U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002
|_| TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-11038
ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
(Exact name of small business issuer as specified in its charter)
California 33-0644381
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
1935 Cordell Court, El Cajon, CA 92020
(Address of Principal Executive Offices)
(619) 438-6000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No __
APPLICABLE ONLY TO CORPORATE FILERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 21,231,627 shares of common stock as
of January 27, 2003.
Transitional Small Business Disclosure Format (check one): Yes __ No X
ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES: (As restated (As restated
see Note 1) see Note 1)
Communications $ 1,634,301 $ 1,637,057 $ 4,924,604 $ 5,081,656
Video compression 727,276 707,546 2,635,589 1,823,891
Satellite transmission technology 2,123,446 1,652,113 3,933,391 4,823,257
-------------- ---------------- --------------- ----------------
TOTAL REVENUES 4,485,023 3,996,716 11,493,584 11,728,804
-------------- ---------------- --------------- ----------------
COSTS AND EXPENSES:
Communications 748,461 650,326 2,188,292 2,137,341
Video compression 165,967 181,047 917,669 453,654
Satellite transmission technology 1,727,011 904,596 2,612,788 2,173,148
-------------- ---------------- --------------- ----------------
Gross profit, excluding depreciation and amortization 1,843,584 2,260,747 5,774,835 6,964,661
Selling, general and administrative 3,099,668 2,515,591 10,491,559 7,668,696
Research and development 64,350 336,893 500,070 1,108,823
Asset impairment - - 11,821,590 -
-------------- ---------------- --------------- ----------------
LOSS FROM OPERATIONS (1,320,434) (591,737) (17,038,384) (1,812,858)
Interest expense - net 143,131 103,393 428,308 478,343
-------------- ---------------- --------------- ----------------
LOSS BEFORE TAXES (1,463,565) (695,130) (17,466,692) (2,291,201)
Income tax (expense) benefit (99,041) 152,512 3,787,561 502,690
-------------- ---------------- --------------- ----------------
NET LOSS (1,562,606) (542,618) (13,679,131) (1,788,511)
Dividend requirement of Series C Preferred Stock (178,594) - (239,939) -
-------------- ---------------- --------------- ----------------
LOSS APPLICABLE TO COMMON STOCKHOLDERS $(1,741,200) $(542,618) $(13,919,070) $(1,788,511)
============== ================ =============== ================
BASIC AND DILUTED LOSS PER SHARE: $ (0.08) $(0.03) $ (0.66) $ (0.08)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 21,231,627 21,198,637 21,235,803 21,135,126
Dilutive effect of:
Employee stock options - - - -
Warrants - - - -
Convertible preferred stock - - - -
Weighted average of common shares outstanding,
assuming dilution 21,231,627 21,198,637 21,235,803 21,135,126
<FN>
See notes to consolidated financial statements.
</FN>
ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
------------------ -----------------
ASSETS 2002 2001
(Unaudited)
CURRENT ASSETS:
Cash $ 356,614 $ 268,731
Accounts receivable - net 2,713,720 3,810,809
Inventories - net 1,007,141 1,572,944
Prepaid expenses and other assets 508,000 541,962
------------------ -----------------
Total current assets 4,585,475 6,194,446
DEPOSITS & OTHER ASSETS 258,950 289,849
PROPERTY - net 538,861 487,402
CAPITALIZED SOFTWARE - net 91,648 234,871
GOODWILL - net 4,890,083 5,434,138
PATENT - net 1,571,571 13,607,983
------------------ -----------------
TOTAL $ 11,936,588 $ 26,248,689
================== =================
LIABILITIES AND STOCKHOLDERS' (DEFICIT)/EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,406,138 $ 2,746,200
Accrued expenses 2,810,330 1,015,982
Deferred revenue 1,628,996 2,052,838
Current portion of notes payable 6,313,552 6,685,065
------------------ -----------------
Total current liabilities 13,159,016 12,500,085
DEFERRED REVENUE 879,444 1,570,613
DEFERRED TAX LIABILITY 4,364,333
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' (DEFICIT)/EQUITY:
Preferred Stock, no par value, 1,000,000 shares authorized:
Convertible preferred series C stock; Series C-1, 15,000
shares authorized, 6,667 shares issued; Series C-2, 8,000
shares authorized, 4,000 shares issued; Series C-3, 2,000
shares authorized, 1,059.19 shares issued.
Liquidation preference: $300 per share series C-1, $500
per share series C-2 and $3,000 per share series C-3 6,828,668 -
Convertible preferred series B stock, 31.25 shares issued,
liquidation preference $10,000 per share. 312,500 3,512,500
Common stock, no par value; 100,000,000 shares authorized,
21,231,627 and 21,201,627 shares issued and outstanding
at 2002 and 2001, respectively 22,655,466 22,280,750
Accumulated deficit (31,898,506) (17,979,592)
------------------ -----------------
Total stockholders' (deficit)/equity (2,101,872) 7,813,658
------------------ -----------------
TOTAL $ 11,936,588 $ 26,248,689
================== =================
<FN>
See notes to consolidated financial statements.
