**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

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**FORM 10-KSB**

 
| **ý**                            | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  *[Fee Required]***                                                                                                                                                                                                                                                                  |
|---------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                            | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| ** **                            | **FOR THE YEAR ENDED SEPTEMBER 30, 2004.**                                                                                                                                                                                                                                                                                                                              |
| ** **                            | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| **OR**                                |
| ** **                            |
| **o**                                 | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  *[No Fee Required]***                                                                                                                                                                                                                                                           |
| ** **                            | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| ** **                            | **FOR THE TRANSITION PERIOD FROM                             TO                             ** |
| ** **                            | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| **Commission  file number 000-26235** |

 

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**BLUEWIRELESS & DATA, INC.**

(formerly Reva, Inc.)

(Exact name of registrant asspecified in its charter)

 

 
| **Delaware**(State or other jurisdiction of incorporation or  organization)                                                              | ** ** | **54-1921580**(I.R.S. Employer Identification No.) |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|
| ** **                                                                                                                               | ** ** | ** **                                         |
| **3001 Knox Street,  Suite 401, Dallas, Texas**(Address of principal executive offices)                                                  | ** ** | **75205**(Zip Code)                                |
| ** **                                                                                                                               | ** ** | ** **                                         |
| **(469) 227-7605**(Registrant’s telephone number, including area code)  Securities registered pursuant to Section 12(b) of the Act: |       |                                               |

 
| **Title of each class**                 | ** ** | **Name of each exchange on which  registered** |
|-----------------------------------------|------------|------------------------------------------------|
| Common  stock, par value $.01 per share |       | OTC Bulletin  Board                            |

 

Securities registered pursuant to Section 12(g) of the Act: Rightsto purchase common stock

 

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Check whetherthe issuer (1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during  the past 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes ý/No o

 

Check if thereis no disclosure of delinquent filers in response to Item 405 ofRegulation S-B is not contained in this form, and no disclosure will becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-KSBor any amendment to this Form 10-KSB.  o

 

As ofSeptember 30, 2004 the registrant reported revenue of $214,786.

 

As of January10, 2005, the aggregate market value of the voting stock held by non-affiliatesof the registrant was $885,607 based on the OTC Bulletin Board average bid andask price of $.0185.

 

As of January10, 2005, there were 102,096,686 shares of the registrant’s common stockoutstanding.

 

TransitionalSmall Business Disclosure Format (Check one): Yes o   No ý

 

 

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**TABLEOF CONTENTS**

 
| **PART I**                    | ** ** | ** **                                                                                       | ** ** |
|-------------------------------|------------|--------------------------------------------------------------------------------------------------|------------|
| ** **                    | ** ** | ** **                                                                                       | ** ** |
| Item 1.                       |       | Business                                                                                         |       |
| Item 2.                       |       | Properties                                                                                       |       |
| Item 3.                       |       | Legal  Proceedings                                                                               |       |
| Item 4.                       |       | Submission  of Matters to a Vote of Security Holders                                             |       |
|                          |       |                                                                                             |       |
| **PART II**                   | ** ** | ** **                                                                                       | ** ** |
| ** **                    | ** ** | ** **                                                                                       | ** ** |
| Item 5.                       |       | Market  for Registrant’s Common Equity and Related Stockholder Matters                      |       |
| Item 6.                       |       | Management’s  Discussion and Analysis                                                       |       |
| Item 7.                       |       | Financial  Statements                                                                            |       |
| Item 8.                       |       | Changes  in and Disagreements with Accountants on Accounting and Financial Disclosure            |       |
| Item  8A.                     |       | Controls  and Procedures                                                                         |       |
|                          |       |                                                                                             |       |
| **PART III**                  | ** ** | ** **                                                                                       | ** ** |
| ** **                    | ** ** | ** **                                                                                       | ** ** |
| Item 9.                       |       | Directors  and Executive Officers of the Registrant                                              |       |
| Item  10.                     |       | Executive  Compensation                                                                          |       |
| Item  11.                     |       | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters |       |
| Item  12.                     |       | Certain  Relationships and Related Transactions                                                  |       |
| Item  13.                     |       | Exhibits,  Financial Statement Schedules, and Reports on Form 8-K                                |       |
| Item 14.                      |       | Principal  Accountant Fees and Services                                                          |       |
|                          |       | Signatures                                                                                       |       |
|                          |       |                                                                                             |       |
| Index to Financial Statements |       |

 

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**PART I**

 

**ITEM1****. *Business.***

 

**General**

 

Blue Wireless & Data, Inc. (the “Company”) a Delaware corporation, (formerly Reva, Inc.), (“Reva”), a Colorado corporation, was incorporated under the laws of Delaware effective October 4, 2004 pursuant to a special meeting of shareholders held on November 15, 2004.  At that special meeting of shareholders, a majority of the shareholders of Reva approved a proposal to change the state of incorporation from Colorado to Delaware. In so doing the majority shareholders also approved a merger agreement between Reva and the Company, a wholly owned subsidiary of Reva, pursuant to which Reva was merged into the Company effectively changing the name of Reva. The Company’s common stock trades on the NASD’s Over the Counter Bulletin Board (“OTCBB”) under the ticker symbol BWDI.OB.

 

The Company is a service company providing a wireless broadband network to its customers primarily located in areas of rural north Texas. The Company’s network provides high speed wireless broadband internet services that is low cost, price competitive and easily scalable.

 

The Company was organized under the laws of the Commonwealth of Virginia on July 16, 1997 as World Wide Video, Inc. On April 9, 1998, the Company was re-incorporated in the State of Colorado. The shareholders of the Company approved a name change to Reva in 2003 and a reverse split of 1 for 100 common shares. The Company was approved for trading by NASD in November 2000 under the name “World Wide Video”.

 

**Recent Acquisitions**

 

On June 30, 2004, the Company entered into a Securities Purchase Agreement with Blue Ocean Technologies, LLC, (“BOT”) and BOT’s minority interest holder OutBack Management Services, L.L.C. ("OutBack") to purchase all of the issued and outstanding stock of Blue Ocean Wireless, Inc. (“BOW”), a subsidiary of BOT. BOW’s assets consist of regional wireless network equipment and customer base, which expanded the Company’s broadband wireless network, as well as its coverage of wireless communication customers in the North Texas area. The Company issued 30,000,000 restricted shares of its common stock, 27,000,000 of which, was issued to BOT and the remaining 3,000,000 shares to OutBack. Following the acquisition BOT beneficially owned approximately 35% of the Company’s outstanding common stock. This acquisition also resulted in a change in management of the Company as new officers and directors were appointed pursuant to the execution of this transaction.

 

On April 2, 2004, the Company formally merged the operations of Bold Wireless Investments, Inc. (“Bold”) into the Company. To effect the merger, the Company issued 32,000,000 shares of common stock to members of Bold, which represented approximately 37% of the outstanding common stock at the merger date. Another effect of the merger was the addition of sustainable operating revenue from broadband wireless customer base of Bold.

 

In January of 2004, the Company completed an acquisition of certain assets from Regional Wireless Networks (“RWN”) consisting of equipment contracts and other intangible assets utilized in generating revenue from wireless internet contracts. The Company issued 3,800,000 shares of its common stock and is required to pay cash installments totaling $105,000, of which $25,000 has been paid to date.

 

**Business Development Plan**

 

Through acquisition and internal sales and marketing, the Company intends to increase its customer base to generate revenue to both support its operation and provide the funds necessary for investment into relevant technology to its business. The Company is a service oriented, technology-based company and, as such, its major focus and emphasis will be on sales and distribution of its system applications, wireless communication and Internet solutions. Additional acquisitions and strategic agreements are planned to improve cash flow, in pursuit of a growing revenue steam. The Company is actively involved in efforts to raise additional funds through private and public offerings to finance the necessary acquisitions and increase working capital to service current debt requirements.

 

**Competitive Strategy**

 

The Companyoperates in a highly competitive market for its services. There are over 1,000retail providers of broadband service in the United States. Several large cableand telecom companies dominate the United States retail broadband servicesmarket.

 

The Company’s strategy is to maintain andenhance its position in the development and implementation of its wirelessbroadband network. The Company’s strategy includes the following key elements.

 

1

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*Emphasize Service*.The Company’s new management has emphasized customer service as its number onepriority in dealing with the competitive nature of its services. The Companybelieves that attention to customer needs such as prompt technical support andcustomer account maintenance are keys in growing the customer base in themarkets the Company serves and creating and maintaining a significantcompetitive differentiation and advantage.

 

*Target Business AsWell As Single Family Household Customers*. The Companyhas focused its marketing efforts on securing contracts with business as wellas individual household customers in order to grow the Company organically.Securing larger business customers will provide greater revenue opportunitiesdue to the scalability of service within a business unit.

 

**Employees**

 

At January 13, 2005, the Company had a totalof 10 employees, all of which are full-time. The Company’s employees are notrepresented by a labor union and are not subject to any collective bargainingagreement. The Company considers its employee relations to be good.

 

**Securities and Exchange Commission**

 

The Company is required to file reports withthe Securities and Exchange Commission “SEC” pursuant to Section 13 or15(d) of The Securities and Exchange Act of 1934. The Company routinely filescertain reports to the SEC. These forms include:

 

| Form 10-KSB  |   | Annual Report                                            |
|--------------|--------|----------------------------------------------------------|
| Form 10-QSB  |   | Quarterly Report                                         |
| Form 8-K     |   | Current Reports                                          |
| Form 3       |   | Initial Statement of Beneficial Ownership  of Securities |
| Form 4       |   | Statement of Beneficial Ownership of  Securities         |
| Form 5       |   | Annual Statement of Beneficial Ownership of  Securities  |
| Schedule 14A |   | Definitive Proxy Statement                               |

 

The public may read and copy any materialsfiled to the SEC by the Company at the SEC’s Public Reference Room at 450 FifthStreet, NW, Washington, DC 20549. The public may obtain information on theoperation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.The Company’s filings to the SEC are submitted electronically and can beaccessed via the SEC’s website at (*http://www.sec.gov*).

 

**Company Website**

 

Information about the Company can be obtainedby accessing the Company’s website at (*http://www.bluewirelessdata.com*).

 

**ITEM2****. *Properties.***

 

The Company has been provided approximately2,500 square feet of office space at its principal executive office located at3001 Knox Street, Suite 401, Dallas, Texas 75205, under a management servicescontract with the current lessee of the property. The Company believes thesefacilities are adequate for its current needs.

 

**ITEM3****. *Legal Proceedings*.**

 

The Company has become subject to variousclaims and other legal matters in the course of conducting its business. TheCompany believes that neither such claims and legal matters nor the cost ofprosecuting and/or defending such claims and legal matters will have a materialadverse effect on the Company’s results of operations, financial condition orcash flows. No material claims are currently pending; however, no assurancescan be given that future claims, if any, may not be material.

