x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Florida
|
65-1102865
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
PART
I
|
1
|
||||||
Item
1
|
Description
of Business
|
1
|
|||||
Item
2
|
Description
of Property
|
7
|
|||||
Item
3
|
Legal
Proceedings
|
8
|
|||||
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
8
|
|||||
PART
II
|
|
8
|
|||||
Item
5
|
Market
for Common Equity and Related Stockholder Matters
|
8
|
|||||
Item
6
|
Management’s
Discussion and Analysis or Plan of Operation
|
10
|
|||||
Item
7
|
Financial
Statements
|
13
|
|||||
PART
III
|
20
|
||||||
Item
9
|
Directors,
Executive Officers, Promoters And Control Persons; Compliance with
Section
16(A) of the Exchange Act
|
20
|
|||||
Item
10
|
Executive
Compensation
|
23
|
|||||
Item
11
|
Security
Ownership of Certain Beneficial Owners and Management
|
25
|
|||||
Item
12
|
Certain
Relationships and Related Transactions
|
25
|
|||||
Item
13
|
Exhibits
|
26
|
|||||
Item
14
|
Principal
Accountant Fees and Services
|
27
|
|||||
SIGNATURES
|
28
|
·
|
palmOne,
Inc.’s Palm.Net service
|
·
|
OmniSky
Corporation
|
·
|
SkyRiver
Communications, Inc.
|
·
|
Ricochet
Networks, Inc.
|
·
|
AsiaCorp
Communications in the People’s Republic of
China
|
·
|
CapRock
Communications’ worldwide network
|
·
|
Site
examination and RF plan for the University of Houston campus facilities
and
|
·
|
Site
and equipment selection and testing for SkyRiver Communication’s
Inc.
|
·
|
software
and application development, such as our streamlining and customization
of
data input and reporting for a global capital project management
system
for a major oil company;
|
·
|
specification,
design, and implementation of business processes and efficiency
optimization systems, such as new energy management systems for
Prenova;
|
·
|
utility
data center process optimization, such as our analysis and automation
of
systems and procedures for Itron,
Inc.
|
January
1, 2005 to December 31, 2005
|
High
Bid
|
|
Low
Bid
|
||||
First
quarter
|
$
|
3.50000
|
$
|
0.00000
|
|||
Second
quarter
|
0.06500
|
0.00000
|
|||||
Third
quarter
|
0.10800
|
0.00600
|
|||||
Fourth
quarter
|
0.02500
|
0.00300
|
January
1, 2006 to December 31, 2006
|
High
Bid
|
|
Low
Bid
|
||||
First
quarter
|
$
|
0.00220
|
$
|
0.0025
|
|||
Second
quarter
|
0.05000
|
0.0042
|
|||||
Third
quarter
|
0.00074
|
0.0032
|
|||||
Fourth
quarter
|
0.00400
|
0.0009
|
(a)
|
|
|
(b)
|
|
|
(c)
|
||||
Plan
Category
|
Number
of Securities
to Be Issued upon Exercise of Outstanding Options, Warrants and Rights |
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and
Rights
|
|
|
Number
of Securities Remaining Available for Future Issuance under Equity
Compensation Plans (Excluding Securities Reflected in Column (a))
|
|||
Equity
compensation plans approved by security holders
|
45,577,624
|
$
|
0.0127
|
99,655,000
|
||||||
Equity
compensation plans not approved by security holders
