U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended DECEMBER 31, 1999.
Transition report under Section 13 or 15(d) of the Securities Exchange Act of
1934.
Commission file number: 333-18439
MOBILE AREA NETWORKS, INC.
(Name of small business issuer in its charter)
Florida 59-3482752
------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1275 Lake Heathrow Lane, Suite 115, Heathrow, Florida 32746
- ----------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
407-333-2350
------------
(Issuer's telephone Number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
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.
[X] Yes No.
- --- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $61,450
The registrant has not authorized non-voting common equity and as of December
31, 1999 33,486,035 shares of the registrant's voting common stock were
outstanding and held by non-affiliates. The aggregate market value of such
common stock at December 31, 1999 had not been established as exchange listing
and trading had not commenced.
Shares of Common Stock, no par value outstanding at December 31, 1999:
33,486,035
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Mobile Area Networks, Inc. is a development stage Company with minimal revenues
and a limited operating history. The Company was incorporated in Florida on
November 28, 1997 and became the successor in interest to a Texas corporation of
the same name, effective as of January 1, 1998. The Texas corporation, formed
May 22, 1996, transferred all right, title, and interests in and to its assets,
over to the Company. Such transfer was made in exchange for the Company's
issuance of stock to the Texas Company's shareholders on a five (5) for one (1)
share basis. That is, each share of the previously outstanding stock was in
effect split up into five (5) shares of the Company's stock. The Management of
the Company had previously decided to operate from Florida and therefore also
decided to streamline its corporate operations and at the same time created more
authorized shares for the corporation to use for funding and/or acquisitions.
This was accomplished without diluting the ownership of the then current owners
of private shares.
The Company has not been a party to any bankruptcy proceedings.
The Company started operations in Heathrow, Florida to develop its mobiLAN(R)
brand of broadband, high speed (T-1) wireless Internet service for travelers and
other business users of laptop computers. The Company has demonstration systems
for proof-of-concept service at high profile properties such as the Westin hotel
in Waltham (Boston), Massachusetts, the Marriott Evergreen conference resort in
Stone Mountain, Georgia, the Sheraton Orlando North in Maitland, Florida, and
the Radisson hotel in uptown Orlando, Florida. From its wireless LANs (local
area networks) at hotels, office buildings, convention centers, or other
locations, the Company routes data traffic through a broadband high speed data
line or a wireless broadband data link which terminates at the Company's
operations center in Heathrow, Florida. The circuit to the Mobile Area Networks
center, whether by wireless or fiber optics is a private data circuit and is not
routed through the insecure public Internet. At its mobiLAN(R) network center
Mobile Area Networks can direct data traffic onto the Internet or through a
private connection commonly known as a VPN (virtual private network) directly to
a user's corporate LAN connection. The concept has been installed and
successfully operating at the Westin hotel site since March of 1997. The service
provided by mobiLAN(R) does not operate through telephone lines and therefore
saves hotel owners the expense of adding extra telephone trunk lines and hotel
PBX upgrades for laptop computer owners to use for their Internet connections.
Mobile Area Networks provisions a data line or wireless broadband link to the
hotel or other property and routes the data traffic to its operations center,
and the Company conceals wireless transmitters throughout the hotel properties
through which the laptop user receives a data connection.
With proceeds from its public offering the Company also intends to provision
wide area broadband wireless data coverage into communities for business
subscribers who need high speed Internet access. This may be accomplished by
placing transmitters on or into tall buildings, on towers, or other high
elevation platforms. At any location where the Company has transmitters, laptop
computers, desktop computers, or other newer and smaller devices can obtain
wireless access to the mobiLAN(R) network. Wherever the Company has data
connections Mobile Area Networks has wirelessly provisioned public Internet
stations, which are commonly known as Internet kiosks. These stations allow
travelers or others to send and receive e-mail or obtain other Internet services
by use of a credit card or in some locations to obtain free access which is
advertiser supported. Currently the traveler pays the hotel a daily fee for use
of the wireless device provided by Mobile Area Networks, but as more properties
are on line, travelers will be solicited to pay a monthly user fee to have
access to all mobiLAN(R) equipped properties, which could include hotels, office
buildings, convention centers, restaurants, airports or convenience stores. The
Company is also planning to provision entire communities for broadband wireless
Internet service which could also be accessed by the monthly fee-paying client.
This fee concept is similar to the cell phone industry. This distribution method
for the Company's services has required the Company to obtain funds for goods
and services for installations for the Company to use in its efforts to obtain
commitments for groups of hotels or other buildings. The Company has now worked
out revenue share agreements with the properties where systems are in place and
is now receiving limited revenue from those systems. There is no certainty that
these systems will at any time become profitable unless the Company is
successful in its efforts to recruit monthly fee based clients and to obtain
funds for goods and services to expand its operations beyond the breakeven
stage.