</FN>
ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
2002 2001
(Unaudited) (Unaudited)
(As restated
see Note 1)
Operating activities:
Net loss $(13,679,131) $ (1,788,511)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Asset impairment 11,821,590 -
Write off of capitalized software, net 105,153 -
Deferred tax (4,364,333) (329,969)
Depreciation and amortization 1,147,560 1,802,064
Issuance of common stock to vendor 9,000 -
Adjustment to stock options and warrants 365,716 -
Changes in assets and liabilities:
Restricted cash - (78,775)
Deposits and other assets 10,064 -
Accounts receivable, net 1,097,089 133,705
Inventories, net 272,405 (119,525)
Prepaid expenses and other assets 33,962 (557,234)
Deferred revenue (1,115,011) 1,889,354
Accounts payable and accrued expenses 1,738,795 1,655,214
----------------- -----------------
Net cash (used in) provided by operating activities (2,557,141) 2,606,323
----------------- -----------------
Investing activities:
Capitalized software - 20,286
Capital expenditures (87,839) (148,268)
----------------- -----------------
Net cash used in investing activities (87,839) (127,982)
----------------- -----------------
Financing activities:
Proceeds from line of credit - 450,000
Payments on line of credit (750,000) (150,000)
Issuance of series C preferred stock, net 3,628,668 -
Issuance of common shares, net - 10,000
Additions to notes payable 214,203 -
Principal payments on notes payable (360,008) (2,579,187)
----------------- -----------------
Net cash provided by (used in) financing activities 2,732,863 (2,269,187)
----------------- -----------------
Net increase in cash 87,883 209,154
Cash at beginning of period 268,731 2,089
----------------- -----------------
Cash at end of period $ 356,614 $ 211,243
================= =================
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Reclassification of accrued interest to note payable $ 399,446
Increase in accounts receivable due to deferred $2,000,000
revenue
Reclassification of demo equipment from inventory
to property - net $ 293,398
Note payable in exchange for insurance premium $ 125,000
<FN>
See notes to consolidated financial statements.
</FN>
ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements as of the nine months ended
September 30, 2002 and 2001 are unaudited and have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 2002 are not necessarily
indicative of the results that may be expected for any other interim period or
for the year ending December 31, 2002.
Restatement - ARCOMS' quarterly report on Form 10-QSB for the three and nine
month period ended September 30, 2001 was amended to restate Items 1 and 2 of
Part I of our original Form 10-QSB to reflect the restatement of our
consolidated financial statements. This restatement relates to certain
capitalized software costs and revenue recognition of one particular licensing
agreement.
Subsequent to the issuance of our consolidated financial statements for the
quarter ended September 30, 2001, we determined that certain software products
for which costs had been capitalized had not met the definition of technological
feasibility as provided in Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 86. Accordingly, we
restated our financial statements for this quarter to reflect the presentation
of such costs as research and development. The restatement resulted in an
increase in research and development expenses of $294,097 and $968,470 for the
three and nine months ended September 30, 2001, respectively.
In addition, subsequent to the issuance of our consolidated financial statements
for the quarter ended September 30, 2001, we determined that it would have been
preferable to recognize a one time license fee ratably over the term of the
agreement based on guidance provided by Staff Accounting Bulletin No. 101 issued
by the U.S. Securities and Exchange Commission ("SAB No. 101"), rather than
recognizing the entire fee upon receipt. The amount of the fee was $1,200,000
all of which we had recognized in the quarter ended March 31, 2001. The term of
the agreement is 18 months. The restatement results in an increase to satellite
transmission technology revenue of $200,000 for the three months ended September
30, 2001 and a decrease to satellite transmission technology revenue of $733,333
for the nine months ended September 30, 2001.
Business Conditions - Management's Plan to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the ordinary course of business. As shown in the accompanying
consolidated financial statements, the Company has incurred net losses
applicable to common shareholders of $1,741,200 for the quarter ended September
30, 2002 and net losses applicable to common shareholders of $13,919,070 for the
nine months ended September 30, 2002 and additionally had net losses of
$4,850,555, $9,111,425, and $926,288 for the years ended December 31, 2001,
2000, and 1999, respectively. The loss for the nine months ended September 30,
2002 includes a non-cash impairment charge of $11,821,590 related to a patent
recorded as a result of the acquisition of Enerdyne Technologies, Inc.
("Enerdyne") and a goodwill impairment charge at Boatracs Gulfport ("Gulfport")
and OceanTrac Limited ("OceanTrac"). The years ended December 31, 2001 and
December 31, 2000 included non-cash impairment charges of $2,300,000 and
$6,000,000, respectively, related to goodwill recorded as a result of the
acquisition of Enerdyne. In addition, during 2001, 2000, and 1999, the Company
undertook significant research and development efforts and refined its marketing
and manufacturing processes, all of which contributed significantly to its net
losses for those years. At September 30, 2002, the Company had an accumulated
deficit of $31,898,506 and at December 31, 2001, the Company had an accumulated
deficit of $17,979,592. Working capital was negative $8,573,541 at September 30,
2002 and negative $6,305,639 at December 31, 2001. At September 30, 2002 and
December 31, 2001 the Company had classified borrowings from the sellers of
Enerdyne as a current liability as the Company was not in compliance with its
debt covenants.
As more fully discussed below under "Recapitalization Arrangement," on May 31,
2002, the Company sold shares of its preferred stock for gross proceeds of
$4,000,000 and extended the maturity dates of its debt agreements with its bank
and the two former owners of Enerdyne. In addition, during the quarter ended
September 30, 2002, the Company reduced its work force by 17% and approximately
37% of the remaining workforce had their salaries reduced by 30%. The chief
executive officer's salary was reduced by 50%. However, the Company does not
have sufficient cash available to fund operations for the next twelve months. In
order to continue as a going concern, the Company must raise additional funds,
including through possible sale of assets or certain operations and
significantly reduce the use of cash in operations.. There can be no assurance
that additional funds will be available on acceptable terms, if at all, or that
the Company will be able to reduce use of cash in operations to the point where
internal cash flow is sufficient to fund operations. (See Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources.)
