
(See "BUSINESS").
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
OVERALL OPERATING RESULTS
We had no sales from our wireless business solutions provider operation for the
years ended March 31, 2002 and 2001. However, our general and administrative
expenses were $3,147,119 for the current year and $1,009,193 for the prior year,
which resulted in substantial operating losses for each year. Operating losses
were $3,147,119 and $1,009,193 for the years ended March 31, 2001 and 2000,
respectively. The Company had other income, including income from the
forgiveness of debt of $248,717 and $0 for the years ended March 31, 2001 and
2000, respectively. The areas where we expended the most funds for each year
were for payroll, professional fees, consulting fees, and marketing expenses.
Because of these large losses and the fact that we did not have adequate capital
in order to continue to operate, we were pursuing alternative business
opportunities in the first quarter of 2002. See "BUSINESS" for our change in
control and our future business strategy.
Our net losses after taxes and other income/expenses were $2,898,402 for March
31, 2002 and $1,009,193 for March 31, 2001.
OPERATING LOSSES
We have accumulated approximately $1,563,018 of net operating loss carryforwards
as of March 31, 2002, that may be offset against future taxable income. 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
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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
We do not currently have any revenues, liquidity or capital resources as we move
forward into our new business venture (See "BUSINESS") and our independent
auditors have issued a going-concern opinion. We will need additional financing
in order to implement our business plan and continue as a going concern. We do
not currently have a source for any additional financing and we cannot give any
assurances that we will be able to secure any financing.
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 only the financial information of our
prior business operations as a wireless business solutions provider business and
are reflective of our new business strategy (See "BUSINESS").
The Company will need additional financing and may use a private placement
offering or debt financing to raise such additional funds, to be used for the
following:
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 the
business goals of the Company.
3) Expand the product offerings of the Company to include RF CMOS
development and Pico-Cell base stations, among others
4) Develop direct and indirect sales and marketing channels for the
Company's products and services.
a. Develop business partnerships that embrace the Company
as the exclusive 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,and
6) General working capital purposes
We have initiated a private placement offerings as of this filing but we cannot
give any assurances that we will be successful in raising any capital.
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As of the date of this report, the Company does not have enough cash and cash
equivalents to meet its cash requirements for its current obligations and
anticipated cash requirements for the next month. As of the date of this report,
the within the next several months, the Company has to raise additional funds,
either by issuing equity or debt, in order to meet its cash obligations.
EMPLOYEES
We, as of March 31, 2002, currently employ one person. With the merger with
Neoreach effective in April of 2002, the Company employs nine people. If the
business grows as we plan, we anticipate that we will need additional persons to
fill administrative, sales and technical positions.
FORWARD-LOOKING INFORMATION
From time to time, we or our representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by us with the Securities and Exchange Commission. Words or
phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements". Such statements are qualified
in their entirety by reference to and are accompanied by the above discussion of
certain important factors that could cause actual results to differ materially
from such forward-looking statements.
We are currently unaware of any trends or conditions other than those previously
mentioned in this management's discussion and analysis that could have a
material adverse effect on the Company's consolidated financial position, future
results of operations, or liquidity. However, investors should also be aware of
factors that could have a negative impact on the Company's prospects and the
consistency of progress in the areas of revenue generation, liquidity, and
generation of capital resources. These include: (i) variations in revenue, (ii)
possible inability to attract investors for its equity securities or otherwise
raise adequate funds from any source should the Company seek to do so, (iii)
increased governmental regulation, (iv) increased competition, (v) unfavorable
outcomes to litigation involving the Company or to which the Company may become
a party in the future and, (vi) a very competitive and rapidly changing
operating environment. Other factors that might cause such a difference include,
but are not limited to, those discussed below:
RISK FACTORS
WE MAY NOT BE SUCCESSFUL IN INTEGRATING THE BUSINESS AND TECHNOLOGY OF NEOREACH
WITH THAT OF THE COMPANY.
We may not be successful in integrating the business and technology of NeoReach
with the business and operations of the Company. 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.
OUR MANAGEMENT TEAM IS NEW TO THE COMPANY.
Mr. Daniel Lozinsky became our President and CEO in February 2002 after he
acquired 64.8% of our voting securities. After the acquisition of NeoReach, Mr.
Arne Dunhem, replaced Mr. Lozinsky as our President and CEO 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 the Company. 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.
OUR ACCOUNTANTS RAISED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A
GOING CONCERN AND WE WILL INCUR LOSSES FOR THE IMMEDIATE FUTURE.
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Our independent accountants raised substantial doubt as to our ability to
continue as a going concern in their report to the Board of Directors in July
2002. As a result of our acquisition of NeoReach effective in April, 2002, the
Company has 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 profitability is to be achieved. To the extent that
revenue does not grow at anticipated rates 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,
our business, results of operations and financial condition will be materially
and adversely affected. We cannot ensure that we will ever achieve or sustain
profitability.
WE ARE AT DEVELOPMENT STAGE AND HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU
CAN BASE YOUR INVESTMENT DECISION.
The Company had a major shift in its business strategy in June 2001. It was not
until June 2001 that the Company focused on the integration and marketing of
complete mobile information solutions that satisfy the needs of mobile
professionals. The Company acquired NeoReach, another development stage company,
in April 2002. While management believes that this acquisition represents the
Company's important entry into the exciting and promising 3G wireless
communications market, the Company only very recently redirected its 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.