2
<PAGE>
The Company has begun to market its concept of CAI (computer assisted
instruction) for use at any type of business that can take advantage of remote
training or group training whether Internet related or not. This system is
useful for setting up wireless laptop computers at (for example) a newly opening
restaurant for new employee training sessions before or after opening hours. Any
number of users can be on the system at the same time, and all the equipment is
removed to the back room before opening time. No cable or equipment is left on
the tables or across the floor. Also the employees are able, during a slow time
of the day, to open the laptop and study without interrupting others. The
Company is pursuing the idea of renting out these wirelessly equipped laptop
computers which could then be moved to other locations as needed. This service
may also include videoconference services that the Company can provide from
laptop to laptop and from property to property on its network. Another value
added service offered by the Company is interconnectivity for the client with
multiple properties. The client may have a managed data network through the
Mobile Area Networks' data line when one connects to each property.
The Company provisioned its Internet connection center for the servicing of its
hotel and office building connection sites, which then allows the Company to
market traditional Internet services such as dial in customers and web site
development and hosting. In addition to these services the Company also develops
business to business electronic commerce systems. This activity has produced
limited revenue and has helped defray some of the substantial overhead
associated with operating the Company's network center. There are competitors to
the Company in all areas of its markets and there can be no assurances that the
Company can compete with other much larger and very highly capitalized
companies.
The wireless technologies currently in use by the Company are the ISM
(industrial scientific and medical) frequencies as defined by the FCC and do not
currently require operation site licensing. It is not anticipated that this
licensing ruling will change because there are many manufacturers committed to
the use of these frequencies. However; there can be no guarantee that this will
not change. The Company does have wireless engineers available to it to address
this issue, as listed herein under part III 9(b).
The Company has a publicly announced supplier partnership arrangement with
Symbol Technologies for joint marketing and supply. However, this is not an
exclusive supplier agreement and the Company is not dependent upon any single
source for any of its required hardware or equipment. The Company is not aware
of any required government approval for any of its services, but should this
need arise there is no reason for the Company to believe that it would not be
able to obtain the same. The Company estimates that it has expended
approximately $300,000 on research and development during the past two years,
the cost of which has been borne by investors in the Company. The Company is
unaware of any environmental issues that may impact the Company or its services.
The Company has a total of 10 full time employees including its President. In
addition there are 5 part time consultants available to the Company, for a total
of 15 employees. The Company also has marketing arrangements with outside
persons on a commission only basis.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company leases approximately 2500 square feet of office and network
operations space under a lease expiring in March 2003 with annual lease payments
of approximately $25,000 per year after consideration for the Company's
providing funding for the build-out of the facilities. The Company also paid for
the installation of fiber optic cable into its network center. As of December
31, 1999 all office equipment and furnishings, Internet servers, network
routers, wireless transmitters, public Internet devices, and other equipment
used at the Company headquarters and at demonstration sites are owned outright
and without leases. It is anticipated that with funding the Company may obtain
additional office space and is exploring potential sites.
The Company owns the registered trademark "mobiLAN(R)", and claims copyright
ownership of other creative and derivative works. On April 28, 1998 Mobile Area
Networks, Inc. was granted U.S. Patent #5,745,884 which covers "System And
Method For Billing Data Grade Network Use On A Per Connection Basis". There can
be no guarantee of tangible value for this patent, which is accounted for as an
intangible asset on the balance sheet of the Company. The Company protects as
"Trade Secrets" certain software processes and procedures used in network
address procedures,
3
<PAGE>
bandwidth managing, and controlling access to its systems, as well as certain
working arrangements with suppliers, consultants and clients.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceeding and is not aware of
any threatened proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None - not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
On February 16, 1999 the Company's registration statement covering the
registration of 5,000,000 shares of common stock was declared effective by the
United States Securities and Exchange Commission ("SEC"). Provisions of the
registration statement include a maximum offering price of $6.00 per share for
projected gross proceeds of $30,000,000. The securities associated with the
offering are being sold on a best efforts, no minimum amount basis. The Company
is actively seeking broker dealers for assistance in the offering with the
intent of listing for OTCBB trading. As of December 31, 1999 the Company had
sold and issued 70,535 shares of common stock under this offering, which has not
closed.
As of December 31, 1999 the Company had no public trading market for its
securities. The Company has previously included this information in its
Quarterly Reports on Form 10-QSB.
The proceeds from the offering to date are being used primarily to fund the
continuing deployment and operation of the Company's infrastructure and
demonstration systems as well as for funding general operations and
administrative activities of the Company.
