Edgar Filing: MOBILEPRO CORP

e10qsb

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2002

Commission File Number 002-97869-D

MOBILEPRO CORP.
(Exact name of registrant as specified in charter)


DELAWARE (State or other jurisdiction of		87-0419571 (I.R.S. Employer
incorporation or organization)		Identification No.)

3204 Tower Oaks Blvd., Suite 350, Rockville, MD (Address of principal executive offices)		20852 (Zip Code)

Registrant’s telephone number, including area code		(301) 230-9125

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 15, 2002, the Company had outstanding 18,806,935 shares of its common stock, par value $0.001.

TABLE OF CONTENTS


ITEM NUMBER AND CAPTION		PAGE

PART I

ITEM 1.	FINANCIAL STATEMENTS	3
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND PLAN OF OPERATIONS	11

PART II

ITEM 1.	LEGAL PROCEEDINGS	15
ITEM 2.	CHANGES IN SECURITIES	15
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	15
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	15
ITEM 5.	OTHER INFORMATION	15
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	16

ITEM 1. FINANCIAL STATEMENTS

Mobilepro Corp. and Subsidiary
(Formerly Craftclick.com Inc.)
(A Development Stage Company)
Condensed Consolidated Balance Sheets
June 30, 2002 (unaudited) and March 31, 2002 (audited)


					June 30,			March 31,
					2002			2002
					(Unaudited)			(Audited)

				ASSETS
CURRENT ASSETS
	Cash and cash equivalents				$	2,592		$	154
	Prepaid expenses					57,500			—

			Total Current Assets			60,092			154
	Fixed assets, net of depreciation					50,821			—

TOTAL ASSETS					$	110,913		$	154

				LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES
Current Liabilities:
	Due to officer				$	277,617		$	44,262
	Short-term debt					187,000			75,000
	Accounts payable and accrued expenses					708,429			187,663

		Total Current Liabilities				1,173,046			306,925

LONG-TERM DEBT						350,000			—

TOTAL LIABILITIES						1,523,046			306,925

STOCKHOLDERS’ DEFICIT
	Preferred stock, $.001 par value, authorized 5,000,000 shares, and 35,425 shares issued and outstanding at June 30, 2002 and March 31, 2002, respectively					35			35
	Common stock, $.001 par value, authorized 50,000,000 shares at June 30, 2002 and March 31, 2002, and 18,001,935 and 4,175,492 shares issued and outstanding, respectively					18,002			4,176
	Additional paid-in capital					3,789,091			3,596,613
	Deficit accumulated during development stage					(5,219,261	)		(3,907,595	)

			Total Stockholders’ Equity			(1,412,133	)		(306,771	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT					$	110,913		$	154

The accompanying notes are an integral part of the condensed consolidated financial statements.

Mobilepro Corp. and Subsidiary
(Formerly Craftclick.com Inc.)
(A Development Stage Company)
Condensed Consolidated Statement of Operations for the
Three Months Ended June 30, 2002 and 2001 with
Cumulative Totals Since Inception


				Unaudited			Unaudited			Cumulative
				Three Months			Three Months			Totals Since
				Ended			Ended			Inception (1)
				June 30,			June 30,			Through June
				2002			2001			30, 2002

OPERATING REVENUES
	Revenue			$	—		$	299,994		$	—

OPERATING EXPENSES
		Professional fees and compensation expenses			1,178,959			415,055			1,178,959
		Advertising and marketing expenses			1,685			308			1,685
		Research and development costs			4,496			62,839			4,496
		General and administrative expenses			26,152			11,566			4,182,464
		Office rent and expenses			38,437			36,566			38,437
		Travel and meals expenses			7,709			33,714			7,709
		Depreciation and amortization			4,000			3,813			4,000

			Total Operating Expenses		1,261,438			563,861			5,417,750

LOSS BEFORE OTHER INCOME (EXPENSE)					(1,261,438	)		(263,867	)		(5,417,750	)
OTHER INCOME (EXPENSE)
		Forgiveness of debt									276,738
		Interest expense									(469	)
		Other expense			(50,228	)		—			(77,836	)
		Interest income			—			1,334			56

