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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10QSB/A
X QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE
SECURITIES EXCHNAGE ACT OF 1934. June 30, 2002
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transaction period from ______ to ______
Commission file number 333-47395
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 were 15,142,434 shares of the Issuer's common stock
outstanding as of December 6, 2002.
Table of Contents
Financial Information
Part I
Item I Financial Statements
Item II Management's Discussion and Analysis or plan of Operation.
Part II
Item I Legal Proceedings
Item II Changes in Securities
Item III Defaults upon Senior Securities
Item IV Submission of Matters to a vote of security holders
Item V Other Information
Item VI Exhibits on Reports on Form 8K
Item 1
WIRELESS DATA SOLUTIONS, INC. AND SUBSIDIARY
Consolidated Balance Sheet
June 30, 2002
Assets
Current Assets
Cash and cash equivalents $ 83,814
Trade accounts receivable, net of estimated
allowance for doubtful accounts of $68,000 182,670
Inventory 91,812
Prepaid expenses 7,020
Total Current Assets 365,316
Property and Equipment
Office fixtures and equipment 59,155
Leasehold improvements 12,894
72,049
Less: accumulated depreciation 48,716
Net Property and Equipment 23,333
Other Assets
Security deposits 5,636
Total Assets $ 394,285
Liabilities and Stockholders= Equity (Deficiency)
Current Liabilities:
Note payable - stockholder $ 50,000
Accounts payable and accrued expenses 201,879
Other current liabilities 10,236
Total Current Liabilities 262,115
Other Liabilities:
Due to officers 14,696
Total Liabilities 276,811
Minority interests in consolidated subsidiaries 20,000
Commitment and contingencies
Stockholders= Equity (Deficiciency)
Preferred stock, $.002 par value; 3,000,000 shares
authorized; no shares issued or outstanding -
Common stock, $.001 par value; 25,000,000 shares
authorized; 15,142,434 issued 15,142
Common stock to be issued 410,126
Additional paid-in capital 2,373,962
Accumulated deficit (2,701,756)
Total Stockholders= Deficiency 97,474
Total Liabilities and Stockholders= Deficiency $ 394,285
WIRELESS DATA SOLUTIONS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Nine Months Ended June 30, 2002 and 2001
2002 2001
(Restated)
Revenue
Net product sales $ 814,852 $ 1,134,350
Repairs and maintenance 35,060 -
Total Revenue 849,912 1,134,350
Cost of sales 289,254 442,696
Gross profit 560,658 691,654
Operating expenses 534,581 1,153,907
Operating income (loss) 26,077 (462,253)
Other Income (expense)
Other expenses - (1,969)
Interest income 40 -
Other income (expense) 40 (1,969)
Net income (loss) $ 26,117 $ (464,222)
Basic and diluted income (loss) per common share $ .002 $ (.042)
Weighted average common shares outstanding 12,660,170 10,950,457
WIRELESS DATA SOLUTIONS, INC. AND SUBSIDIARY
Consolidated Statement of Changes in Stockholders= Equity
For the Nine Months Ended June 30, 2002
Common Stock Common
Number Additional Stock
of Paid-in Accumulated to be
Shares Amount Capital Deficit Issued Total
Balance, September 30, 2000 (Restated) 10,917,124 10,917 $2,007,834 $ (2,098,948) $ 29,545 $ (50,652)
Stock to be issued for services at
$.41 - - - - 175,000 175,000
Stock to be issued for services at
$.38 - - - - 15,675- 15,675
Issuance of common stock for services
at $.375 50,000 50 18,700 - (8,745) 10,005
Stock to be issued for services at
$.55 - - - - 22,687 22,687
Stock to be issued for services at
$.11 - - - - 33,000 33,000
Stock to be issued for services st
$.58 - - - - 23,916 23,916
Net loss for the nine months ended
June 30, 2001 (Restated) - - - (464,222) - (464,222)
Balance, June 30, 2001 10,917,124 $ 10,967 $2,026,534 $ (2,563,170) $ 291,078 $ (234,591)
Balance, September 30, 2001 10,967,124 $ 10,967 $2,026,534 $ (2,727,873) $ 593,729 $ (96,643)
Issuance of common stock for services
at $.04 per share 450,000 450 17,550 - - 18,000
Issuance of common stock for services
at $.41 per share 182,296 182 74,818 - (75,000) -
Issuance of common stock to be issued
at $.20 per share 543,014 543 108,060 - (108,603) -
Issuance of common stock to be issued
at $.05 per share 3,000,000 3,000 147,000 - - 150,000
Net income for nine months ended
June 30, 2002 - - - 26,117 - 26,117
15,142,434 $15,142 $2,373,962 $ (2,701,756) $ 410,126 $97,474
