U.S. SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
[X] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended
December 31, 2005
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.)
2772 Depot Street, Sanford,
Florida 32773
(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]
Indicate by check mark
if the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes [X] No
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12-b of the
Exchange Act).Yes [X]
No
State issuer’s
revenues for its most recent fiscal year.
$256,370
The registrant has not authorized non-voting common equity and as of
December 31, 2005, 45,877,747 shares of the registrant’s voting common stock
were outstanding and held by non-affiliates.
The Company’s stock began trading on January 10, 2001 on the OTCBB under the symbol
"MANW".
Shares of Common
Stock, no par value outstanding at December 31, 2005: 45,877,747
Forward-Looking
Statements:
In addition to historical information, this Annual report on Form 10-KSB may contain statements that could constitute “forward-looking statements” under the federal securities laws. Forward-looking statements often are characterized by terms such as “may”, “believes”, “projects”, “expects”, or “anticipates”, and do not reflect historical facts. Forward-looking statements involve risks, uncertainties, and other factors that may cause the Company’s actual results, performances or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could effect the Company’s results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified throughout this report and in the section in Item 6, below, as well as other factors that the Company currently is unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may effect generally the Company’s business, results of operations, and financial position. Forward-looking statements speak only as of the date the statement was made. The Company does not undertake and specifically declines any obligation to update any forward-looking statements included in this report on Form 10-KSB.
Item 1. Description of Business.
Mobile Area Networks, Inc. (OTCBB: “MANW”) is a Company with a limited
operating history. The Company was incorporated in Florida on
November 28, 1997 and became the successor in interests to a Texas
corporation of the same name, effective 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 split up into five (5) shares of the Company’s
stock. The Management of the Company had previously decided to operate from and
be domiciled in the state of 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 for acquisitions. This was accomplished without diluting the
ownership of the then current owners of private shares. The effect of this action
was to change the State of Incorporation of the Company.
The Company has not been a
party to any bankruptcy proceedings.
Mobile
Area Networks, Inc. (the “Company”) started operations
in Heathrow, Florida in 1996 and in early 1997 the Company successfully
developed and deployed T-1 speed
wireless internet service for business users of
laptop computers in hotels beginning in Waltham
(Boston), Massachusetts. From its
wireless LANs (local area networks) at hotels, office buildings, convention
centers, or other locations, the Company then routed data traffic through
broadband high speed data lines or wireless broadband data links which
terminated at the Company’s operations center in Heathrow, Florida. The
Company retains the technical expertise for providing this service and welcomes
requests
to deploy certain locations. At the time of this report the
Company had entered into discussions to deploy its system in large residential
neighborhoods as the market for this service continues to mature.
The technical success of
this service was far in advance of the market and did not
generate sufficient revenue to sustain those operations so
consequently the Company’s management pursued other means of
generating revenue to sustain the Company.
The Company decided to enter
a Core Industry which is Technology driven,
and oOn August 12, 2002 the Company entered
into an agreement to acquire all of the operating assets of Vintage Industries,
Inc. (“Vintage”) in a stock for assets purchase. The assets consisted of an
ongoing business with highly computerized plastics molds
engineering and manufacturing equipment, including a complete computer
aided machine tool shop, patents pending, and trade secrets for
a process that rapidly produces plastic injection molds, numerous plastics
injection molding presses, office and support equipment, and the existing
customer base of Vintage.
The Company agreed to issue 1,440,000 of its SEC Rule 144 Restricted
Common Shares (having a market value of approximately $274,000 according to the
trading price of public shares on the day of the agreement), to be disbursed
among the shareholders of and by Vintage Industries, Inc. Vintage Industries,
Inc. was to be dissolved and all future operations in a timely manner were to
be consolidated into and owned by Mobile Area Networks, Inc. (the “Company”).
The Company also agreed to assume responsibility for Certain Current and
long-term liabilities of Vintage. After the issuance of the shares used in this
transaction the effect would be that the former owners of Vintage would jointly
own approximately four percent (4.0%) of the then
outstanding shares of the Company. During
August of 2005, 864,000 shares of the original 1,440,000 Vintage shares were
tendered back to the Company in exchange for
$38,200.00, which is herein classified as Treasury Stock.
Simultaneous to the acquisition of the Vintage
assets, the Company acquired the complete plastic molding
department machinery of Recoton Corporation in a distress
sale, which allowed to Company to pay a
small amount of cash and to furnish Recoton with
needed parts production at that time. The effect of this
transaction was to dramatically increase production capacity for the
Company, however the short term effect was detrimental to the cash
position of the Company. The Company consolidated
operations from four (4) smaller facilities into one much
larger
manufacturing center and office space beginning in December 2002, and the
Company began essentially operating in 2003 as a
start up manufacturer. In the years when the demand for
this service was tremendous, Vintage did not have the capacity to expand until
this consolidation.
