UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHNAGE ACT OF 1934.
For the Quarterly Period Ended June 30, 2001
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transaction period from 04-01-2001 to 06-30-2001
Commission file number 000-23051
WIRELESS DATA SOLUTIONS, INC.
(Name of small business issuer as specified in its charter)
Utah 93-0734888
(State of Incorporation) (I.R.S. Employer Identification No.)
2233 Roosevelt Road
Suite #5
St. Cloud, MN 56301
(Address of principal executive offices)
(320)203-7477
(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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Not Applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the practicable date:
There was 11,199,000 shares of the Issuer's common stock
outstanding as of June 30, 2001.
PART I
Wireless Data Solutions, Inc. And Subsidiaries
Consolidated Balance Sheet
June 30, 2001 and 2000
ASSETS
June 30, 2001 June 30, 2000
(Unaudited) (Unaudited)
Current Assets:
Cash and cash equivalents $41,994 $389,131
Trade accounts receivable, net of
$6,000 estimated allowance for
doubtful accounts 351,671 339,049
Inventory 112,608 134,942
Prepaid expenses 4,860 0
Total Current Assets 511,133 863,122
Fixed Assets
Office fixtures and equipment 72,049 17,983
Leasehold Improvements 12,894
Sub-Total 72,049 30,877
Less: Accumulated Depreciation
and Amortization 31,376 27,927
Net Fixed Assets 40,673 2,950
Other Assets:
Prepaid service contract 76,085 111,275
Due from related parties 7,201 2,942
Security deposits 3,113 3,113
Total Other Assets 86,398 117,341
TOTAL ASSETS $638,204 $983,413
LIABILITIES
June 30, 2001 June 30, 2000
(Unaudited) (Unaudited)
Current Liabilities:
Trade accounts payable $296,289 $134,166
Payable in stock 95,278 20,800
Notes Payable 50,000
Current portion of other liabilities 55,457
Advance from Customers 17,285
Other accrued liabilities 8,381 2,393
Total Current Liabilities 449,949 230,101
Other Liabilities:
Accrued salaries, related payroll
taxes, reimbursable expenses
payable to officers 292,916 285,241
Less: Current portion 0 0
Total Other Liabilities 292,916 285,241
TOTAL LIABILITIES 742,865 515,342
Minority interests in consolidated
subsidiaries 20,000 20,000
STOCKHOLDERS' DEFICIENCY:
Preferred Stock, $.002 par value;
3,000,000 shares authorized;
no shares issued or outstanding 0 0
Common Stock, $.001 par value;
25,000,000 shares authorized;
11,199,000 shares issued and
outstanding at 06/30/2001
& 10,917,124 at 06/30/2000. 11,199 10,917
Common Stock options outstanding
Additional paid-in-capital 2,061,850 2,007,834
1,927,969
Deficit (2,197,710) (1,570,680)
Sub-Total (124,661) 448,071
Total Stockholders' Equity (124,661) 448,071
TOTAL LIAB. & STOCKHOLDERS' EQUITY $638,204 $983,413
Wireless Data Solutions, Inc. And Subsidiaries
Consolidated Statement of Earnings
For the Three Month Periods Ended, June 30, 2001, and 2000
June 30, 2001 June 30, 2000
(Unaudited) (Unaudited)
REVENUES
Net product sales $1,134,350 $1,525,391
Other Income (1,969) 200,403
Total Revenues 1,132,381 1,725,793
COST OF SALES
Products 442,696 657,527
Total Cost of Sales 442,696 657,527
Gross Profit 689,685 1,068,266
Operating Expenses 1,145,083 854,615
Income before Interest (455,398) 213,651
Interest expense, net of
interest income 0 0
Income before taxes (455,398) 213,651
Provision for income taxes 0 0
NET EARNINGS ($455,398) $213,651
Wireless Data Solutions, Inc. And Subsidiaries
Consolidated Statement of Cash Flows
For The Three Month Periods Ended June 30, 2001, and 2000
June 30, 2001 June 30, 2000
Operating Activities:
Net Income ($455,398) $213,651
Changes in Operating Assets
and Liabilities:
Decrease (Increase) in
accounts receivable (184,193) (70,203)
Decrease (Increase) in inventory 67,472 96,568
Decrease (Increase) in other assets 7,512 17,058
(Decrease) Increase in
accounts payable 158,492 (28,039)
Increase in advances