The remaining outstanding shares of the company, numbering 33,415,500 shares of
the total authorized 50,000,000 shares, are restricted for sale under SEC Rule
144. A majority of these shares are owned by Company founders or insiders as
reported in the Prospectus of the Company dated February 16, 1999, such shares
being further restricted as to resale. The Company has no obligation or
requirement to register any of the restricted shares for public sales. However;
shares held for the required time period under Rule 144 could be sold by the
owners of those shares who are not considered to be insiders or owners of
control shares.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Management's Discussion and Analysis or Plan of Operation should be read in
conjunction with the financial statements and related notes which are contained
herein in the following pages under Item 7.
Mobile Area Networks, Inc. is a "Development Stage Company" and possible revenue
increases from its announced market of hotels and roadwarriors requires that the
Company have additional locations installed for which the Company is dependent
upon proceeds from its sales of stock. The Company's operations to date have
been devoted primarily to product development and marketing at its demonstration
sites, raising capital, and administrative activities. For the year 1999 the
Company experienced a $19,834 decrease in revenue, but the revenue reported was
derived primarily from its systems in place as compared to one time sales, which
is encouraging to management. The
4
<PAGE>
Company's cash position improved substantially from $54,971 at 1998 year end to
$216,185 at year end 1999 even though the Company installed and supported
additional demonstration systems. Some of this improvement can be attributed to
the fact that much of the internal infrastructure of the Company had been
expensed in the previous year. The Company considered the transition into the
year 2000 to be a routine year end and did not experience any material issues
related thereto. Total liabilities of the Company increased very slightly for
the year.
Product development and marketing costs slightly increased from $354,772 in 1998
to $392,542 but general and administrative costs substantially decreased from
$306,963 to $241,103.
Net assets and shareholder equity both increased substantially, and the net loss
per share remained even from 1998 to 1999. The Company's operating loss
carryforwards are approximately $1,500,000 which translates into income tax
potential savings advantages through the year 2014.
The Company's short term liquidity and capital needs have been satisfied
primarily from the continuing sale of the Company's stock. The Company continues
to offer its shares of common stock under its best efforts no minimum offering
according to its final prospectus dated February 16, 1999, with related
quarterly and Audited Annual financial reports added thereto and filed therewith
with the SEC. The Company is currently aggressively seeking support of
underwriters and market makers for the handling of its stock sales. The Company
also intends to engage outside stock Registrars and a shareholder communications
firm in the near future.
Mobile Area Networks, Inc. is continuing to target the hotel market with its
mobiLAN(R) brand high speed wireless Internet service for users of laptop
computers and maintains demonstration systems for proof of concept in service at
high profile properties such as the Westin hotel in Waltham (Boston),
Massachusetts, the Marriott Evergreen Conference Resort in Stone Mountain
Georgia, and the Sheraton Orlando North in Maitland Florida. The Company has
experienced user demand for its service, and many managers in hotels recognize
the need for this service. However; while developing the business at the hotel
chain level the Company also is pursuing the possibility of promoting its system
into individual hotels properties one at a time to form a strategic footprint
across the country. To this footprint the Company plans to add other types of
locations that can be accessed by travelers with a wireless receiver and a
laptop computer.
The Company is planning to deploy wide area broadband high speed wireless
service for the Florida town of Orange City during the second quarter 2000 to
target business subscribers who need fast Internet access anywhere in the town.
The Company has plans for locating public Internet machines (kiosks) into pack
and ship office centers, shared use office buildings, and convenience stores.
From all of these locations subscribers may access the mobiLAN(R) wireless
network which will be an added value to the business traveler who will then have
many more locations for their use while on the road. Added locations will lower
the average cost per location for user fees and will lower resistance to user
fees.
From its wireless LANs at hotels, office buildings and convention centers, the
Company routes data traffic through a high speed data line commonly known as a
T-1 circuit which terminates at the Company's operations center in Heathrow
Florida. The circuit used by the Company to the network center is a private data
line and is not the public Internet. Maintaining these private data lines to
each property is a major overhead expense to the Company even though the Company
now works with more than one data carrier and continues to obtain more favorable
terms for these lines. One difficulty in exploiting this market is that the
hotels may take advantage of some of the valued services of the Company which
could include access to the Internet for in house employees, video training,
data networking between properties, and other uses, but the hotel managers may
be reluctant to commit to covering portions of the monthly line charges to the
properties.
The Company will continue its marketing efforts geared toward the hotels and
business travelers, while at the same time building its client base for
traditional Internet and data services such as electronic commerce and other
services that can be accomplished with the infrastructure already in place at
the Company, with very little additional overhead. Some of the additional
services offered by the Company are wireless point of sale for restaurants and
other businesses, Computer Assisted Instruction for groups of laptop or other
computer users, and data network support. The Company's
5
<PAGE>
management believes that for the far term the build out and owning of physical
facilities assets such as Internet network server computers, data routers, and
related software, by which the Company can support electronic commerce and other
businesses, is more important than becoming a "virtual" company with only a web
site or a domain name as a business.