 

**ITEM4****. *Submission of Matters to a Vote of Security Holders.***

 

No matterswere submitted to a vote of stockholders, through the solicitation of proxiesor otherwise, during the quarter ended September 30, 2004.

 

2

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**PART II**

 

**ITEM5****. *Market for Registrant’s Common Equity and RelatedStockholder Matters.***

 

**Market for Registrant’s Common Equity**

 

The Company’s common stock is traded on theOTCBB under the symbol BWDI.OB. The stock prices set forth below represent thehighest and lowest sales prices per share of the Company’s common stock asreported by the OTCBB. The prices reported in the following table reflectinter-dealer prices without retail mark-up, mark-down or commissions. Pricesafter June 30, 2003 reflect the 100 to 1 reverse stock split.

 

| **Quarter Ended**      | ** ** | **High** | ** ** | **Low** | ** ** |
|------------------------|------------|----------|------------|---------|------------|
| September 30, 2004     |       | $        | 0.07       |    | $          | 0.01 |   |
| June 30, 2004          |       | $        | 0.10       |    | $          | 0.05 |   |
| March 31, 2004         |       | $        | 0.16       |    | $          | 0.04 |   |
| December 31, 2003      |       | $        | 0.35       |    | $          | 0.03 |   |
|                   |       |     |       |    |       |
| September 30, 2003     |       | $        | 0.420      |    | $          | 0.1000 |   |
| June 30, 2003          |       | $        | 0.650      |    | $          | 0.1300 |   |
| March 31, 2003         |       | $        | 0.016      |    | $          | 0.0030 |   |
| December 31, 2002 |       | $        | 0.024      |    | $          | 0.0009 |   |

 

**Holders of Record**

 

As of January 13, 2005 there wereapproximately 387 holders of record of the Company’s common stock.

 

**Dividends**

 

The Company’s has paid no cash dividends onits common stock.

 

The following table provides informationrelated to the number of shares to be issued upon exercise of all outstandingoptions, warrants and rights and the number of shares available for futureissuance under the Company’s equity compensation plans at September 30, 2004.

 

**EQUITYCOMPENSATION PLAN INFORMATION**

 
| ** **                                                  | ** ** | **(a)**                                                                                             | ** ** | **(b)**                                                                            | ** ** | **(c)**                                                                                                                                              | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Plan Category**                                           | ** ** | **Number of securities  to be issued upon exercise of   outstanding options,  warrants and rights** | ** ** | **Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation plans  (excluding securities  reflected in column (a))** | ** ** |
|                                                        |       |                                                                                                |       |                                                                               |       |                                                                                                                                                 |       |
| Equity compensation plans approved by  security holders     |       | 2,140                                                                                               | (1)        | $                                                                                  | 0.10       |                                                                                                                                                 | 7,860      |   |
| Equity compensation plans not approved by security  holders |       | N/A                                                                                                 |       | N/A                                                                                |       | N/A                                                                                                                                                  |       |
| Total                                                       |       | 2,140                                                                                               |       | $                                                                                  | 0.10       |                                                                                                                                                 | 7,860      |   |

 

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(1)                                  Thenumber of shares is subject to adjustments for changes resulting from stockdividends, stock splits, recapitalizations and similar events.

 

3

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**Descriptionof Securities**

 

*Common Stock.*At January 13, 2005, the Company had102,096,686 shares of its common stock outstanding and 200,000,000 sharesauthorized. Common stock holders have full voting rights.

 

*Preferred Stock*.   AtJanuary 13, 2005, the Company had 805,000 shares of preferred Series B stockoutstanding and 10,000,000 preferred shares authorized. Preferred Series Bstock bears dividends at the rate of 6% annually and is convertible into 1.5shares of the Company’s common stock.

 

**Change in Securities and Use of Proceeds**

 

During the year ended September 30, 2004, theCompany issued 805,000 shares of cumulative preferred stock, via privateplacement.  The Company is seekingworking capital and funds maintenance and growth of its regional wirelessbroadband network, for marketing of products, overhead costs and costs relatedto its operational restructuring and network upgrades.

 
| ** ** | **Quarter Ended** | ** ** | **Preferred Shares** | ** ** | **Type** | ** ** | **Price** | ** ** | **Total Consideration** | ** ** |
|------------|-------------------|------------|----------------------|------------|----------|------------|-----------|------------|-------------------------|------------|
|       | March 31, 2004    |       | 60,000               |       | SALE     |       | $         | .10        |                    | $          | 6,000 |   |
|       | March 31, 2004    |       | 75,000               |       | SALE     |       | $         | .08        |                    | $          | 6,000 |   |
|       | June 30, 2004     |       | 50,000               |       | SALE     |       | $         | 0.10       |                    | $          | 5,000 |   |
|       | June 30, 2004     |       | 20,000               |       | SALE     |       | $         | 0.10       |                    | $          | 2,000 |   |
|       | June 30, 2004     |       | 125,000              |       | SALE     |       | $         | 0.10       |                    | $          | 12,500 |   |
|       | June 30, 2004     |       | 125,000              |       | SALE     |       | $         | 0.10       |                    | $          | 12,500 |   |
|       | June 30, 2004     |       | 125,000              |       | SALE     |       | $         | 0.10       |                    | $          | 12,500 |   |
|       | June 30, 2004     |       | 125,000              |       | SALE     |       | $         | 0.10       |                    | $          | 12,500 |   |
|       | June 30,  2004    |       | 100,000              |       | SALE     |       | $         | 0.10       |                    | $          | 10,000 |   |
| TOTAL      |              |       | 805,000              |       |     |       |      |       | $                       | 79,000     |   |

 

**ITEM6****. *Managements Discussion and Analysi*s *or Planof Operation*.**

 

The following discussion should be read inconjunction with the Company’s Financial Statements and the notes thereto andthe other information included in Item 7 of this Annual Report onForm 10-KSB.

 

**Overview**

 

The Company derives its revenue from monthlyand in some cases annual fees for wireless broadband internet services. Duringthe fiscal year ended September 30, 2004, the Company made several acquisitionsand an asset purchase that increased the customer and revenue base of theCompany. The Company also focused its primary business efforts on expanding itswireless broadband network and away from the development of video compressiontechnology, which had not produced positive financial results. The Company alsofocused on raising capital through private and public placements of it commonstock essential to providing the capital to expand its wireless broadbandnetwork and servicing its debt.

 

*Critical Accounting Policies*

 

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that affect the amounts reportedin the accompanying financial statements and related footnotes. Managementbases its estimates and assumptions on historical experience, observance ofindustry trends and various other sources of information and factors. Actualresults could differ from these estimates. Critical accounting policies aredefined as those that are reflective of significant judgments anduncertainties, and potentially could result in materially different resultsunder different assumptions and conditions.

 

*Revenue Recognition*

 

Revenue is recognized when realizable andearned generally as services are provided over the life of the contract.

 

4

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*Business Combinations*

 

Business combinations are accounted for usingthe purchase method. Under the purchase method the Company reports the acquiredentities assets and liabilities at fair market value. Any excess of the fairmarket value of the consideration given over the fair market value of the netassets acquired is reported as goodwill. If the fair market value of theconsideration given is less than the fair market value of the net assetsacquired, the resulting excess of fair value of acquired net assets over thecost of the acquired entity is allocated, on a pro rata basis, against certainassets acquired in the business combination. If any excess over cost remainsafter reducing certain assets to zero, the remaining excess is recognized as anextraordinary gain. The operating statements of the Company for purchase methodcombinations report combined results only for the period subsequent to thecombination.

 

Business combinations between companies undercommon control, such as the Bold acquisition, the net assets of the acquiredcompany are reported at their carrying amounts at the date of transfer.

 

***Fiscal Year 2004 Compared to Fiscal Year 2003***

 

***Sales***

 

Sales increased $162,977 or 315% to $214,786 in fiscal 2004, from$51,809 in fiscal 2003. This increase was directly attributable to acquisitionsmade during fiscal 2004, which increased the Company’s regional wirelessbroadband network and customer base.

 

# ***Product Development Costs***

# ** **

Product development costs decreased 77%to $39,418 from $171,019 during fiscal 2004. The decrease reflects the Company’schange of business focus from video compression technology to wirelessbroadband internet services. With the change in management, during fiscal 2004,the Company evaluated its business prospects and related costs of continuing tofocus its business on video compression technology. It was management’sdecision that opportunities to expand the regional wireless network were moreavailable and cost effective, the Company will continue to focus the majorityof its efforts on expanding its regional wireless netwook in fiscal 2005.

 

***Operating Expenses***

 

Operating expenses increased 25% to $1,422,849from $1,139,821 during fiscal 2004. This increase is a result of increasedsalary and benefit cost primarily due to non-cash issuances of the Company’scommon stock for payment of passed amounts owed to employees and executives.The Company does not expect stock issuances, such has payment for pastservices, to recur in fiscal 2005. In addition, the Company experiencedincreased operating costs related to the rental and maintenance of equipmentacquired pursuant to the acquisitions during fiscal 2004.

 

New management assumed control of the Companyeffective July 1, 2004. One of management’s first objectives was to analyze theinternal operations of the Company. Extensive internal audits of the Company’saccounts receivable, including its customer base, reconciliation of accountspayable, including amounts owed to vendors and its senior lender, uncoverederrors in many accounts. The Company has made an entry to adjust the net assetsand liabilities to reflect their true makeup. This adjustment decreased the netloss realized by the Company during fiscal 2004 by $385,680.

 

***Liquidity andCapital Resources***

 

Cash used in operating activities was $564,686in fiscal 2004, compared to $272,368 in fiscal 2003. The increase is primarilyrelated to the increase in net loss experienced by the Company in fiscal 2004.

 

Net cash used in investing activitiesincreased to $41,791 in fiscal 2004, from $2,926 in fiscal 2003. The increaseprimarily reflects the purchase of equipment necessary for the maintenance ofthe Company’s regional wireless broadband network.

 

Net cash provided by financing activities was$500,934 in fiscal 2004, compared to $379,500 in fiscal 2003. This increasereflects proceeds from notes and sales of preferred stock, which exceededamounts raised in fiscal 2003 primarily from sales of common stock.

 

5

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During the twoyear period ending September 30, 2004, the Company recorded net lossesaggregating $2.4 million.  The Company’scontinued existence is dependent upon its ability to take advantage of acquisitionopportunities, raise capital through private securities offerings and use thesesources of capital to grow and enhance its regional wireless broadband network.During the third quarter ended June 30, 2004 the Company completed the mergerwith Bold Wireless Networks, Inc. (“Bold”), and the acquisition of Blue OceanWireless, Inc. (“BOW”). Both of these entities engage in providing wirelessinternet services and have increased the customer base and wireless networkarea coverage for the Company. The Company has also continued to raise capitalthrough a variety of private securities offerings of both preferred and commonstock.