|
-
|
-
|
||||||||
Total
|
45,577,624
|
$
|
0.0127
|
99,655,000
|
Year
Ended December 31,
|
|||||||
2005
|
|
|
2006
|
||||
Net
sales
|
$
|
2,193,685
|
$
|
3,198,853
|
|||
Cost
of sales
|
1,026,414
|
1,782,458
|
|||||
Gross
profit
|
$
|
1,167,271
|
$
|
1,416,395
|
|||
Research
and Development
|
185,565
|
||||||
Selling,
general and administrative
|
1,363,490
|
2,851,800
|
|||||
Recapitalization
Expense
|
1,513,727
|
-
|
|||||
Depreciation
and Amortization
|
171,019
|
195,096
|
|||||
Operating
loss
|
$
|
(1,880,965
|
)
|
$
|
(1,816,166
|
)
|
Table
of Contents
|
||||
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|||
Consolidated
Balance Sheet
|
F-2
|
|||
Consolidated
Statements of Operations
|
F-3
|
|||
Consolidated
Statements of Cash Flows
|
F-4
|
|||
Consolidated
Statements Stockholders’ Deficit
|
F-5
|
|||
Notes
to Financial Statements
|
F-6
|
Assets
|
||||
Current
assets
|
||||
Cash
and equivalents
|
$
|
222,666
|
||
Accounts
receivable, net
|
525,697
|
|||
Inventory
|
-
|
|||
Prepaid
expenses and other assets
|
146,143
|
|||
Total
current assets
|
$
|
894,506
|
||
Property
and equipment, net
|
$
|
167,401
|
||
Customer
list, net of amortization
|
674,147
|
|||
Goodwill
|
1,868,986
|
|||
Other
long-term assets
|
28,206
|
|||
Total
assets
|
$
|
3,633,246
|
||
Liabilities
and stockholders’ deficit
|
||||
Current
liabilities
|
||||
Derivative
liability
|
$
|
250,000
|
||
Notes
payable
|
807,585
|
|||
Line
of credit
|
438,000
|
|||
Accounts
payable and accrued expenses
|
669,361
|
|||
Capital
lease
|
3,481
|
|||
Customer
deposits and advance billings
|
120,657
|
|||
Total
current liabilities
|
$
|
2,289,084
|
||
Convertible
notes payable
|
$
|
1,966,670
|
||
Accrued
derivative liability
|
577,507
|
|||
Note
payable - Related parties
|
263,452
|
|||
Total
liabilities
|
$
|
5,096,713
|
||
Stockholders’
deficit
|
||||
Series
A preferred stock, par value $0.001 per share, 10,000,000 shares
authorized;
960,000
shares issued and outstanding at December 31, 2006 and 2005,
respectively
|
$
|
10
|
||
Series
B preferred stock, par value $0.001 per share, 10,000,000 shares
authorized;
10,000,000
issued and outstanding at December 31, 2006 and 2005,
respectively
|
1,000
|
|||
Series
C preferred stock, par value $1.00;
2,200,000
shares authorized issued and outstanding at December 31,
2006
|
2,200,000
|
|||
Common
stock, par value $0.00001 per share, 5,000,000,000 authorized, 486,380
issued and outstanding
|
5
|
|||
Additional
paid-in capital
|
890,915
|
|||
Accumulated
deficit
|
(4,562,376
|
)
|
||
Comprehensive
income
|
6,979
|
|||
Total
stockholders’ deficit
|
$
|
(1,463,467
|
)
|
|
Total
liabilities and stockholders’ deficit
|
$
|
3,633,246
|
Year
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Sales,
net
|
$
|
3,198,853
|
$
|
2,193,685
|
|||
Cost
of sales
|
1,782,458
|
1,026,414
|
|||||
Gross
profit
|
$
|
1,416,395
|
$
|
1,167,271
|
|||
.
|
.