The Company continues to sell shares of its common stock to the public under its
best efforts no minimum offering. However; the Company is now aggressively
seeking the support of underwriters and market makers to take over the job of
handling stock sales so the Company can concentrate more on the marketing and
operations of the Company. The management intends to engage an outside stock
registrar as well as a shareholder communications firm that will handle such
duties as delivering this document to shareholders who cannot print it from the
SEC's electronic distribution Edgar system.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
December 31, 1999 and 1998 (With Independent Auditors' Report Thereon)
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
INDEX TO FINANCIALS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report...........................................................................F-2
Financial Statements:
Balance Sheets................................................................................F-3
Statements of Operations......................................................................F-4
Statements of Stockholder's Equity............................................................F-5
Statements of Cash Flows......................................................................F-6
Notes to Financial Statements..........................................................................F-7
</TABLE>
F-1
<PAGE>
PTWO Parks, Tschopp, Whitcomb & Orr., P.A.
2600 Maitland Center Parkway, Suite 330
Maitland, Florida 32751
Certified Public Accountants
Telephone: 407 875-2760
Fax: 407 875-2762
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Mobile Area Networks, Inc.:
We have audited the balance sheets of Mobile Area Networks, Inc. (a development
stage company) as of December 31, 1999 and 1998, and the related statements of
operations, stockholders' equity, and cash flows for the years then ended and
for the cumulative period from May 23, 1996 (date of inception) through December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mobile Area Networks, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for the years then ended and for the
cumulative period from May 23, 1996 (date of inception) through December 31,
1999, in conformity with generally accepted accounting principles.
s/Parks, Tschopp, Whitcomb & Orr P.A.
February 22, 2000
F-2
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
------------------- --------------------
<S> <C> <C>
Current assets:
Cash $ 216,185 54,971
Inventory 23,947 20,944
Other current assets 5,671 9,337
------------------- --------------------
Total current assets 245,803 85,252
------------------- --------------------
Property and equipment, net (note 2) 132,347 134,200
Intangible assets, net of accumulated amortization of $9,150
and $6,100. 6,108 9,158
------------------- --------------------
$ 384,258 228,610
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 15,771 71,353
Accrued expenses 240,000 198,000
Advances from stockholder (note 3) - 20,000
------------------- --------------------
Total current liabilities 255,771 289,353
------------------- --------------------
Stockholders' equity:
Common stock, no par value, authorized 50,000,000 shares,
issued and outstanding 33,486,035 and 33,023,130 shares. 1,742,541 982,422
Deficit accumulated during the development stage (1,614,054) (1,043,165)
------------------- --------------------
Total stockholders' equity 128,487 (60,743)
------------------- --------------------
$ 384,258 $ 228,610
=================== ====================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
Statements of Operations
Years ended December 31, 1999 and 1998 and the
cumulative period from May 23, 1996 through December 31, 1999
<TABLE>
<CAPTION>
For the Period
May 23, 1996
Year Ended Year Ended Through
December December December
31, 1999 31, 1998 31, 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue $ 61,450 81,284 142,734
---------- ---------- ----------
Costs and expenses:
Product development and marketing 392,542 354,772 786,931
General and administrative 241,103 306,963 989,773
---------- ---------- ----------
Total costs and expenses 633,645 661,735 1,776,704
---------- ---------- ----------
Interest income 1,306 4,706 19,916
---------- ---------- ----------
Net loss $ (570,889) (575,745) (1,614,054)
---------- ---------- ----------
Weighted average shares outstanding 33,254,583 32,228,270 29,844,086
========== ========== ==========
Net loss per share $ (0.02) (0.02) (0.05)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
and the period from May 23, 1996 (date of
inception) through December 31, 1999
<TABLE>
<CAPTION>
STOCK TOTAL
COMMON STOCK SUBSCRIPTION ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE DEFICIT EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Common stock issued in
Exchange for services 5,000 $ 1,000 - - 1,000
Common stock issued for cash 26,138,500 178,000 (2,300) - 175,700
Net loss - - - (6,575) (6,575)
Stock issuance cost - (5,091) - - (5,091)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1996 26,143,500 173,909 (2,300) (6,575) 165,034
Net loss - - - (460,845) (460,845)
Common stock issued for cash 5,102,030 544,156 2,300 - 546,456
Stock issuance costs - (7,261) - - (7,261)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 31,245,530 710,804 - (467,420) 243,384
Common stock issued for cash 1,777,600 274,950 - - 274,950
Stock issuance cost - (3,332) - - (3,332)