 

Management is focusing the Company onexpanding and improving its wireless internet service and reviewing thecontinued development of newer, leading edge video technology. Throughacquisition and normal growth, the Company will continue to increase itscustomer base to derive the necessary revenue generation to support operations.

 

Management retains the ability to raiseadditional funds through private offerings or public offerings, which, inmanagement’s opinion, will provide sufficient capital resources. There can beno assurance that any of management’s plans as described above will besuccessfully implemented or that the Company will continue as a going concern.

 

The Company’s Liquidity Plan

 

Recent operating results give rise toconcerns about the Company’s ability to generate cash flow from operationssufficient to make scheduled debt payments as they become due. During the yearended September 30, 2004, the Company continued to seek financing from privateplacements and seek acquisitions to expand its wireless broadband network andrevenue customer base. The Company has implemented cost saving measuresincluding staff reductions. The Company will take additional cost savingsmeasures, if necessary, to enhance its liquidity position.

 

The Company’s need to raise additional equityor debt financing and the Company’s ability to generate cash flow from   operations sufficient to make scheduledpayments on its debts as they become due will depend on its future performanceand the Company’s ability to successfully raise capital and implement businessand growth strategies. The Company’s performance will also be affected byprevailing economic conditions. Many of these factors are beyond the Company’scontrol. If future cash flows and capital resources are insufficient to meetthe Company’s debt obligations and commitments, the Company may be forced toreduce or delay activities and capital expenditures, obtain additional equitycapital or restructure or refinance its debt. In the event that the Company isunable to do so, the Company may be left without sufficient liquidity and itmay not be able to meet its debt service requirements. In such a case, an eventof default would occur and could result in a substantial portion of the Company’sindebtedness becoming immediately due and payable. As a result, the Company’ssenior lender would be able to foreclose on the Company’s secured assets.

 

# ***Off-Balance Sheet Arrangements***

# ** **

# **At September 30, 2004 the Company had noobligations that would qualify to be disclosed as off-balance sheetarrangements.**

# ** **

**Risk Factors**

 

***The Company’srevenue and operating results may fluctuate significantly from quarter toquarter, and fluctuations in operating results could cause its stock price todecline.***

 

The Company’s revenue and operating results may varysignificantly from quarter-to-quarter due to a number of factors. In futurequarters, operating results may be below the expectations of public marketanalysis or investors, and the price of its common stock may decline. Factorsthat could cause quarterly fluctuations include:

 

•           the ability to secure new significantcontracts during a quarter; and

 

•           the ability to raise the necessarycapital to execute mergers, acquisitions and asset purchases.

 

***The market in whichthe Company competes is intensely competitive and actions by competitors couldrender its services less competitive, causing revenue and income to decline.***

 

The ability to compete depends on a number offactors outside of the Company’s control, including:

 

•           the prices at which others offercompetitive services, including aggressive price competition and discounting;

 

•           the ability of competitors toundertake more extensive marketing campaigns;

 

6

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•           the extent, if any, to whichcompetitors develop proprietary tools that improve their ability to compete;

 

•           the extent of competitors’responsiveness to customer needs.

 

The Company may not be able to competeeffectively on these or other factors. If the Company is unable to competeeffectively, market position, and therefore revenue and profitability, woulddecline.

 

***The Company mustcontinually enhance its services to meet the changing needs of its customers orface the possibility of losing future business to competitors.***

 

Future success will depend upon the Company’sability to enhance existing services and to introduce new services to meet therequirements of customers in a rapidly developing and evolving market. Presentor future services may not satisfy the needs of the market. If the Company isunable to anticipate or respond adequately to its customers’ needs, lostbusiness may result and financial performance will suffer.

 

***The Company isdependent on a limited number of key personnel, and the loss of theseindividuals could harm its competitive position and financial performance.***

 

The Company’s business consists primarily ofthe delivery of services and, accordingly, its success depends upon theefforts, abilities, business generation capabilities and project execution ofits executive officers. The Company’s success is also dependent upon themanagerial, operational and administrative skills of its executive officers.The loss of any executive officer could result in a loss of customers orrevenue, and could therefore harm the Company’s financial performance.

 

***The Company’srestructured credit facility could have an adverse effect on the Company’s financialhealth.***

 

The restructured credit facility may:

 

•                                 requirethe Company to dedicate a substantial portion of our cash flows to pay downdebt;

 

•                                 increasethe Company’s vulnerability to general adverse economic and industryconditions;

 

•                                 limitthe Company’s ability to fund future working capital and other generalcorporate requirements; and

 

•                                 limitthe Company’s flexibility in planning for, or reacting to, changes in theCompany’s business and the industry in which it operates.

 

The ability to make payments on and torefinance the Company’s debt will depend on financial and operatingperformance, which may fluctuate significantly from quarter to quarter and issubject to prevailing economic conditions and to financial, business and otherfactors beyond the Company’s control.

 

There can be no assurance that the Company’sbusiness will generate sufficient cash flow from operations or that futureborrowings will be available to it under the restructured credit facility in anamount sufficient to enable it to pay debt or to fund other liquidity needs.The Company may need to refinance all or a portion of its debt on or beforematurity. The Company can give no assurance that it will be able to refinanceany of its debt on commercially reasonable terms or at all.

 

**“Safe Harbor” Statement Under The PrivateSecurities Litigation Reform Act:**

 

With the exception of historical information,the matters discussed in this report are “forward looking statements” as thatterm is defined in Section 21E of the Securities Exchange Act of 1934.

 

**ITEM7****. *Financial Statements.***

 

See Index to Financial Statements on pageF-1.

 

**ITEM8****. Changes inand Disagreements with Accountants on Accounting and Financial Disclosure.**

 

Notapplicable.

 

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###### **ITEM 8A**.Controls and Procedures.

 

Based on the evaluation of the Company’sdisclosure controls and procedures as of the end of the period covered by thisannual report, Dennis G. McLaughlin, III, the President, Chief ExecutiveOfficer and Chief Financial Officer, has concluded that, in his judgment, theCompany’s disclosure controls and procedures are designed to ensure thatmaterial information relating to the Company, including the Company’ssubsidiaries, is accumulated and communicated to the Company’s management,including its principal executive and financial officers of the Company, toallow timely decisions regarding required disclosure.  Management necessarily applied its judgmentin assessing the costs****andbenefits of such controls and procedures, which, by their nature, can provide****only reasonable assurance regardingmanagement’s control objectives.  Thedesign of any system of controls and procedures is based in part upon certainassumptions about the likelihood of future events.  There can be no assurance that any designwill succeed in achieving its stated goals under all potential futureconditions, regardless of how remote.

 

There were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthese controls subsequent to the date of their evaluation, including anycorrective actions with regard to significant deficiencies and materialweaknesses.

 

### **PART III**

### ** **

**ITEM9****. Directors andExecutive Officers of the Registrant.**

 

As of September 30, 2004 the following holdoffice as Officers and Directors,

 

| **Name**                  | ** ** | **Age** | ** ** | **Positions  with Company**                                                 |
|---------------------------|------------|---------|------------|-----------------------------------------------------------------------------|
| Dennis G. McLaughlin, III |       | 39      |       | President, Chief Executive Officer, Chief  Financial Officer & Chairman |
| John W. Mills, III        |       | 46      |       | Vice President, Chief Operating Officer  & Director                     |
| Kit Chambers              |       | 40      |       | Corporate Secretary & Director                                          |
| John Diebold              |       | 50      |       | Director                                                                    |
| William Slay              |       | 54      |       | Director                                                                    |

 

The backgrounds of the officers and board members are as follows:

 

Dennis G. McLaughlin, III

 

Mr. McLaughlin was appointed to the Board of Directors in July 2004 andat that time was also appointed Chairman of the Board of Directors. Also inJuly 2004, Mr. McLaughlin succeeded Mr. James Ontiveros as Chief ExecutiveOfficer.  Mr. McLaughlin is the ManagingPartner of MAC Partners, LP, a Technology Merchant Bank in Dallas, Texas thatprovides management services and infrastructure to the Company under aManagement Services Agreement.  Mr.McLaughlin has over 14 years experience managing and operating energy andtechnology companies as CEO and has many years success buildingcompanies from the ground up.  Mr.McLaughlin began his first company in 1993 with a small investment.  Under his leadership and management, thecompany grew to be recognized as Entrepreneur Magazine’s fastest growing entrepreneurshipin America in October of 1995.  From aninitial investment of $75,000 and follow-on investments of $16 million, Mr.McLaughlin guided a total of four different companies to reach a combined valueof over $100 million.  Mr. McLaughlinserved as chairman, president and CEO of Aurion Technologies, a supplier ofhardware and services for the oil and gas industry, from June 1998 untilDecember 2001.  Remaining management of Aurion Technologies made avoluntary filing for Chapter 11 bankruptcy protection in March of 2002.  Mr. McLaughlin has a Bachelor of Economicsdegree from the University of Oklahoma where he has subsequently been honoredas a Top Ten Alumnus.

 

John W. Mills, III

 

Mr. Mills was appointed to the Board of Directors in July 2004. Hecurrently serves as the Company’s Chief Operating Officer. Mr. Mills has over24 years of experience in the telecommunications and data communication fields.Prior to joining the Company Mr. Mills managed and operated Outback TelecomLLC, which has since been acquired by the Company as part of the Blue OceanWireless, Inc. acquisition in June 2004. Prior to forming Outback Telecom LLC,Mr. Mills was the Chief Technical Officer at Velocitel, Inc. where he wasresponsible for all aspects of engineering, R&D and IT groups. Mr. Millswas also the Vice President and co-founder of airBrand Communications where hewas responsible for the technology section, network design and deployment of anationwide unlicensed broadband network. He successfully set up local operationsfor the corporate offices in Dallas, Texas, authored the technology and networksections of the business plan, and built the initial system. Mr. Millssuccessfully engaged Cisco as a prime vendor for airBrand. Prior to airBrand,Mr. Mills was regional Vice President for the Central Region of NextWave. Mr.Mills’ responsibilities included engineering, real

 

8

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estate, construction and project management and site acquisition. Inaddition, Mr. Mills participated in the negotiation of contracts for thebuild-out of NextWave’s Central Region. Mr. Mills has extensive experience inthe areas of design, development, deployment and management of CMDA and GSMsystems. Before NextWave, Mr. Mills was Product Manager at Motorola between1992 and 1995. In this role, he was responsible for product definition and theintroduction of CMDA products and High density analog products. Prior toMotorola, Mr. Mills was Manager of Network Projects at Pacific Telesis (PacTel)where he was responsible for developing strategic relationships with QUALCOMMand leading cellular infrastructure and handset manufacturers. Mr. Millsdeveloped engineering guidelines for CDMA networks and contributed to thedesign and definition of the CMDA IS-95A specification. Mr. Mills received aB.S. degree in Business Administration and an M.B.A. in Operations Managementfrom California Coast University. Mr. Mills is also a Marine Corps Captain,having risen from the rank of Private.

