ITEM 2. CHANGES IN SECURITIES
On April 23, 2002, the Company issued 12,352,129 shares of its common stock to the holders of NeoReach’s common stock pursuant to an Agreement and Plan of Merger, dated March 21, 2002. A newly formed, wholly-owned subsidiary of Mobilepro merged into NeoReach, in a tax-free one-for-one share exchange transaction. The merger was consummated on April 23, 2002. As a result of the merger, NeoReach is now a wholly-owned subsidiary of Mobilepro. The issuance of the shares were valued at a fair value of $ 6,546,628, based on the last trading price of $0.53 and assuming there was actual active trading of our stock at that time. The Company believes the issuance of the stock to be exempt from registration under Section 4(2) of the Securities Act.
On May 31, 2002, the Company issued a total of 690,000 shares of its common stock to the following parties: 450,000 shares to INFe, Inc., 150,000 shares to Thomas Richfield, 60,000 shares to Francene Goodman, and 30,000 shares to Triple Crown Consulting. These shares were issued for consulting services regarding the Mobilepro-NeoReach merger. The shares were valued at $ 317,400, the fair value of our stock at the time of issuance. We believe the value of the services provided were commensurate with the value of the stock issued. The Company believes the issuance of the stock to be exempt from registration under Section 4(2) of the Securities Act.
On June 10, 2002, the Company issued a total of 784,314 shares of its common stock to the following parties: 764,706 to Cornell Capital Partners and 19,708 to West Rock Advisors, Inc. These shares were issued pursuant to an equity line of credit arrangement with Cornell Capital Partners, dated May 31, 2002. The shares were valued at $517,647, the fair value of our stock at the time of issuance. The Company believes the issuance of the stock to be exempt from registration under Section 4(2) of the Securities Act.
In addition, on May 31, 2002, the Company entered into a Securities Purchase Agreement with certain investors pursuant to which the Company issued and sold $250,000 of convertible debentures (the “Debentures”). The Debentures accrue interest at the rate of four percent per year. The Debentures must be repaid two years following their issuance or, at the Company’s election, converted into shares of Common Stock. In addition, at any time, the holders of the Debentures may elect to convert their debt into Common Stock. If, at the time of conversion, the Common Stock is listed on the Nasdaq Bulletin Board System, Nasdaq SmallCap Market, or American Stock Exchange, the conversion price will be 120% of the closing bid price or an amount equal to eighty percent of the average of the four lowest closing bid prices of the common stock for the five trading days immediately preceding the conversion date. If, at the time of conversion, the Common Stock is not listed on any of the foregoing markets, the conversion price will be 80% of the closing bid price of the Common Stock as furnished by the National Association of Securities Dealers, Inc. The Debentures also provide the Company with certain redemption rights which, if exercised, will require the Company to issue Common Stock warrants to the Debenture holders. Holders of the Debentures have certain registration rights with respect to the resale of shares of Common Stock received upon any conversion of the Debentures. As of January 30, 2004 the Company has satisfied the Debentures with full repayment with cash payments or the issuance of shares of the Company’s common stock.
On July 18, 2002, we issued a total of 305,000 shares of our common stock to various parties. 160,000 shares of our restricted common stock were issued to Daniel Lozinsky, a director of the Corporation, in a private sale for an aggregate cash consideration of $39,000 based on a Board Resolution as of July 17, 2002. In addition, we also issued 20,000 shares of common stock under the 2001 Equity Performance Plan and 100,000 restricted common stock as compensation to Mark Johnson for various Merger and Acquisition related services and associated back office services in accordance with a Consulting Agreement dated July 17, 2002. We also issued 25,000 shares of restricted common stock as compensation to M. Johnson & Associates, Inc. for certain services in accordance with an Investor Relations Agreement dated July 17, 2002. The issuance of the shares was valued at $65,250, the fair value of our stock at that time. We believe the value of the services provided were commensurate with the value of the stock issued. We believe the issuance of the stock to be exempt from registration under Section 4(2) of the Securities Act.
On July 26, 2002, we issued a total of 500,000 shares of our restricted common stock to Capital Research Group, Inc. for certain investor relations consulting services in accordance with a Consulting Services Agreement dated July
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25, 2002. The issuance of the shares was valued at $220,000, the fair value of our stock at that time. We believe the issuance of the stock to be exempt from registration under Section 4(2) of the Securities Act.