			Total Other Income (Expense)		(50,228	)		1,334			198,489

NET LOSS BEFORE PROVISION FOR INCOME TAXES					(1,311,666	)		(262,533	)		(5,219,261	)
Provision for Income Taxes					—			—			—

NET LOSS APPLICABLE TO COMMON SHARES				$	(1,311,666	)	$	(262,533	)	$	(5,219,261	)

NET LOSS PER BASIC AND DILUTED SHARES				$	(0.10	)	$	(0.06	)	$	(0.07	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING					12,905,121			4,614,921			19,367,867

(1) includes operations of NeoReach, Inc. only as an operating company as a result of the merger.

The accompanying notes are an integral part of the condensed consolidated financial statements.

Mobilepro Corp. and Subsidiary
(Formerly Craftclick.com Inc.)
(A Development Stage Company)
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended June 30, 2002 and 2001 with
Cumulative Totals Since Inception


					Unaudited			Unaudited			Cumulative
					Three Months			Three Months			Totals Since
					Ended			Ended			Inception (1)
					June 30,			June 30,			Through June
					2002			2001			30, 2002

CASH FLOW FROM OPERATING ACTIVITIES
		Net loss			$	(1,311,666	)	$	(262,533	)	$	(5,219,261	)

		Adjustments to reconcile net loss to net cash used in operating activities:
				Forgiveness of debt		—			—			(276,738	)
				Depreciation		4,000			3,813			4,000
				Common stock issued for services		835,047			—			4,056,706

	Changes in assets and liabilities
				(Increase) in accounts receivable		—			—			—
				(Increase) in inventory		—			—			—
				Increase in prepaid expenses and other assets		(57,500	)		(5,678	)		(57,500	)
				Increase (decrease) in accounts payable and and accrued expenses		(62,798	)		52,069			460,938

				Total adjustments		718,749			50,204			4,187,406

				Net cash (used in) operating activities		(592,917	)		(212,329	)		(1,031,855	)


CASH FLOWS FROM INVESTING ACTIVITIES
		Increase in amounts due to related parties				233,355			—			233,355
		Acquisitions of fixed assets				—			(2,502	)		—

				Net cash provided by (used in) investing activities		233,355			(2,502	)		233,355


CASH FLOWS FROM FINANCING ACTIVITIES
			Proceeds from common stock issuances		$	—		$	214,399		$	100
			Proceeds from borrowings, net			—			—			394,730
			Change in officer loan, net			—			—			44,262
			Net proceeds from issuance of notes payable			362,000			432			362,000

				Net cash provided by financing activities		362,000			214,831			801,092

NET INCREASE IN CASH AND CASH EQUIVALENTS						4,831			—			2,592

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD						154			—			154


CASH AND CASH EQUIVALENTS — END OF PERIOD					$	2,592		$	—		$	2,746


SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
			Issuance of common stock for Services		$	835,047		$	—		$	4,056,706

(1) includes operations of NeoReach, Inc. only, as an operating company.
The accompanying notes are an integral part of the condensed consolidated financial statements.

MOBILEPRO CORP AND SUBSIDIARY
(FORMERLY CRAFTCLICK.COM)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001 (Unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

The condensed consolidated unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements and notes are presented as permitted on Form 10-QSB and do not contain information included in the Company’s annual financial statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the March 31, 2002 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

These condensed consolidated unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the consolidated operations and cash flows for the periods presented.