from customers (15,255) (90,503)
(Decrease) Increase in
other payables 68,437 (54,048)
Decrease in deferred
service contract 23,381 35,429
Net cash provided by
operating activities (279,552) 119,913
Investing Activities:
Proceeds of miscellaneous assets 5,039 (2,950)
Financing Activities:
(Decrease) in due from
related parties (2,466) 287,057
(Decrease) Increase in due
to related parties
and related expenses 7,675 (283,176)
(Decrease) Increase in
common stock
options outstanding 0 (11,250)
Increase in related entity for
Sale of Common Stock 0 48,773
Proceeds of issuance of
common stock 54,298 80,600
Net cash provided by financing
activities 59,507 122,004
Net increase in cash (215,006) 238,967
Cash at beginning of period 256,986 150,165
Cash at end of period $41,980 $389,131
Wireless Data Solutions, Inc. And Subsidiaries
Consolidated Statement of Stockholders' Equity
For The Three Month Periods Ended June 30, 2001, and 2000
Common Additional
Common Stock Options Paid-In
Stock Outstanding Capital
Balance at September 30, 2000 $10,917 $0 $2,007,834
Net Earnings for the period
ended June 30, 2001
Issuance of common stock
Stock issued to cancel
debt to officer 282 54,016
Sub-Total 11,199 0 2,061,850
Receivable from related
Entity for sale of common
stock
Balance at June 30, 2001 $11,199 $0 $2,061,850
Common Additional
Common Stock Options Paid-In
Stock Outstanding Capital
Balance at September 30, 1999 $10,182 $11,250 $1,927,969
Net Earnings for the period
ended June 30, 2000
Issuance of common stock 10 (11,250) 8,090
Stock issued to cancel
debt to officer 725 71,775
Sub-Total 10,917 0 2,007,834
Receivable from related
Entity for sale of common
stock
Balance at June 30, 2000 $10,917 $0 $2,007,834
Deficit Total of Rows
continued From above
Balance at September 30, 2000 ($1,742,312) $276,439
Net Earnings for the period
ended June 30, 2001 (455,398) (455,398)
Issuance of common stock 0
Stock issued to cancel debt
to officer 54,298
Subtotal (2,197,710) (124,661)
Receivable from related entity
for sale of common stock
Balance at June 30, 2001 ($2,197,710) ($124,661)
Deficit Total of Rows
continued From above
Balance at September 30,1999 ($1,784,331) $165,070
Net Earnings for the period
ended June 30, 2000 213,651 213,651
Issuance of common stock (3,150)
Stock issued to cancel debt
to officer 72,500
Subtotal (1,570,680) 448,071
Receivable from related entity
for sale of common stock
Balance at June 30, 2000 ($1,570,680) $448,071
Part 1
Notes to Financial Statements
Summary of Accounting Policies
The summary of Wireless Data Solution's, Inc.(the "Company")
significant accounting policies are incorporated by reference to
the Company's Registration Statement filed on Form 10-SB, as amended,
dated February 12, 1998.
The accompanying unaudited consolidated financial statements reflect all
adjustments which, in the opinion of management, are necessary for a
fair presentation of the results of operations, financial position and
cash flows. The results of the interim period are not necessarily
indicative of the results for the full year.
This report does not include the customary auditor's review as the
company changed auditors for reasons specified in the 8K filed on
February 21, 2001 and amended on April 12, 2001. In essence the auditor
was not in compliance with certain SEC requirements. On review the
situation could not be rectified in the near term to provide a timely
opinion. The audit process has been progressing and the new audit firm
is near the completion of their work and the results are expected to be
filed in August. The results of operations are not expected to vary,
however, changes to some balance sheet items are anticipated.
Company Background Information
The following background information is deemed important in conjunction
with the data provided in the financial statements for the period ending
June 30, 2001.