Net loss - - - (575,745) (575,745)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1998 33,023,130 982,422 - (1,043,165) (60,743)
Common stock issued for cash 462,905 770,738 - - 770,738
Stock issuance cost - (10,619) - - (10,619)
Net loss - - - (570,889) (570,889)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1999 33,486,035 $ 1,742,541 - (1,614,054) 128,487
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
and the period from May 23, 1996 (date of inception)
through December 31, 1999
<TABLE>
<CAPTION>
For the Period
May 23, 1996
Year Ended Year Ended Through
December December December
31, 1999 31, 1998 31, 1999
---------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (570,889) (575,745) (1,614,054)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 39,744 26,068 77,733
Change in operating assets and liabilities:
Accounts payable (55,582) 40,997 15,771
Accrued expenses 42,000 78,000 240,000
Inventory (3,003) 14,848 (23,947)
Other current assets 3,666 (2,832) (5,671)
---------- ---------- ----------
Net cash used in opearting activities (544,064) (418,664) (1,310,168)
---------- ---------- ----------
Cash flows from investing activities:
Patent acquisition costs - - (15,258)
Purchase of property and equipment (34,841) (97,465) (200,930)
---------- ---------- ----------
Net cash used in investing activities (34,841) (97,465) (216,188)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 770,738 274,950 1,768,844
Stock issuance cost (10,619) (3,332) (26,303)
Advances from stockholder (20,000) 20,000 -
---------- ---------- ----------
Net cash provided by financing activities 740,119 291,618 1,742,541
---------- ---------- ----------
Net increase (decrease) in cash 161,214 (224,511) 216,185
Cash at beginning of period 54,971 279,482 -
---------- ---------- ----------
Cash at end of period $ 216,185 54,971 216,185
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF DEVELOPMENT STAGE OPERATIONS
Mobile Area Networks (the Company) was incorporated on May 23, 1996 in the
state of Texas, and later transferred its assets to a Florida corporation, which
was formed for the purpose of providing all aspects of wireless data
communication including LAN-speed data connectivity service to remote
home-office network services and to the Internet from frequently traveled routes
and places such as hotels and airports. Unlike a modem connection, no cord or
phone line connection is necessary while accessing the Company's MobiLAN(R)
Technology.
Operations of the Company through the date of these financial statements have
been devoted primarily to product development and marketing, raising capital,
administrative activities and deployment of communications network
infrastructure and service demonstration systems. The Company's fiscal year end
is December 31.
(B) CASH FLOWS
For purposes of reporting cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less to be cash
equivalents.
(C) INVENTORY
Inventory is valued at the lower of cost or market and consists primarily of
replacement parts and supplies. Cost is determined on a first-in, first-out
(FIFO) method.
(D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight line method over the estimated useful lives of the related assets which
range from five to seven years. Expenses for repairs and maintenance are charged
to operations as incurred.
(Continued)
F-7
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(1), SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(E) INTANGIBLE ASSETS
Intangible assets consist of patents which are amortized over their
estimated useful life of five years using the straight-line method.
(F) REVENUE RECOGNITION
Revenue is recognized as data communication and consulting services are
provided or upon sale and/or installation of related computer hardware and
software. The Company is presently operating in this one business segment within
the United States and has generated minimal revenue through December 31, 1999.
(G) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Changes in tax rates are recognized in the
period that includes the enactment date.
Development stage operations for the years ended December 31, 1999 and
1998 resulted in net operating losses. At December 31, 1999, the
Company has net operating loss carryforwards of approximately
$1,500,000 which will expire at various dates through 2014. A valuation
allowance equal to the tax benefit of the net operating loss has been
established since it is uncertain that future taxable income will be
realized during the carryforward period. Accordingly, no income tax
provision has been recognized in the accompanying financial statements.
(H) ADVERTISING COSTS
Advertising expenditures related to product presentation material and marketing
efforts are expensed as incurred.
(Continued)
F-8
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(1), SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(I) FINANCIAL INSTRUMENTS FAIR VALUE
The carrying amount reported on the balance sheet for cash, accounts payable,
accrued expenses and advances from stockholder approximates fair value because
of the immediate or short-term maturity of these financial instruments.
(J) NET LOSS PER COMMON SHARE
Net loss per common share has been computed based upon the weighted average
number of common shares outstanding during the period presented.
(K) USE OF ESTIMATES
Management of the Company has made certain estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
(L) RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
1999 presentation.