On September 9, 2002, we issued a total of 709,853 of our common stock to various parties. 100,000 shares were issued to Hee Han Bang, a non-affiliated and accredited/sophisticated investor in a private sale for an aggregate cash consideration of $25,000. These shares were issued at $0.25 per share. 150,000 shares of our common stock were issued to Daniel Lozinsky, a director of the Corporation, in a private sale for an aggregate cash consideration of $15,000. We issued a total of 209,853 shares of our common stock to shares to INFe, Inc. as of August 19, 2002. These shares were issued for consulting services in connection with the Mobilepro-NeoReach merger and a Reverse Merger Engagement Agreement dated January 11, 2002 between NeoReach, Inc. and INFe, Inc. The issuance of the shares was valued at $62,956, the fair value of our stock at that time. We also granted a total of 250,000 shares of our restricted common stock to Parag Sheth, an executive of the Corporation. Parag Sheth was granted 150,000 shares of our restricted common stock for forgiving a total of $15,000 in salary corresponding to a price of $0.10 per share. Mr Sheth was also granted 100,000 shares of our restricted common stock as an inducement for providing services to us. The issuance of the shares was valued at $25,000, commensurate with the the value of the services provided to us. We believe the issuance of these shares to be exempt from registration under Section 4(2) of the Securities Act.
On February 6, 2003, we entered into an equity line of credit arrangement with Cornell Capital Partners, LP. The Equity Line of Credit provides that Cornell Capital will purchase up to $10 million of common stock over a two-year period, with the timing and amount of such purchases, if any, at our discretion. Any shares of common stock sold under the Equity Line of Credit will be priced at a 9% discount to the lowest closing bid price of the common stock during the five-day period following the Company’s notification to Cornell Capital that it is drawing down on the Equity Line. We are not permitted to draw down more than $450,000 in any 30-day calendar period. In addition, there are certain other conditions applicable to the Company’s ability to draw down on the Equity Line including the filing and effectiveness of a registration statement registering the resale of all shares of common stock that may be issued to Cornell Capital under the Equity Line and the Company’s adherence with certain covenants. At the time of each draw down, the Company is obligated to pay Cornell Capital a fee equal to three percent of amount of each draw down . We previously issued 764,706 shares of our common stock to Cornell Capital as a commitment fee pursuant to a prior Equity Line of Credit Agreement, dated May 31, 2002 that was subsequently terminated. As of January 30, 2004, Mobilepro has received advances under the Equity Line of Credit in the aggregate gross amount of $2,435,000 with a corresponding aggregate net amount of $1,991,528 after expenses for various fees, interest and certain pay-downs of a convertible debenture issued by the Company to Cornell Capital from May 31, 2002. As of January 30, 2004, the Company has Pursuant to the Equity Line of Credit issued into stock escrow with Butler Gonzalez, LLP, to the benefit of Cornell Capital or directly to Cornell Capital an aggregate of 110,000,000 shares of common stock as follows: 10,000,000 shares on March 5, 2003; 10,000,000 shares on April 30, 2003; 10,000,000 shares on May 22, 2003; 10,000,000 shares on June 19, 2003; 2,262,443 shares on July 10, 2003; 10,000,000 shares on July 30, 2003; 15,000,000 shares on August 7, 2003; 15,000,000 shares on September 23, 2003; and 30,000,000 shares on December 18, 2003. In addition, Cornell Capital has as of January 30, 2004 fully converted, pursuant to a Securities Purchase Agreement dated May 31, 2002 to which the Company issued and sold $250,000 of convertible debentures, with net proceeds of $172,255, an aggregate of 21,306,674 shares of common stock as follows: 658,334 shares on March 4, 2003; 4,139,601 shares on June 17, 2003; 970,874 shares on June 18, 2003; 574,713 shares on June 20, 2003; 666,667 shares on July 8, 2003; 2,262,443 on July 10, 2003; 2,816,902 shares on July 16, 2003; 714,286 shares on July 21, 2003; 3,010,101 shares on August 4, 2003; 1,063,830 shares on August 7, 2003; 2,173,913 shares on August 21, 2003; and 2,255,010 on November 14, 2003.
On June 16, 2003, Dr. Dong Kyung Kang exercised in a net exercise election a total of 350,000 options for shares of our common stock that had vested on May 5, 2003, under the terms of his employment agreement with the Company. These shares were valued at $8,050 at the time of exercise.