Recapitalization Arrangement
On May 31, 2002, the Company entered into an agreement (the "Stock Purchase
Agreement") with two private companies (the "Purchasers"). Under the Stock
Purchase Agreement, the Company sold an aggregate of 10,667 shares of two newly
designated classes of the Company's preferred stock (series C-1 and series C-2),
having a total aggregate purchase price of $4,000,000 to the Purchasers pursuant
to a private placement exempt from registration under the Securities Act of
1933. As part of the total purchase price, $500,000 was paid through
cancellation/conversion of a promissory note that was entered into on May 16,
2002. In addition, the Company offered all existing holders of its Series B
Preferred Stock to exchange such shares for shares of a third newly designated
class of its preferred stock (series C-3) in a Tender Offer, which closed July
26, 2002. Of the original 351.25 shares of Series B issued, 320 shares converted
to Series C-3. The holders of the series C preferred stock are entitled to
receive cumulative dividends at the rate of 10% per annum on each outstanding
share of series C preferred stock semi-annually payable in either a like class
of Series C or cash. The series C preferred ranks senior and prior to all other
outstanding stock, including series B preferred. Each share of the newly
designated classes of preferred stock is convertible into common stock at $.30
per share for series C-1 preferred stock, $.50 per share for series C-2
preferred stock and $3 per share for series C-3 preferred stock and may be
adjusted for certain recapitalization events.
As part of the transaction described above, the Chairman of the Company's Board
of Directors resigned his chairmanship as well as the position as chief
executive officer and president, and four of the remaining five members of the
Company's Board of Directors resigned their directorships. Three new directors
were appointed to the Company's Board of Directors, one of whom was also
appointed Chairman and Chief Executive Officer. Concurrent with the execution of
the Stock Purchase Agreement, the Company's debt agreement with its bank as well
as its debt agreements with the two former owners of Enerdyne Technologies, Inc.
were modified to extend the maturity dates of the loans and to waive all
violations of the relative covenant requirements through the date of the Stock
Purchase Agreement (see Note 4).
In conjunction with the Stock Purchase Agreement, the Company entered into an
employment contract with the Chief Executive Officer and granted him non
statutory stock options to purchase 3,000,000 shares of the Company's common
stock.
The Stock Purchase Agreement grants the investors the exclusive right,
exercisable by delivery of written notice to the Company during the period from
August 2, 2002 through June 1, 2003 to purchase the assets of the Company's
Boatracs division at a purchase price as defined in the agreement. In the event
that the investors exercise their option to purchase Boatracs' assets, they may
tender the Series C Preferred Stock toward the purchase price, which shall be
valued at their original purchase price plus accrued but unpaid dividends
thereon.
In an unrelated transaction, in September 2002 the Purchasers purchased the
Company's line of credit from the original issuing bank. (See Note 4.)
Settlement with QUALCOMM
On June 3, 2002, the Company executed an amendment to a license and distribution
agreement ("the Agreement") the Company has with QUALCOMM, Incorporated
("QUALCOMM") and paid QUALCOMM $500,000 in order to reinstate ARCOMS'
exclusivity rights under the Agreement. The exclusivity was reinstated through
September 30, 2002. In accordance with the amendment, ARCOMS released QUALCOMM
and waived any existing or future claims, liabilities, or arguments contesting
the number of units to be purchased to meet the minimum purchase requirements
for maintaining exclusivity under the Agreement for all periods prior to October
1, 2003. The amendment also defined the revised minimum purchase requirements
under the Agreement. In accordance with SFAS No. 5 "Accounting for
Contingencies," the Company recorded the payment of $500,000 to QUALCOMM as a
contingent liability as of March 31, 2002 with a corresponding increase to
selling, general and administrative expenses for the quarter then ended.
Subsequent to June 2002, the Company became delinquent on its accounts payable
to QUALCOMM. In December 2002, QUALCOMM informed the Company of its intent to
terminate the Agreement unless the Company became current on its financial
obligations under the Agreement. In January 2003, the Company reached a
settlement with QUALCOMM, which requires the Company to pay its delinquent
accounts payable balance of approximately $300,000 at the rate of $35,000 per
month, plus interest of 1.5% per month on the delinquent balance, and to remain
current on all of its other obligations. QUALCOMM has reserved the right to
terminate the agreement without further notice in the event that the Company
does not comply with the terms of the settlement.
Reclassification - Certain balances in the prior quarter have been reclassified
to conform to the presentation adopted in the current quarter.
Use of estimates - In preparing the financial statements, we have made estimates
and assumptions that affect the following:
Reported amounts of assets and liabilities at the date
of the financial statements; Disclosure of contingent
assets and liabilities at the date of the financial
statements; and Reported amounts of revenues and
expenses during the period.
Actual amounts could differ from those estimates.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition, this statement amends SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include certain financial
institution-related intangible assets. This statement is not applicable to the
Company.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." This statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost, as defined, was recognized at the date of an
entity's commitment to an exit plan. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002 with earlier application encouraged.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 updates, clarifies, and simplifies existing accounting
pronouncements. This statement rescinds SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material, classified
as an extraordinary item, net of related income tax effect. As a result, the
criteria in Accounting Principles Board Opinion No. 30 ("APB No. 30") will now
be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4 and
is no longer necessary as SFAS No. 4 has been rescinded. SFAS No. 44 has been
rescinded as it is no longer necessary. SFAS No. 145 amends SFAS No. 13 to
require that certain lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as sale-lease
transactions. This statement also makes technical corrections to existing
pronouncements. While those corrections are not substantive in nature, in some
instances, they may change accounting practice. This statement is not applicable
to the Company.