(2) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1999
and 1998:
1999 1998
------------ ------------
Office furniture and equipment $ 82,795 64,438
Computer equipment and software 84,878 66,165
Leasehold improvements 33,257 33,257
------------ ------------
200,930 163,860
Less accumulated depreciation 68,583 29,660
------------ ------------
$ 132,347 134,200
============ ============
F-9
<PAGE>
MOBILE AREA NETWORKS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(3) ADVANCES FROM STOCKHOLDER
Advances from stockholder were made to the Company for working capital purposes.
The advances were non-interest bearing and were repaid in 1999.
(4) REGISTRATION OF SECURITIES
On February 16, 1999 the Company's registration statement covering the
registration of 5,000,000 shares of common stock was declared effective
by the United States Securities and Exchange Commission. Provisions of
the registration statement include a maximum offering price of $6.00
per unit resulting in maximum gross proceeds of $30,000,000.
The securities associated with the offering are being sold on a best
efforts, no minimum amount basis. The proceeds from the offering are
being used primarily to fund the deployment of the Company's
communications network infrastructure and service demonstration
systems.
F-10
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None -
17
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
(A) DIRECTORS AND EXECUTIVE OFFICERS:
At the present time, the Company's Board of Directors consists of four members.
No other is nominated to join the Board at this time, but the Company expects to
add to the Board in the near future.
GEORGE E. WIMBISH, age 56, is a founder of the Company and its concept,
and has been a Director of the predecessor (Texas) Company since November 3,
1996, and Chairman, President and CEO since March 28, 1997. His term of office
is yearly until a successor is chosen. His business experience for the past 5
years includes 2 years as a private investor for the 2 years immediately prior
to joining the Company and his service on the Company's Board. Mr. Wimbish does
not serve as a Director in any other reporting company. He resides in Heathrow,
Florida.
DR. ROBERT M. GOOD, age 62, is a founder and has been a Director and
Treasurer of the predecessor (Texas) Company since November 3, 1996. His
business experience has been as a private investor in various ventures for the
past 16 years. He is a licensed stockbroker, but does not participate as a
broker in selling the Company's stock. Dr. Good operated a successful dental
practice in Long Island, New York and sold the practice to achieve early
retirement. Dr. Good has served as an officer of numerous companies. Dr. Good
does not serve as a Director in any other reporting company. He resides in
Heathrow, Florida.
DR. RUSSELL M. GRAHAM, M.D. age 41, has been a Director of the Company
since November 1998. Dr. Graham has been a practicing Physician for more than
the past 11 years. He is a Principal in a Clinical Research Company, and is a
licensed pilot. Dr. Graham does not serve as a Director of any other reporting
company. He resides in Altamonte Springs, Florida. Dr. Graham has introduced the
Company to other business and Investment community leaders.
JAMES R. LEONE, age 56, has served as a Director and Corporate
Secretary since November 3, 1996. He is a practicing attorney and has had his
own law firm since 1985, concentrating in the fields of securities and corporate
law. Previously, Mr. Leone was briefly with Gray, Harris & Robinson in Orlando,
FL (1984-1985) and with Quinn, Jacobs, Barry and Miller in Chicago, IL. Until
1981 Mr. Leone was a financial attorney and financial analyst with the U.S.
Securities and Exchange Commission in Washington, D.C. Mr. Leone resides in New
Smyrna Beach, Florida. Mr. Leone and James R. Leone & Associates, P.A. filed for
Bankruptcy Reorganization in 1995 and 1997, later converted to Liquidation. See
Item 9(d) herein.
(B) SIGNIFICANT EMPLOYEES
JUDY D. WIMBISH: Executive Assistant to the CEO. Ms. Wimbish is the wife of the
CEO and has served full time without compensation since the first of 1998 until
the present. She has assisted with structuring the office and has been a valued
member of the marketing team. She has served as a communicator to the investment
community.
LEWIS C. THOMAS: Technologies Director. Mr. Thomas serves on a full time as
needed basis. He is an early private investor in the Company and serves without
salary until funding. He completed a Naval career with the rank of Commander
with Top Secret EBI Clearance. Holds a Master of Science and Bachelor of Science
in Electrical Engineering with highest distinction from Purdue University. He
completed the Air Force Air Intelligence Training Program, Denver, CO and the
Naval Integrated Operational Intelligence System Training Program. Mr. Thomas's
career in engineering management includes computer interface devices and an
in-depth background in military reconnaissance, space satellite and intelligence
systems. He directed Navy advance space technology programs and he holds various
patents in related products of the Company.
18
<PAGE>
JAMES M. DAVIS: Manager of Wireless Community Internet Services. Mr. Davis has
an extensive background in wireless communications and has developed, licensed
and built public safety communications systems. He has a Federal Communications
Radiotelephone license with radar endorsement. He is a U.S. Customs technical
investigator. Mr. Davis currently serves without salary, but has agreed to join
the Company full time when funded. He is currently implementing wide area
wireless for the Company to the town of Orange City, Florida.
