U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
? Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011
? 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)
(State or Other Jurisdiction of
Incorporation or Organization)
2772 Depot Street, Sanford, Florida
(Address of Principal Executive Offices)
(Issuer’s telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ? No ?
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge , in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ?
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ? Accelerated filer ? Non-accelerated filer ? Smaller Reporting Company ?
Indicate by check mark whether the registrant is a shell company as defined in Rule 12-b of the Exchange Act. Yes ? No ?
As of December 31, 2011, 49,060,788 shares of the registrant’s voting common stock were outstanding and held by non-affiliates.
In addition to historical information, this Annual report on Form 10-K 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-K.
Item 1. Business.
Mobile Area Networks, Inc. (“MANW”) was incorporated in Texas on May 22, 1996 and a Florida corporation of the same name and purpose was formed on November 28, 1997 and became effective on January 1, 1998. The Florida corporation then became the successor in interests to the Texas corporation of the same name. The Texas corporation transferred all right, title, and interests in and to its assets over to the Florida Company. Such transfer was made in exchange for the Company’s issuance of stock to the Texas Company’s shareholders on a five for one share basis. That is, each share of the previously outstanding stock was split up into five 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 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 shareholders.
The primary effect of this action was to change the State of Incorporation of the Company.
Mobile Area Networks, Inc. the “Company” began operations in Heathrow, Florida in 1996, and in early 1997 the Company successfully developed, deployed, and documented the first use of any Wireless internet or data service. This service was for users of laptop computers and stationary internet computers “kiosks”, beginning in the Westin Hotel in Waltham (Boston), MA. and other hotels, office buildings, convention centers, and the town of Altamonte Springs Florida. Less secure services with free access became the dominant business model, and although technically successful, this service did not generate sufficient revenues to sustain operations, and the Company’s management pursued other means of generating revenues to sustain the operating Company.
The Company therefore decided to enter a core Industry to create value for its’ shareholders, and on August 12, 2002 the Company entered into an agreement to acquire the operating assets of Vintage Industries, Inc. (“Vintage”) in a stock for assets purchase. The assets consisted of the remnants of an ongoing plastics molding business with computerized plastics mold engineering and manufacturing equipment including computer aided machinery, patents pending, trade secrets for a process to rapidly produce plastic injection molds, numerous existing injection molds, plastics injection molding presses, office and support equipment, and the then 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 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 also agreed to assume responsibility for certain current and long-term liabilities of Vintage.
Simultaneous to the acquisition of the Vintage assets, the Company acquired the complete plastic molding machinery and equipment of Recoton Corporation (at that time a NASDAQ company) in a distress sale which allowed the Company to pay a small amount of cash, plus the agreement to furnish Recoton with certain parts production requirements which it had been molding in-house. 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 and then shortly thereafter Recoton’s business ceased operating. At the time of Recoton’s demise the Company had consolidated operations from four smaller facilities into one much larger manufacturing facility beginning in December, 2002. The Company began the year 2003 as essentially a start-up molding company. In the years when the demand for these plastic services was great Vintage did not have the capacity to increase production and after the consolidation the demand and profitability for these services was eroded by foreign competition.
The business and customer base changed substantially after the Vintage assets acquisition by Mobile Area Networks, Inc. Previously Vintage derived the majority of its revenues from one business segment which was the sporting firearms industry. Customers included many of the well known firearms makers in the business such as Austin Halleck, Charter Arms, Colt, Henry Repeating Arms, North American Arms, Marlin Firearms, Mossberg, Savage Arms, and Winchester. For several years the sporting arms industry suffered economically but at the year ending 2011 the industry appeared to be improving and some of these companies remain customers of the Company.
THE FUTURE OF PLASTICS AND THE COMPANY: During the year ended 2011, the Company generated its plastics services revenues from a diverse mix of residential and commercial construction product parts, military and simulation training parts, orthopedic device parts, consumer product parts, sporting rifle parts, concrete block construction parts, air conditioner parts, and military battery and gas alarm housings. The Company’s management is also working to develop proprietary items to market in addition to custom molding in order to better control production scheduling and costs in the future.