WIRELESS DATA SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine Months Ended June 30, 2002 and 2001
2002 2001
(Restated)
Cash provided by (used in)
Operating activities:
Net income (loss) $ 26,117 $ (464,222)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 12,201 10,877
Common stock to be issued for services - 10,005
Issuance of common stock for services 18,000 95,278
(Increase) decrease in assets:
Accounts receivable (48,515) (184,184)
Inventory 32,729 67,472
Prepaid expenses and other assets (2,171) 7,512
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (104,820) 208,300
Advances from customers (5,828) (15,255)
Net cash used in operating activities (72,287) (264,217)
Cash Flows from Investing Activities:
Purchase of property and equipment - (6,534)
Cash Flows from Financing Activities:
Proceeds from issuance of notes receivable - 50,000
Proceeds from issuance of common stock 150,000 -
Proceeds from stock to be issued - -
Repayment to officers (5,900) -
Net cash provided by financing activities 144,100 50,000
Net Increase (Decrease) in Cash and Cash Equivalents 71,813 (220,751)
Cash and cash equivalents, beginning of period 12,001 262,745
Cash and cash equivalents, end of period $ 83,814 $ 41,994
WIRELESS DATA SOLUTIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Statements
For the Nine Months Ended June 30, 2002
Note 1 - General
These consolidated financial statements have not been audited. In the opinion of
management, the consolidated financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the financial position
of Wireless Data Solutions, Inc. (WDS) and its majority-owned subsidiary, Distributed
Networks, Inc. (Dinet) (collectively, the Company). as of June 30, 2002, the results of
operations for the nine months ended June 30, 2002 and 2001 and the cash flows for the
nine months ended June 30, 2002 and 2001. However, the operating results and cash
flows for the interim periods may not be indicative of the results expected for a full
year.
Certain information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles have
been omitted. It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto included in the
Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended September 30, 2001.
Note 2 - Related Party
The names and relationships of the related parties referred to in these notes are set forth
below:
Patrick L. Makovec is Chairman/Treasurer of Dinet and WDS, and 8.3%
stockholder in WDS. In addition, the Company owes Mr. Makovec $11,619 for
business expense outlays.
Brian Blankenburg, director of WDS and Dinet, and former president of Dinet, is a
4.8% shareholder in WDS. The Company owes Mr. Blankenburg $20,800 in
common stock for consulting services performed before taking office as president
and a bonus for the year 2001. In addition, the Company owes Mr. Blankenburg
$22,000 for a 2000 performance bonus and $1,764 for various business expense
outlays.
Note 2 - Related Party Transactions and Relationships (continuation)
Prior the 1994, an officer, Patrick Makovec, elected to leave the major portion of his
salary and expenses as a way of infusing additional cash in WDS thereby enabling WDS
to continue its growth pattern. Such salary and expenses was to be disbursed as
management determined, assuming cash flow is adequate. All related salaries and tax
items have been expensed so that there would be no effect on future earnings. On
September 30, 2001, Mr. Makovec converted $250,402 of debt to common stock to be
issued at $.25 per share The officer has waived the accrued interest on balances from
October 1, 1999 through June 30, 2002.
On August 2, 2000 the Company entered into an employment agreement with Robert
Chase, who succeeds Mr. Blankenburg as President of Dinet. (Mr. Blankenburg will
continue to serve as President and CEO of WDS.). Mr. Chase receives certain stock
incentives and a severance package in addition to the normal salary of $85,000 per year
and bonuses. At the end of 2001, Mr. Chase has accumulated 265,000 shares of common
stock all of which is restricted and is stock to be issued at September 30, 2001. This one
time benefit to Mr. Chase encouraged him to join the Company. The severance package
contains a sliding payment schedule based on longevity. After three years his severance
would be approximately $85,000. In addition, $1,313 is due to Mr. Chase at June 30,
2002.