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.
IF OUR MARKET DOES NOT GROW AS EXPECTED, OUR REVENUES WILL BE BELOW OUR
EXPECTATIONS AND OUR BUSINESS AND FINANCIAL RESULTS WILL SUFFER.
We are engaged in a developing business with an unproven market, and we cannot
accurately estimate the size of our market or the potential demand for 3G modem
solutions. If there is substantial delay in the commercial launch of our
products or if there is not widespread acceptance of our products, our business
and prospects will be harmed. We believe that our potential to grow and increase
our market acceptance depends on many factors, some of which are beyond our
control. There can be no assurance that potential clients will find our products
attractive.
OUR INDUSTRY IS SUBJECT TO INTENSE COMPETITION.
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:
- existing rights to competing and emerging technologies;
- longer operating histories and presence in key markets;
- greater name recognition; and
- 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:
-19-
- the performance of our modem technology in a manner that meets
customer expectations;
- the success of our efforts to develop effective channels of
distribution for our products;
- our ability to price our products that are of a quality and at a price
point that is competitive with similar or comparable products
offered by our competitors;
- general conditions in the wireless communications industry;
- the success of our efforts to develop, improve and satisfactorily
address any issues relating to our modem technology; and
- 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.
OUR INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE THAT WE MUST KEEP PACE
WITH TO SUCCESSFULLY COMPETE.
New technological innovations generally require a substantial investment before
they are commercially viable. The market for our products and technology is
characterized by many factors, including:
- rapid technological advances and evolving industry standards;
- changes in customer requirements;
- frequent introductions of new products and enhancements; and
- evolving methods of building and operating telecommunications systems.
Our failure to keep pace with these rapid technological changes could adversely
affect our business and results of operations.
OUR PATENT APPLICATIONS MAY BE REJECTED, WHICH MAY ADVERSELY AFFECT OUR
BUSINESS.
We will rely on the patents that may be granted as a result of certain patent
applications that have been filed with respect to our wireless modem technology,
as well as copyrights, trademark and trade secret law, to protect our
proprietary information. The rejection of our patent applications would
adversely affect our business, because we would be unable to protect or enforce
our intellectual property rights with respect to such technology and may result
in claims by third parties that we infringe their intellectual property rights.
CONSOLIDATIONS IN THE WIRELESS COMMUNICATIONS INDUSTRY COULD ADVERSELY AFFECT
OUR BUSINESS.
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.
WE WILL REQUIRE SIGNIFICANT ADDITIONAL CAPITAL IN THE FUTURE, WHICH WE MAY NOT
BE ABLE TO OBTAIN.
Part of our business strategy is to raise additional capital to finance our
operations. We cannot be sure that we will be successful in raising this
additional capital or that the net proceeds from such financing will be
sufficient to meet our funding demands. 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.
In addition, the Company received a letter from the SEC dated April 26, 2002 in
which the SEC raised certain comments and questions regarding certain of the
Company's prior public filings with the SEC. Many of the issues addressed in the
SEC's letter relate to the Company's prior business operations and strategy as
well as the failure to comply with certain technical requirements relating to
the Company's SEC filings. While the Company has responded to the SEC letter,
the ability of the Company to raise funds through offerings that require
registration with the SEC could be delayed. In addition, the Company could be
subject to further action from the SEC and/or investors who may have relied on
such filings.
MANAGEMENT OF THE COMPANY CONTROLS 70.3% 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
-20-
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.
SHAREHOLDERS MAY HAVE DIFFICULTY SELLING THEIR SHARES IN THE SECONDARY MARKET
GIVEN THE NATURE OF THE BULLETIN BOARD AND RULES RELATING TO LOW-PRICE STOCKS,
OR THE "PENNY STOCK" RULES.
The Common Stock is quoted on the Bulletin Board. Shares traded on this system
are often characterized by low trading volumes and volatile prices. As a result,
investors may find it more difficult to dispose of or to obtain accurate
quotations of the Common Stock. In addition, quotations on the Bulletin Board
depend on the willingness of broker-dealers to make a market for the stock.
There can be no assurance that the Common Stock will continue to be quoted on
the Bulletin Board or that there will continue to be a market for such stock.
Further, the SEC has adopted regulations which define a "penny stock" to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. The Common Stock presently is a "penny stock" and,
accordingly, is subject to rules that impose additional sales practice
requirements on broker/dealers who sell such securities to persons other than
established customers and accredited investors. There can be no assurance that
the Common Stock will trade for $5.00 or more per share, or if so, when.
Consequently, the "penny stock" rules may restrict the ability of broker/dealers
to sell the Common Stock and may affect the ability of the purchasers of any
future offering by the Company to sell the Common Stock in a secondary market.
WE HAVE NOT PAID DIVIDENDS ON OUR COMMON STOCK TO DATE.
We have not paid to date and do not expect to pay in the foreseeable future any
cash or stock dividends on our Common Stock.
THE COMPANY'S FINANCIAL PROJECTIONS CANNOT BE ASSURED.
The projections of the future business prospect of the Company were prepared by
the Company in good faith based upon the assumptions that the Company believes
to be reasonable. No assurance can be given, however, regarding the
attainability of the projections or the reliability of the assumptions on which
they were based. The projections are subject to the uncertainties inherent in
any attempt to predict the results of operations for the next two years. Certain
of the assumptions used will inevitably not materialize and unanticipated events
will occur. Therefore, the actual results of operations are likely to vary from
the projections and the variations may be material and adverse.