 

Kit Chambers

 

Mr. Chambers was appointed to the Board of Directors and subsequentlywas appointed Corporate Secretary for the Company in July 2004.  Mr. Chambers has over ten years experience insystems development and operations within the technology industry, and has beenan integral part of Mr. McLaughlin’s development and management teams since hisbeginnings in 1993.  He was the originaldeveloper of the data collection, hosting and Internet redelivery systemarchitecture that laid the foundation for the service offering of aninternational technology service company. He is integral to priority account and pilot project management and haswide-ranging experience in telecommunication systems, information technology,data center operations, logistical operations, systems integration and salesengineering.  Mr. Chambers received aBachelor of Science degree from the University of Oklahoma.

 

John Diebold

 

Mr. Diebold was appointed to the Board of Directors in December of2003. Mr. Diebold currently serves as President and Secretary of Horton, Inc.since his promotion in 1997. Mr. Diebold has served 23 years with Horton, Inc.where he has been responsible for daily operations of the company since 1982.Under his leadership Horton, Inc, has experienced a 145% increase in sales withincremental profitability. Previous to being promoted to President andSecretary Mr. Diebold served as Vice President of Sales where he wasinstrumental in increasing sales and managing the company to profitability.

 

William Slay

 

Mr. Slay was appointed to the Board of Directors in May of 2004. Mr.Slay is a Real Estate Property Manager and investor. Mr. Slay became associatedwith the Company, in January 2004, through his role as Vice President ofOperations of Bold Communications, a company since merged into the Company,where he focused on the reduction of operating expenses, implementation ofprocess improvement and improvements in customer service. Previously Mr. Slayserved 15 years with LSG Sky Chefs as Director of Corporate Communications untilhis early retirement election in 2002.

 

Directors Compensation

 

Directors who are also officers of the Company receive no cashcompensation for services as a director. However,  the  directors will be  reimbursed  for out-of-pocket  expenses incurred in  connection  with attendance  at board and committeemeetings.

 

**SECTION 16(a) REPORTING**

 

Section 16(a) of the Exchange Act requires the Company’s officers,directors and persons who beneficially own more than 10% of a registered classof the Company’s equity securities to file reports of ownership and changes inownership with the Securities and Exchange Commission, and to furnish to theCompany copies of such reports.  Basedsolely on the review of copies of the forms received, the Company believes that,during the last fiscal year, all filing requirements under Section 16(a)applicable to its officers, directors and 10% stockholders were timely, exceptfor: Five Form 3’s reporting the initial beneficial ownership Mr. McLaughlin,Mr. Chambers, Mr. Mills, Mr. Diebold and Mr. Slay, respectively.

 

Code of Ethics

 

As of September 30, 2004 the Company had not yet adopted a formal codeof ethics governing its executive officers and directors, primarily due totiming constraints involving the recent management change and assembling a newBoard of Directors. Management plans to address this issue with its Board ofDirectors at a near term Board meeting.

 

9

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**ITEM10****. ExecutiveCompensation.**

 

Compensation paid to executive officers ofthe Company for the past three fiscal years is presented below.

 
| ** **                                        | ** ** | ** **    | ** ** | **Long-Term Compensation  Awards** | ** ** |
|---------------------------------------------------|------------|---------------|------------|------------------------------------|------------|
| **Name & Principal Position**                 | ** ** | **Year**      | ** ** | **Annual Compensation**            | ** ** | **Restricted  Stock  Awards ($)** | ** ** | **All Other  Compensation** | ** ** |
| **Salary ($)**                                    | ** ** | **Bonus ($)** | ** ** | **Other Annual  Compensation ($)** |
|                                              |       |          |       |                               |       |   |   |   |   |   |   |   |   |
| Dennis G. McLaughlin, III  President, CEO and CFO |       | 2004          |       | —                             |       | — |   | — |   | — |   | — |   |
|                                              |       |          |       |                               |       |   |   |   |   |   |   |   |   |
| John W. Mills, III  Chief Operating Officer       |       | 2004          |       | 7,500                              |       | — |   | — |   | — |   | — |   |
|                                              |       |          |       |                               |       |   |   |   |   |   |   |   |   |
| Kit Chambers  Corporate Secretary                 |       | 2004          |       | —                             |       | — |   | — |   | — |   | — |   |
|                                              |       |          |       |                               |       |   |   |   |   |   |   |   |   |
| John Perry,                                       |       | 2003          |       | 43,000                             |       | — |   | — |   | — |   | — |   |
| Former CEO, resigned 2004                         |       | 2002          |       | 20,000                             |       | — |   | — |   | — |   | — |   |
|                                              |       |          |       |                               |       |   |   |   |   |   |   |   |   |
| Frank Maas,                                       |       | 2003          |       | 43,000                             |       | — |   | — |   | — |   | — |   |
| Former Secretary                                  |       | 2002          |       | —                             |       | — |   | — |   | — |   | — |   |
|                                              |       |          |       |                               |       |   |   |   |   |   |   |   |   |
| James Ontiveros                                   |       | 2004          |       | 8,226                              |       | — |   | — |   | 100,000 |   | — |   |
| Former CEO, resigned 2004                         |       | 2003          |       | —                             |       | — |   | — |   | — |   | — |   |
|                                              |       | 2002          |       | —                             |       | — |   | — |   | — |   | — |   |
|                                              |       |          |       |                               |       |   |   |   |   |   |   |   |   |
| Don Dansby                                        |       | 2004          |       | 11,228                             |       | — |   | — |   | 100,000 |   | — |   |
| Former CFO, Secretary, Treasurer                  |       | 2003          |       | —                             |       | — |   | — |   | — |   | — |   |
| Resigned 2004                                     |       | 2002          |       | —                             |       | — |   | — |   | — |   | — |   |

 

Restricted stock awards for Mr. Ontiveros and Mr. Dansby are based onthe April 2, 2004 closing price of $.10.

 

There have been no stock option or SAR grants or exercises in the lastfiscal year reportable under Reg. S-B, 402 (c) or (d).

 

There have been no activities in these areas to date:

Retirement Plans

Termination Payments

Stock Option/SAR Grants

Aggregate/SAR Exercise and Fiscal Year-End Option/SAR Value

Long-Term Incentive Plan

Pension Plan

 

**ITEM11****. SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters.**

 

The following table sets forth certain information regarding beneficialownership of the Company’s common stock as of January 13, 2005, by (1) eachdirector and named executive officer of the Company, (2) all officers anddirectors of the Company as a group, and (3) all persons who are known by theCompany to be beneficial owners of 5% or more of the Company’s outstandingcommon stock.

 
| **Names and Address of  Directors, Officers and  5% Stockholders**              | ** ** | **Shares Owned  Number** | ** ** | **Percent** | ** ** |
|---------------------------------------------------------------------------------|------------|--------------------------|------------|-------------|------------|
| John D. Diebold                                                                 |       | 953,626                  |       | *           | %          |
| William R. Slay                                                                 |       | 319,959                  |       | *           | %          |
| Christopher Chambers                                                            |       | 0                        |       | 0.00        | %          |
| Dennis G. McLaughlin, III                                                       |       | 0                        |       | 0.00        | %          |
| John W. Mills, III                                                              |       | 0                        |       | 0.00        | %          |
| All Officers and Directors as a group (6  persons)                              |       | 1,273,585                |       | 1.25        | %          |
|                                                                            |       |                     |       |        |       |
| Blue Ocean  Technologies, LLC  3001 Knox Street, Suite 403  Dallas, Texas 75205 |       | 27,000,000               |       | 26.45       | %          |
|                                                                            |       |                     |       |        |       |
| Becky Dansby  P.O. Box 1388  Bowie, Texas 76230                                 |       | 10,524,665               |       | 10.31       | %          |
|                                                                            |       |                     |       |        |       |
| James. E. Ontiveros                                                             |       | 9,607,999                |       | 9.41        | %          |
|                                                                            |       |                     |       |        |       |
| Cecil R.  Fenoglio  P.O. Box 4443  Wichita Falls, Texas 76308                   |       | 7,633,394                |       | 7.48        | %          |

 

10

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* Indicates less than one percent (1%).

 

Except as set forth above and based solely upon reports of beneficialownership required to be filed with the Securities and Exchange Commission (the“Commission”) pursuant to Rule 13d-1 under the Securities Exchange Act of1934, as amended (the “Exchange Act”), we do not believe that any other personbeneficially owned, as of January 13, 2005, greater than 5% of the outstandingcommon stock.

 

**ITEM 12****. Certain Relationships and Related Transactions.**

 

**Fiscal 2004**

During the fiscal year ended September 30,2004, the Company received working capital in the form of loans from its ChiefOperating Officer John W. Mills, III, totaling $112,343 plus accrued interestof $2,805. These loans bear interest ranging from 7% to 12% and include an 18%default provision. These loans are classified as current liabilities in theCompany’s Balance Sheet.

 

The Company entered into a management services agreement with MAC Partners, LP (“MAC”) effective June 30, 2004. MAC initially received 4,500,000 of the Company’s common stock valued at $.05 per share to execute the agreement. On September 1, 2004 MAC received an additional 500,000 shares of the Company’s common stock valued at $.04 per the terms of the management services agreement. MAC also made loans to the Company totaling $90,751 plus accrued interest of $1,921 for working capital needs. These loans bear interest ranging from 7% to 12% and include an 18% default provision. These loans are classified as current liabilities on the Company’s Balance Sheet.

 

Former officers of the Company, JamesOntiveros and Don Dansby each received 1,000,000 shares of restricted commonstock, valued at the then market price of $.10 per share for back salaries andother considerations provided to the Company.

 

**Fiscal 2003**

Restated to reflect reverse stock slit

 
| **Quarter** | ** ** | **Shares** | ** ** | **Type**        | ** ** | **Price** | ** ** | **Consideration  Total** | ** ** |
|-------------|------------|------------|------------|-----------------|------------|-----------|------------|--------------------------|------------|
| Quarter 1   |       | 281,100    |       | S-8  Registered |       | 1.1263    |       | 316,615                  |       |
|        |       | 44,500     |       | Restricted      |       | 1.1124    |       | 49,500                   |       |
| Quarter 2   |       | 44,000     |       | S-8  Registered |       | 0.6200    |       | 27,280                   |       |
|        |       |       |       | Restricted      |       | 0.4762    |       | 50,000                   |       |
| Quarter 3   |       | 232,100    |       | S-8  Registered |       | 0.1725    |       | 40,030                   |       |
|        |       | 105,000    |       | Restricted      |       | —    |       | —                   |       |
| Quarter 4   |       | 1,720,000  |       | S-8  Registered |       | 0.1000    |       | 172,000                  |       |
|        |       | 4,995,091  |       | Restricted      |       | 0.531     |       | 265,000                  |       |
| Total       |       | 7,421,791  |       |            |       |      |       | 920,425                  |       |

 

(1) The restricted shares issued as listed above were issued in reliance upon exemptions contained in Sections 4(2) and 4(6) of the Securities Act of 1933 to persons whom the company believed were accredited investors and for which subscriptions were received, which asserted that the purchasers were purchasing for their own account for investment purposes and not with a view to resell or redistributed the shares purchased.