Mobilepro Corp., formerly Craftclick.com, Inc., was incorporated under the laws of the State of California in January 1999, as BuyIt.com, Inc. (“BuyIt”). From inception through March 31, 1999, the Company engaged in preliminary activities related to the set up of an Internet auction business. On April 16, 1999, the Company entered into an Agreement and Plan of Reorganization (“Plan”) with Tecon, Inc. (“Tecon”), a Utah Corporation, wherein all of the outstanding shares and subscriptions of BuyIt were exchanged for 8,500,000 shares (for the outstanding shares of common stock of Tecon, and 245,997 shares (for the outstanding subscriptions) of common stock of Tecon. At the conclusion of all the transactions contemplated in the Plan, BuyIt shareholders and subscribers owned 8,745,997 shares of total outstanding shares of 12,179,249, or 71.9%. The survivor in the aforementioned combination was Tecon. However, the name of the surviving company was changed to BuyIt.com, Inc., simultaneously with the Plan. The combination of these two entities had been accounted for as a purchase. The Company changed its name to Craftclick.com, Inc., on January 4, 2000, as a result of changing its business strategy and focus-which was to become the premier destination for buyers and sellers of arts and crafts products and supplies through the use of Internet websites. However, the Company disposed of substantially all assets in February of 2001 when secured creditors foreclosed on loans to the Company.

In April 2001, Craftclick.com, Inc. reorganized pursuant to a Plan of Merger wherein its domicile was changed from Utah to Delaware, and the common stock was reverse split on the basis of 1 new share for every 100 shares outstanding.

On June 6, 2001, Craftclick.com, Inc. merged with Mobilepro Corp. a Delaware corporation as of June 1, 2001. Under the merger agreement, Mobilepro Corp. merged into Craftclick.com, Inc. with Craftclick being the surviving corporation and the Certificate of Incorporation and By Laws of Craftclick being the constituent documents of the surviving corporation.

In July 2001, the Company changed its name to Mobilepro Corp. On March 21, 2002, NeoReach, Inc., a Delaware Company, and Mobilepro Corp. entered into an Agreement and Plan of Merger. NeoReach, Inc. is a development stage company designing state of the art modem solutions to support third generation (3G) wireless communications systems. On April 23, 2002 the Company consummated the merger pursuant to which NeoReach became its wholly-owned subsidiary. Mobilepro Corp. issued 12,352,129 shares of its common stock as merger consideration.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Development Stage Company

Mobilepro Corp. is a development stage company. The Company since April 23, 2002 has devoted 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenue is recognized when earned. For products which the Company sells, revenue is recognized when products are shipped. Customer payments for sales are charged to pre-approved/authorized credit cards. Thus, the sale is not recorded and product not shipped unless collection is determined to be certain. The Company records accounts receivable for the sale proceeds during the period of time between shipping and when cash is posted in the bank.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents.

The Company maintains cash and cash equivalent balances at several financial institutions which are insured by the Federal Deposit Insurance Corporation up to $100,000.

Income Taxes

Effective July 14, 2000, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 (the Statement), Accounting for Income Taxes. The Statement requires an asset and liability approach for financial accounting and reporting for income taxes, and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting bases and tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The cumulative effect of this change in accounting for income taxes as of June 30, 2002 is $0 due to the valuation allowance established as described in Note 3.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash and cash equivalents, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.

Advertising Costs

The Company expenses the costs associated with advertising as incurred. Advertising and promotional expenses were approximately $1,685 and $308 for the three months ended June 30, 2002 and 2001, respectively.

Furniture and Equipment

Furniture and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized. Deduction is made for retirements resulting from renewals or betterments. Furniture and equipment consist of the following at June 30, 2002:

Office Furniture and Computer Equipment 3 to 5 Years

There was $4,000 and $3,813 charged to operations for depreciation expense for the three months ended June 30, 2002 and 2001, respectively.

Earnings (Loss) Per Share of Common Stock

Historical net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) includes additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents were not included in the computation of diluted earnings per share when the Company reported a loss because to do so would be antidilutive for periods presented.

The following is a reconciliation of the computation for basic and diluted EPS:


		June 30,			June 30,
		2002			2001

Net Loss		$	(1,311,666	)	$	(262,533	)
Weighted-average common shares outstanding
	Basic		12,905,121			4,614,921

Weighted-average common shares equivalents:
	Stock Options		—			—
	Warrants		—			—

Weighted-average common shares outstanding
(Diluted)			12,905,121			4,614,921

Options and warrants outstanding to purchase stock were not included in the computation of diluted EPS because inclusion would have been antidilutive.