PAUL SAVAGE: Research and Development Director. Mr. Savage has more than 25
years experience in Principal wireless product design in digital, analog, RF,
and microwave circuit design. He also possesses extensive field experience in
the implementation of wireless on towers and other locations. Mr. Savage
currently serves in a consulting role to the Company, but has agreed to become a
full time employee when funded.
*PATRICIA D. GEESE: Bookkeeper, Office Manager-Administrator. Full time and
salaried since 1998, Ms. Geese received Associate in Fine Arts Degree with 4.0
GPA, and completed Liberal Arts courses with 4.0 GPA. Her duties also include
preparing graphics for sales presentations as well as assisting the CEO on
corporate filings.
*MARK A. YINGLING: Hospitality Marketing Executive. Mr. Yingling joined the
Company in 1998 upon opting for early retirement from the Seminole County
Florida Sheriff's department. He has more than 11 years experience in Internet
services and computer technology services including network management, Internet
web design and hosting. Mr. Yingling has been very instrumental in provisioning
and marketing services in the Company's hotel demonstration sites. He is a full
time salaried employee.
*DOUGLAS S. GUNTHER: Network Systems Administrator. Mr. Gunther has an Associate
in Arts Degree, and is pursuing a Computer Engineering Degree. Mr. Gunther has
been a salaried employee of the Company since 1998 and possesses vast experience
in all areas of the Company's services.
WILLIAM H. SMITH, PH.D: Dr. Smith holds a Ph.D. in Business Administration, he
held the rank of Major in the US Army, and is a private pilot. Dr. Smith is
associated with Florida Site Selectors, Inc. and is a resource to the Company in
site selection for its system placements. He serves as a consultant to the
Company without compensation.
*THOMAS J. MEAD: Manager of Internet Design and Hosting Services. Mr. Mead holds
an A.B.S. Degree in Business Communications. He is a full time employee with the
priority of maximizing the Company's use of its Internet backroom facilities.
*SANDRA ROSENGLICK: Ms. Rosenglick holds a B.A. Degree in Business
Administration. She is a full time employee with the priority of booking
advertising sales for the Company's public Internet machines.
MARK VALLELLA: Hardware and Software Consultant to the Company since early 1997.
Mr. Vallella has been instrumental in recruiting some of the talent for the
Company, and is the prime resource for obtaining favorable purchase terms on
equipment purchases. Mr. Vallella was an early private investor in the Company
and hopes to participate in the possible future success of the Company.
ANGEL MARTINEZ: Computer Analyst with vast knowledge and experience in software
applications including database and Electronic Commerce systems. Mr. Martinez
was an early private investor in the Company and has served as a volunteer
technical resource since 1998. He has expressed his desire to become a full time
employee in the future.
*STEVE UNDERWOOD: Hospitality Marketing Executive. Mr. Underwood has more than
10 years experience in the Hospitality industry and is a full time employee with
the priority of selling to the hotel industry.
MICHAEL MANTHE: Software Programmer, Network Security and Addressing specialist.
Mr. Manthe has served the Company since 1997 both as a salaried employee and as
an independent consultant, in which capacity he currently serves. He has
expressed a high level of desire to become full time with the Company upon
funding.
19
<PAGE>
* Full time salaried employees, all others are independent consultants for fees
or may provide services for possible future stock value.
ALL EMPLOYEES AND CONSULTANTS HAVE ENTERED CONTRACTS IN FAVOR OF THE COMPANY FOR
NON-COMPETE, NON-CIRCUMVENT, NON-DISCLOSE, AND TRADE SECRETS PROTECTION.
(C) FAMILY REATIONSHIPS
Judy D. Wimbish who serves as Executive Assistant, is the wife of CEO and
majority shareholder George Wimbish, whose shares are jointly owned by Mrs.
Wimbish. She currently serves full time and has received no compensation to
date.
(D) CERTAIN LEGAL PROCEEDINGS:
The Company is not aware of any legal proceedings within the last five years
against any Director, Officer, Significant Employee, or candidate for any such
position involving a petition under the Bankruptcy Act or any State insolvency
law or of any receiver, fiscal agent or similar officer appointed by a court for
the business or property of such person or any partnership in which he was
general partner or within two (2) years before the time of such filing, or any
corporation or business association of which he was an executive officer at or
within two (2) years before the time of such filing; nor is the Company aware of
any of the above-mentioned persons being convicted in a criminal proceeding;
except as follows:
On August 14, 1995 James R. Leone & Associates, P.A., a Florida professional
corporation, filed a reorganization petition in the Bankruptcy Court in Orlando,
Florida. Its Plan of Reorganization was scheduled for a confirmation hearing on
January 14, 1997 but a notice of proposed conversion to liquidation was filed on
that date and the conversion was made on or about March 12, 1997. A Director and
the corporate Secretary of the Company, James R. Leone, was the sole
shareholder, officer and director of that corporation. On March 10, 1997 Mr.