|
||||||
Operating
expenses
|
|||||||
Research
and development
|
$
|
185,665
|
|||||
Selling,
general and administrative
|
2,851,800
|
$
|
1,363,490
|
||||
Recapitalization
expense
|
1,513,727
|
||||||
Depreciation
and amortization
|
195,096
|
171,019
|
|||||
Total
operating expenses
|
$
|
3,232,561
|
$
|
3,048,236
|
|||
Loss
from operations
|
$
|
(1,816,166
|
)
|
$
|
(1,880,965
|
)
|
|
Other
income (expense)
|
|||||||
Other
income
|
-
|
$
|
2,131
|
||||
Other
expense
|
$
|
(34,674
|
)
|
-
|
|||
Change
in accrued derivative liability
|
(577,507
|
)
|
-
|
||||
Interest
expense
|
(391,748
|
)
|
$
|
(30,365
|
)
|
||
|
|||||||
Net
other income (expense)
|
$
|
(1,003,929
|
)
|
$
|
(28,234
|
)
|
|
Loss
before provision for income taxes
|
$
|
(2,820,095
|
)
|
$
|
(1,909,199
|
)
|
|
Income
tax benefit
|
-
|
(158,817
|
)
|
||||
Net
income (loss)
|
$
|
(2,820,095
|
)
|
$
|
(1,750,382
|
)
|
|
Weighted
average number of common shares outstanding
|
300,029
|
6,556
|
|||||
Net
income (loss) per share
|
$
|
(9.40
|
)
|
$
|
(266.98
|
)
|
* |
Jackson
Rivers issued preferred shares, rather than common stock, in connection
with the merger with Diverse Networks, Inc. Accordingly, no common
shares
are deemed outstanding prior to the
merger.
|
Year
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
loss from operations
|
$
|
(2,820,095
|
)
|
$
|
(1,750,382
|
)
|
|
Adjustments
to reconcile net income to net cash provided by (used by)
operations:
|
|||||||
Depreciation
|
146,024
|
143,407
|
|||||
Amortization
|
61,286
|
27,612
|
|||||
Common
stock issued in exchange for consulting services rendered
|
|||||||
Common
stock issued in exchange for employee services rendered and related
transaction costs
|
25,200
|
44,543
|
|||||
Change
in accrued derivative liability
|
577,507
|
||||||
Accretion
of discount on notes payable
|
138,425
|
-
|
|||||
Recapitalization
expense
|
-
|
1,513,727
|
|||||
Changes
in assets and liabilities:
|
|||||||
Accounts
receivable
|
(58,712
|
)
|
215,102
|
||||
Inventory
|
19,633
|
6,856
|
|||||
Prepaid
expenses
|
(113,462
|
)
|
94,923
|
||||
Accounts
payable and accrued expenses
|
(395,600
|
)
|
-
|
||||
Customer
deposits and advance billings
|
86,157
|
(465,120
|
)
|
||||
Net
cash used by operating activities
|
$
|
(2,026,287
|
)
|
$
|
(120,932
|
)
|
|
|
|||||||
Cash
flows from investing activities
|
|||||||
Capital
expenditures
|
$
|
(38,400
|
)
|
$
|
(9,753
|
)
|
|
Acquisition
of other assets
|
(28,206
|
)
|
-
|
||||
Net
cash used in investing activities
|
$
|
(66,606
|
)
|
$
|
(9,753
|
)
|
|
Cash
flows from financing activities
|
|||||||
Proceeds
from notes payable, net of repayments
|
$
|
2,179,350
|
$
|
(85,356
|
)
|
||
Proceeds
from notes payable - related parties, net of repayments
|
|||||||
Payment
on capital lease obligations
|
(11,571
|
)
|
(9,690
|
)
|
|||
Acquisition
of UTSI
|
195,229
|
23,857
|
|||||
Cash
flows from financing activities
|
$
|
2,272,219
|
$
|
(71,189
|
)
|
||
Net
increase (decrease) in cash
|
$
|
179,326
|
$
|
(201,874
|
)
|
||
Effect
of exchange rate on cash and cash equivalents
|
6,979
|
-
|
|||||
Cash,
beginning of period
|
36,361
|
238,235
|
|||||
Cash
at end of period
|
$
|
222,666
|
$
|
36,361
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Income
taxes paid
|
-
|
-
|
|||||
Interest
paid
|
$
|
391,748
|
$
|
30,628
|
|||
Common
stock issued to retire convertible debt
|
$
|
142,520
|
Preferred
Series A
|
Preferred