Effective January 1, 2002, the Company adopted SFAS No. 141, "Business
Combinations," SFAS No. 142, "Goodwill and Intangible Assets" and SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 142
sets forth the accounting for goodwill and intangible assets already recorded.
Commencing January 1, 2002, goodwill is no longer being amortized. Factors we
consider important which could trigger an impairment review include significant
under-performance relative to expected historical or projected future operating
results, significant changes in the manner of our use of the acquired assets or
the strategy for our overall business and significant negative economic trends.
During the second quarter, the Company employed outside consultants to perform
an independent valuation analysis of the Company's total invested capital. In
the analysis of the Company, the consultants utilized valuation techniques and
methodologies deemed appropriate under the circumstances. The first step of the
valuation test compared the fair value of a reporting unit with its carrying
amount to identify potential impairment. If the carrying value of a reporting
unit exceeds its fair value, the second step of the test is then performed to
measure the amount of any impairment. The fair value of the Company's patent at
Enerdyne was determined utilizing an income approach based on a relief from
royalty method of valuation. It was concluded that the fair value of the patent
was reasonably stated in the amount of $800,000, net of related deferred taxes.
Accordingly, the patent was written down to this value, resulting in an asset
impairment charge of $11,277,535 in the quarter ended June 30, 2002. Goodwill
was also evaluated and the Company recorded an impairment charge to goodwill at
Boatracs Gulfport and Canada in the aggregate amount of $544,055 in the quarter
ended June 30, 2002 after evaluating the current technology at Gulfport and
projected future sales at both locations. With the adoption of SFAS No. 142, the
Company reassessed the useful lives and residual values of all other acquired
intangible assets to make any necessary amortization period adjustments. No
amortization period adjustments were necessary.
As of September 30, 2002
Gross Carrying Amount Accumulated Amortization
Amortized Intangible Assets
Patent $1,633,323 $ 1,752
Non-compete Agreements 125,000 87,970
--------- ----------
TOTAL $1,758,323 $ 149,722
========= ==========
Unamortized Intangible Asset
Goodwill $8,173,495 $ 3,283,412
========= ==========
Aggregate Amortization Expense:
For the quarter ended September 30, 2002 $68,776
Estimated Amortization Expense:
For year ending December 31, 2002 $948,420
For year ending December 31, 2003 $205,560
For year ending December 31, 2004 $180,085
For year ending December 31, 2005 $177,780
For year ending December 31, 2006 $177,780
The following table reflects the reconciliation of reported net loss and net
loss per share to the amounts adjusted for the exclusion of goodwill
amortization (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
Loss applicable to common $(1,741) $(543) $(13,919) $(1,789)
shareholders
Add Back: Goodwill Amortization 0 222 0 667
------ ---- ------ -----
Adjusted Net Loss $(1,741) $(321) $(13,919) $(1,122)
====== ==== ====== =====
Basic and Diluted Loss Per Share: $(.08) $(.03) $(.66) $(.08)
Add Back: Goodwill Amortization 0 .01 0 .03
------ ---- ------ -----
Adjusted Net Loss $(.08) $(.02) $(.66) $(.05)
====== ==== ====== =====
NOTE 3 - BALANCE SHEET DETAILS
9/30/2002 12/31/2001
-------------- --------------
Accounts receivable $3,037,461 $3,936,044
Less allowance for doubtful accounts (323,741) (125,235)
--------- ----------
$2,713,720 $3,810,809
========= ==========
Inventory:
Raw materials $886,766 $927,575
Work in progress 41,750 270,242
Finished goods 236,863 463,186
--------- ---------
$1,165,379 $1,661,003
Less allowance for obsolete inventory (158,238) (88,059)
--------- ---------
$1,007,141 $1,572,944
========= =========
Property:
Computers and equipment $1,738,853 $1,357,615
Furniture and fixtures 219,953 219,953
Leasehold improvements 84,531 84,531
--------- ---------
2,043,337 1,662,099
Less accumulated depreciation (1,504,476) (1,174,697)
--------- ---------
$ 538,861 $ 487,402
========= =========
Goodwill $8,173,495 $9,102,022
Less accumulated amortization (3,283,412) (3,667,884)
--------- ---------
$4,890,083 $5,434,138
========= =========
Patent $1,633,323 $18,299,990
Less accumulated amortization (61,752) (4,692,000)
--------- ----------
$1,571,571 $13,607,983
========= ==========
NOTE 4 - LINE OF CREDIT AND NOTES PAYABLE
In September 2002, the Purchasers purchased the Company's line of credit from
the original issuing bank. The Company is required to meet certain restrictive
financial and operating covenants under the line of credit. Under the Loan
Modification Agreement (see Note 1), the bank replaced certain of the existing
covenants with new covenants. At September 30, 2002 the Company was not in
compliance with the new covenants. The interest rate at September 30, 2002 was
6.5% and the balance on the line of credit was $1,500,000.
The Loan Modification Agreement prohibits the Company from making principal
payments on notes payable to the two former owners of Enerdyne Technologies,
Inc. and has further prohibited making any future principal payments on the
notes until the balance of the line of credit has been fully paid. The maturity
dates of the notes have been extended through January 1, 2004, and the
note-holders permanently waived all events of default through May 29, 2002. The
balance of the loans at September 30, 2002 was approximately $4,752,000.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In October 2001, the Company received approximately $1.4 million satisfying in
full an obligation to be paid future guaranteed royalty payments totaling $2
million. The future guaranteed royalty payments had been due to be paid at
specified dates in 2003 and 2004. The $1.4 million received may be applied by
the payer against any royalties or certain purchases owed to the Company up to
the original amount of future guaranteed royalty payments of $2 million though
November 2004, adjusted for interest at 15 percent per annum. The Company has
not accrued for this potential contingency and does not believe it is probable
that the payment will be applied to royalties or purchases in the future.