The former Vintage Industries, Inc. was formed in 1991
and through the years became a leader in its core business of cCustom
iInjection
molding of pPlastics
and
r Rubber. molding. Vintage developed has extensive
capabilities to provide consulting, engineering, mold design, mold manufacturing, and parts molding production. The
business and customer base of Vintage changed dramatically over the past
several years, and changed even more after the Agreement to be acquired by the
Company was signed. Initially Vintage derived a substantial portion of it
revenues from the design, mold manufacture, and production of rifle stocks and
other parts for the sporting gun industry. Customers included Colt, Henry
Repeating Arms, North American Arms, Marlin Firearms, O.F.
Mossberg, Savage Arms (both USA and Canada),, and
Winchester. For several years the sporting arms industry suffered economically
and Vintage consequently shifted its focus away from that industry.
THE FUTURE OF PLASTICS AND
THE COMPANY: VINTAGE: The Vintage
Division (renamed “Plastech Service” during
2003) of Mobile Area Networks, Inc. (the “Company”) During the
year ended 2005 the Company currently generated itss the
majority of plastics services revenues from a diverse
mix of High-Tech Military parts, Medical Device parts, Consumer
Products, Automotive Accessories, Irrigation Devices, Sporting Rifle Stocks,
Archery Bow parts, Building Systems Devices, Snow
Ski Equipment parts, Military Simulation Trainer Parts, and
other
Specialty Applications. The Company’s management is focused on
developing additional and diversified proprietary products to manufacture, in
addition to the custom molding currently done for customers.
The
current customer base includes among others; Lockheed Martin (military application
parts), AAMP of America (automotive after market accessory parts), Orthomerica
(medical devices), Senninger (irrigation devices), Rapid Patient Monitoring
(medical dispensing device parts), SoundParts (hearing aid parts), and Darton
Archery (sporting bow handles). Plastech Services’ current customer base is
industry diverse to minimize the effect of possible specific market segment
declines.
THE FUTURE OF
PLASTIC MOLD MAKING:
The annual U.S. market for plastic injection molds is reported to be
approximately twenty billion dollars ($20 billion) annually. Spending by U.S.
companies on machinery to manufacture these molds amounts to approximately $3.8
billion annually. A significant share of this market could be gained
with innovative machinery that could reduce the skilled labor requirements of
mold making, and create high precision molds, while saving on time and costs of
mold making. The Company Vintage has developed and claims
trade secretsowns for the unique
patent pending and proprietary Nickel Composite Tooling (“NCT™”) process which
reduces the time necessary to make plastic injection molds, while delivering
the high quality and precision typified by the computer control of a process.
The NCT™ system could allow
manufacturers of plastic products to go from product design to full production
in ten to fifteen workdays instead of the current twelve to eighteen weeks.
This dramatic savings in time and labor is further enhanced by a substantial
savings in mold manufacturing costs. The Company also claims trade
secrets for a process to produce short run production parts
direct from molds produced in polymer from CAD (computer aided design) files. During the
next several years the Company intends to exploit the NCT™ technology with
hopes to capture 5% to 10% of the annual market by offering mold manufacturers
a system that will allow them to pass on significant savings in costs and time
to their customers, even after increasing their own profit margins
dramatically.
NCT™
closes aPlastic product prototyping and mold designs are already
dominated by computer automation, but many of today’s mold manufacturers still
rely on expensive and lengthy manual and semi-automated machining processes.
The NCT™ process could apply computer automation to mold manufacturing.
Mobile Area Networks, Inc. (the “Company”) started operations in
Heathrow, Florida in 1996 and to developed
the mobiLAN®
brand of broadband, high speed (T-1 speed) wireless Internet service for
travelers and other business users of laptop computers. From its wireless LANs
(local area networks) at hotels, office buildings, convention centers, and
other locations. The Company routed data traffic through broadband high speed
data lines or wireless broadband data links which terminated at the Company’s
operations center in Heathrow, Florida. The circuits to the Mobile Area
Networks communications center, whether by wireless or fiber optics, was a private
data circuit and was not routed through the insecure public Internet. At its
network center Mobile Area Networks directed 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 service provided by mobiLAN® didoes
not operate through telephone lines and therefore saved 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
provisioned data lines to hotels or other properties and routed the data
traffic to its operations center. The Company concealed wireless transmitters throughout
those properties through which the laptop user received data connections.
The Company installed systems
and had its first publicized and successfully operating T-1 speed wireless
internet service in early 1997 at the Westin Hotel in Waltham (Boston)
Massachusetts and otherseveral locations in Florida and other
locations within the United States. The mobiLAN® systems in major
hotel chain properties region were
technologically successful, but the revenue never matched the expenditures
required to maintain these services andon of the Company
discontinued its service to hotels after its decision to acquire its Plastics
Manufacturing operations. Plastech Service business. The Company
retains the Trade Secrets and expertise for the mobiLAN®
wireless service and as of the date this filing is in discussions for providing
the service to residential neighborhoods.