Note 3 - Equity - Stock to be Issued
Contract Services Shares Amount
During the period November 1998 through February
1999, Brian Blankenburg performed consulting
services for the Company, in return for common stock
to be issued at .1089 per share.
190,981
$ 20,800
Employment Agreement
Pursuant to an employment agreement dated August
2000, Robert Chase is entitled to restricted common
stock to be issued for the following periods of
employment:
August 2000 - November 2000 @ $.38 per share
December 2000 - February 2001 @ $.55 per share
March 2001 - May 2001 @ $.58 per share
June 2001 - August 2001 @ $.309 per share
41,250
41,250
41,250
141,250
15,675
22,687
23,925
43,637
Stock Bonuses
As per the actions of the Board of Directors on January
2, 2001, the Company declared the following bonuses
payable in a common stock:
Pat Makovec - @ $.11 per share
Brian Blankenburg - @ $.11 per share
100,000
200,000
11,000
22,000
Conversion of Debt
As per the actions of the Board of Directors, Pat
Makovec converted $250,402 of debt to common stock
to be issued at $.25. The conversion was effective
September 30, 2001 and was ratified by the board on
June 11, 2002.
Pat Makovec - @ $.25 per share
1,001,608
250,402
$ 410,126
Note 4 Restatement of Materials Presented in the quarterly
report filed for the quarter ending 3/31/01.
The numbers presented on the 6/30/01 quarterly report were
restated to reflect the numbers which were presented in the
9/30/01 audit. The company's 6/30/01 quarterly report was not
reviewed by the auditing firm.
Note 5 Going Concern
The cost reduction program has been very successful and was a
major reason for the company's return to profit ability.
However, there are a number of other factors, over which
management has no control, which will have an impact on the
company's future. The general economy and technological
changes are two major factors, which will affect the future
and ultimately the company's success.
Item 2
Management's Discussion and Analysis of Financial Conditions &
Results of Operations
This discussion may include certain "forward looking" statements
that reflect our current views with respect to future events and
financial performance. Investors should be aware that actual
results may differ materially from our expressed expectations
because of risks and uncertainties inherent in future events;
particularly those risks identified and set forth below, and
should not unduly rely on these forward looking statements. We
undertake no duty to update the information in this discussion if
any forward looking statement later turns out to be inaccurate.
Business Issues
The need to significantly up-grade mobile data terminal hardware
technology was recognized in a 2000 fiscal year WDS management
business review that included discussions with existing and
potential customers, projected wireless fleet tracking growth
trends that included primary and secondary research sources, a
competitive analysis and an internal capabilities assessment of
DINET. The analysis also determined that the core assets of WDS
were identified as DINET'S substantial customer base in the
concrete construction segment, the broad awareness that DINET
produced high quality mobile data computers, and the publicly
traded stock of WDS that could be utilized to secure capital.
The result of this business review was a strategic business
decision to acquire advanced hardware technologies that would
enhance our competitive position in the concrete construction
market as well as other vertical markets rather than to develop
them internally. The rationale for this decision was based upon
the projected high R&D costs and the long-time frame associated
with internal development. Additionally the review determined
that there were a broad variety of advanced wireless hardware and
software products with significant market potential that had been
designed in small private companies that were under exploited due
to a lack of available capital to market and manufacture the new
technology.
WDS management believed that an "acquisition strategy" would
enable the company to continue to be a leading provider of
wireless fleet tracking technology to the Ready Mixed market, and,
at the same time, enable WDS to exploit other new vertical market
opportunities due to the significant wireless growth opportunities
in vehicle fleet management.
Implementation of the technology acquisition strategy in FY2001
and through the first quarter of FY2002 was impeded for several
reasons:
? In one instance, the proposed acquisition by the company of
very advanced and implemented technology was stymied by
questions about applicable patent rights discovered during the
course of the company's due diligence. While WDS received two
patent attorney opinions that the firm could probably win a
patent challenge the firm did not have the financial resources
to support the extended challenge.
? In FY 2001 the SEC notified WDS management that the auditing
firm that had completed the firms FY2000 audit had not
maintained their continuing education requirements and the SEC
made a determination that WDS had to re-submit their FY2000
audit. However a marked decrease in revenues during fiscal
2001, continuing in fiscal 2002, had deprived the company of
the cash resources needed to pay a new auditing firm to
resubmit the FY2000 audit as well as pay for the FY2001 audit.