NOTE 6 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION
The Company operates three reportable business segments: communications, video
compression and satellite transmission technology. The Company's reportable
segments are strategic business units that offer different products and
services. They are managed separately based on fundamental differences in their
operations.
The communications segment consists of the operations of Boatracs, Boatracs
Gulfport, ARCOMS Europe and OceanTrac Limited . The communications segment has
exclusive distribution rights in the United States for marine application of the
OmniTRACS(R) system of satellite-based communication and tracking systems
manufactured by QUALCOMM Incorporated ("QUALCOMM"). In addition, the Company's
wholly owned subsidiaries, Europe and OceanTrac, have agreements with QUALCOMM's
authorized service providers in Europe and Canada for marine distribution of
OmniTRACS(R) in parts of Europe and Canada. Gulfport is a provider of software
applications and service solutions to the commercial work boat and petroleum
industries, including customers of Boatracs.
The video compression segment consists of the operations of Enerdyne. Enerdyne
is a provider of versatile, high performance digital video compression products
and multiplexing equipment to government and commercial markets.
The satellite transmission technology segment consists of the operations of
ICTI. ICTI is engaged in designing and implementing bandwidth efficient
multimedia satellite networks and develops customized software solutions to
manage and allocate available satellite power/bandwidth resources to optimize a
satellite system's lifecycle costs.
Corporate overhead expenses have been allocated based on revenue percentages of
each segment to total revenues.
Information by business segment for the three months ended September 30, 2002 is
set forth below.
Commun- Video Satellite
Ications Compression Technology Consolidated
---------------- ---------------- ------------------ ---------------
Revenues $1,634,301 $727,276 $2,123,446 $4,485,023
(Loss) from
operations $(101,876) $(724,816) $(493,742) $(1,320,434)
Interest expense, net $10,898 $118,737 $13,496 $143,131
Depreciation and
amortization $24,339 $89,677 $26,524 $140,540
Information by business segment for the three months ended September 30, 2001 is
set forth below.
Commun- Video Satellite
ications Compression Technology Consolidated
---------------- ---------------- ------------------ -------------
Revenues $1,637,057 $707,546 $1,652,113 $3,996,716
Income (loss) from
operations $313,032 $(775,659) $(129,110) $(591,737)
Interest expense, net $10,365 $82,526 $10,502 $103,393
Depreciation and
amortization $53,160 $396,188 $153,242 $602,590
Information by business segment for the nine months ended September 30, 2002 is
set forth below.
Commun- Video Satellite
Ications Compression Technology Consolidated
---------------- ---------------- ------------------ -------------
Revenues $4,924,604 $2,635,589 $3,933,391 $11,493,584
(Loss) from
operations $(430,465) $(3,255,430) $(1,530,899) $(5,216,794)
(excluding asset
Impairment)
Asset impairment $544,055 $11,277,535 0 $11,821,590
Interest expense, net $44,891 $348,230 $35,187 $428,308
Depreciation and
amortization $78,430 $991,319 $77,836 $1,147,585
Total assets $1,438,128 $3,753,893 $6,744,567 $11,936,588
Information by business segment for the nine months ended September 30, 2001
is set forth below.
Commun- Video Satellite
Ications Compression Technology Consolidated
---------------- ---------------- ------------------ ------------
Revenues $5,081,656 $1,823,891 $4,823,257 $11,728,804
Income (loss) from
operations $833,882 $(2,445,560) $(201,180) $(1,812,858)
Interest expense, net $44,697 $390,221 $43,425 $478,343
Depreciation and
amortization $161,975 $1,172,669 $467,420 $1,802,064
Total assets $2,547,468 $20,283,121 $9,219,961 $32,050,550
The Company has two foreign subsidiaries: Europe and OceanTrac. Europe is
located in the Netherlands and provides communication services to the European
market. OceanTrac provides communication services in Eastern Canada. The
financial position and results of operations of our foreign subsidiaries are
generally determined using the U.S. dollar as the functional currency.
Transactional gains and losses are included in determining net income for the
period in which the exchange rate changes. Such amounts have remained immaterial
in the aggregate. In addition, Enerdyne and ICTI have foreign sales. The
following tables present revenues and long lived assets for each of the
geographical areas in which the Company operates:
Three months ended 9/30/02 Three months ended 9/30/01
Long Long
Revenues Lived Assets Revenues Lived Assets
United States $2,244,362 $2,392,280 $2,301,909 $15,364,874
International 2,240,661 0 1,694,807 2,366
--------- --------- --------- ----------
Total $4,485,023 $2,392,280 $3,996,716 $15,367,240
========= ========= ========= ==========
Nine months ended Nine months ended
9/30/02 9/30/01
Revenues Revenues
United States $ 6,984,046 $ 6,692,723
International 4,509,538 5,036,081
---------- ----------
Total $11,493,584 $11,728,804
========== ==========
NOTE 7 - SUBSEQUENT EVENTS
In January 2003, the Company signed an "Agreement of Mutual General Release"
("the Agreement") with a financial advisor (see Part 11, Item 1 - Legal
Proceedings) in full and final settlement of a claim previously made by the
advisor. Pursuant to the Agreement, the Company will pay the advisor $100,000
commencing January 2003 in ten equal installments of $10,000 each. In addition,
the Company issued a stock warrant to purchase 200,000 shares of the Company's
common stock at a price of $.21 per share. The warrant expires in October 2007
and is valued at $15,650. At September 30, 2002 the Company had accrued a total
expense of $115,000 in connection with the claim.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company has three business segments:
1. Boatracs, the communications segment,
2. Enerdyne Technologies, Inc. ("ENERDYNE"), the video compression
segment, a wholly owned subsidiary, and
3. Innovative Communications Technologies, Inc. ("ICTI"), the
satellite technology segment, a wholly owned subsidiary.