THE FUTURE OF PLASTIC MOLD MAKING: During the year 2011 the Company obtained new business because of its ability to develop molds from customer’s ideas, as well as its ability to modify and maintain molds. Many plastic molders must outsource mold maintenance whenever repairs are needed, which causes dramatic delays in production time. The Company also offers product development prototyping and mold design to speed the process of “Idea To Product”.
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 $795,000 on research and development during the past ten years, the majority of which has been provided by investors in the Company and primarily with respect to the Company’s wireless systems, plastics molding systems, and new product development. The Company is not aware of any environmental issues that may impact the Company or its services.
The Company has approximately four full time employees including its President. In addition there are 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.
Item 1A. Risk Factors.
Not applicable for smaller reporting companies.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
On January 1, 2009, the Company executed a new seven year lease with the same owner effective January 1, 2009 through December 31, 2015 with a base rent of $10,500.00 and pro-rated real estate taxes plus sales taxes aggregating $13,181.33 per month.. The lease is subject to annual increases of $.20 per square foot. The lease provides two options to renew the term for five years each. Additionally, the lease provides the tenant with the right of first refusal to lease, under the same terms, the approximate 10,000 square feet of adjoining space if vacant when the Company should need it. As of December 31, 2011 all office equipment and furnishings and computers were owned by the Company outright and without leases.
The Company owns the registered trademark “MOBILAN®”, 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 any tangible value for this patent, which was accounted for as a fully amortized intangible asset on the balance sheet of the Company.
Item 3. Legal Proceedings.
On October 3, 2002, a complaint was filed against the Company with the Circuit Court of Seminole County, Florida by David Byron, a former officer and employee of Vintage Industries, Inc., for non-delivery of 288,000 shares of restricted common stock of Mobile Area Networks, Inc., per a general mutual release and separation agreement between Vintage Industries, Inc. and Mr. Byron. Mr. Byron is seeking immediate delivery of 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 delivery of the shares to Vintage Industries, Inc., as it was agreed to in its acquisition Agreement pending the return of various Vintage Industries owned assets which remain allegedly held in the possession of and by Mr. Byron. The Company intends to vigorously defend its position as the Company has never entered into any Agreement of any nature whatsoever with Mr. Byron. Therefore the Company 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.
There has never been at any time, any Agreement made by or between Mobile Area Networks, Inc., and Mr. Byron relating to stock shares or any other matter whatsoever.
On September 3, 2009 a complaint was filed against the company with the Circuit Court of Seminole County, Florida by Vortex Innerspace Products, Inc. concerning the alleged debt by the Company to Vortex. The company believes that the note holder violated its agreement to not-compete by Daryl Dockery VP and had agreed to bring the molding business of Vortex to the Company. The Company therefore will vigorously defend its position. The Company believes that it will prevail in this action and therefore does not set aside any reserves pertaining to this case.
On February 17, 2010 a complaint was filed against the Company with the Circuit Court of Seminole County, Florida by Merrill Lynch Bank USA (now Business Lenders, Inc.), regarding a former obligation to GE Capital Small Business lending by Vintage Industries from which the Company acquired assets. The Company made all payments to date for Vintage on this obligation from the time of the Vintage Agreement. The Company was in discussions with GECC concerning a compromise on this debt and without notice GECC sold all of its loans. The Company is continuing to negotiate with Business Lenders, Inc., a more favorable settlement.
The Company has not been a party to any bankruptcy proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
On January 10, 2001, the Company’s stock began publicly trading on the OTCBB system under the symbol “MANW” and currently trades on the OTC Pinksheets.
The following table shows the reported high and low sales price at which the Common Stock of the Company was traded in 2011.
The proceeds from the Company’s stock sales to date have been and are being used primarily to fund the continuing operations of the Company’s plastics manufacturing systems as well as for funding administrative activities and marketing programs of the Company which now includes the consolidated plastics molding facility. The Company continues to explore acquisition opportunities in order to grow the revenue base and build value for the Company.