On July 7, 2003, we issued to GBH telecom, LLC as compensation for services, pursuant to a memorandum of understanding between the Company and GBH telecom, LLC, dated June 16, 2003, a total of 3,500,000 shares of common stock valued at $68,250, the value of the services provided to us. These shares of our stock were assigned by GBH telecom, LLC to 360 Partners, LLC.
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On September 12, 2003, the Company agreed to convert a September 5, 2002, advance of $5,000 to us by Mr. Isaak Tarasulo into 100,00- shares of our common stock based on the closing trading price of our common stock on September 12, 2003, of $0.023 or a total of 217,391 shares of the Company’s restricted common stock. At Mr. Tarasulo’ request, 100,000 of these shares were issued in his name and 117,391 of these shares were issued in the name of Daniel Lozinsky.
On September 12, 2003, Ms. Mila Superfin requested the conversion of her July 12, 2002, advance to the Company of $4,000 into shares of our common stock. We issued 173,913 shares of our common stock to Ms. Superfin based on the closing trading price on September 12, 2003, of $0.023 per share.
On November 26, 2003, we agreed to issue to Arne Dunhem under the terms of his termination agreement with the Company, a warrant for four million shares of our common stock. The warrants are exercisable for five years and vest in two equal installments on January 31, 2004 and April 30, 2004. The exercise price is $.029 per share.
Except as otherwise noted, the securities described in this Item were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933. Each such issuance was made pursuant to individual contracts which are discrete from one another and are made only with persons who were sophisticated in such transactions and who had knowledge of and access to sufficient information about Mobilepro to make an informed investment decision. Among this information was the fact that the securities were restricted securities.
Two directors and officers of Mobilepro advanced during 2002 the total amount of $277,617 to Mobilepro. Daniel Lozinsky, a Director of Mobilepro, advanced to Mobilepro during the period February 9, 2002 through June 20, 2002 a total of $155,617 as follows: $23,262 on February 9, 2002; $25,000 on February 19, 2002; $76,355 on April 25, 2002; $15,000 on May 16, 2002; $4,000 on June 3, 2002; and $12,000 on June 20, 2002, with a repayment by Mobilepro on or before March 1, 2003 with interest of 4% on the unpaid principal balance. Arne Dunhem, the former President and Chief Executive Officer of Mobilepro, advanced to the Company during the period April 19, 2002 through May 6, 2002 a total of $122,000 as follows: $46,000 on April 19, 2002; $40,000 on April 25, 2002; and $36,000 on May 6, 2002, with a repayment by the Company on or before March 1, 2003 and interest of 4% on the unpaid principal balance. As of November 14, 2003, the principal balance of these loans remains at $277,617 plus an interest of approximately $17,000. As of January 23, 2003, the Company has repaid $72,000 to Arne Dunhem and has made no repayments to Daniel Lozinsky on these loans.
On May 16, 2003, Mobilepro issued convertible debentures in the amount of $155,617 to Daniel Lozinsky and $122,000 to Arne Dunhem. Under the terms of the convertible debentures, Mr. Daniel Lozinsky can convert no more than $130,000 of the $155,617 principal and Mr. Dunhem can convert no more than $50,000 of the $122,000 principal into shares of our common stock at a price equal to either 120% of the closing bid price of our common stock as of May 16, 2003, or 120% of the average of the four lowest closing bid prices of our common stock for the five trading days immediately preceding the conversion date. The Holders submitted on August 29, 2003, Notices of Conversion under which Mr. Lozinsky would receive 12,037,037 shares and Mr. Dunhem would receive 4,629,630 shares of our common stock. The Convertible Debenture for Mr. Dunhem provides that $30,000 shall be due and payable on or before September 1, 2003 resulting in a balance of $40,000 plus accrued interest, assuming a conversion of $50,000 into shares of common stock. The Convertible Debentures stipulate that if at the time of conversion, the Common Stock is listed on the NASD Bulletin Board System, Nasdaq SmallCap Market, or American Stock Exchange, the conversion price will be 120% of the average closing bid price as defined above. As of August 29, 2003, the resulting conversion price would be $0.0108 per share. The convertible debentures accrue interest at a rate of 4% per year and are convertible at the holder’s option. The convertible debentures have a term of two years. At Mobilepro’s option, the convertible debentures may be paid in cash or converted into shares of our common stock on the second anniversary unless converted earlier by the holder. We paid Mr. Dunhem all the cash we owed him under the terms of the convertible debenture as part of the payments he received under the termination agreement dated November 26, 2003, between Mr. Dunhem and the Company. |