In the year 1998 the Company
registered the LearningPort.com™ name and began marketing its concept of CAI
(computer assisted instruction) which is also known as E-Learning or Distance
Learning solutions through its internet domain portal named
LEARNINGPORT.COM™. After experiencing the downward slide of the hotel market,
the Company began devoting more resources into the E-Learning market during
2001. In
2001 this segment of the business generated the majority of the
Company's revenue for the year and the Company's management believed that this
product could be marketed successfully. However, due to severe economic
condition down-turns in late 2001 these expectations were not met. The Company
is currently not devoting any resources toward this market. 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 such approvals. The Company
estimates that it has expended approximately $695,000 on research and
development during the past eight years, the majority of which has been
provided by investors in the Company and primarily with respect to the
Company’s MobiLAN®
efforts. The Company is unaware of any environmental issues that may impact the
Company or its services.
The Company has approximately seven full time employees including its President. In addition there are two part time consultants available to the Company on an as-needed basis. The Company also has marketing arrangements with outside individuals on a commission only basis.
The Company leases its office and manufacturing facility at 2772 Depot
Street in Sanford, Florida. That lease, which originally was a sub-lease, was
executed on November 11, 2002 covering 20,680 square feet for a five year term
with annual lease payments approximating $85,000 plus pro-rated real estate
taxes approximating $9,500 per year. On The Company had the option
to assume the master lease under certain conditions, particularly, if the
lessee may be declared insolvent. The
option to assume the master lease was exercised onJuly 31, 2003, the
Company negotiated a new master lease covering the entire. The new
lease now covers 25,000 square feet for a term of three years and
ten months commencing on August 1, 2003 and continuing through May 31, 2007.
The lease provides two options to renew the term for two years each. As of
December 31, 2005 all office equipment and furnishings were owned outright and
without leases.
The Company owns the registered trademark “mobiLAN®”, and claims copyright ownership of other creative
and derivative works including, but not limited to the Learningport.com™ name. 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”. which was accounted
for as a fully amortized 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, bandwidth managing, and
controlling access to its systems, certain methods of plastics
molding and mold building, as well as certain working arrangements
with suppliers, consultants and clients. There can be no guarantee of any
tangible value for this patent or any other intangible property
On October 3, 2002, a
complaint was filed against the Company with the Circuit Court of Seminole
County, Florida by David Byron, a former sshareholdertockholder
of Vintage Industries, Inc., for non-delivery of 288,000 shares of restricted
common stock of Mobile Area Networks, Inc., per the general mutual release and
separation agreement between Vintage Industries, Inc. and Mr. Byron. Mr. Byron
is seeking immediate delivery of the 288,000 shares of Restricted Common Stock
of Mobile Area Networks, Inc. and damages in the amount of the value of the
stock. The Company is withholding the delivery of the shares pending the return
of various Vintage Industries owned assets allegedly held by Mr. Byron. The Company intends to vigorously
defend its position as it never entered into this or any
other
agreement with Mr. Byron, and does not believe the range of loss,
if any, can be reasonably estimated at this time. Accordingly, no provision for
possible loss has been made in these financial statements.
The
Company has not been a party to any bankruptcy proceedings.
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
U.S. Securities and Exchange Commission (SEC). Provisions of the registration
statement included a maximum offering price of $6.00
per share for projected gross proceeds of
$30,000,000. The securities associated with the offering were sold on a
best efforts, no minimum amount basis and as of December 31, 2000 the Company
had sold and issued 100,103 shares of common stock under the is offering,
which was closed on November 24, 2000 in anticipation of being traded on the
OTCBB system.
On January 10, 2001,
the Company’s stock began public trading on the OTCBB system under the symbol
“MANW”.
The following table shows the reported high and low sales price at which
the Common Stock of the Company was traded during the year 2005.
High Low
First
Quarter .12 .07
Second
Quarter .10 .05
Third
Quarter .05 .04
Fourth
Quarter .40 .08
The proceeds from the Company’s stock sales to date have been for, and are
being used primarily to fund the continuing deployment and
operations of the Company’s plastics manufacturing infrastructure
and demonstration systems as well as for funding administrative
activities and marketing programs of the Company which now includes the
consolidated ing of theVintage
and
Recoton equipment for plastics production. Industries
acquisition. The Company continues to explore acquisition
opportunities in order to improve the revenue base and build value for the
Company.
A majority of the Company’s total
outstanding shares, 45,877,747, are restricted for sale under SEC Rule 144.
Total authorized shares are 50 million. Most of the outstanding shares are
owned by Company founders or insiders as reported in the Prospectus of the
Company dated February 16, 1999 and in subsequent periodic reports including
this Annual Report, such insider owned 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 under certain conditions be
sold by the owners of those shares who are not considered to be insiders or
owners of control shares when sold through broker transactions and with the
proper Form 144 documentation and filing.
As of December 31, 2005, the
Company had 417 registered shareholders of record.
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.
Revenues decreased from $503,052 in 2004 to $256,370 in 2005, a decrease of 49%. During 2005, the Company’s
receipt of orders decreased due toech competitive pressures and lack of
working capital to initiate marketing strategies. The decrease was also related
to cutbacks in military orders for one of its major customers because of
cancelled or phased out government defense programs such as the Comanche and
Miles systems.