Reclassifications

Certain amounts for the three months ended June 30, 2001 have been reclassified to conform with the presentation of the June 30, 2002 amounts. The reclassifications have no effect on net income for the three months ended June 30, 2001.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of the gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. On June 30, 1999, the FASB issued SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No. 133”. SFAS No. 133 as amended by SFAS No. 137 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities”. SFAS No. 133 as amended by SFAS No. 137 and 138 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000.

Historically, we have not entered into derivatives contracts to hedge existing risks or for speculative purposes. Accordingly, we do not expect adoption of the new standard to have a material effect on our consolidated financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements.” SAB 101 provides guidance for revenue recognition under certain circumstances, and is effective during the first quarter of fiscal year 2001. SAB 101 is not expected to have a material effect on our consolidated results of operations, financial position and cash flows.

On March 16, 2000, the Emerging Issues Task Force issued EITF 99-19 “Recording Revenue as a Principal versus Net as an Agent” which addresses the issue of how and when revenues should be recognized on a Gross or Net method as the title implies. The emerging Issues Task Force has not reached a consensus but sites SEC Staff Accounting Bulletin 101. EITF 99-19 does not affect our consolidated financial statements.

On July 20, 2000, the Emerging Issues Task Force issued EITF 00-14 “Accounting For Certain Sales Incentives” which establishes accounting and reporting requirements for sales incentives such as discounts, coupons, rebates and free products or services. Generally, reductions in or refunds of a selling price should be classified as a reduction in revenue. For SEC registrants, the implementation date is the beginning of the fourth quarter after the registrant’s fiscal year end December 15, 1999. EITF 00-14 does not affect our consolidated financial statements.

In June 2001, the FASB issued Statement No. 142 “Goodwill and Other Intangible Assets”. This Statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. This statement does not affect our consolidated financial statements.

NOTE 3- GOING CONCERN

As shown in the accompanying condensed consolidated financial statements the Company has sustained substantial net operating losses for the year ended March 31, 2002 and the period June 30, 2002 and periods prior. There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations.

Management has received a commitment from Cornell Capital Partners, L.P. to provide the Company with up to $10 million in financing under certain conditions.

Additionally, assuming that the Company receives the full $10 million from Cornell Capital, the Company believes that that amount will be sufficient enough to implement NeoReach, Inc. its subsidiary’s Plan over the next two years.

NOTE 4- STOCKHOLDERS DEFICIT

The following details the stock transactions for the period April 1, 2002 through June 30, 2002.

Common Stock

On May 31, 2002, the Company issued 690,000 shares for banking consulting fees at a value of $317,400 ($.46 per share) the Company’s fair value of the stock at that time.

On April 23, 2002, the Company issued 12,352,129 shares of its common stock as consideration in the merger pursuant to which the Company acquired NeoReach, Inc. at par value $.001.

On June 10, 2002, the Company issued 784,314 shares of common stock for consulting services valued at 517,647 ($.66 per share).

NOTE 5- PATENTS

NeoReach, Inc. in April 2002 received notice that two of the five filed patent applications relating to its technology innovations have been allowed by the U.S. Patent and Trademark Office and the review process for the other three are still under way.

The first patent involves intellectual property that can enhance the performance of conventional smart antenna processing technology if used for 3G wireless communications. Using the NeoReach proprietary approach, wireless network operators will be able to provide 3G networks in which subscribers will experience less interference and more stable connections as they move around while using their handsets or personal digital assistants (PDA’s).

The second patent delivers automatic low-cost improvements to the smart antenna processing technology. Using this NeoReach invention, 3G network operators will be able to automatically eliminate potential distortions throughout their full network without having to conduct individual, time-consuming phase calibration of each separate communication channel.

NOTE 6- COMMITMENTS

In April 2002, NeoReach, Inc. established a technology alliance with Prime Circuits, Inc. Prime Circuits is a privately-held semiconductor developer based in Greenbelt, MD that specializes in ultra small, ultra low power analog, digital and hybrid chipsets. Prime Circuits’ technology is currently in use in a number of NASA applications at Goddard Space Flight Center.