Revenues for the first three quarters ended June 30 were down
approximately $593,000. Management believes there are several factors
associated with the reduction in revenue. Those factors are addressed
under results of operations. Management understands that the company
must move to a new level to regain profitability. To that end the
company has been focusing on the acquisition of new technology and
enhancing the existing technology. The company has developed an auto
status product, which is targeted to the aggregate side of the redi-mix
market. The waste management market has also shown strong interest in
the new auto status unit. The product is presently in beta testing with
a company dealing in aggregate. The company has been working with
several investment banking groups in pursuit of funds to move the
projects along. Management recognizes that current capital market
conditions are such that they can reasonably be called a "sellers
market." The company will continue to search for the best terms
possible.
Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources
The company's current assets totaled approximately $511,000 compared to
$863,000 one year ago. The primary difference is the change in the cash
position from one year ago. There was a decline in cash holdings of
approximately $348,000.
Last year the company experienced a large influx from the cancellation
of the Varitek contract. The one time event netted $200,000 to the cash
position. The current decline is most attributable to decreased revenues
and the increased costs associated with the new audit, legal fees
resulting from the lawsuit described under legal proceedings, and
contract engineering fees, which are a part of product enhancement and
new developments. The other major current asset, accounts receivable is
up slightly compared to one year ago, however, the company has since
begun to collect those receivables. The company finished the development
of a new version of software, which was distributed to the problem
account's, which has resolved the software issues.
The cash and cash equivalents were down approximately $348,000. That
change required the company to arrange a loan of $50,000 from one of its
major shareholders to increase the cash reserves. That loan is shown
under notes payable.
Management is in the process of obtaining new equity capital, which will
provide the company working capital and enable it to realize its growth
objectives.
Management believes that current cash balances, receivable balances, and
additional equity capital will adequately fund operations and expenses
near term.
Results of Operations
Revenues for the first three quarters of the year totaled approximately
$1,132,000 compared to $1,725,000 one year ago. Management does not
believe one single issue is responsible for the decline, rather it
believes there are multiple factors, the general economy has been very
hard on companies in the telecommunications field. The company needs to
have a more diverse product line with enhanced features. The company
also needs to be active in other market segments, which can employ our
core technology. The company has invested significant resources in
pursuing those goals and has an auto status product in beta testing with
a California aggregate company, which was an appeal to other market
segments.
The company incurred a loss of approximately $455,000 compared to a gain
of approximately $213,000 for the same period one year ago. The revenue
derived from the cancellation of the Varitek agreement, which
contributed $200,000 to last years profit position. Legal and accounting
fees exceeded last years costs, by approximately $80,000. The excess
costs were incurred in connection with the lawsuit described in legal
proceedings and redoing the audit. Also engineering costs exceeded last
years expenses by a figure in excess of $110,000, the excess
expenditures were associated with the new product development. Also
there were significant legal costs involved in the due diligence related
to the acquisition of an advanced auto status technology, which includes
sensing. There was also increased travel expense. The reduced revenue
was also a major contribution to the loss.
The increase in trade payables also reflects the high costs of the
litigation. The payable in stock was increased due to the stock, which
is to be issued to Robert Chase under his employment contract. Mr. Chase
is owed 123,750 shares under that arrangement. Mr. Chase is the
President of Dinet. Pat Makovec is owed 100,000 shares and Brian
Blankenburg is owed 200,000 shares. Those shares were accrued as part of
their salaries for calendar year 2000.
Financial Condition
Cash holdings for the corresponding period one year ago decreased
approximately $348,000. Increased expenditures for product development,
legal and accounting expense, and travel expense were major factors. The
decline in revenues was also a major factor.
Subsequent Events
The company has substantively agreed to a settlement in the lawsuit
described under legal proceedings.
Forward-Looking Statements
The foregoing and subsequent discussion contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, which are
intended to be covered by the safe harbors created thereby. These
forward-looking statements include the plans and objectives of
management for future and possible further capitalization of the
Company. These forward-looking statements contained herein are based on
current expectations that involve numerous risks and uncertainties.
Assumptions relating to such current expectations involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond and
control of the Company. Although the Company believes that the
assumptions are accurate, there can be no assurance that the assumptions
included in this Form 10-QSB will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be
regarded as a representation of the Company or any other person that the
objectives and plans of the Company will be achieved.
PART II
Item 1. Legal Proceedings.