Cost of Goods Sold decreased from $194,575 in 2004 to $179,591 in 2005, a
decrease of 8%. The decrease was
commensurate with the reduction in revenues. Included in Cost of Goods Sold is
Factory Rent which increased from $70,956 in 2004 to $123,826 in 2005. The rent
increase related to catch up for a past-due condition in 2004. ech
Total Operating
Expenses decreased from $748,968 in 2004 to $690,170 in 2005, a decrease
of 8%.
Bad Debts expense increased from $23,726 in 2004 to $(2,220) in 2005. The
Allowance for Doubtful Accounts was decreased to recognize the improvement in
past-due balances.
Depreciation expense decreased from $168,023 in 2004 to $161,020 in 2005,
a decrease of 4%. The decrease reflects certain assets that became
fully-depreciated during the year.ech
Interest expense increased from $46,997 in 2004 to $60,212 in 2005, an
increase of 28%. The increase reflects
interest incurred on credit card balances in addition to late charges and
penalties on long-term debt balances, as well as dramatic increases in variable
interest rates on financing.assumed ech
Payroll and payroll taxes decreased from $388,684 in 2004 to $339,877 in
2005, a decrease of 13%. The decrease is attributable to the termination of excess staff.ech
Professional Services increased from $15,300 in 2004 to $15,622 in 2004,
an increase of 2%. The increase is not material.ech
Other Operating Expenses, which includes such expenses as telephone,
utilities, postage, office supplies, and local taxes, increased from $106,238
in 2004 to $115,659 in 2005, an increase of
9%. The increase again relates principally to liability
and health insurance and travel expenses.ech
The Company realized a Gain on Forgiveness of Debt of $49,165 during 2005
resulting from the successful negotiation of outstanding long-term debt to
amounts less than what was originally required.
Also, the Company recovered $70,432 from its insurance carrier for loss
of business and repairs following the 2004 hurricanes. During 2004, the Company also realized a Gain
on Forgiveness of Debt of $62,546.
The Net Loss increased from $377,945 in 2004 to $506,701 in 2005. The
increased loss is attributable to the decrease in revenues. The Net Loss Per
Share was $.01 in 2005 and $.01 in 2004.
The Company’s operating loss
carry-forwards are approximately four million-seven hundred thousand dollars
($4,700,000) which are recoverable as income tax savings through the year 2025.
The Company’s short term liquidity and capital needs have been satisfied
primarily from the continuing sale of the Company’s common stock in private
sales, and loans from shareholders. The Company continues to seek the support
of underwriters and market makers for the handling of its stock sales.
The Company’s stock Registrar ishas
engaged Atlas Stock Transfer Corporation which handles all its
outside Stock share Registrations and Transfers.
|
MOBILE AREA NETWORKS, INC. (A FLORIDA Corporation) Sanford,
Florida TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm F
– 2 Balance Sheets at December 31, 2005 and 2004 F
– 3 Statements of Changes in Stockholders' Deficit for the
Years Ended December 31,
2005 and 2004 F
– 4 Statements of Operations for the Years Ended December 31, 2005 and 2004 F
– 5 Statements of Cash Flows for the Years Ended December 31, 2005 and 2004 F
- 6 – F – 7 Notes to Financial Statements F
- 8 – F –16 |
F-1 PO BOX 1670
To The Board of Directors
Mobile Area Networks, Inc.
Report
of Independent Registered Public Accounting Firm
We have audited the accompanying balance sheet of Mobile Area Networks, Inc. as of December 31, 2005 and the related statement of operations, changes in stockholder’s deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The 2004 financial statements were audited by another auditor whose report dated March 30, 2005, included an explanatory paragraph describing conditions that raised substantial doubt about the Company’s ability to continue as a going concern.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board ( United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mobile Area Networks, Inc. as of December 31, 2005 and the results of its operations, changes in its stockholder’s deficit and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note K to the financial statements, the Company has suffered recurring losses from operations and has no commitments for funding future operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note K. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
S/ Berman Hopkins Wright & Laham, CPAs, LLP
Winter Park, Florida
March 10, 2006
F-2
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MOBILE AREA NETWORKS, INC. (A FLORIDA CORPORATION) |
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Sanford, Florida |
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BALANCE SHEETS |
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December 31, |
2005 |
2004 |
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ASSETS |
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Current Assets |
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Cash and
Cash Equivalents |
$ 6,621 |
$ 11,325 |
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Accounts
Receivable - Net of Allowance for Doubtful Accounts |
19,009 |
40,487 |
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Inventory |
47,626 |
25,582 |
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Total Current Assets |
73,256 |
77,394 |
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Property and Equipment – Net of
Accumulated Depreciation |
240,897 |
414,825 |
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Other Assets |
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Security
Deposits |
7,091 |
4,314 |
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Total Assets |
$
321,244 |
$ 469,533 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities |
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Notes and
Capital Leases Payable - Due Within One Year |
$ 112,745 |
$ 136,404 |
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Accounts
Payable |
241,687 |
276,699 |
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Accrued
Expenses |
59,284 |
56,997 |
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Total Current Liabilities |
413,716 |
470,100 |
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Other Liabilities |
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Notes and
Capital Leases Payable - Due After One Year |
114,256 |
235,430 |
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Accrued
Salaries - Related Party |
774,973 |
720,000 |
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Advances
from Stockholders |
31,147 |
124,205 |
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Total Liabilities |
1,334,092 |
1,549,735 |
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Stockholders’ Deficit |
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Common
Stock: No Par; 50,000,000 Shares
Authorized, |
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45,877,747 and
42,915,470 Shares Issued |
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And Outstanding, respectively |
3,742,069 |
3,156,814 |
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Treasury
Stock, 864,000 shares |
(38,200) |
— |
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Accumulated
Deficit |
(4,716,717) |
(4,210,016) |
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Total Stockholders’ Deficit |
(1,012,848) |
(1,053,202) |
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Total Liabilities and Stockholders’
Deficit |
$
321,244 |
$ 496,533 |
The accompanying notes are an integral part of these
financial statements.