As a consequence, completion of the company's Annual Report on
Form 10-KSB for the year ended September 30, 2001, and of
subsequent quarterly reports, was substantially delayed,
thereby, in turn, inhibiting the company's ability to pursue
acquisitions involving use of the company's common stock as a
medium of payment.
? Sales in FY2001 declined approximately 28% from FY2000
significantly impacting the cash flow essential to implementing
the acquisition strategy.
? A customer filed a complaint against Dinet alleging certain
problems with equipment purchased in December 1995 (three years
prior to the employment of the current presidents of both WDS and
Dinet). The complaint included claims against Dinet for breach of
express warranty. This action by the customer also included the
manufacturers of the two-way radio system the customer had
purchased as well as the spectrum network provider. WDS settled
its portion of the action out of court for $175,000. The payment
terms for the settlement include $75,000 worth of WDS common
stock to be issued at $0.41 per share and $100,000 worth of WDS
common stock to be issued at $0.20 per share. The final
settlement was reached in April 2002 (the third quarter of
FY2002) and the stock issued in accordance with the terms of the
agreement. Additionally the legal costs for WDS in defending the
company against this complaint exceeded $100,000.
These business setbacks made it essential for WDS to secure
additional capital to re-submit the fiscal year 2000 audit and
complete the 2001 audit that would bring its filings current.
Subsequently WDS was able to sell common stock in a private
placement and raise $150,000. Management also decided that it was
important to reduce the debt on the WDS balance sheet so that WDS
would be able to resume acquisition and/or merger discussions with
a clean balance sheet. Consequently in the first quarter of FY2002
the WDS management implemented a cost and debt reduction strategy
enabling the company to eliminate over $400,000 in debt in
exchange for common stock. The stock issued or to be issued will
be restricted.
RESULTS OF OPERATIONS (3rd qtr. FY2002)
Total revenue for the first three-quarters of FY2002 was $849,912
versus $1,134,350 for the first three-quarters of FY2001. This was
a decline of $284,438 or 25.1%.
The gross profit for the first three-quarters of this fiscal year
were $560,658 compared to $691,654 for the first three-quarters of
FY2001. This was a 18.9% decline in gross profits. However the
gross profits as a percentage of total revenues in FY2002 showed a
small increase moving to 66% as compared to 61% for the same time
period in FY2001. This increase can be directly attributed to
lower operating expenses.
The cost of sales for the first three-quarters of FY2002 was
$289,254 versus $442,696 for the same time period in FY2001. As a
percent of sales the results were quite consistent from year to
year.
Operating expenses for the first three-quarters of FY2002 were
$534,581 versus $1,153,907 during the same time frame in FY2001.
This was a decrease of $619,326 or 53.7%. This decline was a
consequence of the cost reduction strategy implemented at the
beginning of FY2002.
The operating income for the first three-quarters of FY2002 was a
$26,117 versus a loss of $464,222 for the first three-quarters of
FY2001. The basic and diluted earnings per share was $0.002 for
the first three quarters of FY2002 versus a loss per share of
$0.042 during the same time frame in FY2001.
Liquidity and Capital Resources
The company's FY2002 third quarter cash position increased to
$83,814 versus $41,994 for FY2001. This was due to the private
placement, which is discussed under changing in securities Part II
Item II, and the fact that the company was able to show a small
profit. Trade accounts receivable declined to $182,670 during the
same time frame versus $281,671 for the first three-quarters of
FY2001. This change was reflected in total current assets for
FY2002 of $365,316 versus $441,133 for the first three-quarters of
FY2001. Part of this increase was also a reflection in the change
in the allowance for doubtful accounts as it was increased from
$53,000 for the quarters of FY2001 to $68,000 in the first three
quarters of FY2002. This change was based upon a review of the
receivables at the end of FY2001. The result was that total assets
were $394,285 in the third quarter of FY2002 versus $487,441 in
the third quarter of FY2001. This was a decline in total assets of
$103,156. However, this was a $32,584 improvement from the
company's total asset position at the end to the second quarter of
FY2002.