Leone filed a personal reorganization petition on the advice of counsel because
of liabilities caused by the corporate liquidation, and his plan of
Reorganization was confirmed.
ITEM 10. EXECUTIVE COMPENSATION.
The Company's current policy is that Directors serve without compensation.
However; in the future, it may be in the Company's best interests to compensate
Directors in a manner that will attract the most qualified people to serve on
the Company's Board. Through December 31, 1999 the officers of the Company have
served without compensation other than the allowance to acquire founders stock.
The Company's management may determine when it is in the best interest of the
Company to compensate officers. During 1998 and 1999, Mr. Wimbish's annual
salary was $120,000, a portion of which has not been collected and remains in
accrued expenses on the 1998 and 1999 balance sheets.
20
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 1999 with respect to
each director and officer and any person who is known to the Company to be the
beneficial owner of five percent (5%) or more of the Company's outstanding
Common Stock. Also set forth in the table is the beneficial ownership of all
shares held by all directors and officers, individually and as a group.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
NAME AND ADDRESS SHARES OWNED. PERCENT PERCENT AFTER
OF OWNER. BEFORE OFFERING SALES OF
TOTAL SOLD. MAXIMUM OFFERING.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
George E. Wimbish 25,500,000(a) 76.31.% 66.37%
Director, Chairman, President, & CEO
1275 Lake Heathrow Lane (Suite 115)
Heathrow, Fl 32746
Dr. Robert M. Good 2,250,000(a) 6.73% 5.85%
Director, Vice-President, Treasurer
1275 Lake Heathrow Lane (Suite 115)
Heathrow, Fl 32746
Dr. Russell M. Graham 135,000(d) 0.40% 0.35%
109 Camphor Tree Lane
Altamonte Springs, Fl. 32714
James R. Leone 5,000 0.01% 0.01%
Director, Secretary
1275 Lake Heathrow Lane (Suite 115)
Heathrow, FL 32746
- --------------------------------------------------------------------------------------------------------------------------------
Subtotal 27,890,000 83.48% 72.58%
Other Private Shareholders 5,525,230(b) 16.52%(c) 14.38%(c)
New Shareholders 5,000,000 -- 13.04%
From Offering If All Sold
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL 38,415,230 100.0% 100.0%
</TABLE>
(a) Within the knowledge of the issuer, no other person holds or shares the
power to vote or direct the voting of securities described pursuant to
subsection (a) above. No other person holds shares or the power to vote
5% or more of the issuer's voting securities.
(b) The Company may utilize private stock shares as incentive or
compensation for the product and service marketing efforts of the
Company's employees, when appropriate.
(c) Some of the restricted shares included in this total have been
conditionally assigned to certain employees or consultants with
performance and or tenure requirements. The possibility that all of
these private shares may or may not be rescinded would not dramatically
affect this percentage.
(d) A portion of these shares were acquired in private transactions between
unrelated private shareholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
All transactions during the previous two years and any presently proposed
transaction to which the issuer is a party in which any person having a
relationship with the issuer has a direct or indirect material interest are the
following transactions, and no others:
None.
21
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
None.
22
<PAGE>
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.
MOBILE AREA NETWORKS, INC.
/s/ George Wimbish
By:________________________________
George Wimbish
President & CEO
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in capacities and on the dates
indicated.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Signature Title Date
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ George Wimbish
__________________________Director, Chairman, President, April 10, 2000
George Wimbish Chief Executive.
/s/ Robert M. Good
__________________________Director, Treasurer. April 10, 2000
Robert M. Good
/s/ James R. Leone
__________________________Director, Secretary. April 10, 2000
James R. Leone
/s/ Russell M. Graham
__________________________Director April 10, 2000
Russell M. Graham
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 216185
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 23,947
<CURRENT-ASSETS> 245,803
<PP&E> 200,930
<DEPRECIATION> 68,583
<TOTAL-ASSETS> 384,258
<CURRENT-LIABILITIES> 255,771
<BONDS> 0
1,742,541
0
<COMMON> 0
<OTHER-SE> (1,614,054)
<TOTAL-LIABILITY-AND-EQUITY> 384,258
<SALES> 62,756
<TOTAL-REVENUES> 62,756
<CGS> 0
<TOTAL-COSTS> 633,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (570,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> (570,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (570,889)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