F-3
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Mobile Area Networks, Inc. (A
Florida Corporation) Sanford, Florida |
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STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT |
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Number Of
Shares |
Common Stock |
Treasury Stock |
Accumulated Deficit |
Stockholders’ Deficit |
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Balances –
December 31, 2003 |
41,910,817 |
$
2,973,490 |
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$(3,832,071) |
$(858,581) |
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Issuance of Common Stock for Cash |
1,004,653 |
183,324 |
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— |
183,324 |
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Net Loss |
— |
— |
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(377,945) |
(377,945) |
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|||
|
Balances –
December 31, 2004 |
42,915,470 |
$
3,156,814 |
|
$(4,210,016) |
$(1,053,202) |
|
|||
|
|
|
|
|
|
|
|
|||
|
Issuance of Common Stock for Cash |
2,802,277 |
559,255 |
|
— |
559,255 |
|
|||
|
|
|
|
|
|
|
|
|||
|
Issuance of Common Stock for Notes |
160,000 |
26,000 |
|
|
26,000 |
|
|||
|
|
|
|
|
|
|
|
|||
|
Purchase of Shares for Treasury |
|
|
(38,200) |
|
(38,200) |
|
|||
|
|
|
|
|
|
|
|
|||
|
Net Loss |
— |
— |
|
(506,701) |
(506,701) |
|
|||
|
|
|
|
|
|
|
|
|||
|
Balances –
December 31, 2005 |
45,877,747 |
$
3,742,069 |
$(38,200) |
$(4,716,717) |
$(1,012,848) |
|
|||
The accompanying notes are an integral part of these
financial statements.
F-4
|
MOBILE AREA NETWORKS, INC. |
|
|
|
(A FLORIDA CORPORATION) |
|
|
|
Sanford, Florida |
|
|
|
|
|
|
|
|
|
|
|
STATEMENTS
OF OPERATIONS |
|
|
|
|
|
|
|
Years Ended December 31, |
2005 |
2004 |
|
|
|
|
|
Revenues -
Net of Returns and Allowances |
$ 256,370 |
$ 503,052 |
|
|
|
|
|
Cost of Goods Sold |
179,591 |
194,575 |
|
|
|
|
|
Gross Profit |
76,779 |
308,477 |
|
|
|
|
|
Operating
Expenses |
|
|
|
Bad Debts |
(2,220) |
23,726 |
|
Depreciation |
161,020 |
168,023 |
|
Interest |
60,212 |
46,997 |
|
Payroll and Payroll Taxes |
339,877 |
388,684 |
|
Professional Services |
15,622 |
15,300 |
|
Other Operating Expenses |
115,659 |
106,238 |
|
Total
Operating Expenses |
690,170 |
748,968 |
|
|
|
|
|
Loss Before
Other Income and (Expenses) |
(613,391) |
(440,491) |
|
Other Income
and (Expenses) |
|
|
|
Loss on disposal of
fixed assets |
(12,907) |
¾ |
|
Gain on Forgiveness of Debt |
49,165 |
62,546 |
|
Insurance Recovery |
70,432 |
— |
|
|
|
|
|
Loss Before
Provision for Taxes |
(506,701) |
(377,945) |
|
|
|
|
|
Provision for Taxes |
— |
— |
|
|
|
|
|
Net Loss |
$
(506,701) |
$ (377,945) |
|
|
|
|
|
Weighted
Average Number of Common Shares |
|
|
|
Outstanding – Basic and Diluted |
45,003,518 |
42,355,928 |
|
|
|
|
|
Net Loss per
Share – Basic and Diluted |
$ (0.01) |
$ (0.01) |
The
accompanying notes are an integral part of these financial statements.