Total current liabilities for the third quarter of FY2002 were
$262,115 versus $404,381 for the third period of FY2001. Accounts
payables that declined approximately $105,000 were the primary
reason for this decline.
Total due to officers for the third quarter of FY2002 were $14,696
versus $291,078 for the third quarter of FY2001. This was a
decrease of $276,382. The major cause of this decline was due to a
settlement with Patrick Makovec, an officer of WDS. Prior to 1994
Mr. Makovec, elected to leave the major portion of his salary and
expenses as a way in infusing additional cash in WDS thereby
enabling WDS to continue its growth pattern. Such salary and
expenses was to be disbursed as management determined, assuming
cash flow was adequate. On September 31, 2001, Mr. Makovec
exchanged $250,402 of debt for 1,001,609 shares of common stock to
be issued at $0.25 per share. This conversion reduced the amount
due to Mr. Makovec to $17,519 at September 30, 2001. The officer
has waived the accrued interest on balances from October 1, 1999
through June 30, 2001. During the years ended September 30, 2001
and 2000, this officer's base compensation was approximately
$60,000 for each year.
Total liabilities for WDS in the third quarter of FY2002 were
$276,811 versus $702,031 for the third quarter in FY2001. This was
a decline in total liabilities of $425,220. The accumulated
stockholders deficit for the third quarter of FY2002 was 2,701,756
versus 2,5,63,170 for the first quarter of FY2001.
Part II
Item I Legal Proceedings
(none)
Item II Changes in Securities
In April of 2002 a private placement of WDS common stock was done
with Alta Mines, which is owned by a major shareholder, John
Doubek and two of his partners. The placement was for 3,000,000
shares which netted $150,000 which was used to finish the year end
audits for 2000 & 2001 and the interim reports (10Qs) for 2002.
Also proceeds were used to handle legal issues associated with due
diligence with potential candidates for various business
combinations sought by WDS and other working capital items.
Also in April Wireless Data Solutions was able to engineer a
settlement with Sanact for the balance of the legal settlement.
Sanact was owed $175,000 plus interest as a result of the lawsuit,
which was described in the WDS 10K. In October of 2001 WDS issued
Sanact 182,296 shares of common stock in exchange for forgiveness
of 75,000 of the settlement. On April 16 Sanact was owed $100,000
plus interest of $8,602, the remainder of the legal settlement.
Sanact accepted 543,014 of WDS common stock in exchange for
$108,602.74 obligation owed to it by Dinet. In both instances the
stock was issued in accordance with rule 144.
Item III Defaults upon Senior Securities
(none)
Item IV Submission of matters to a vote of security holders
(none)
Item V Other Information
(none)
Item VI Exhibits on Reports on Form 8-K
(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.
December 6, 2002 WIRELESS DATA SOLUTIONS, INC.
/s/ Patrick Makovec
Patrick Makovec
Chairman of the Board
CERTIFICATION
PURSUANT TO 18 U.S.C SECTION 1350
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Blankenburg, as Chief Executive Officer of Wireless
Data Solutions, certify, pursuant to 18 U.S.C.ss.1350, as
adopted by Section 906 of the Sarbanes-Oxley Act of 2002,
that to my knowledge:
1) The accompanying Quarterly Report on Form 10-Q for
the period ending June 30, 2002 as filed with the
U.S. Securities and Exchange Commission (the
"Report") fully complies with the requirements of
Section 13 (a) or 15 (d) of the Securities
Exchange Act of 1934, as amended; and
2) The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the
Company.
Dated: December 6, 2002
/s/ Brian Blankenburg
Brian Blankenburg
Chief Executive Officer
CERTIFICATION
PURSUANT TO 18 U.S.C SECTION 1350
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I Pat Makovec, as Chief Financial Officer of Wireless Data
Solutions, certify, pursuant to 18 U.S.C.ss.1350, as adopted
by Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
1) The accompanying Quarterly Report on Form 10-Q for
the period ending June 30, 2002 as filed with the
U.S. Securities and Exchange Commission (the
"Report") fully complies with the requirements of
Section 13 (a) or 15 (d) of the Securities Exchange
Act of 1934, as amended; and
2) The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company.
Dated: December 6, 2002
/s/ Patrick Makovec
Patrick Makovec
Chairman of the Board
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