The projections are to give management information concerning the Company's
estimates of future operating results based on the assumptions and no assurance
can be made that such results will be achieved. The financial projections have
not been prepared, reviewed or compiled by any firm of accountants. The
projections of the Company were not prepared with a view to public disclosure or
compliance with published guidelines of the Securities and Exchange Commission
or any state securities commission, or the guidelines established by the
American Institute of Certified Public Accountants and should not be considered
as a forecast of actual earnings.
THE BUSINESS PLAN CONTAINS ASSUMPTIONS THAT MAY PROVE TO BE INCORRECT OR MAY NOT
BE ADHERED TO BY MANAGEMENT.
The Company's Business Plan is based upon numerous assumptions that may later
prove to be incorrect. The Company's ability to adhere to the Business Plan will
depend upon factors that the Company believes are beyond its control. Likewise,
management is not bound to follow the Business Plan and may elect to adopt other
strategies based upon changes in circumstances.
The risks identified here are not all inclusive. New risk factors emerge from
time to time and it is not possible for management to predict all of such risk
factors, nor can it assess the impact of all such risk factors on the Company's
business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results.
-21-
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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
-22-
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
PAGE(S)
-------
AUDITED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants F-2
Balance Sheet as of March 31, 2002 F-3
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-4
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-5
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-7
Notes to Financial Statements F-8
F-1
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-2
MOBILEPRO CORP
(FORMERLY CRAFTCLICK.COM, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2002
ASSETS
CURRENT ASSET
Cash $ 154
-----------
TOTAL ASSET $ 154
===========
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-3
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-4
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-5
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-6
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
=========== =========== ===========
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-7
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 e significant accounting policies:
F-8
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-9
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-10
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-11
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-12
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 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-13
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-14
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-15
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 cetain 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-16
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective June 6, 2002, the Board of Directors of Mobilepro Corp. (the
"Company") dismissed its independent auditors, Mantyla, McReynolds & Associates
("Mantyla"), and engaged the services of Bagell, Josephs & Company, L.L.C.
("Bagell"), as its new independent auditors. Bagell will audit the Company's
financial statements for the fiscal year ended March 31, 2002.
During the two most recent fiscal years of the Company ended March 31, 2001, and
the subsequent interim period through June 6, 2002, there were no disagreements
between the Company and Mantyla on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Mantyla's satisfaction, would have caused
Mantyla to make reference to the subject matter of the disagreements in
connection with its reports; and there were no reportable events described under
Item 304(a)(1)(v) of Regulation S-K.
The audit reports of Mantyla on the Company's financial statements as of and for
the fiscal years ended March 31, 2000 and 2001 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles, other than a fourth
explanatory paragraph describing going concern contingencies.
During the two most recent fiscal years of the Company ended March 31, 2001, and
the subsequent interim period through June 6, 2002, the Company did not consult
with Bagell regarding any of the matters or events set forth in Item
304(a)(2)(i) and (ii) of Regulation S-K.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Certain information about the directors and executive officers of the Company as
of March 31, 2002 is included below.
------------------------------------------------------------------------------------------------
Name Age Position Director or Officer Since
------------------------------------------------------------------------------------------------
Scott R. Smith 42 Director June 1, 2001
------------------------------------------------------------------------------------------------
Arne Dunhem 52 Treasurer and Director February 19, 2002
------------------------------------------------------------------------------------------------
Daniel Lozinsky 41 President and CEO and Chairman February 19, 2002
------------------------------------------------------------------------------------------------
The following describes the business background and the experience of each of
the directors and executive officers of the Company:
Mr. Daniel Lozinsky, the President and CEO and Chairman of the Company, was
appointed a Director of the Company in February 2002. Daniel Lozinsky has 17
years of management and software development experience with small and large
multinational corporations. Mr. Lozinsky was 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. Prior to that Mr. Lozinsky was senior
39
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 96
and 99, when the company grew from 4 million to 21 million users. He was working
for AOL's MIS (BISY) department between 4/95 - 6/96. Prior to that Mr. Lozinsky
was employed as a senior software engineer at Eastman Kodak Corporation in
Rochester NY between 9/89 - 4/95. 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 8/87 - 9/88,
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 8/85 - 5/87, Mr. Lozinsky worked as
a programmer and systems analyst for Merrill Lynch, Real Time Pricing Group that
delivers NYSE financial data to different departments of Merrill Lynch. Mr.
Lozinsky holds MS/CS from Stevens Institute of Technology in Hoboken NJ, 1/89.
He also holds BS/CS from Polytechnic Institute of NY, 1/84.
Mr. Arne Dunhem was appointed a Director and Treasurer of the Company 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 all aspects of business,
management, information systems, network operations and engineering. Mr. Dunhem
was between November 1998 and June 2001 the President & CEO of erbia, Inc. a
long-distance communications company where he took the company from its start-up
phase through the sale of the operation to another company. Prior to this he was
between 1993 and September 1997 the Chairman of Tele8 Kontakt AB, a Swedish
nationwide start-up wireless operator and also between 1993 and December 1997
the Chairman of Nordiska Tele8 AB of Sweden, a long distance and local telephone
service company. Here again, he took the company from its start-up phase through
full operation and eventually the sale of the companies. Mr. Dunhem was between
September 1989 and April 1990 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 and
June 1989 Mr. Dunhem was with INTELSAT, Washington, D.C., an international
satellite communications organization in a capacity growing from staff engineer
to program manager where he had responsibilities for building-up some of the
world's largest command, control and monitoring networks. He has also been with
the Saab-Scania corporation and the Swedish Telecom. He has lived in the
Washington, D. C. area since 1978.