 

(2) The shares registered on Form S-8 were issued for services rendered by employees, consultants and professionals pursuant to plans as attached to the S-8 Registration Statements.

 

11

 

(3) On June 5, 2003, 996,400 restricted shares were issued for a subscription $84,694 as part of the private placement. The shares involved are restricted “144” shares. As of this 9/30/03 all shares issue on 6/5/03 has been canceled for lack of complete payment. Only $20,000 was received and shares (276,817) were issued for that amount in Q4.

 

(4) The total of $124,694 also includes 350,000 shares of restricted stock issued as payment for services.

 

Between July 2003 and September 30, 2003, common stock was sold via a private placement to BOLD Communications Networks, LLC. The private placement was $250,000 for 4,750,000 common shares at $0.05 per share and 150,000 preferred shares at $0.10 per share. In September 2003, BOLD received 150,000 common shares in consideration of its preferred shares and another 359 common shares for the accrued interest. The total number of the Company's shares owned by BOLD as of September 30, 2003 was 4,850,359.

 

Don Dansby and James Ontiveros, Managers and majority owners of BOLD Communications Networks, LLC became Officers and Directors of the Company in August 2003. BOLD Controlled a Majority of the Stock and Controlled the Board of Directors at that time. James Ontiveros received $9,000 per month from the Company as base salary effective October 1, 2003 through June 30, 2004.

 

The Company held a Preferred Shareholder Special Meeting for Class A Preferred Shares in September 2003 to approve the conversion of Class A Preferred Stock to Common Stock on a 1:1 ratio. The conversion was approved. This resulted in corporate liabilities being reduced by approximately $200,000. This also resulted in 272,781 shares being issued for preferred stock held (1 to 1) and for dividends, and 480,986 common shares valued at $0.30 per share for a total of $144,295.

 

**ITEM13****.  Exhibits, Financial Statement Schedules, andReports on Form 8-K.**

 

The followingdocuments are filed as part of this report:

 

(1) AuditedFinancial Statements:  (See PART II ITEM7)

(2) Additional financial schedules: None

(3) SKExhibits (See Below

(4)Supplemental Oil and gas Information: None

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                      |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                 |
| 2.1                 |       | Securities Purchase Agreement dated June  30, 2004 by and among Reva, Inc., Blue Ocean Technologies, LLC and Outback  Management Services, L.L.C. (filed as Exhibit 2.1 to the Company’s Form 8-K  dated August 16, 2004 and incorporated herein by reference). |
| 3.1                 |       | Articles of Incorporation of World Wide  Video, Inc. (Colorado) (filed as Exhibit 3.1 to the Company’s Form 10-SB/A  (SEC ACCESSION NUMBER: 0001072588-99-000079) and as amended).                                                                              |
| 3.2                 |       | Bylaws of World Wide Video, Inc. (Colorado)  (filed as Exhibit 3.2 to the Company’s Form 10-SB/A (SEC ACCESSION NUMBER:  0001072588-99-000079) and as amended).                                                                                                 |
| 3.3                 |       | Articles of Incorporation of World Wide  Video, Inc. (Virginia) (filed as Exhibit 3.3 to the Company’s Form 10-SB/A  (SEC ACCESSION NUMBER: 0001072588-99-000079) and as amended).                                                                              |
| 3.4                 |       | By laws of World Wide Video, Inc.  (Virginia) (filed as Exhibit 3.4 to the Company’s Form 10-SB/A (SEC ACCESSION  NUMBER: 0001072588-99-000079) and as amended).                                                                                                |
| *3.5                |       | Certificate of Incorporation of Blue  Wireless & Data, Inc. (Delaware)                                                                                                                                                                                           |
| *3.6                |       | Bylaws of Blue Wireless & Data, Inc.  (Delaware)                                                                                                                                                                                                                 |
| 4.1                 |       | World Wide Video, Inc 2001 Stock Option  Plan (filed as Exhibit 4.1 to the Company’s Form S-8 dated November 7, 2001  and incorporated herein by reference).                                                                                                    |
| 4.2                 |       | World Wide Video, Inc 2002 Stock Option  Plan (filed as Exhibit 4.1 to the Company’s Form S-8 dated April 4, 2002 and  incorporated herein by reference).                                                                                                       |
| 4.3                 |       | World Wide Video, Inc 2003 Stock Option  Plan (filed as Exhibit 4.1 to the Company’s Form S-8 dated July 25, 2002 and  incorporated herein by reference).                                                                                                       |
| 4.4                 |       | 2002 STOCK OPTION AND COMPENSATION PLANOF  WORLD WIDE VIDEO, INC. (filed as Exhibit 4.1 to the Company’s Form S-8 dated  October 9, 2002 and incorporated herein by reference).                                                                                 |
| 4.5                 |       | 2002 STOCK OPTION AND COMPENSATION PLANOF  WORLD WIDE VIDEO, INC. (filed as Exhibit 4.1 to the Company’s Form S-8/A  dated October 10, 2002 and incorporated herein by reference).                                                                              |
| 10.1.1              |       | Agreement with National Executive Trade,  Inc. (filed as Exhibit 10.1.1 to the Company’s Form 10-SB/A (SEC ACCESSION  NUMBER: 0001072588-99-000079) and as amended).                                                                                            |
| 10.1.2              |       | Agreement with Data Power, Inc. (filed as  Exhibit 10.1.2 to the Company’s Form 10-SB/A (SEC ACCESSION NUMBER:  0001072588-99-000079) and as amended).                                                                                                          |

 

12

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| 10.2  |   | Share Exchange Agreement. (filed as Exhibit  10.2 to the Company’s Form 10-SB/A (SEC ACCESSION NUMBER:  0001072588-99-000079) and as amended). |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| *10.3 |   | Services Agreement between the Company and  MAC Partners, LP dated June 30, 2004.                                                                   |
| *10.4 |   | Agreement and Plan of Merger dated October  4, 2004.                                                                                                |
| 24    |   | Power of Attorney (set forth on the  signature page of this Form 10-KSB).                                                                           |
| *31.1 |   | Certification pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002                                                                            |
| *32.1 |   | Certification pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002.                                                                           |

 

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*                                         Filedherewith

 

Reports onForm 8-K for the quarter ending September 30, 2004:

 
| **Date of Filing** | ** ** | **Subject**                                          |
|--------------------|------------|------------------------------------------------------|
| August 16,  2004   |       | Change in control of  registrant.                    |
| August 17,  2004   |       | Other events, changes in  management of the Company. |

 

**ITEM14****. PrincipalAccountant Fees and Services.**

 

*Audit Fee:*.  Davis, Kinard, & Co., P.C. billed the Company $12,500 for the 2003 audit, which was paid after the September 30, 2003 audit. Fees incurred in the fiscal year ended September 30, 2004 include $5,500 for review of the interim financial statements included in quarterly reports on Form 10-QSB for the periods ended December 31, 2003, March 31, 2004, and June 30, 2004. The  Company’s previous auditor,  Thompson,  Greenspan & Co. billed the Company  $21,764.37 for the  2002  audited  which  was  paid in  2003.  For the  following  professional services: audit for the annual financial statement of the Company for the fiscal year ended  September  30, 2003 and review of the interim  financial  statements included in quarterly  reports on Form 10-QSB for the periods ended  December 31, 2002, March 31, 2003, and June 30, 2003.

 

*Tax Fees:* Tax related fees in fiscal 2004 included $1,400 billed by Davis, Kinard, & Co., P.C. for preparation of Form 1065 for Bold Communications Network, LLC.

 

*All Other Fees*: Not applicable.

 

The Company’s Board acts as the audit committee and had no “pre-approval policies and procedures” in effect for the auditors’ engagements for the audit years 2004 and 2003. All audit work was performed by the auditors’ full time employees.

 

13

 

**SIGNATURES**

 

Pursuant tothe requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Company has duly caused this Form 10-KSB to be signed on itsbehalf by the undersigned, thereunto duly authorized, in the City of Irving,State of Texas, on January 13, 2005.

 
|   | BLUE WIRELESS & DATA, INC. |
|--------|--------------------------------|
|   |                           |   |
|   | By:                            | /s/ DENNIS G. MCLAUGHLIN, III |
|   |                           | Dennis G. McLaughlin, III |
|   |                           | *Chief Executive Officer* |

 

**POWER OF ATTORNEY**

 

Eachindividual whose signature appears below constitutes and appoints Dennis G. McLaughlin,III such person’s true and lawful attorneys-in-fact and agents with full powerof substitution and resubstitution, for such person and in such person’s name,place, and stead, in any and all capacities, to sign any and all amendments tothis Form 10-KSB and to file the same with all exhibits thereto, and alldocuments in connection therewith, with the Securities and Exchange Commission,granting unto such attorneys-in-fact and agents, and each of them, full powerand authority to do and perform each and every act and thing requisite andnecessary to be done in and about the premises, as fully to all intents andpurposes as such person might or could do in person, hereby ratifying andconfirming all that such attorneys-in-fact and agents or any of them, or theirsubstitute or substitutes, may lawfully do or cause to be done by virtuehereof.