F-5
|
MOBILE AREA NETWORKS, INC. |
|
|
|
(A FLORIDA CORPORATION) |
|
|
|
Sanford, Florida |
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF
CASH FLOWS |
|
|
|
|
|
|
|
Years Ended December 31, |
2005 |
2004 |
|
|
|
|
|
Cash Flows
Used By Operating Activities |
|
|
|
|
|
|
|
Net Loss |
$(506,701) |
$(377,945) |
|
|
|
|
|
Adjustments
to Reconcile Net Loss to |
|
|
|
Net Cash Flows Used By Operating
Activities: |
|
|
|
Bad Debts |
(2,220) |
23,726 |
|
Depreciation |
161,020 |
168,023 |
|
Interest on Advances from Stockholders |
2,201 |
8,451 |
|
Loss on Disposal of Fixed Assets |
12,907 |
¾ |
|
Changes in
Assets and Liabilities: |
|
|
|
Accounts Receivable |
23,699 |
(36,381) |
|
Inventory |
(22,044) |
51,898 |
|
Other Assets |
(2,777) |
— |
|
Accounts Payable |
(35,012) |
40,018 |
|
Accrued Expenses |
2,287 |
— |
|
Accrued Salaries – Related Party |
54,973 |
120,000 |
|
|
|
|
|
Net Cash
Flows Used By Operating Activities |
(311,667) |
(2,210) |
|
|
|
|
|
Cash Flows
Used By Investing Activities |
|
|
|
Acquisition of Property and Equipment |
— |
— |
|
|
|
|
|
Cash Flows
Provided By Financing Activities |
|
|
|
Advances from Stockholders |
|
20,233 |
|
Proceeds from Issuance of Common Stock |
585,255 |
183,323 |
|
Purchase of Treasury Stock |
(38,200) |
|
|
Repayment of Notes and Capital Leases Payable |
(144,833) |
(207,399) |
|
|
|
|
|
Net Cash
Flows Provided By Financing Activities |
|
(3,843) |
|
|
|
|
|
Net Change
in Cash and Cash Equivalents |
(4,704) |
(6,053) |
|
|
|
|
|
Cash and Cash Equivalents – Beginning of Year |
11,325 |
17,378 |
|
|
|
|
|
Cash and
Cash Equivalents – End of Year |
$ 6,621 |
$ 11,325 |
The
accompanying notes are an integral part of these financial statements.
F-6
|
MOBILE AREA NETWORKS, INC. |
|
|
|
(A FLORIDA CORPORATION) |
|
|
|
Sanford, Florida |
|
|
|
|
|
|
|
|
|
|
|
STATEMENTS
OF CASH FLOWS – continued |
|
|
|
|
|
|
|
Years Ended December 31, |
2005 |
2004 |
|
|
|
|
|
Supplemental
Disclosures |
|
|
|
|
|
|
|
Interest
Paid |
$ 58,011 |
$ |
|
Income Taxes Paid |
|
|
The accompanying notes are an integral part of these
financial statements.
F-7
MOBILE AREA NETWORKS, INC.
(A FLORIDA Corporation)
Sanford, Florida
NOTES TO FINANCIAL STATEMENTS
Note A - Nature of
Operations
Mobile Area Networks, Inc. (the
“Company”) was incorporated on May 23, 1996 in the State of Texas, and
subsequently transferred all of its assets to a Florida Corporation of the same
name, which was formed for the purpose of changing the state of Incorporation,
and 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.
Operations of the Company up to
the date of acquiring the assets of Vintage Industries, Inc. (“Plastics
Services”), was devoted primarily to product development and marketing, raising
capital, administrative activities and deployment of communications network
infrastructure and service demonstration systems for both the MobiLAN®
and Learningport.com™ services. Since the date of the Vintage Assets
acquisition the operations of the Company have been devoted primarily to
consolidating the assets and operations of Plastics Services into the Company.
The primary business function of the Plastics Services assets is the design,
engineering, production of intricate plastic and rubber injection molds, and
the production of molded plastic and rubber parts. The Company had entered into
discussions at the date of this filing to re-enter the wireless market with its
secure wireless networks into residential housing communities.
Resources of the Company up to
the date of the acquisition of the Plastics Services facilities were also
devoted to marketing the Company’s concept of computer assisted instruction
solutions through its internet domain portal named Learningport.com™. Since the date of the Vintage assets
acquisition, the resources of the Company have been devoted to consolidating
and operating the Plastics Services equipment of the Company.
Note B - Summary of
Significant Accounting Policies
Recent Accounting Pronouncements
In
November, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 151, “Inventory Costs-an amendment of ARB No.43” (SFAS 151), in an effort
to converge U.S. accounting standards for inventories with International
Accounting Standards. SFAS 1551 requires
idle facility expenses, freight, handling costs, and wasted material (spoilage)
costs to be recognized as current-period charges. It also requires that allocation of fixed
production overhead to the costs of conversion be based on the normal capacity
of the production facilities. SFAS 151
will be effective for inventory costs incurred during fiscal years beginning
after June 15, 2005. The Company believes its current accounting policy
complies with the requirements of the new standard and as such the adoption of
this standard is not expected to have a material impact on the Company’s
financial statements.
In
December, 2004, the FASB issued a revision to SFAS No. 123, “Share-Based
Payment” (SFAS 123). This statement requires a public entity to measure the
cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award (with limited
exceptions). That cost will be
recognized over the period during which the employee is required to provide
service in exchange for the award requisite service period (usually the vesting
period). No compensation cost is recognized for equity instruments for which
employees do not render the requisite service.