As of December 31, 2011, the Company had 416 registered shareholders of record.
Item 6. Selected Financial Data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results 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.
Results of Operations
Revenues decreased to $228,437 in 2011 from $288,483 in 2010. During 2011, several key customers suffered financial challenges which adversely affected the Company’s expected order pattern.
Cost of Goods Sold decreased to $154,021 in 2011 from $262,268 in 2010. Raw Material purchases, Direct Labor savings and a decrease in business accounted for the change.
Total Operating Expenses decreased to $400,631 in 2011 from $439,588 in 2010, a decrease of 8.9%.
Bad Debts expense increased to $8,500 in 2011 from $2,500 in 2010. The Allowance for Doubtful Accounts was increased to $25,000 as of December 31, 2011 from $18,500 as of December 31, 2010.
Depreciation expense was unchanged at $6,188 for both 2011 and 2010.
Interest expense increased to $33,700 in 2011 from $17,070 in 2010. Imputed interest on Advances from Stockholders was brought up-to-date.
Outside Services increased to $15,257 in 2011 from $8,624 in 2010. The increase reflects a greater need for contracting outside services to meet certain production schedules.
Administrative Payroll and payroll taxes decreased slightly to $199,178 in 2011 from $208,710 in 2010. Overall staffing was less in 2011.
Professional Services decreased to $9,550 in 2011 from $19,925 in 2010. The decrease reflects a 2010 switch to accruing for audit and review services rather than reporting the expense on a cash basis.
Other Operating Expenses, which includes such expenses as telephone, health insurance, utilities, travel, office supplies, and local taxes, decreased to $128,258 in 2011 from $176,571 in 2010, a decrease of 27%. The decrease relates to reduced spending on electric utilities, local taxes, licensing, workmen’s compensation insurance and travel.
The Net Loss for the Period decreased to $326,215 in 2011
from $413,373 in 2010. The decreased loss is attributable to spending reductions.
The Company’s operating loss carry-forwards are approximately seven million one hundred thousand dollars ($7,100,000) which are recoverable as income tax savings through the year 2031.
Liquidity and Capital Resources
Working Capital amounted to $(537,419) at December 31, 2011 compared to $(393,974) at December 31, 2010. There was a Bank Overdraft of $31,574 at December 31, 2011 as compared to a Bank Overdraft of $13,587 at December 31, 2010. As more fully presented under the Company’s statements of cash flows in the accompanying financial statements, net cash used in operating activities for the year ended December 31, 2011 and 2010 was $(83,314) and $(124,067), respectively. For the years ended December 31, 2011 and December 31, 2010 cash was provided primarily by advances from Shareholders.
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 is Standard Register & Transfer Company, Inc. which handles all its outside stock share registrations and transfers.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable for smaller reporting companies.
Item 8. Financial Statements and Supplementary Data.
See Financial Index on page F-1.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures
(a) Management’s Annual Report on Internal Control over Financial Reporting
Evaluation of Disclosure Controls and Procedures: As of December 31, 2011, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) promulgated under the Exchange Act Rules.
The Company’s disclosure controls and procedures were ineffective as of December 31, 2008 due to the failure to file Managements Annual Report on Internal Control over Financial Reporting in our original annual report on Form 10-K/A.
Management’s Annual Report on Internal Control over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Mobile Area Networks, Inc; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding prevention of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2011. The determination that our internal control over financial reporting was not effective is due to the Company’s limited resources and lack of ability to have multiple levels of transaction review. Management believes that this “lack of segregation of duties” will be resolved as the Company’s growth provides for the necessary additional staff. Through the use of internal consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its assessment and those criteria, our management has concluded that we do not maintain effective internal control over financial reporting as of December 31, 2011.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before of after the date hereof, regardless of any general incorporation language in such filing.
(b) Changes in Internal Controls
There have been no changes in the Company’s internal control over financial reporting during the period ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.”