 

Pursuant tothe requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, this Form 10-KSB has been signed by the following persons on behalfof the Registrant in the capacities and on the dates indicated.

 
| **Signature**                 | ** ** | **Capacity**                                                   | ** ** | **Date**          |
|-------------------------------|------------|----------------------------------------------------------------|------------|-------------------|
|                          |       |                                                           |       |              |
| /s/ DENNIS G. MCLAUGHLIN, III |       | Chief  Executive Officer, Chief Financial Officer and Chairman |       | January 13,  2005 |
| James T. Taylor               |       |                                                           |       |              |
|                          |       |                                                           |       |              |
| /s/ JOHN W. MILLS, III        |       | Vice  President, Chief Operating Officer and Director          |       | January 13,  2005 |
| John W. Mills, III            |       |                                                           |       |              |
|                          |       |                                                           |       |              |
| /s/ KIT CHAMBERS              |       | Corporate  Secretary and Director                              |       | January 13,  2005 |
| Kit Chambers                  |       |                                                           |       |              |
|                          |       |                                                           |       |              |
| /s/ JOHN D. DIEBOLD           |       | Director                                                       |       | January 13,  2005 |
| John D. Diebold               |       |                                                           |       |              |
|                          |       |                                                           |       |              |
| /s/ WILLIAM R. SLAY           |       | Director                                                       |       | January 13,  2005 |
| William R. Slay               |       |                                                           |       |              |

 

14

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**ANNUAL REPORT ON FORM 10-KSB**

**ITEM 7**

**LIST OF FINANCIAL STATEMENTS**

**CERTAIN EXHIBITS**

**FINANCIAL STATEMENTS**

**YEAR ENDED SEPTEMBER 30, 2004**

**BLUE WIRELESS & DATA, INC.**

**DALLAS, TEXAS**

 

**FORM 10-KSB—ITEM 7**

**Blue Wireless & Data, Inc.**

**INDEXTO FINANCIAL STATEMENTS**

 

The following financialstatements of Blue Wireless & Data, Inc. are included in response toItem 7:

 
|                                                                                                      |   |
|-----------------------------------------------------------------------------------------------------------|--------|
| Reports of Independent Auditors                                                                           |   |
| Balance  Sheets as of September 30, 2004 and 2003                                                         |   |
| Statements of Operations for the fiscal years ended September 30,  2004 and 2003                          |   |
| Statements of Stockholders’ Equity  (Deficit) for the fiscal years ended September 30, 2004 and 2003 |   |
| Statements of Cash Flows for the fiscal years ended September 30,  2004 and 2003                          |   |
| Notes to Financial Statements                                                                             |   |

 

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**REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS**

 

To the Board of Directors

Blue Wireless & Data, Inc.

 

We have audited theaccompanying balance sheets of Blue Wireless & Data, Inc. (the Company) asof September 30, 2004 and 2003 and the related statements of operations,stockholders’ equity and cash flows for the years then ended.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our audits inaccordance with auditing standards generally accepted in the United States ofAmerica.  Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovides a reasonable basis for our opinion.

 

In our opinion, the financialstatements referred to above present fairly, in all material respects, thefinancial position of Blue Wireless & Data, Inc. at September 30, 2004 and2003, and the results of their operations and their cash flows for the yearthen ended in conformity with accounting principles generally accepted in theUnited States of America.

 

The accompanying financialstatements have been prepared assuming the Company will continue as a goingconcern.  As discussed in Note 2 to thefinancial statements, the Company has suffered continued losses that raisesubstantial doubt about is ability to continue as a going concern.  Management’s plans in regard to these mattersare also described in Note 2.  Thefinancial statements do not include any adjustments that might result from theoutcome of this uncertainty.

 

 
|              | DAVIS,  KINARD & CO. P.C. |
|-------------------|-------------------------------|
|              |                          |
|              |                          |
| January 13,  2005 |                          |
| Abilene,  Texas   |                          |

 

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**BLUEWIRELESS & DATA, INC. BALANCE SHEETS**

 
| ** **                                                                                                                                                                           | ** ** | **September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                                                                                                           | ** ** | **2004**          | ** ** | **2003** | ** ** |
| ** **                                                                                                                                                                           | ** ** | ** **        | ** ** | ** ** | ** ** |
| **ASSETS**                                                                                                                                                                           |       |              |       |   |   |
| Current Assets                                                                                                                                                                       |       |              |       |   |   |
| Cash and cash equivalents                                                                                                                                                            |       | $                 | —     |   | $ | 105,543 |   |
| Investment in marketable equity securities                                                                                                                                           |       | 65,000            |       | — |   |
| Trade accounts receivable                                                                                                                                                            |       | 30,106            |       | — |   |
| Other current assets                                                                                                                                                                 |       | 4,435             |       | — |   |
| Total Current Assets                                                                                                                                                                 |       | 99,541            |       | 105,543 |   |
| Property and equipment, net                                                                                                                                                          |       | 493,768           |       | 14,495 |   |
| Intangible assets                                                                                                                                                                    |       | 1,436,377         |       | — |   |
| Deposits                                                                                                                                                                             |       | 1,340             |       | — |   |
|                                                                                                                                                                                 |       | $                 | 2,031,026  |   | $ | 120,038 |   |
| ** **                                                                                                                                                                           |       |              |       |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**                                                                                                                             |       |              |       |   |   |
| Current Liabilities                                                                                                                                                                  |       |              |       |   |   |
| Accounts payable and accrued liabilities                                                                                                                                             |       | $                 | 342,140    |   | $ | 194,262 |   |
| Due to officers and employees                                                                                                                                                        |       | —            |       | 108,926 |   |
| Bank overdraft                                                                                                                                                                       |       | 14,407            |       | — |   |
| Current portion of long-term debt                                                                                                                                                    |       | 302,455           |       | — |   |
| Current maturities of indebtedness to  related parties                                                                                                                               |       | 248,948           |       | — |   |
| Accrued acquisition cost                                                                                                                                                             |       | 114,094           |       | — |   |
| Note payable – other                                                                                                                                                            |       | 18,457            |       | — |   |
| Total Current Liabilities                                                                                                                                                            |       | 1,040,501         |       | 303,188 |   |
| Long-term debt                                                                                                                                                                       |       | 79,972            |       | — |   |
| Total Liabilities                                                                                                                                                                    |       | 1,120,473         |       | 303,188 |   |
|                                                                                                                                                                                 |       |              |       |   |   |
| Stockholders’ Equity (Deficit)                                                                                                                                                  |       |              |       |   |   |
| Common stock, $.01 par value; 100,000,000  shares authorized; 12,109,538 shares issued and 88,700,533 and 8,680,829  shares outstanding at September 30, 2004 and 2003, respectively |       | $                 | 887,005    |   | $ | 86,808 |   |
| Cumulative preferred stock, $.01 par value;  10,000,000 shares authorized; 805,000 shares issued and outstanding at  September 30, 2004                                              |       | 8,050             |       | — |   |
| Additional paid-in capital                                                                                                                                                           |       | 7,676,323         |       | 5,814,477 |   |
| Accumulated deficit                                                                                                                                                                  |       | (7,411,136        | )          | (6,084,435 | ) |
| Common stock issued for future services                                                                                                                                              |       | (327,689          | )          | — |   |
| Common stock to be issued                                                                                                                                                            |       | 3,000             |       | — |   |
| Convertible preferred stock to be issued                                                                                                                                             |       | 75,000            |       | — |   |
| Total Stockholders’ Equity (Deficit)                                                                                                                                            |       | 910,553           |       | (183,150 | ) |
|                                                                                                                                                                                 |       | $                 | 2,031,026  |   | $ | 120,038 |   |

 

See accompanying notes to financial statements.

 

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**BLUE WIRELESS &DATA, INC. STATEMENTS OF OPERATIONS**

 
| ** **                                  | ** ** | **Year Ended September 30,** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|
| ** **                                  | ** ** | **2004**                     | ** ** | **2003** | ** ** |
| ** **                                  | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Sales                                       |       | $                            | 214,786    |   | $ | 51,809 |   |
|                                        |       |                         |       |   |   |
| Product Development Cost:                   |       |                         |       |   |   |
| Salaries and benefits                       |       | 39,418                       |       | 123,468 |   |
| Subcontractors                              |       | —                       |       | 34,587 |   |
| Other developmental costs                   |       | —                       |       | 12,964 |   |
| Total product development cost              |       | 39,418                       |       | 171,019 |   |
|                                        |       |                         |       |   |   |
| Operating Expenses:                         |       |                         |       |   |   |
| Salaries and benefits                       |       | 857,207                      |       | — |   |
| Office                                      |       | 41,657                       |       | 4,633 |   |
| Marketing and sales                         |       | 19,031                       |       | 58,661 |   |
| Professional services                       |       | 427,768                      |       | 620,365 |   |
| Occupancy                                   |       | 47,850                       |       | 52,343 |   |
| Depreciation and amortization               |       | 118,346                      |       | 71,540 |   |
| Utilities and telephone                     |       | 49,114                       |       | 38,963 |   |
| Equipment rental, lease and cost            |       | 167,579                      |       | — |   |
| Adjustment of assets and (liabilities), net |       | (385,680                     | )          | 252,530 |   |
| Other                                       |       | 79,977                       |       | 40,786 |   |
| Total operating expense                     |       | 1,422,849                    |       | 1,139,821 |   |
| Total costs and expenses                    |       | 1,462,267                    |       | 1,310,840 |   |
| Operating loss                              |       | (1,247,481                   | )          | (1,259,031 | ) |
| Interest expense                            |       | (67,715                      | )          | — |   |
| Other income, (expense), net                |       | (11,505                      | )          | 210,871 |   |
| Loss from operations before income taxes    |       | (1,326,701                   | )          | (1,048,160 | ) |
| Income taxes                                |       | —                       |       | — |   |
| Net loss                                    |       | (1,326,701                   | )          | (1,048,160 | ) |
| Dividends, preferred stock                  |       | —                       |       | 33,297 |   |
| Loss available to common shareholders       |       | $                            | (1,326,701 | ) | $ | (1,081,457 | ) |
|                                        |       |                         |       |   |   |
| Loss per common share:                      |       |                         |       |   |   |
|                                        |       |                         |       |   |   |
| Basic and diluted                           |       | $                            | (0.03      | ) | $ | (0.76 | ) |
|                                        |       |                         |       |   |   |
| Weighted average shares:                    |       |                         |       |   |   |
| Basic and diluted                           |       | 40,968,071                   |       | 1,425,989 |   |

 

See accompanying notes to financial statements.