Series B
|
Preferred
Series C
|
Common
|
Additional
Paid-in
|
Stock
|
Retained
Earnings
|
Total
Shareholders'
|
||||||||||||||||||||||||||||||
Shares
|
Stock
|
Shares
|
Stock
|
Shares
|
Stock
|
Shares
|
Stock
|
Capital
|
Subscribed
|
(Deficit)
|
Equity
|
||||||||||||||||||||||||||
Balance,
|
|
|
|
|
|||||||||||||||||||||||||||||||||
December
31, 2004
|
—
|
$
|
—
|
—
|
$
|
—
|
5,005,000
|
$
|
300,060
|
$
|
$
|
$
|
8,101
|
$
|
308,161
|
||||||||||||||||||||||
Proceeds
from sale of
|
|||||||||||||||||||||||||||||||||||||
common
stock
|
—
|
—
|
—
|
—
|
24,700,000
|
247
|
116,010
|
(92,400
|
)
|
—
|
23,857
|
||||||||||||||||||||||||||
Stock
based
|
|||||||||||||||||||||||||||||||||||||
compensation
|
—
|
—
|
—
|
—
|
—
|
—
|
92,943
|
—
|
—
|
92,943
|
|||||||||||||||||||||||||||
Recapitalization
of
|
|||||||||||||||||||||||||||||||||||||
Diverse
Networks, Inc.
|
960,000
|
10
|
10,000,000
|
1,000
|
19,822,624
|
(299,812
|
)
|
298,802
|
—
|
—
|
—
|
||||||||||||||||||||||||||
Common
stock issued
|
|||||||||||||||||||||||||||||||||||||
for
services
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||||
Net
loss for the
|
|||||||||||||||||||||||||||||||||||||
year
ended
|
|||||||||||||||||||||||||||||||||||||
December
31, 2005
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(1,750,382
|
)
|
(1,750,382
|
)
|
|||||||||||||||||||||||
Balance,
|
—
|
||||||||||||||||||||||||||||||||||||
December
31, 2005
|
960,000
|
10
|
10,000,000
|
1,000
|
—
|
—
|
49,527,624
|
495
|
507,755
|
(92,400
|
)
|
(1,742,281
|
)
|
(1,325,421
|
)
|
||||||||||||||||||||||
Common
stock issued
|
|||||||||||||||||||||||||||||||||||||
from
subscriptions
|
|||||||||||||||||||||||||||||||||||||
receivable
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(92,400
|
)
|
92,400
|
—
|
—
|
||||||||||||||||||||||||
Common
stock issued
|
|||||||||||||||||||||||||||||||||||||
for
consulting services
|
—
|
—
|
—
|
—
|
—
|
—
|
91,250,000
|
913
|
306,437
|
—
|
—
|
307,350
|
|||||||||||||||||||||||||
Common
stock to
|
|||||||||||||||||||||||||||||||||||||
employees
for services
|
—
|
—
|
—
|
—
|
—
|
—
|
8,000,000
|
80
|
25,120
|
—
|
25,200
|
Preferred
Series A
|
Preferred
Series B
|
Preferred
Series C
|
Common
|
Additional
Paid-in
|
Stock
|
Retained
Earnings
|
Total
Shareholders'
|
||||||||||||||||||||||||||||||
|
Shares
|
Stock
|
Shares
|
Stock
|
Shares
|
Stock
|
Shares
|
Stock
|
Capital
|
Subscribed
|
(Deficit)
|
Equity
|
|||||||||||||||||||||||||
Preferred
shares
|
|||||||||||||||||||||||||||||||||||||
issued
to acquire
|
|||||||||||||||||||||||||||||||||||||
UTSI
|
—
|
—
|
—
|
—
|
2,200,000
|
2,200,000
|
—
|
—
|
—
|
—
|
2,200,000
|
||||||||||||||||||||||||||
Common
stock issued
|
|||||||||||||||||||||||||||||||||||||
to
retire debt
|
—
|
—
|
—
|
—
|
—
|
—
|
94,412,200
|
944
|
141,576
|
—
|
—
|
142,520
|
|||||||||||||||||||||||||
To
give effect to the
|
|||||||||||||||||||||||||||||||||||||
1
-
500 split approved
|
—
|
—
|
—
|
—
|
—
|
—
|
(242,703,444
|
)
|
(2,427
|
)
|
2,427
|
—
|
—
|
—
|
|||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Net
loss for the
|
|||||||||||||||||||||||||||||||||||||
year
ended
|
|||||||||||||||||||||||||||||||||||||
December
31, 2006
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(2,820,095
|
)
|
(2,820,095
|
)
|
|||||||||||||||||||||||
960,000
|
$
|
10
|
10,000,000
|
$
|
1,000
|
2,200,000
|
$
|
2,200,000
|
486,380
|
$
|
5
|
$
|
890,915
|
$
|
—
|
$
|