Mr. Scott R. Smith, a Director of the Company since June 1, 2001, has 20 years
experience in the high technology sector, product development, sales, business
development and engineering. Mr. Smith is the founder of Mobilepro Corp. and
brings to this company extensive business, sales and technology experience. From
1992 through 1999, he founded two technology product development companies
providing product development, prototyping, tooling, project management and
process consulting services to major technology companies such as Motorola, 3M,
Lucent Technologies, Molex, and FCI/Berg Electronics. From 1989 to 1992 he was
Regional Director of Sales and Technology for Rand Worldwide and was primarily
responsible for developing a midwest presence for the company by establishing
anchor accounts and building a sales and technical support team. Prior to that
Mr. Smith worked for several major technology companies, including Motorola
Automotive, Parametric Technology Corp., Intergraph Corp. and Allen-Bradley Co.
On Feb. 26, 2002, Mr. Scott R. Smith, a director of the Company since June 1,
2001 and a director as of March 31, 2002, filed a petition for personal
bankruptcy in the U.S. Bankruptcy Court for the Northern District of Illinois,
Western Division.
Our Board of Directors, as of March 31, 2002, consisted of only the three
individuals listed above.
Subsequent to the period covered under this report, Mr. Smith, on April 1, 2002,
resigned from the Board of Directors of the Company. His position has currently
not been filled on the Board.
40
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's common stock, to file with the Securities and Exchange Commission
("SEC") the initial reports of ownership and reports of changes in ownership of
the common stock. Officers, directors and greater than 10% stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. The Company has not received any such forms. The Company
believes that certain of these required filings, under the Section 16(a), may
not have been made.
41
ITEM 10. EXECUTIVE COMPENSATION
The following table reflects compensation paid to our mostly highly compensated
executive officers and directors for the year ended March 31, 2002.
Annual Compensation
--------------------------------------------------
For Fiscal
Year Ended Salary Bonus Other
Name And Principal Position March 31, ($) ($) ($)
--------------------------- ----- --------- ------- -------
--------------------------- ----- --------- ------- -------
Daniel Lozinsky 2002 $ 0 $ 0 $ 0
CEO/Chairman 2001 $ 0 $ 0 $ 0
2000 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Arne Dunhem 2002 $ 0 $ 0 $ 0
Director 2001 $ 0 $ 0 $ 0
2000 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Scott Smith 2002 $ 53,652 $ 0 $ 0
Director & former CEO 2001 (2) $ 218,750 $ 0 $ 0
2000 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Long Term Compensation
---------------------------------------------
Awards
-----------------------------
Restricted Securities Payouts
--------------
Stock Underlying LTIP All Other
Awards Options Payouts Compensation
Name And Principal Position ($) SARS (#) ($) ($) (1)
--------------------------- ---------- ---------- ---------- -----------
--------------------------- ---------- ---------- ---------- -----------
Daniel Lozinsky $ 0 0 0 $ 140,250
CEO/Chairman $ 0 0 0 $ 0
$ 0 0 0 $ 0
--------------------------------------------------------------------------------------------
Arne Dunhem $ 0 0 0 $ 195,250
Director $ 0 0 0 $ 0
$ 0 0 0 $ 0
--------------------------------------------------------------------------------------------
Scott Smith $ 0 0 0 $ 80,000
Director & former CEO $ 0 0 0 $ 0
$ 0 0 0 $ 0
--------------------------------------------------------------------------------------------
Notes:
(1) All of the amounts listed in this column paid paid to directors
and officiers in the form of stock. The amounts listed are the
fair market value of the stock on the date of the grant.
(2) The compensation for the period ended 3/31/2001 was earned while
Mr. Smith was an employee of MobilePro Corp, a private company,
prior to its reverse merger dated June 6, 2002. This amount was
accrued and Mr. Smith took no cash payments for salary while at
MobilePro Corp, a private company. On February of 2002 in
connection with the Stock Purchase Agreement with Mr. Daniel
Lozinsky and Dungavel, Inc., and in connection with another
Stock Purchase Agreement with 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 the
Company'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 3/31/2002, the Company does not owe
Mr. Smith any accrued salary amount.
42
No other person makes over $100,000 per year.
COMPENSATION OF DIRECTORS
We do not currently compensate directors in cash for any services provided as a
director. Persons who are directors and employees have been additionally
compensated for their services as a director in the form of common stock of the
Company. There is no formal plan in place for compensation of persons who are
directors who are not employees of the Company, but it is expected that in the
future we will create a formal remuneration and reimbursement plan.
OTHER COMPENSATION ARRANGEMENTS
On December 4, 2001, we registered 1,000,000 shares of our common stock in an
S-8 filing with the Securities and Exchange Commission as part of the 2001
Equity Performance Plan. In March 2002, we issued 355,000 shares of the
Company's common stock to Mr. Arne Dunhem, 255,000 shares of the Company's
common stock to Mr. Daniel Lozinsky, and 25,000 shares of the Company's common
stock to Mr. Scott Smith for compensation as officers and directors. In June
2001, we issued 250,000 to Mr. Scott Smith and 50,000 to Mr. Howard Geisler, Mr.