 

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** **

**BLUE WIRELESS & DATA, INC. STATEMENTS OF STOCKHOLDERS’ EQUITY(DEFICIT)**

 
| ** **                                                   | ** ** | **Common  Stock** | ** ** | **Cumulative  Preferred  Stock** | ** ** | **Additional  Paid In  Capital** | ** ** | **Common  Stock Issued  for Future  Services** | ** ** | **Convertible  Preferred  Stock To Be  Issued** | ** ** | **Common  Stock To Be  Issued** | ** ** | **Unearned  Compensation** | ** ** | **Accumulated  Deficit** | ** ** | **Totals** | ** ** |
|--------------------------------------------------------------|------------|-------------------|------------|----------------------------------|------------|----------------------------------|------------|------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|--------------------------|------------|------------|------------|
| **Balance  September 30, 2002**                              |       | $                 | 4,646      |                             | $          | 1,894                            |       | $                                              | 4,954,770  |                                            | $          | —                          |       | $                          | —     |                     | $          | —     |       | $ | (163,958 | ) | $ | (5,002,978 | ) | $ | (205,626 | ) |
| Common stock  issued for services                            |       | 22,772            |       | —                           |       | 533,153                          |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 555,925    |       |
| Sale of common  stock                                        |       | 51,446            |       | —                           |       | 313,054                          |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 364,500    |       |
| Sale of preferred  stock                                     |       | —            |       | 1,500                            |       | 13,500                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 15,000     |       |
| Preferred stock  returned                                    |       | —            |       | (666                             | )          | —                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | (666       | )          |
| Dividend,  cumulative preferred stock                        |       | —            |       | 4,809                            |       | —                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | (33,297                  | )          | (28,488    | )          |
| Conversion of  preferred stock to common stock               |       | 7,537             |       | (7,537                           | )          | —                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | —     |       |
| Rounding, stock  split                                       |       | 407               |       | —                           |       | —                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 407        |       |
| Cancellation  unearned compensation                          |       | —            |       | —                           |       | —                           |       | —                                         |       | —                                          |       | —                          |       | 163,958                    |       | —                   |       | 163,958    |       |
| Net and  comprehensive loss                                  |       | —            |       | —                           |       | —                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | (1,048,160               | )          | (1,048,160 | )          |
| **Balance  September 30, 2003**                              |       | 86,808            |       | —                           |       | 5,814,477                        |       | —                                         |       | —                                          |       | —                          |       | —                     |       | (6,084,435               | )          | (183,150   | )          |
| Common stock  issued for services and to retire liabilities  |       | 147,197           |       | —                           |       | 843,763                          |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 990,960    |       |
| Common stock  issued in acquisition of assets                |       | 38,000            |       | —                           |       | 152,000                          |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 190,000    |       |
| Common stock  issued in acquisitions                         |       | 620,000           |       | —                           |       | 743,647                          |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 1,363,647  |       |
| Cumulative  preferred stock issued                           |       | —            |       | 3,050                            |       | 25,950                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 29,000     |       |
| Common stock  issued for services                            |       | —            |       | —                           |       | —                           |       | (327,689                                       | )          | —                                          |       | —                          |       | —                     |       | —                   |       | (327,689   | )          |
| Convertible  preferred stock to be issued                    |       | —            |       | —                           |       |                             |       | —                                         |       | 75,000                                          |       | —                          |       | —                     |       | —                   |       | 75,000     |       |
| Capital  investments                                         |       | —            |       | —                           |       | 46,486                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 46,486     |       |
| Common stock to  be issued                                   |       | —            |       | —                           |       |                             |       | —                                         |       | —                                          |       | 3,000                           |       | —                     |       | —                   |       | 3,000      |       |
| Cancel common  stock and reissue convertible preferred stock |       | (5,000            | )          | 5,000                            |       | 50,000                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | —                   |       | 50,000     |       |
| Net and  comprehensive loss                                  |       | —            |       | —                           |       | —                           |       | —                                         |       | —                                          |       | —                          |       | —                     |       | (1,326,701               | )          | (1,326,701 | )          |
| **Balance  September 30, 2004**                              |       | $                 | 887,005    |                             | $          | 8,050                            |       | $                                              | 7,676,323  |                                            | $          | (327,689                        | )          | $                          | 75,000     |                     | $          | 3,000      |       | $ | — |   | $ | (7,411,136 | ) | $ | 910,553 |   |

 

See accompanying notes to financial statements.

 

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**BLUE WIRELESS &DATA, INC. STATEMENTS OF CASH FLOWS**

 
| ** **                                 | ** ** | **Year Ended September 30,** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|
| ** **                                 | ** ** | **2004**                     | ** ** | **2003** | ** ** |
|                                       |       |                         |       |   |   |
| **Cash Flows from Operating Activities:**  |       |                         |       |   |   |
| Net loss                                   |       | $                            | (1,326,701 | ) | $ | (1,048,160 | ) |
| Non-cash items included in net loss:       |       |                         |       |   |   |
| Depreciation and amortization              |       | 118,346                      |       | 71,540 |   |
| Contributed services                       |       | 982,148                      |       | 555,925 |   |
| Loss on disposal of equipment              |       | 704                          |       | 2,549 |   |
| Inventory write-down                       |       | —                       |       | 252,530 |   |
| Bad debt                                   |       | 33,542                       |       | — |   |
| Write-down marketable equity securities    |       | 10,000                       |       |   |   |
| Other                                      |       | (16,046                      | )          | 24,331 |   |
|                                       |       |                         |       |   |   |
| Changes in assets and liabilities:         |       |                         |       |   |   |
| Decrease (increase) in:                    |       |                         |       |   |   |
| Inventory                                  |       | —                       |       | (11,383 | ) |
| Accounts receivable                        |       | (51,905                      | )          | — |   |
| Prepaid and other assets                   |       | (2,775                       | )          | 2,760 |   |
| Advances and other receivables             |       | —                       |       | 22,561 |   |
| Marketable equity securities               |       | (75,000                      | )          |   |   |
|                                       |       |                         |       |   |   |
| Increase (decrease) in:                    |       |                         |       |   |   |
| Accounts payable and accrued expenses      |       | (128,073                     | )          | 15,812 |   |
| Due to officers and employees              |       | (108,926                     | )          | (160,833 | ) |
| Net cash used in operating activities      |       | (564,686                     | )          | (272,368 | ) |
|                                       |       |                         |       |   |   |
| **Cash Flows From Investing Activities:**  |       |                         |       |   |   |
| Cash paid in acquisition of assets         |       | (25,000                      | )          | — |   |
| Cash acquired in acquisitions              |       | 30,355                       |       | — |   |
| Purchase of equipment and software         |       | (47,146                      | )          | (2,926 | ) |
| Net cash used in investing activities      |       | (41,791                      | )          | (2,926 | ) |
|                                       |       |                         |       |   |   |
| **Cash Flows From Financing Activities:**  |       |                         |       |   |   |
| Proceeds from notes payable                |       | 126,500                      |       | — |   |
| Proceeds from capital investments          |       | 46,486                       |       | — |   |
| Proceeds from sales of common stock        |       | —                       |       | 364,500 |   |
| Proceeds from the sales of preferred stock |       | 79,000                       |       | 15,000 |   |
| Proceeds from related party debt           |       | 248,948                      |       | — |   |
| Deposits                                   |       | —                       |       | — |   |
| Net cash provided by financing activities  |       | 500,934                      |       | 379,500 |   |
|                                       |       |                         |       |   |   |
| Net (decrease) increase in cash            |       | (105,543                     | )          | 104,206 |   |
|                                       |       |                         |       |   |   |
| Cash and cash equivalents                  |       |                         |       |   |   |
| Beginning of year                          |       | 105,543                      |       | 1,337 |   |
| End of year                                |       | $                            | —     |   | $ | 105,543 |   |

 

See accompanying notes to financial statements.

 

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**BLUE WIRELESS & DATA, INC.**

**NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30,2004**

 

**1.  NATURE OF OPERATIONS ANDSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

Company and Purpose

 

Blue Wireless & Data, Inc. (“the Company”) (formerly Reva, Inc.)was originally organized under the laws of the Commonwealth of Virginia on July16, 1997.  On April 9, 1998, the Companywas reincorporated in the State of Colorado. The Company provides high speed wireless internet services to customersin rural communities in the State of Texas. The Company relocated its operations from Culpeper, Virginia to Roanoke,Texas during the year ended September 30, 2003. In July of 2004, the Companycame under new management and the corporate offices were relocated to Dallas,Texas.

 

In management’s opinion, these financial statements include alladjustments necessary to present fairly the financial position of the Companyat September 30, 2004 and 2003 and the results of operations and changes incash flows for the fiscal years ended September 30, 2004 and 2003.  The accounting and reporting policies of theCompany conform with generally accepted accounting principles and reflectpractices appropriate for its industry. Revenue is recognized when earned in accordance with the accrual basisof accounting.  These policies aresummarized below.

 

Development Stage Enterprise

 

Through September 30, 2001, the Company was a Development StageEnterprise and substantially all of its activities were in connection with theestablishment of a new business.  TheCompany adopted Statement of Position 98-5 which requires expensing of costs ofstart-up activities, including organization costs, as incurred.  The Company ended its Developmental Stage inOctober 2001 when it began selling finished products.

 

Financial Statement Estimates

 

The preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosures of contingent assets and liabilities at the date of the financialstatements and reporting period.  Due totheir prospective nature, actual results could differ from those estimates.

 

Financial Instruments

 

The estimated fair value of cash and cash equivalents, accountsreceivable, accounts payable and accrued expenses and other liabilitiesapproximate their carrying amounts in the financial statements.

 

The Company’sfinancial instruments include notes payable and marketable equity securities.The carrying value of notes payable approximates market value because theborrowing rate is similar to other financial instruments with similar terms.The Company’s investment in marketable equity securities are classified astrading, whereby unrealized gains or losses are recognized currently in thestatement of operations.  At September30, 2004, the Company was carrying marketable equity securities with anapproximate fair value of $65,000.  Anunrealized loss related to these securities of $10,000 has been recognized inthe statement of operations in the year ended September 30, 2004.

 

Cash and Cash Equivalents

 

The statements of cash flows classify changes in cash or cashequivalents (short-term, highly liquid investments readily convertible intocash with a maturity of three months or less) according to operating, investingor financing activities.

 

Accounts Receivable

 

At September 30, 2004, the amounts carried in accounts receivable wereconsidered by management to be collectible in full.  Uncollectible receivables are charged againstincome using the direct write-off method, which approximates the allowancemethod.

 

Income Tax and Interest Paid

 

There were no income taxes or interest paid during the years endedSeptember 30, 2004 and 2003.

 

Inventory

 

Inventory, consisting of items utilized in providing wireless internetservices, were acquired from Regional Wireless Networks (See note 5), and arecarried at the lower of cost (first in, first out) or market. At September 30,2004 there was approximately $3,000 of inventory related to this equipment.This inventory amount is classified on the Company’s balance sheet under thecaption “Other current assets”.

 

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Advertising Costs

 

Advertising costs are expensed as incurred.  Advertising costs were insignificant in theyears ended September 30, 2004, and 2003.

 

Property and Equipment

 

Property and equipment are recorded at cost and depreciated over theirestimated useful lives, ranging from three to five years.  Expenditures for maintenance, repairs, andimprovements which do not materially extend the useful lives of property andequipment are charged to earnings.  Whenproperty or equipment is sold or otherwise disposed of, the cost and relatedaccumulated depreciation or amortization is removed from the accounts, and theresulting gain or loss is reflected in earnings.  During the year ended September 30, 2003, theCompany reevaluated the estimated useful life assigned to property andequipment.  The change in accountingestimate resulted in additional depreciation of $33,122 in the year endedSeptember 30, 2003.  The estimateddepreciable lives of property and equipment are:

 

| ** **                   | ** ** | **2003** | ** ** | **Prior to  2003** | ** ** |
|------------------------------|------------|----------|------------|--------------------|------------|
|                         |       |     |       |               |       |
| Furniture and fixtures       |       | 7 years  |       | 7 years            |       |
| Computer and other equipment |       | 3 years  |       | 5 years            |       |

 

Technology Licenses

 

The Company capitalizes technology licenses. Technology licenses are carried at cost less accumulated amortization. Amortization is taken on the straight-line basis over three to five years. The licenses were fully amortized at September 30, 2003. Amortization expense for the year ended September 30, 2003 was $13,125.