(4,562,376
|
)
|
$
|
(1,470,446
|
)
|
||||||||||||||||
Other
comprehensive income
|
6,979
|
||||||||||||||||||||||||||||||||||||
(1,463,467
|
)
|
· |
Short-term
financial statements (cash equivalents, accounts receivable and payable,
short-term borrowings, and accrued liabilities) - cost approximates
fair
value because of the short maturity
period.
|
· |
Long-term
debt - fair value is based on the amount of future cash flows associated
with each debt instrument discounted at our current borrowing rate
for
similar debt instruments of comparable
terms.
|
1. |
Requires
an entity to recognize a servicing asset or servicing liability each
time
it undertakes an obligation to service a financial asset by entering
into
a servicing contract.
|
2. |
Requires
all separately recognized servicing assets and servicing liabilities
to be
initially measured at fair value, if
practicable.
|
3. |
Permits
an entity to choose “Amortization method” or “Fair value measurement
method” for each class of separately recognized servicing assets and
servicing liabilities.
|
4. |
At
its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the treatment
of other available-for-sale securities under Statement 115, provided
that
the available-for-sale securities are identified in some manner as
offsetting the entity’s exposure to changes in fair value of servicing
assets or servicing liabilities that a servicer elects to subsequently
measure at fair value.
|
5. |
Requires
separate presentation of servicing assets and liabilities subsequently
measured at fair value in the statement of financial position and
additional disclosures for all separately recognized servicing assets
and
servicing liabilities.
|
Current
assets
|
$
|
389,884
|
||
Property
and equipment
|
23,630
|
|||
Customer
list
|
735,433
|
|||
Goodwill
|
1,868,986
|
|||
Total
assets
|
$
|
3,017,933
|
||
Less
- Total liabilities
|
817,933
|
|||
$
|
2,200,000
|
Years
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Revenues
|
$
|
3,587,107
|
$
|
4,288,505
|
|||
Cost
of goods sold
|
1,897,884
|
2,401,321
|
|||||
Gross
profit
|
$
|
1,689,223
|
$
|
1,887,184
|
|||
Research
and development
|
$
|
185,665
|
—
|
||||
Selling,
general and administrative
|
3,810,324
|
$
|
2,169,869
|
||||
Recapitalization
expense
|
—
|
1,513,727
|
|||||
Depreciation
and amortization
|
170,215
|
185,986
|
|||||
Total
operating expenses
|
$
|
4,166,204
|
$
|
3,869,582
|
|||
Loss
from operations
|
$
|
(2,476,981
|
)
|
$
|
(1,982,398
|
)
|
|
Other
expense, net
|
682,236
|
48,815
|
|||||
Loss
before income taxes
|
$
|
(3,159,217
|
)
|
$
|
(2,031,213
|
)
|
|
Income
taxes (benefit)
|
81,139
|
(200,229
|
)
|
||||
Net
loss from continuing operations
|
$
|
(3,240,356
|
)
|
$
|
(1,830,984
|
)
|
As
of December 31,
|
||||||||||
Life
|
2006
|
2005
|
||||||||
Office
furniture and equipment
|
3-7
|
$
|
1,116,537
|
$
|
689,597
|
|||||
Leasehold
improvements
|
10
|
279,410
|
259,835
|
|||||||
$
|
1,395,947
|
$
|
949,432
|
|||||||
Less
- Accumulated depreciation
|
1,198,489
|
723,947
|
||||||||
$
|
197,458
|
$
|
225,485
|
March
31, 2009
|
$
|
690,630
|
||
May
4, 2009
|
600,000
|
|||
October
11, 2009
|
700,000
|
|||
$
|
1,990,630
|
Note
payable to a corporation dated January 2, 2006, due with interest
at 8%
per annum, and due on or before January 1, 2007. This note is convertible
into common stock pursuant to a “variable conversion price” equaling 80%
of market, as defined.