Employee share purchase plans will not result in recognition of
compensation cost if certain conditions are met; those conditions are much the
same as the related conditions in SFAS 123.
This Statement is effective for public entities that file as a small
business issuer as of the beginning of the first interim or annual reporting
period that begins after December 15, 2005.
This Statement applies to all awards granted after the required
effective date and to awards modified, repurchased, or cancelled after that
date. The cumulative effect of initially applying this Statement, if any, is
recognized as of the required effective date and is not expected to have a
material impact on the Company’s financial statements.
F-8
MOBILE AREA NETWORKS, INC.
(A FLORIDA Corporation)
Sanford, Florida
NOTES TO FINANCIAL STATEMENTS
Note B -Summary of Significant Accounting Policies-continued
In December, 2004, the FASB
issued SFAS No. 153, “Exchanges of Non-monetary Assets-an amendment of APB Opinion No. 29” (SFAS No. 153). This Statement amends Opinion 29 to eliminate
the exception for non-monetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of non-monetary assets that
do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The adoption of SFAS 153 will not
have a material impact on the Company’s financial statements.
In May, 2005, the FASB issued
SFAS No. 154, “Accounting Changes and Error Corrections” (SFAS 154), which
replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements-An Amendment of APB No. 28.” SFAS 154 provides guidance on the accounting
for and reporting of accounting changes and error corrections. It establishes
retrospective application, or the latest practicable date, as the required
method for accounting for and reporting a change in accounting principle and a
correction of an error. SFAS 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. The
Company does not expect that the adoption of SFAS 154 will have a material
impact on its financial position, results of operations or cash flows.
Impairment of Long-Lived
Assets
Management reviews long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount exceeds the fair value of the assets which considers the
discounted future net cash flows.
Method
of Accounting
The Company maintains its books
and prepares its financial statements on the accrual basis of accounting.
Cash and Cash Equivalents
Cash and cash
equivalents include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or less.
Allowance
for Doubtful Accounts and Bad Debts
The Company provides for
estimated losses on accounts receivable based on prior bad debt experience and a review of existing receivables. Based on these factors, there is an allowance
for doubtful accounts of $35,000 at
December 31, 2005 and $37,221 at December 31, 2004, respectively.
Inventory
Inventory consists of raw
materials, work-in-process, and finished goods, and is stated at the lower of
cost or market using the first-in, first-out method.
F-9
MOBILE AREA NETWORKS, INC.
(A FLORIDA Corporation)
Sanford, Florida
NOTES TO FINANCIAL STATEMENTS
Note B
-Summary of Significant Accounting Policies-continued
Property,
Equipment and Depreciation
Property and equipment are stated
at cost, less accumulated depreciation computed using the straight line method
over the estimated useful lives as follows:
Manufacturing
Equipment 5
Years
Computer
Equipment and Software 5
Years
Office
Furniture and Equipment 5
- 7 Years
Leasehold
Improvements 5
Years
Maintenance and repairs are
charged to expense. The cost of the
assets retired or otherwise disposed of and the related accumulated
depreciation are removed from the accounts.
Advances from Stockholders
Advances from stockholders
consists of advances due on demand for working capital purposes. The amount due has an unstated interest rate
and contains no formal repayment terms.
Accordingly, the Company has imputed interest at the prime rate plus
1%. Imputed interest expense for the years
ended December 31, 2003 and 2005 and 2004 was $2,201 and $8,451, respectively.
Revenue Recognition
Revenues from product sales are
recognized when both the goods are shipped and the customer’s right of return
has expired for Plastics Services.
Unearned revenue results from deposits received on jobs still in progress.
In accordance with the provisions
of the AICPA’s Statement of Position 97-2, “Software Revenue Recognition”,
revenue is recognized on sales of Learningport.comä
products when evidence of a sales order exists with a fixed sales price,
delivery has occurred and collectability of amounts involved are deemed
probable.
For the MobiLAN®
products, revenue is recognized as data communication and consulting services
are provided, or upon sale for installation of related computer hardware and
software.
Use of
Estimates
The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Actual results can differ from those estimates.
Concentrations
of Credit Risk
Financial instruments, which
potentially expose the Company to significant concentrations of credit risk, consist principally of bank deposits, which may
at times exceed federally insured limits, and trade accounts receivable. The
Company had no cash balances that exceeded insured limits at December 31, 2005 or 2004.
Cash is placed primarily in high quality short-term interest bearing
financial instruments.
The
Company had sales in 2005 to eighteen different customers, one of which
comprised twenty-five percent (25%) of the total. Also, the one significant
customer comprised approximately eighteen (18%) and zero (0%) of the accounts
receivable balance at December 31, 2005 and December 31, 2004, respectively.
F-10
MOBILE AREA NETWORKS, INC.
(A FLORIDA Corporation)
Sanford, Florida
NOTES TO FINANCIAL STATEMENTS
Note B
-Summary of Significant Accounting Policies-continued
Concentrations of Credit
Risk-continued
The Company periodically monitors
the credit worthiness of its customers to which it grants credit terms in the
ordinary course of business and maintains an allowance for anticipated credit
losses.