As part of the alliance, NeoReach will gain access to technical knowledge, personnel and low power semiconductor technology that NeoReach believes will greatly expand its digital modem suite. This solution targets the consumer handsets and network transmission base stations to support 3G communications.

On May 10, 2002 the Company announced that Arne Dunhem was appointed the Chairman, President and CEO of Mobilepro Corp. Mr. Dunhem has over 28 years of experience in the growth of high technology companies, especially in the telecommunications field.

On May 31, 2002, the Company entered into an equity line of credit arrangement with Cornell Capital Partners, L.P. The equity line provides generally, that Cornell will purchase up to $10 million of common stock over a two-year period, with the time and amount of such purchases, if any, at the Company’s discretion.

There are certain conditions applicable to the Company’s ability to draw down on the equity line including the filing and effectiveness of a registration statement registering the resale of all shares of common stock that may be issued to Cornell under the equity line and the Company’s adherence with certain covenants.

The Company on May 31, 2002, entered into a Securities Purchase Agreement with certain investors pursuant to which the Company issued and sold $250,000 of convertible debentures. The debentures accrue interest at the rate of four percent (4%) per year. Holders of the debentures have certain registration rights with respect to the resale of shares of common stock received upon any conversion of the debentures.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

When used in this Form 10QSB and in future filings by Mobilepro Corp. with the Securities and Exchange Commission, the words or phrases “will likely result,” “management expects,” or we expect,” “will continue,” “is anticipated,” “estimated,” or similar expression or use of the future tense, are intended to identify forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. These statements are subject to risks and uncertainties, some of which are described below and others are described in other parts of this Form 10QSB. Actual results may differ materially from historical earnings and those presently anticipated or projected. We have no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.

Business 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.

NeoReach was incorporated in February of 2000 and is focused on designing state-of-the-art modem solutions to support 3G wireless communications systems.

The Company with which NeoReach merged into April of 2002 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 to CraftClick.com, Inc. on January 4, 2000, and finally to Mobilepro Corp. on July 9, 2001. Mobilepro’s previous business strategy and focus was to position itself as a provider of wireless business solutions for the mobile business professional workforce and the Company intended to develop complete mobile information solutions that include products and services such as wireless handheld devices and Web based enterprise applications. Due to the lack of adequate funding and the lack of generating any sales, MobilePro was not able to execute its plan.

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.

On May 10, 2002, Mr. Arne Dunhem became the Company’s President, CEO and Chairman and Mr. Daniel Lozinsky became our Senior Vice President.

Business Strategy

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, through its wholly-owned subsidiary NeoReach, 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.

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 Company is developing products for the 3G markets. 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 Company currently has prototypes available of modems for the micro cell base station. 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. A third potential future product line can include RF CMOS.

The Company intends to use third-party manufacturing for its products. Because of this approach, the Company does not expect to make any significant purchase of plants or equipment. The Company has initiated some preliminary discussions with contract manufacturers for product development, prototyping and production agreements for its planned ASIC chips and modems systems. None of these agreements have been finalized as of this date and no assurances can be given that any agreements will be forthcoming.

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. There are no assurances that the Company’s products, once developed, will be accepted or marketable to its intended customers.

We have many competitors, many of whom are well-recognized brand names and are well financed. 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. We may not be able to overcome the strengths of our competitors.

Financial Condition and Changes in Financial Condition

Overall Operating Results:

We had no revenues for the quarter ended June 30, 2002.

Our operating expenses for the quarter ended June 30, 2002 were approximately $1,261,438. Our primary expense was incurred for Professional fees and compensation expenses of $1,178,959 compared with $415,055 for the three months ended June 30, 2001. Of this amount, $835,047 of common stock in lieu of cash was issued in connection with consulting fees and expenses for services rendered as a part of the reverse triangular merger with NeoReach and the establishment of the equity line of credit with Cornell Capital. These consulting fees and expenses are not anticipated to be recurring. Approximately $300,000 in expenses was for on-going compensation expenses.