|
$
|
250,000
|
||
Note
payable to a corporation for settlement of legal fees and costs for
services
|
25,000
|
|||
Note
payable to an individual dated June 5, 2005 payable four quarterly
installments beginning March 1, 2006, including interest at 8% per
annum.
|
174
|
|||
Note
payable to an individual dated April 15, 2006, payable in monthly
installments of $20,263 including interest at 10% per annum with
a final
payment due December 1, 2006.
|
144,839
|
|||
Note
payable to an individual dated April 15, 2006, payable in monthly
installments of $20,263 including interest at 10% per annum with
a final
payment due December 1, 2006.
|
144,839
|
|||
Note
payable to an individual dated April 15, 2006, payable in monthly
installments of $16,211 including interest at 10% per annum with
a final
payment due December 1, 2006.
|
115,871
|
|||
Note
payable to an individual dated December 1, 2005 payable in quarterly
installments beginning March 1, 2006 including interest at 8% per
annum,
with a final payment due on December 1, 2006.
|
143,302
|
|||
Note
payable to a corporation dated February 14, 2006, due on March 31,
2006
including interest at 8%.
|
45,000
|
|||
Note
payable to an individual dated December 1, 2005, due in quarterly
payments
with interest at 8% per annum beginning March 1, 2006 with a final
payment
due on December 1, 2006.
|
695
|
|||
Note
payable to an individual dated December 1, 2005 due in quarterly
payments
with interest at 8% per annum beginning March 1, 2006 with a final
payment
due on December 1, 2006.
|
17,381
|
|||
Note
payable to a corporation dated April 15, 2006, payable in monthly
installments of $20,263 including interest at 10% per annum with
a final
payment due December 1, 2006.
|
144,839
|
2007
|
$
|
384,908
|
||
2008
|
381,461
|
|||
2009
|
381,461
|
|||
2010
|
215,433
|
|||
2011
|
106,095
|
|||
$
|
1,469,358
|
2006
|
2005
|
||||||
Federal
income tax benefit at statutory rate
|
$
|
(987,033
|
)
|
$
|
(595,130
|
)
|
|
Non-deductible
expenses
|
101,425
|
-
|
|||||
Adjustments
|
885,608
|
436,313
|
|||||
Income
tax benefit
|
$
|
-
|
$
|
(158,817
|
)
|
||
Effective
income tax rate
|
-
|
9.6
|
%
|
2006
|
2005
|
||||||||||||
Number
of Shares
|
Weighted-Average
Exercise Price
|
Number
of Shares
|
Weighted-Average
Exercise Price
|
||||||||||
Outstanding
at January 1
|
3,717,404
|
$
|
0.2976
|
3,885,552
|
$
|
0.3185
|
|||||||
Granted
|
-
|
-
|
120,000
|
1.0000
|
|||||||||
Exercised
|
-
|
-
|
-
|
0.5000
|
|||||||||
Cancelled
|
-
|