Item 9B. Other Information.
Item 10. Directors, Executive Officers and Corporate Governance.
(a) Directors and Executive Officers:
Beginning January 1,2011, the following individuals will comprise the Board of Directors and management team. Consistent with Florida corporate law and the Company’s By-Laws, the Company’s Board of Directors may by unanimous vote increase the number of Board members from time to time and or to elect members to fill vacancies, if any. At it’s December 2010 meeting, the 2010 Board members voted to fill vacancies being created by terms expiring for then current Board members, Jerry Nettuno and Noah Savant, The two members elected to fill these positions are reflected herein, Jerald Hoeft and Hung Ninh were elected for one year terms each. The term for Mr. Ninh expired on December 31, 2011 and no replacement Director was elected yet to fill that position.
BOARD OF DIRECTORS
George E. Wimbish, age 68, 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 serving as the Company’s Chief Executive Officer. Mr. Wimbish does not serve as a Director in any other public company. He resides in Heathrow, Florida.
Jerald R. Hoeft, CPA, age 69, was appointed Chief Financial Officer in January, 2001 and Director in December, 2010. Mr. Hoeft had been a practicing CPA in the Orlando area from 1999 through 2007. Prior to 1999, he was in the financial services industry for over twenty-five years where he served as a chief financial officer and director for several leading public and privately-held companies. Mr. Hoeft does not serve as a Director in any other public company. He resides in Heathrow, Florida.
Judy D. Wimbish: Corporate Secretary and Executive Assistant to the CEO. Mrs. Wimbish is the wife of the CEO and has served full time with minimal compensation since the beginning of 1998 until the present.
(b) Significant Employees and Consultants
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.
(c) Family Relationships
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 with token compensation.
(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: NONE
Item 11. 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, 2011 the officers of the Company have served mostly without compensation other than the allowance to acquire Restricted founders stock at a preferred price. Mr. Wimbish was paid $-0- in 2011 and $10,000 in 2010. The Company’s management may determine when it is in the best interest of the Company to compensate Officers and Directors. For the years 1998 through 2011, Mr. Wimbish’s annual salary was approved to be $120,000, a portion of which has not been paid and remains in accrued expenses on the 2011 and 2010 balance sheets. Mr. Wimbish’s deferred salary as wages remains to be the most superior lien upon the Company’s assets.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information regarding beneficial ownership of the Company’s Common Stock as of December 31, 2011 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.
Name and Address of Owner
George E. Wimbish
Director, Chairman, President, & CEO
2772 Depot Street
Sanford, Fl 32773
Kevin J. Spolski, Building Owner
1425 E. Airport Blvd.
Sanford, FL 32773
Hung V. Ninh
Jerald R. Hoeft
Director, Treasurer, Chief Financial Officer
Other Private Shareholders
Publicly traded shares
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.
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.
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.
A portion of these shares were acquired in private transactions between unrelated private shareholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
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:
Item 14. Principal Accounting Fees and Services.
The Company incurred audit and review fees from its Independent Registered Public Accounting Firm, Randall N. Drake, CPA, PA the sum of $9,000 for the year ending December 31, 2011 and $8,000 for the year ending December 31, 2010.
All Other Fees
Item 15. Exhibits, Financial Statement Schedules.
MOBILE AREA NETWORKS, INC.
(A FLORIDA Corporation)
TABLE OF CONTENTS
Independent Auditors’ Report
Balance Sheets at December 31, 2011 and 2010
Statements of Changes in Stockholders' Deficit for the Years Ended December 31, 2011 and 2010
Statements of Operations for the Years Ended December 31, 2011 and 2010
Statements of Cash Flows for the Years Ended December 31, 2011 and 2010
F 6 – F 7
Notes to Financial Statements
F 8 – F16
MOBILE AREA NETWORKS, INC.
(A FLORIDA CORPORATION)
Cash and Cash Equivalents
Accounts Receivable – Net of Allowance for Doubtful Accounts