Statements within this Form 10-QSB which are not historical facts, including
statements about strategies and expectations for new and existing products,
technologies, and opportunities, are forward-looking statements that involve
risks and uncertainties. The Company wishes to caution readers to the risk
factors inherent to the business including, but not limited to, the continuing
reliance upon QUALCOMM, one of the major suppliers of equipment sold by the
Boatracs business segment, reliance upon QUALCOMM's Network Management Facility
through which the Boatracs' business segment message transmissions are formatted
and processed, the development of more advanced technology by competitors and
continuing technological innovation by the Company. These and other risks are
more fully described in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2001.
Critical Accounting Policies and Estimates
Valuation of long-lived and intangible assets and goodwill.
As discussed under Note 2, effective January 1, 2002, the Company adopted SFAS
No. 142 and reassessed the useful lives and residual values of all acquired
intangible assets. In the quarter ended June 30, 2002, the Company determined
that the value recorded for a patent was impaired utilizing an income approach
based on a relief from royalty method of valuation. As a result, the Company
recognized an impairment loss to the patent of $11,277,535 prior to a tax
benefit of $4,130,079 in the quarter ended June 30, 2002. In addition, the
Company recorded an impairment to goodwill recorded at Boatracs Gulfport and
Canada in the aggregate amount of $544,055 due to an evaluation of the
technology being used at Gulfport and future projected sales at both locations.
For the three months ended September 30, 2002 and 2001
Total revenues for the quarter ended September 30, 2002, were $4,485,023 an
increase of $488,307 or 12% compared to total revenues of $3,996,716 for the
quarter ended September 30, 2001.
Communications revenues, which consist of revenues from the sale of Boatracs
systems, software and data transmission and messaging, were $1,634,301 or 36% of
total revenues for the quarter ended September 30, 2002, compared to $1,637,057
or 41% of total revenues for the quarter ended September 30, 2001. Revenues from
the sale of Boatracs systems are recognized under SAB No. 101 over a three-year
period, the estimated period of time the Company provides messaging services to
its customers. Included in communications revenues are revenues from data
transmission and messaging revenues, which remained relatively constant and
software revenues, which decreased 68%.
Video compression revenues were $727,276 or 16% of total revenues for the
quarter ended September 30, 2002, an increase of $19,730 or 3%, compared to
$707,546 or 18% of total revenues in the prior comparable quarter. The increase
was primarily due to the completion of engineering and the sale of new products.
Revenues from satellite transmission technology were $2,123,446 or 47% of total
revenues for the quarter ended September 30, 2002 compared to revenues of
$1,652,113 or 41% of total revenues in the third quarter of 2001. The increase
in revenues of $471,333 or 29% is due primarily to an increase in system
integration revenues derived from a single contract.
Communications expenses were $748,461 or 46% of communications revenues for the
quarter ended September 30, 2002, an increase of $98,135 or 15%, compared to
$650,326 which represented 40% of communications revenue in the comparable
quarter of the prior year. Overall, gross margin for communications decreased 6%
to 54% from 60%, primarily due to the reduction in high margin software
revenues.
Video compression expenses were $165,967 or 23% of video compression revenues
for the quarter ended September 30, 2002 a decrease of $15,080 or 8% compared to
$181,047 or 26% of video compression revenues in the same period of the prior
year. Gross margin increased 3% to 77% in the third quarter compared to 74%
gross margin in the same quarter of the prior year.
Satellite transmission technology expenses were $1,727,011 or 81% of satellite
transmission technology revenues for the quarter ended September 30, 2002, an
increase of $822,415 or 91%, compared to $904,596 or 55% of satellite
transmission technology revenues in the prior year third quarter. The gross
margin decreased 26% to 19% from 45% in the prior year primarily due to
increased system integration contracts which had a lower margin compared to the
quarter ended September 30, 2001 which had greater royalty revenues with no
related cost of sales expenses.
Selling, general and administrative expenses were $3,099,668 or 69% of total
revenues for the quarter ended September 30, 2002, an increase of $584,077 or
23%, compared to $2,515,591 or 63% of total revenues in the prior comparable
quarter. Salary expense increased by approximately $300,000 due primarily to
severance agreements recorded in the third quarter. In August 2002, the Company
reduced its work force by 17%. In addition, highly paid employees' salaries were
reduced by 30% and the Chief Executive Officer's salary was reduced by 50%.
General office expenses increased $176,180 primarily due to the write off of
unamortized bank fees and moving expenses in connection with the relocation of
the corporate office to El Cajon, California. Insurance expense increased
$118,566 due to overall increases in director and officer liability, workers
compensation and health insurance. Amortization expense decreased $463,062 to
$71,764 due to the implementation SFAS No. 141 which eliminates the amortization
of goodwill and a $11.3 million write down of a patent in the quarter ended June
30, 2002 further reducing amortization expense.
Research and development expenses were $64,350 or 1% of total revenues for the
quarter ended September 30, 2002, a decrease of $272,543 or 81% compared to
research and development expenses of $336,893 or 8% of total revenues in the
prior comparable quarter. Research and development expenses for the quarter
ended September 30, 2001 have been restated (Note 1). The decrease in research
and development expenses is due to completion of product development programs
and to the use of engineering personnel in system integration activities.