Mitchell Geisler, and Ms. Cindy Roach for compensation as officers and directors
(See "RECENT SALES OF SECURITIES").
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of July 11, 2002, the name and shareholdings,
including options to acquire our Common Stock, of each person who owns of
record, or was known by the us to own beneficially, 5% or more of the shares of
the Common Stock currently issued and outstanding; the name and shareholdings,
including options to acquire the Common Stock, of each director; and the
shareholdings of all executive officers and directors as a group. The address of
each of the individuals listed below is the address of the Company.
---------------------------------------------------------------------------------------------------------------
Beneficial
Ownership (1)
---------------------------------------------------------------------------------------------------------------
Common Stock Options Series A Preferred
Name and Address Common Stock (2) Stock (3)
---------------------------------------------------------------------------------------------------------------
Daniel Lozinsky (6) 6,618,694 - -
---------------------------------------------------------------------------------------------------------------
Arne Dunhem (7) 2,601,244 210,519 -
---------------------------------------------------------------------------------------------------------------
Ken Min (8) 2,833,156 - -
---------------------------------------------------------------------------------------------------------------
Scott Smith (9) 533,455 - -
---------------------------------------------------------------------------------------------------------------
Cornell Capital Partners (10) 764,706 - -
---------------------------------------------------------------------------------------------------------------
Dungavel, Inc. (11) 333,552 - -
---------------------------------------------------------------------------------------------------------------
All Others (12) 4,317,128 2,996,887 35,378
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
All executive officers and directors as a
group (4 persons) (13) 12,586,549 210,519 -
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Total 18,001,935 3,207,406 35,378
---------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Percent of
Name and Address Total (4) Ownership (5)
------------------------------------------------------------------------------------
Daniel Lozinsky (6) 6,618,694 36.77%
------------------------------------------------------------------------------------
Arne Dunhem (7) 2,811,763 15.44%
------------------------------------------------------------------------------------
Ken Min (8) 2,833,156 15.74%
------------------------------------------------------------------------------------
Scott Smith (9) 533,455 2.96%
------------------------------------------------------------------------------------
Cornell Capital Partners (10) 764,706 4.25%
------------------------------------------------------------------------------------
Dungavel, Inc. (11) 333,552 1.85%
------------------------------------------------------------------------------------
All Others (12) 7,314,192 36.32%
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
All executive officers and directors as a
group (4 persons) (13) 12,797,068 70.27%
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Total 21,209,518 100.00%
------------------------------------------------------------------------------------
(1) Unless otherwise indicated, the Company believes that all
persons named in the table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by
them. A person is
43
considered to be the beneficial owner of securities that can be
acquired by that person within 60 days of July 11, 2002 upon the
exercise of warrants or option or the conversion of convertible
securities.
(2) Options to purchase shares of Common Stock that are presently or
will become exercisable within 60 days.
(3) Each share of Series A Preferred Stock is convertible without
additional consideration into one two-hundredth of a share of
Common Stock, subject to adjustment for stock splits, stock
dividends and other recapitalizations and reorganizations. As of
July 11, 2002, the 35,378 shares of Series A preferred stock is
currently convertible into 177 shares of Common Stock, subject
to the issuance of additional fractional shares for rounding
purposes. The holders of the Series A Preferred Stock and Common
Stock vote together as a single class on all matters presented
for the vote of the Company's stockholders. Each preferred
stockholder may cast a number of votes equal to the number of
shares of Common Stock issuable upon conversion of his or her
preferred stock.
(4) Assumes that the beneficial owners' shares of Series A Preferred
Stock have been converted into Common Stock, and warrants to
purchase shares of Common Stock have been exercised.
(5) Each beneficial owner's percent ownership is determined by
assuming that options or warrants that are held by that person
(but not those held by any other person) and which are
exercisable within 60 days have been exercised and that shares
of Series A Preferred Stock that are held by that person (but
not those held by any other person) have been converted into
Common Stock.
(6) Includes shares owned by Mr. Daniel Lozinsky. Mr. Lozinsky is
currently a Director of the Company. His address is c/o
MobilePro Corp. 3204 Tower Oaks Blvd. Suite 350, Rockville, MD
20852.
(7) Includes, owned by Mr. Arne Dunhem, the following: 2,601,244
shares, 210,519 options vested and excercisable within 60 days,
and 210,518 non-vested options. Mr. Dunhem is currently a
Director of the Company. His address is c/o MobilePro Corp. 3204
Tower Oaks Blvd. Suite 350, Rockville, MD 20852.
(8) Includes 2,833,152 shares owned by Mr. Ken Min. Mr. Min is
currently an executive officer of the Company. His address is
c/o MobilePro Corp. 3204 Tower Oaks Blvd. Suite 350, Rockville,
MD 20852.
(9) Includes the following shares owned by Mr. Scott Smith and Mrs.
Joann Smith: (i) 33,455 shares of Common Stock owned directly by
Scott Smith; (ii) 500,000 shares of Common Stock owned directly
by Joann Smith. Mr. Scott was the President, Chief Executive
Officer and Chairman of the Board of Directors of the Company
and, as of July 11, 2002, is currently a Executive Vice
President of the Company. Joann Smith is the wife of Scott
Smith. Their address is 1240 Alexandria Blvd., Crystal Lake, IL
60014.