We incurred approximately $70,004 for legal fees rendered in connection with the registration of our common stock with the Securities and Exchange Commission (“SEC”), the Company’s compliance filings with the SEC, and general legal for general matters. The remaining expenses included general administrative expenses of operating a start up business

Operating Losses

Our net operating loss for the quarter ended June 30, 2002 was approximately $1,311,666. These losses were incurred primarily as a result of the aforementioned incurred expenses.

We have accumulated approximately $5,219,261 of net operating loss carryforwards as of June 30, 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 reported in the financial statements, because we believe there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards is offset by a valuation allowance of the same amount.

Liquidity and Capital Resources:

As of June 30, 2002, we had a total Stockholders’ Deficit of approximately $1,412,133 and do not currently have any revenues, liquidity or capital resources as we move forward with our business plan and our independent auditors have issued an audit opinion as of March 31, 2002 that raises substantial doubt as to our ability to continue as a going concern. We will need additional financing in order to implement our business plan and continue business. The traditional markets for raising capital have become extremely more difficult in the last year due to a depressed economy, large well-known business failures and the events of September 11, 2001.

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:

•		Investment in laboratory facilities including test and simulation equipment;
•		Acquisition or licensing of certain intellectual property related to the development of modems and communications semiconductor and component technology;
•		Pay-down certain debt; and
•		General working capital purposes.

We are in the process of establishing a source for any additional financing and we cannot give any assurances that we will be able to secure any financing.

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.

In addition to the establishment of the Equity Line, the Company has initiated a private placement offerings as of this filing but we cannot give any assurances that we will be successful in raising a sufficient amount of capital, if any at all, to meet our requirements.

Employees

We currently employ seven people. Mr. Arne Dunhem is our President, Chief Executive Officer and Chairman. We anticipate that we will need additional persons to fill administrative, sales and technical positions if we are successful in raising the capital to implement our business plan.

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

The Company’s results of operations have not been affected by inflation and management does not expect inflation to have a significant effect on its operations in the future.

Recent Events

On July 17, 2002, the Company issued a total of 160,000 shares of its common stock for the forgiveness of $39,000 of advances from an officer of the Company. The Company believes the issuance of the stock to be exempt from registration under Section 4(2) of the Securities Act.

On July 17, 2002, the Company issued a total of 645,000 shares of its common stock for consulting services to be performed. The Company believes the issuance of the stock to be exempt from registration under Section 4(2) of the Securities Act.

On August 6, 2002, the Company announced that it has signed a Memorandum of Understanding (MOU) with the RF Microelectronics Lab (RFIC) at the Information and Communications University in South Korea to co-develop a new semiconductor chip. Under the MOU, engineering teams from NeoReach and RFIC will devote joint research and design expertise, staffing, facilities resources, project management, and testing for the development of an RF CMOS — a radio frequency chipset. This specific chipset, which will support the W-CDMA standard, is also a required component in the consumer handsets and base stations managed by the mobile operators to support 3G wireless services. This co-development initiative has the potential to expand the NeoReach product suite beyond the Company’s modem solutions currently in development and testing

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. CHANGES IN SECURITIES

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.

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 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 or an amount equal to eighty percent of the average of the four lowest closing bid prices of the common stock for the five trading days immediately preceding the conversion date. 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. As of August 15, 2002, the Debentures can be converted into 1,041,667 shares of the Company’s common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. 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))

	2.3		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))

	2.4		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)

	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		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. (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))

b) Reports on Form 8-K

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 April 23, 2002. As a result of the merger, NeoReach is now a wholly-owned subsidiary of Mobilepro. Prior to the merger, Mr. Daniel Lozinsky who was a controlling stockholder of Mobilepro also owned 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.

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.

Subsequent to the period of this report, the Company filed two amended Current Reports of Form 8-K, dated June 6, 2001 and March 21, 2002 with the Securities and Exchange Commission on July 5, 2002.

Signatures

In accordance with the requirements of the Exchange Act, the Company caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.


MobilePro Corp.

	By	/s/ Arne Dunhem Arne Dunhem, President and Chief Executive Officer (principal executive and financial officer)

	Date	August 19, 2002