Interest expense, net was $143,131 for the third quarter of 2002 and $103,393
for the third quarter of 2001, an increase of $39,738 or 38%.
The income tax expense for the quarter ended September 30, 2002 was $99,041
compared to an income tax benefit of $152,512 the prior comparable quarter.
For the nine months ended September 30, 2002 and 2001
Total revenues for the nine months ended September 30, 2002, were $11,493,584 a
decrease of $235,220 or 2% compared to total revenues of $11,728,804 for the
nine months ended September 30, 2001.
Communications revenues, which consist of revenues from the sale of Boatracs
systems, software and data transmission and messaging, were $4,924,604 or 43% of
total revenues for the nine months ended September 30, 2002, a decrease of
$157,052 or 3% compared to $5,081,656 or 43% of total revenues for the nine
months ended September 30, 2001. Revenues from the sale of Boatracs systems are
recognized under SAB No. 101 over a three-year period, the estimated period of
time the Company provides messaging services to its customers. Included in
communications revenues are revenues from data transmission and messaging which
decreased by 3% and software revenues which decreased by 28% in the nine months
ended September 30, 2002.
Video compression revenues were $2,635,589 or 23% of total revenues for the nine
months ended September 30, 2002, an increase of $811,698 or 45%, compared to
$1,823,891 or 16% of total revenues in the prior comparable period. The increase
was primarily due to increased sales of newly engineered products to commercial
markets and increased orders for existing products from Enerdyne's military
customers.
Revenues from satellite transmission technology were $3,933,391 or 34% of total
revenues for the nine months ended September 30, 2002 compared to revenues of
$4,823,257 or 41% of total revenues in the nine months ended September 30, 2001.
The decrease in revenues of $889,866 or 18% is due primarily to a reduction of
$600,382 in royalty revenues for the nine months ended September 30, 2002
compared to the prior comparable period. Royalty revenues for 2001 have been
restated (Note 1).
Communications expenses were $2,188,292 or 44% of communications revenues for
the nine months ended September 30, 2002, an increase of $50,951 or 2%, compared
to $2,137,341 which represented 42% of communications revenue in the comparable
quarter of the prior year. Overall, gross margin for communications decreased by
2% to 56%.
Video compression expenses were $917,669 or 35% of video compression revenues
for the nine months ended September 30 2002, an increase of $464,015 or 102%
compared to $453,654 or 25% of video compression revenues in the same period of
the prior year. Gross margin decreased 10% to 65% in the nine months ended
September 30, 2002 compared to a 75% gross margin in the same period of the
prior year due to increased costs of a long term project and the write off of
obsolete inventory in the second quarter of 2002.
Satellite transmission technology expenses were $2,612,788 or 66% of satellite
transmission technology revenues for the nine months ended September 30, 2002,
an increase of $439,640 or 20%, compared to $2,173,148 or 45% of satellite
transmission technology revenues in the prior nine month period. The decrease in
gross margin of 21% to 34% from 55% in the prior year relates primarily to a
reduction in royalty revenues for the nine months ended September 30, 2002
compared to the prior period which do not have associated costs of goods sold
and a reduction in margins on system integration revenues.
Selling, general and administrative expenses were $10,491,559 or 91% of total
revenues for the nine months ended September 30, 2002, an increase of $2,822,863
or 37%, compared to $7,668,696 or 65% of total revenues in the prior comparable
period. Salaries and related benefits increased by approximately $1.5 million,
primarily due to accrual of severance costs for terminated employees and to
shifting of engineering efforts from research and development activities. Other
increases in selling, general and administrative expenses were in bad debt
expense, consulting and general office expenses, and the recognition of costs
associated with the modification of the terms of previously issued options and
warrants and consulting fees associated with the Recapitalization Arrangement
(Note 1). In addition, the Company paid Qualcomm $500,000, to settle
distribution exclusivity issues (see Note 1). Amortization expense decreased by
$1,258,704 to $325,022 due to the implementation SFAS No. 141, which eliminates
the amortization of goodwill and a $11.3 million write off of a patent in the
second quarter of 2002 million further reducing amortization expense.
Research and development expenses were $500,070 or 4% of total revenues for the
nine months ended September 30, 2002, a decrease of $608,753 or 55% compared to
research and development expenses of $1,108,823 or 9% of total revenues in the
prior comparable period. Research and development expenses for the nine months
ended September 30, 2002 includes $150,400 of previously capitalized patent and
software development costs. Of this amount, $81,928 relates to a software
project that attained technological feasibility in 1999, but was abandoned in
the quarter ended June 30, 2002. The remaining $68,471 relates to projects where
the Company determined that the net realizable value was less than the amount
capitalized. Research and development expenses for the nine months ended
September 30, 2001 have been restated (Note 1).
Interest expense, net was $428,308 for the nine month period ended September 30,
2002 and $478,343 for the nine month period ending September 30, 2001, a
decrease of $50,035 or 10% due primarily to the repayment of the Company's term
note with a bank in the second quarter of 2001.
The income tax benefit for the nine months ended September 30, 2002 was
$3,787,561 compared to an income tax benefit of $502,690 in the prior comparable
period. The income tax benefit for the nine months ended September 30, 2002
included the reduction of deferred taxes related to values recorded for a
patent, which was written down substantially.