(10) Cornell Capital Partners, LLP is a New Jersey-based domestic
investment fund. They use a variety of funding techniques,
including both convertible instruments and equity lines of
credit (also known as Private Investments in Public Equities or
PIPEs) in making direct investments in small- to-midsized
publicly traded companies in emerging markets. Mark A. Angelo is
its President. Their address is 101 Hudson St. Suite 3606,
Jersey City, NJ 07302
(11) The Company believes that Rob Landau is the control person of
Dungavel, Inc. based on the Company's and the Company's
representatives' interaction with Landau and Dungavel. Dungavel
is a Bahamian company whose address is Dungavel Inc., c/o Valdy
Administration, British Colonial Center of Commerce, One Bay
Street, 3rd Floor, P.O. Box N-7115, Nassau, Bahamas. Their
telephone is 242-326-3248. Boris Stein is the Authorized Signer.
(12) As of July 11, 2002, the common stock options column in this row
includes 1) options to employees convertible into 2,302,443
shares of the Company's common stock, and 2) options to convert
a $250,000 note payable into the Company's common shares based
on a price of 120% of the closing bid price as quoted on the
Nasdaq Bulletin Board System. As of July 11, 2002, the note can
be converted into 694,444 shares of the company's common stock.
44
(13) As of July 11, 2002, executive officers and directors include
Daniel Lozinsky, Arne Dunhem, Ken Min, and Scott Smith.
There are currently 2,723,480 outstanding options to purchase shares of our
stock, of which 2,512,962 are currently vested and excercisable within 60 days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the period ended March 31, 2000, a shareholder and officer received
advances of $13,000. These secured advances were eliminated as part of winding
up the website business.
Mr. Howard Geisler, a former secretary and director of the Company, provided our
office space on a gratis basis.
The Company 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, a related
party 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 the Company's common stock. Also in connection with the merger, ZDG
Investments Ltd., a Toronto investment company, was issued 1,475,000 shares of
the Company's common stock. The stock was given for services rendered with
regard to the merger. The Company believes 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 the
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 of 2002, a the President of the Company loaned the Company a net
amount of $44,262 to pay certain creditors at 6% interest due on demand. The
officer has waived interest until April 2002.
INVESTORS RIGHTS AGREEMENT
On June 6, 2001, CraftClick.Com, Inc. a Delaware corporation ("CraftClick"), and
Mobilepro Corp., a Delaware corporation ("Mobilepro"), entered into an Agreement
and Plan of Merger dated as of June 1, 2001 ("Merger Agreement"). Under the
Merger Agreement Mobilepro merged with and into CraftClick, with CraftClick
being the surviving corporation and the certificate of incorporation and bylaws
of CraftClick being the constituent documents of the surviving corporation
("Merger").
In connection with the Merger, Mr. Scott R. Smith was appointed as a director of
CraftClick by the existing board of directors. After the appointment, Mr.
Mitchell Geisler and Ms. Cindy Roach, two of the then current directors of
CraftClick, Inc. resigned. Mr. Smith was appointed the President and Chief
Executive Officer and Chairman and Mr. Howard Geisler was appointed the
secretary of CraftClick.
In connection with the Merger, CraftClick issued to Ms. Joann M. Smith an
aggregate of 8,227,663 shares of common stock representing approximately 55% of
the 14,907,196 issued and outstanding shares of common stock of CraftClick
immediately after the Merger. Ms. Smith is the wife of Mr. Scott R. Smith, the
President, Chief Executive
45
Officer and Chairman of CraftClick after the Merger. Ms. Smith will be the
single largest stockholder of CraftClick after the Merger.
To obtain the support for the Merger and the Merger Agreement from the largest
stockholder of CraftClick prior to the Merger, CraftClick entered into an
Investor Rights Agreement ("Investor Rights Agreement") with Dungavel, Inc.
simultaneously with the Merger Agreement. The Investor Rights Agreement provides
a number of rights to Dungavel, including:
- The right to have a person of its selection as a director of the
company, who currently is Mr. Howard Geisler, and a limit of three
persons as the size of the board of directors;
- Limitations on the issuances of securities of the company
representing more than 2.5% of the outstanding common stock in any
transaction in a three month period at less than the greater of the
market price or $1.00 per share for cash or for no cash
consideration;
- Limitations on the creation of any class of securities that has the
right to elect any directors, to receive any dividends or to have
the securities registered for public resale, unless approved by
Dungavel;
- Limitations on the ability of the company to merge, combine or
consolidate with another entity, repurchase any common stock of the
company, recapitalize the common stock to reduce the number of
shares outstanding, or declare a stock split or stock dividend
without the consent of Dungavel; or if no consent is given by
Dungavel and the company proceeds with the transaction, then the
company must issue 3,000,000 post-transaction shares of common stock
(or their equivalent) to Dungavel; and
- The right to request information about the company in addition to
publicly disclosed information.
Although the above rights are granted to Dungavel and may be exercised within
its sole discretion, Dungavel believes that these above rights will benefit all
stockholders. The above rights last for five years after the Merger or, in some
instances, only so long as Dungavel owns at least 2.5% of the issued and
outstanding common stock or the right to acquire 2.5% of the issued and
outstanding common stock
In addition, the Investor Rights Agreement provides for registration rights for
common stock owned by Dungavel, and the right of first refusal and tag along
rights in the event Mr. Smith or his wife sell any of their shares of common
stock in a private transaction. Mr. and Ms. Smith have agreed that they will
also vote any shares of common stock, over which they have voting control, in
favor of the person Dungavel selects as its director nominee.