Fair
Value of Financial Instruments
The fair value of cash and cash
equivalents, accounts receivables, inventory, security deposits, accounts
payable, and accrued expenses approximated book value at December 31, 2005 and
2004, because of the immediate or short-term maturity of these financial
instruments.
The fair value of property and
equipment, line of credit, notes and capital leases payable, and advances from
stockholders could not be obtained without incurring excessive costs as they
have no readily determinable market price.
Stock Transactions
Shares of common stock or common
stock equivalents issued for services performed are valued at either the fair
value of the equity instruments issued or the value of services performed,
whichever is the more reliable measure.
During the year ended December
31, 2005, two stockholders were issued 160,000 shares of common stock in
satisfaction of repayment of their advances totaling $26,000 to the
Company. These stock issuances are
separately included in the Statement of Changes in Stockholders’ Deficit.
Net Loss Per Common Share
Net loss per common share is
computed in accordance with SFAS No. 128, “Earnings Per Share.” Basic Earnings Per Share is calculated by
dividing loss available to common stockholders by the weighted average number
of common shares outstanding for each period.
Diluted Earnings per share is the same as Basic Earnings Per Share since
no common stock equivalents were outstanding for the years ended December 31,
2005 and 2004.
Reclassifications
Certain
amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
Income
Taxes
The Company accounts for income
taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” using the
asset and liability approach, which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of such assets and
liabilities. This method utilizes
enacted statutory tax rates in effect for the year in which the temporary
differences are expected to reverse and gives immediate effect to changes in
income tax rates upon enactment.
Deferred tax assets are recognized, net of any valuation allowance, for
temporary differences and net operating loss and tax credit carry forwards.
Deferred income tax expense represents the change in net deferred tax assets
and liability balances. The Company had
no material deferred tax assets or liabilities at December 31, 2005 and 2004.
F-11
MOBILE AREA NETWORKS, INC.
(A FLORIDA Corporation)
Sanford, Florida
NOTES TO FINANCIAL STATEMENTS
Note B -Summary of Significant Accounting Policies-continued
Provision for Income Taxes
Deferred
income taxes result from temporary differences between the basis of assets and
liabilities recognized for differences between the financial statement and tax
basis thereon, and for the expected future tax benefits to be derived from net
operating losses and tax credit carry forwards.
The Company has approximately four million-seven hundred thousand
dollars ($4.7 million) in net operating losses as of
December 31, 2005, and a
valuation allowance equal to the tax benefit of the accumulated net operating
losses has been established since it is uncertain that future taxable income
will be realized during the applicable carry-forward periods. Accordingly, no
income tax provision has been recognized in the accompanying financial
statements.
Note C - Accounts
Receivable
Accounts receivable consisted of
the following:
|
December 31, |
2005 |
2004 |
|
|
|
|
|
Trade |
$
54,009 |
$ 77,708 |
|
Less: Allowance for
Doubtful Accounts |
35,000 |
37,221 |
|
|
|
|
|
Net Accounts Receivable |
$19,009
|
$
40,487 |
Note D - Inventory
Inventory consisted of the
following:
|
December 31, |
2005 |
2004 |
|
|
|
|
|
Raw Materials |
$ 47,627
|
$
25,582 |
|
Work-in-Process |
— |
— |
|
Finished Goods |
— |
— |
|
|
|
|
|
Total Inventory |
$
47,627 |
$ 25,582 |
F-12
MOBILE AREA NETWORKS, INC.
(A FLORIDA Corporation)
Sanford, Florida
NOTES TO FINANCIAL STATEMENTS
Note E - Property and
Equipment
Property and equipment consisted
of the following:
|
December 31, |
2005 |
2004 |
|
Manufacturing Equipment |
$
772,462 |
$ 775,174 |
|
Computer Equipment and Software |
66,912 |
66,912 |
|
Office Furniture and Equipment |
42,725 |
42,725 |
|
Leasehold Improvements |
42,921 |
72,477 |
|
|
$
925,020 |
$ 957,288 |
|
Less: Accumulated
Depreciation |
684,123 |
542,463 |
|
Net Property and Equipment |
$
240,897 |
$ 414,825 |
Depreciation expense for the
years ended December 31, 2005 and 2004 was $161,020 and $168,023, respectively.
Note F - Notes and
Capital Leases Payable
Notes and capital leases payable
consisted of the following:
|
December 31, |
2005 |
2004 |
|||
|
Notes
Payable |
|
|
|||
|
Business
Loan Center, Inc. Note payable due December, 2007, payable in monthly
installments of $4,209, including principal and interest at prime plus 2¾%
(10.00% at December 31, 2005). The
loan is secured by all assets of Vintage Industries, Inc., with personal
guarantees by four shareholders of Vintage Industries, Inc. and their
spouses, with their residences pledged as additional security, assignment of
life insurance in the amount of $350,000 on each of the Vintage Industries,
Inc. stockholders, and a guarantee by the Small Business Association. |
$
31,145 |
$ 119,058 |
|||