Liquidity and Capital Resources
The Company's cash balance at September 30, 2002 was $356,614, an increase of
$87,883 compared to the December 31, 2001 cash balance of $268,731. At September
30, 2002, working capital was negative $8,573,541 an increase in negative
working capital of $2,267,902 from the negative working capital of $6,305,639 at
December 31, 2001. Cash of $2,557,141 was used in operating activities, cash of
$87,839 was used in investing activities and cash of $2,732,863 was provided by
financing activities in the first nine months of 2002.
To date, the Company has financed its working capital needs through private
loans, bank debt, the issuance of common and preferred stock and cash generated
from operations. On May 31, 2002, the Company sold shares of its preferred stock
for gross proceeds of $4,000,000 and extended the maturity dates of its debt
agreements on a line of credit and to the two former owners of Enerdyne. (See
Note 1.)
The report of independent auditors on the Company's December 31, 2001 financial
statements includes an explanatory paragraph indicating there is substantial
doubt about the Company's ability to continue as a going concern. Although the
Company has entered into a recapitalization arrangement (see Note 1) under which
it received additional financing and restructured its current debt arrangements,
the Company does not have sufficient cash available to fund operations for the
next twelve months. In order to continue as a going concern, the Company must
raise additional funds and significantly reduce operating expenses. There can be
no assurance that additional funds will be available on acceptable terms, if at
all, or, in the absence of external funding that the Company will be able to
reduce operating expenses to the point where internal cash flow is sufficient to
fund operations. It is likely that any external funding, either debt or equity,
will be on terms that could result in substantial dilution to common
stockholders. If unable to achieve its fund-raising or operating expense
reduction goals, the Company's ability to conduct its business would be
materially adversely affected.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of filing this Form 10-QSB, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
the Company's Chief Financial Officer, of the effectiveness of design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chief
Executive Officer and the Company's Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material changes in information relating to the Company required to be
included in the Company's periodic SEC filings.
There have been no significant changes in the Company's internal controls or in
other factors which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any current or pending legal proceedings to which
the Company is a party and which may have an adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As of December 31, 2001 the Company was in default under its existing revolving
credit facility and subordinated notes due to failure to meet certain financial
ratio covenants and as such, balances were classified as current. In May 2002,
we entered into an amendment to our credit facility and subordinated notes,
which, among other provisions, waived the defaults that existed at December 31,
2001 and reset all covenants for 2002 and subsequent years and as such, the
balances were reclassified as long-term and current. At September 30, 2002 the
Company was not in compliance with the revised covenants and accordingly the
long-term debt has been classified as current. For further information see Note
4 to the condensed consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 29, 2002 the Company held its Annual Meeting of Stockholders in El
Cajon, California. The following directors were elected:
SHARES
AUTHORIZED
DIRECTOR TO VOTE: VOTES FOR VOTES AGAINST
Elected by Series C-1 and C-2 Preferred Stockholders:
Brandon Nixon 10,763,441 10,763,441 0
Joseph Niehaus 10,763,441 10,763,441 0
Elected by Series C-3 Preferred Stockholders:
Harvey Gettleson 1,068,482 1,060,856 0
Elected by shareholders of all classes of stock:
Michael Silverman 33,190,149 24,477,141 3,219,317
Mohammed Abutaleb 33,190,149 24,493,214 3,203,244
In addition, an amendment to the ARCOMS 1996 stock option plan was approved,
increasing the number of available shares in the plan to 7,500,000 from
6,000,000.
AUTHORIZED
TO VOTE FOR AGAINST
33,190,149 19,139,055 3,853,139
There were no other proposals at the meeting.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
In June 2002, the Company filed Form 8-K advising the Securities and Exchange
Commission of a change in control. Amendment No. 1 to the 8-K was filed July 19,
2002 and Amendment No. 2 was filed August 26, 2002.
Exhibits
99.1 Written Statement of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350.
99.2 Written Statement of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350.
99.3 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of 2002 by the Chief Executive Officer.
99.4 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial
Officer.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the Undersigned,
thereunto duly authorized.
ADVANCED REMOTE COMMUNICATION SOLUTIONS, Inc.
Registrant
January 27, 2003 /s/ BRANDON L. NIXON
Date BRANDON L. NIXON
CHIEF EXECUTIVE OFFICER
CHAIRMAN
January 27, 2003 /s/ PAUL WICKMAN
Date CHIEF FINANCIAL OFFICER
EXHIBIT 99.1
Written Statement of the Chief Executive Officer
Pursuant to 18 U.S.C. ss.1350
Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned
Brandon L. Nixon of Advanced Remote Communication Solutions, Inc. (the
"Company"), hereby certify, that to the best of my knowledge, the Quarterly
Report on Form 10-QSB of the Company for the quarter ended September 30, 2002
(the "Report") fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ BRANDON L. NIXON,
Chief Executive Officer
January 27, 2003
EXHIBIT 99.2
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. ss.1350
Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned
Paul P. Wickman of Advanced Remote Communication Solutions, Inc. (the
"Company"), hereby certify, that to the best of my knowledge, the Quarterly
Report on Form 10-QSB of the Company for the quarter ended September 30, 2002
(the "Report") fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ PAUL P. WICKMAN
Chief Financial Officer
January 27, 2003
Exhibit 99.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brandon L. Nixon, Chief Executive Officer of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Advanced Remote
Communications Solutions, Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a statement of
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the evaluation date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Dated: January 27, 2003
Signed:
/s/ BRANDON L. NIXON
Chief Executive Officer
Exhibit 99.4
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul P. Wickman, Chief Financial Officer of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Advanced Remote
Communications Solutions, Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a statement of
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the evaluation date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Dated: January 27, 2003
Signed:
/s/ PAUL P. WICKMAN
Chief Financial Officer