On November 19, 2001, the Company implemented a 200 for 1 reverse stock split,
which resulted in 84,492 shares outstanding. Concurrent with the reverse stock
split and as required pursuant to the Investor Rights Agreement, the Company
issued 3,000,000 new shares of common stock to Dungavel, Inc., an investor in
the Company.
On February 19, 2002, the Company 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 the
Company at the time. Pursuant to these two stock purchase agreements, this
Investors Rights Agreement was terminated.
NEOREACH PURCHASE AGREEMENT
On February 19, 2002, the Company 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 the
Company at the time. Pursuant to these two stock purchase agreements, Mr.
Lozinsky became the majority shareholder of MobilePro.
Subsequent to but in connection with the Stock Purchase Agreements, on March 21,
2002, Neoreach, Inc., a Delaware company and Mobilepro entered into an Agreement
and Plan of Merger pursuant to which a newly formed, wholly-owned subsidiary of
Mobilepro would merge into Neoreach, in a tax-free transaction. The merger was
46
consummated on April 23, 2002. Mr Daniel Lozinsky and Mr. Arne Dunhem, both
members of the Company's Board of Directors, were both significant shareholders
and members of the Board of Directors of Neoreach, Inc., holding approximately
32.5% and 18.5% of Neoreach's common stock, respectively.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
2.1 Articles of Merger of CraftClick.com, Inc. (a Utah corporation)
and CraftClick.com, Inc. (a Delaware corporation) (incorporated
by reference to the Company's Form S-8 Registration Statement as
filed with the Securities and Exchange Commission on May 11,
2001 (File No. 333-60726)
2.2 Plan of Merger of CraftClick.com, Inc. (a Utah corporation) with
and into CraftClick.com, Inc. (a Delaware corporation)
(incorporated by reference to the Company's Form S-8
Registration Statement as filed with the Securities and Exchange
Commission on May 11, 2001 (File No. 333-60726)
3.1 Certificate of Incorporation of CraftClick.com, Inc. (a Delaware
corporation) (incorporated by reference to the Company's Form
S-8 Registration Statement as filed with the Securities and
Exchange Commission on May 11, 2001 (File No. 333-60726)
3.2 By-Laws of CraftClick.com, Inc. (a Delaware corporation)
(incorporated by reference to the Company's Form S-8
Registration Statement as filed with the Securities and Exchange
Commission on May 11, 2001 (File No. 333-60726)
3.3 Certificate of Amendment of Certificate of Incorporation of
Mobilepro Corp (a Delaware corporation) (incorporated by
reference to the Company's Form S-8 Registration Statement as
filed with the Securities and Exchange Commission on December 4,
2001 (File No. 333-74492)
4.1 2001 Performance Equity Plan (incorporated by reference to the
Company's Form S-8 Registration Statement as filed with the
Securities and Exchange Commission on May 11, 2001 (File No.
333-60726)
4.2 2001 Equity Performance Plan (incorporated by reference to the
Company's Form S-8 Registration Statement as filed with the
Securities and Exchange Commission on December 4, 2001 (File No.
333-74492)
10.1 Agreement and Plan of Merger dated as of June 1, 2001, between
CraftClick.Com, Inc. a Delaware corporation, and Mobilepro
Corp., a Delaware corporation, (incorporated by reference to the
Company's Form 8-K Current Report as filed with the Securities
and Exchange Commission on June 20, 2001 (File No. 002-97869-D)
10.2 Stock Purchase Agreement dated February 19, 2002 with Mr. Daniel
Lozinsky and Dungavel, Inc., and another Stock Purchase
Agreement dated February 19, 2002 with Mr. Daniel Lozinsky, Ms.
Joann Smith and Mr. Scott Smith. Dungavel, Inc. (incorporated by
reference to the Company's Form 8-K Current Report as filed with
the Securities and Exchange Commission on March 6, 2002 (File
No. 002-97869-D)
10.3 Agreement and Plan of Merger dated March 21, 2002 between
Neoreach, Inc., a Delaware company and Mobilepro. (incorporated
by reference to the Company's Form 8-K Current Report as filed
with the Securities and Exchange Commission on April 5, 2002
(File No. 002-97869-D)
47
b) Reports on Form 8-K
During the fourth quarter of the fiscal year ended March 31, 2001 we filed the
following reports on Form 8-K with the Securities and Exchange Commission:
The Company filed a Current Report on Form 8-K dated February 23, 2001 with the
Securities and Exchange Commission on March 7, 2001. The Current Report was
regarding that the Company sold substantially all of its assets to a group of
California entrepreneurs (the "Group") in exchange for the forgiveness of
outstanding secured loans made by the Group to the Company totaling $546,000
plus accrued interest of $9,625 and a payment of $77,275 to substantially redeem
all of the Company's current obligations.
The Company filed a Current Report on Form 8-K dated March 27, 2001 with the
Securities and Exchange Commission on March 28, 2001. The Current Report was
regarding the change of control of the Company, contracted on March 16, 2001 and
consummated on March 27, 2001, to Dungavel, Inc., a Bahamian company, from
Metropolitan Capital Partners LLC, arising from the private sale of the
outstanding stock of the Company representing greater than 50% of the voting
control of the Company.