A former customer filed an action against the company alleging certain
problems, which developed with equipment the company sold them, on or
about December, 1995. The complaint includes claims against Dinet for
breach of express warranty, and for punitive damages and attorney's
fees, all in an amount in excess of $150,000. The action was filed on
September 7th, 1999. All parties have agreed to a negotiated settlement
the company's share would be $175,000, $75,000 would be paid in
restricted common stock, with the balance to be paid in cash beginning
on January 1, 2002. There would be no interest charged on the balance as
long as the company is not in default of the agreement. Management was
of the opinion that for their expenditures of resources, by way of a
trial, was to much of a risk compared to what might have been gained and
accepted the settlement.
Item 2. Changes in Securities and Use of Proceeds.
On May 1, 2000, The Company issued 10,000 shares of its common stock to
a consultant in payment for services. At the time of issuance, the
consultant was advised that the shares were registered on Form S-8 and
could be freely re-sold. The consultant sold the shares in July, 2000,
in broker's transactions, at prevailing market rates.
Thereafter, on January 2, 2001, the Company issued 50,000 shares of its
common stock to a second consultant, also in payment for services. This
second consultant was also advised by the Company that the shares were
registered on form S-8 and could be freely re-sold. The consultant sold
3,500 of these shares on June 2, 2001, and an additional 3,000 were sold
on June 13, 2001. Both of these re-sales were effected in broker's
transactions at prevailing market prices.
The advice given by the Company to each consultant was erroneous; none
of the shares mentioned above was registered at the time of issuance,
and the exemption from registration afforded by Regulation D may not
have been available. It is possible, therefore, that each of the
issuances occurred in violation of the registration requirements set
forth in Section 5 of the Securities Act of 1933, and that resale by the
consultants of a total of 16,500 of such shares was likewise in
violation of Section 5.
The Company regrets the error, which has resulted in the creation of
16,500 freely-tradable shares in possible violation of the Securities
Act of 1933.
Item 3. Defaults Upon Senior Securities.
There has been no material default in the payment of principal,
interact, a sinking or purchase fund installment, of any other material
default not cured within 30 days with respect to any indebtedness of the
Company exceeding five percent (5%) of the total assets of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's
security holders during the fiscal quarter covered by this report.
Item 5. Other information.
The Company has no other information to report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
2.1* Agreement dated March 1, 1984, between
Heartland Oil & Mineral Corporation and
Gold Genie Worldwide, an Oregon partnership
2.2* Buy/Sell Agreement dated March 1, 1984,
between the Company and Heartland Oil &
Mineral Corporation
3.1* Articles of Incorporation of Gold Genie
Worldwide, Inc., filed on March 7, 1984.
3.2* Certificates of Amendment to the Articles
of Incorporation of Products, Services, &
Technology Corporation, filed on June 13, 1988
3.3* Articles of Domestication of Products, Services
and Technology Corporation, filed on June 2,
1997.
3.4* Articles of Amendment to the Articles of
Incorporation of Products, Services and
Technology Corporation, filed on June 13, 1997
3.5* Bylaws of Products, Services and Technology
Corporation dated as of June 2, 1997
10.1* Settlement Agreement and Release dated December
17, 1987, between Heartland Diversified
Industries, Inc., the Company, and certain
individuals
10.2* Agreement, dated April 19, 1988, by and between
the Company, Heartland Diversified Industries,
Inc., Distributed Networks, Inc., and certain
shareholders of Distributed Networks, Inc.
10.3* Buy/Sell Agreement, dated March 27, 1996, by
and between the Company and Heartland
Diversified Industries, Inc.
10.4* Consulting Agreement dated April 15, 1997,
among Products, Services and Technology
Corporation, David Wood and Henry Hanson
11 Statement regarding computation of per share
earnings
24 Power of Attorney
27 Financial Data Schedule
99* Gold Genie Worldwide, Inc. Offering Prospectus,
dated July 24, 1985
1 Summaries of all exhibits contained in this Registration Statement
are modified in their entirety by reference to such exhibits.
* Incorporated by reference herein to the Company's Form 10-SB, as
amended, dated as of February 12, 1998.
(b) Forms 8-K filed during the last quarter. None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
August 16, 2001 WIRELESS DATA SOLUTIONS, INC.
/s/ Patrick Makovec
Patrick Makovec
Chairman of the Board