Subsequent to March 31, 2001 we filed the following report on Form 8-K with the
Securities and Exchange Commission:
On June 6, 2001, we reported that CraftClick.Com, Inc. a Delaware corporation
("CraftClick"), and Mobilepro Corp., a Delaware corporation ("Mobilepro"),
entered into an Agreement and Plan of Merger dated as of June 1, 2001 ("Merger
Agreement"). Under the Merger Agreement Mobilepro merged with and into
CraftClick, with CraftClick being the surviving corporation and the certificate
of incorporation and bylaws of CraftClick being the constituent documents of the
surviving corporation ("Merger").
In connection with the Merger, Mr. Scott R. Smith was appointed as a director of
CraftClick by the existing board of directors. After the appointment, Mr.
Mitchell Geisler and Ms. Cindy Roach, two of the then current directors of
CraftClick, Inc. resigned. Mr. Smith was appointed the President and Chief
Executive Officer and Chairman and Mr. Howard Geisler was appointed the
secretary of CraftClick.
In connection with the Merger, CraftClick issued to Ms. Joann M. Smith an
aggregate of 8,227,663 shares of common stock representing approximately 55% of
the 14,907,196 issued and outstanding shares of common stock of CraftClick
immediately after the Merger. Ms. Smith is the wife of Mr. Scott R. Smith, the
President, Chief Executive Officer and Chairman of CraftClick after the Merger.
Ms. Smith will be the single largest stockholder of CraftClick after the Merger.
On August 8, 2001, we filed an amended 8-K to include the pre-merger audited
financials of Mobilepro Corp.
The Company filed a Current Report on Form 8-K dated February 19, 2002 with the
Securities and Exchange Commission on March 6, 2002. The Current Report was
regarding a change of control of registrant. On February 19, 2002, the Company
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 the Company at the time. Pursuant to these
two stock purchase agreements, Mr. Lozinsky, an accredited investor, paid
$160,000 in cash out of his own personal funds and assumed the Company's debt of
approximately $25,000 in order to acquire an aggregate of 2,057,733 shares of
our Common Stock, representing approximately 64.7% of the Company's voting
securities. On February 28, 2002, Mr. Scott Smith resigned as the President, CEO
and Chairman of the Company, and Mr. Lozinsky became the President and CEO of
the Company.
Subsequent to the period of this report, the Company filed a Current Report on
Form 8-K dated April 5, 2002 with the Securities and Exchange Commission on
March 21, 2002. On March 21, 2002, Neoreach, Inc., a Delaware company and
Mobilepro entered into an Agreement and Plan of Merger pursuant to which a newly
formed, wholly-owned subsidiary of Mobilepro would merge into Neoreach, in a
tax-free transaction. The merger was effective on
48
April 23, 2002. As a result of the merger, Neoreach is now a wholly-owned
subsidiary of Mobilepro. Mr. Daniel Lozinsky who is a controlling stockholder of
Mobilepro also owns approximately 32.5% of Neoreach.
The Company filed a Current Report on Form 8-K dated May 10, 2002 with the
Securities and Exchange Commission on June 20, 2002. Effective June 6, 2002, the
Board of Directors of Mobilepro Corp. (the "Company") dismissed its independent
auditors, Mantyla, McReynolds LLC ("Mantyla"), and engaged the services of
Bagell, Josephs & Company, L.L.C. ("Bagell"), as its new independent auditors.
Bagell will audit the Company's financial statements for the fiscal year ended
March 31, 2002.
During the two most recent fiscal years of the Company ended March 31, 2002, and
the subsequent interim period through June 6, 2002, there were no disagreements
between the Company and Mantyla on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Mantyla's satisfaction, would have caused
Mantyla to make reference to the subject matter of the disagreements in
connection with its reports; and there were no reportable events described under
Item 304(a)(1)(v) of Regulation S-K.
The audit reports of Mantyla on the Company's financial statements as of and for
the fiscal years ended March 31, 2000 and 2001 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
certainty, audit scope or accounting principles, other than a "going concern"
disclaimer which applied to the audit reports of Mantyla on the Company's
financial statements as of and for the fiscal years ended March 31, 2000 and
2001.
During the two most recent fiscal years of the Company ended March 31, 2001, and
the subsequent interim period through June 6, 2002, the Company did not consult
with Bagell regarding any of the matters or events set forth in Item
304(a)(2)(i) and (ii) of Regulation S-K.
Also included in the Current Report dated May 10, 2002, on May 13, 2002, the
Company announced in a press release that Mr. Daniel Lozinsky had resigned as
the President, Chief Executive Officer and Chairman of the Board of the Company
and that Mr. Arne Dunhem had been appointed to serve as the President, Chief
Executive Officer and Chairman of the Board of the Company, effective as of May
10, 2002. Mr. Lozinsky was also appointed to serve as a Senior Vice President of
the Company, effective as of May 10, 2002.
The Company filed an amended Current Report on Form 8-K/A dated May 10, 2002
with the Securities and Exchange Commission on June 25, 2002.
49
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: July 15, 2002 MOBILEPRO CORP.
Bys: /s/ ARNE DUNHEM
---------------------------------------------
Arne Dunhem
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
/s/ ARNE DUNHEM Chief Executive Officer and Chairman
------------------------------------------ (principal executive and financial officer)
Arne Dunhem
/s/ DANIEL LOZINSKY Director
------------------------------------------
Daniel Lozinsky
50