 

Income Taxes

 

The Company utilizes the liability method for accounting for incometaxes.  The liability method accounts fordeferred income taxes by applying enacted statutory rates in effect at thebalance sheet date to differences between financial statement amounts and taxbases of assets and liabilities.  Theresulting deferred income tax liabilities are adjusted to reflect changes intax laws and rates.  Temporarydifferences consist of the difference in financial statement and income taxbases for accounting for start-up and organizational costs.  Deferred income taxes related to an asset orliability are classified as current or non-current based on the classificationof the related asset or liability. Deferred tax assets related to losses accumulated during the developmentstage and thereafter have been reduced by a corresponding valuation allowanceat September 30, 2004 and 2003, and accordingly, no income tax expense orbenefit has been recognized. Net operating loss carryforwards approximating$7.4 million expire in the years 2012 through 2019.

 

Stock Based Compensation

** **

The Company grants stock options for a fixed number of shares toemployees with an exercise price equal to the fair value of the shares at thedate of grant.  The Company accounts forstock option grants using the intrinsic value method prescribed by AccountingPrinciples Board (APB) Opinion No. 25, Accounting for Stock Issued to Employeesand related interpretations under Statement of Financial Accounting Standards(SFAS) No. 123, Accounting for Stock-Based Compensation, which require the useof option valuation models that were not developed for use in valuing employeestock options.  Under APB No. 25, becausethe exercise price of the Company’s employee stock options equals the marketprice of the underlying stock on the date of grant, no compensation expense isrecognized.  Had compensation cost forthe plan been determined consistent with SFAS No. 123, the Company’s netloss and loss per share would have been increased by insignificant amounts on apro forma basis for the years ended September 30, 2004 and 2003.  Note 8 provides additional information on theCompany’s stock option plan.

 

Net Loss Per Share

 

Basic net loss per share is computed by dividing net loss available tocommon shareholders (numerator) by the weighted average number of common sharesoutstanding during the year (denominator). The weighted average shares for the year ended

 

----

 

September 30, 2003 have been restated to reflect the 100 to 1 reversestock split effected in the year ended September 30, 2003.  Diluted net loss per share is computed usingthe weighted average number of common shares and potential common sharesoutstanding during the year.  Potentialcommon shares result from the assumed exercise, using the treasury stockmethod, of outstanding convertible cumulative preferred stock and stock optionshaving a dilutive effect.  The numeratorsfor each period presented are equal to the reported net loss plus cumulativepreferred dividends.  Potential commonshares were not included in the computations of net loss per share because theeffect on the calculations would be antidilutive.

 

Comprehensive Loss

 

Comprehensiveloss includes all changes in equity except those resulting from investments bystockholders and distributions to stockholders. At September 30, 2004 and 2003 comprehensiveloss was equal to net loss.

 

Write Down OfAssets And Liabilities, Net

 

New managementassumed control of the Company effective July 1, 2004. One of management’sfirst objectives was to analyze the internal operations of the Company. Extensiveinternal audits of the Company’s accounts receivable, including its customerbase, reconciliation of accounts payable, including amounts owed to vendors andits senior lender, uncovered errors in many accounts. The Company has made anentry to adjust the net assets and liabilities to reflect their true makeup.This adjustment decreased the net loss realized by the Company during fiscal2004 by $385,680.

 

During fiscal2003, the Company wrote down its inventory totaling $252,530.

 

**2.  GOING CONCERN AND MANAGEMENTPLANS**

 

During the two year period ending September 30, 2004, the Companyrecorded net losses aggregating $2.4 million. The Company’s continued existence is dependent upon its ability to takeadvantage of acquisition opportunities, raise capital through privatesecurities offerings and use these sources of capital to grow and enhance itsregional wireless broadband network. During the third quarter ended June 30,2004 the Company completed the merger with Bold Wireless Networks, Inc. (“Bold”),and the acquisition of Blue Ocean Wireless, Inc. (“BOW”). Both of theseentities engage in providing wireless internet services and have increased thecustomer base and wireless network area coverage for the Company. The Companyhas also continued to raise capital through a variety of private securitiesofferings of both preferred and common stock.

 

Management is focusing the Company on expanding and improving itswireless internet service and reviewing the continued development of newer,leading edge video technology. Through acquisition and normal growth, theCompany will continue to increase its customer base to derive the necessaryrevenue generation to support operations.

 

Management retains the ability to raise additional funds throughprivate offerings or public offerings, which, in management’s opinion, willprovide sufficient capital resources. There can be no assurance that any ofmanagement’s plans as described above will be successfully implemented or thatthe Company will continue as a going concern.

 

The Company’s Liquidity Plan

 

Recentoperating results give rise to concerns about the Company’s ability to generatecash flow from operations sufficient to make scheduled debt payments as theybecome due. During the year ended September 30, 2004, the Company continued toseek financing from private placements and seek acquisitions to expand itswireless broadband network and revenue customer base. The Company hasimplemented cost saving measures including staff reductions. The Company willtake additional cost savings measures, if necessary, to enhance its liquidityposition.

 

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The Company’sneed to raise additional equity or debt financing and the Company’s ability togenerate cash flow from operations sufficient to make scheduled payments on itsdebts as they become due will depend on its future performance and the Company’sability to successfully raise capital and implement business and growthstrategies. The Company’s performance will also be affected by prevailingeconomic conditions. Many of these factors are beyond the Company’s control. Iffuture cash flows and capital resources are insufficient to meet the Company’sdebt obligations and commitments, the Company may be forced to reduce or delayactivities and capital expenditures, obtain additional equity capital orrestructure or refinance its debt. In the event that the Company is unable todo so, the Company may be left without sufficient liquidity and it may not beable to meet its debt service requirements. In such a case, an event of defaultwould occur and could result in a substantial portion of the Company’sindebtedness becoming immediately due and payable. As a result, the Company’ssenior lender would be able to foreclose on the Company’s secured assets.

 

**3.  PROPERTY AND EQUIPMENT**

 

Property and equipment are summarized at September 30, 2004 and 2003,as follows:

 
| ** **                                      | ** ** | **September 30,** | ** ** |
|-------------------------------------------------|------------|-------------------|------------|
| ** **                                      | ** ** | **2004**          | ** ** | **2003** | ** ** |
| ** **                                      | ** ** | ** **        | ** ** | ** ** | ** ** |
| Broadband equipment                             |       | $                 | 170,413    |   | $ | — |   |
| Computer equipment                              |       | 116,360           |       | 128,149 |   |
| Machinery and equipment                         |       | 173,241           |       | 2,374 |   |
| Office furniture and artwork                    |       | 21,559            |       | 15,451 |   |
| Transportation equipment                        |       | 7,200             |       | — |   |
| Installation equipment                          |       | 205,597           |       | — |   |
| Transmission equipment                          |       | 51,321            |       | — |   |
|                                            |       | $                 | 745,691    |   | $ | 145,974 |   |
| Less accumulated depreciation and  amortization |       | (251,923          | )          | (131,479 | ) |
|                                            |       | $                 | 493,768    |   | $ | 14,495 |   |

 

Depreciation expense for the years ended September 30, 2004 and 2003,was $118,346 and $71,540, respectively.

 

**4.  ACQUISITIONS**

 

Effective April 2, 2004 the Company finalized its negotiations andformally merged the operations of Bold into the Company. To effect the merger,the Company issued 32,000,000 shares of common stock to the members ofBold.  This represented 37% of theoutstanding voting securities of the Company. No member received more than 10%of the outstanding voting securities of the Company as a result of thistransaction. Another effect of the merger was the addition of sustainableoperating revenue from Bold’s current customer base approximating $50,000 perquarter.  Since the merger was betweenentities under common control, the business combination was accounted for in amanner similar to a pooling of interest, whereby the net assets and liabilitiesof Bold were merged into the Company at their carrying value.

 

The following is a condensed balance sheet disclosing the actualcarrying values of Bold’s assets and liabilities at the acquisition date.

 

| ASSETS                                     |   |     |    |
|--------------------------------------------|--------|----------|---------|
|                                       |   |     |    |
| Cash and cash equivalents                  |   | $        | 9,672   |   |
| Accounts receivable                        |   | 1,494    |    |
| Fixed assets, net                          |   | 242,030  |    |
| Other assets                               |   | 1,340    |    |
|                                       |   |     |    |
| Total assets                               |   | $        | 254,536 |   |
|                                       |   |     |    |
| LIABILITIES  AND MEMBERS’ DEFICIT     |   |     |    |
|                                       |   |     |    |
| Accounts payable and accrued expenses      |   | $        | 42,514  |   |
| Notes payable                              |   | 383,763  |    |
| Members’ deficit                      |   | (171,741 | )       |
|                                       |   |     |    |
| Total liabilities and members’ equity |   | $        | 254,536 |   |

 

----

 

The following represents the approximate pro-forma effect assuming themerger with Bold had occurred on October 1, 2003, the beginning of the Company’scurrent fiscal year.

 
| ** **                                                             | ** ** | **Year Ended  September 30, 2004** | ** ** |
|------------------------------------------------------------------------|------------|------------------------------------|------------|
|                                                                   |       |                               |       |
| Net loss, as reported (includes Bold  activity since acquisition date) |       | $                                  | (1,326,701 | ) |
| Additional estimated Bold net loss (prior  to acquisition date)        |       | (170,000                           | )          |
|                                                                   |       |                               |       |
| Pro-forma net loss                                                     |       | $                                  | (1,496,701 | ) |
|                                                                   |       |                               |       |
| Weighted average shares outstanding                                    |       | 40,968,071                         |       |
| Adjustment to reflect common stock issued  to Bold members             |       | 14,688,525                         |       |
|                                                                   |       |                               |       |
| Pro-forma weighted average shares  outstanding                         |       | 55,656,596                         |       |
|                                                                   |       |                               |       |
| Loss per share, as reported                                            |       | $                                  | (.03       | ) |
|                                                                   |       |                               |       |
| Pro-forma loss per share                                               |       | $                                  | (.03       | ) |
|                                                                        |            |                                    |            |  |  |

 

Effective June 30, 2004 the Company acquired all of the issued andoutstanding common stock of BOW. In consideration for such purchase, theCompany issued an aggregate of 30,000,000 restricted shares of the Common stockof the Company, allocated as follows: 90% (or 27,000,000 shares) to Blue OceanTechnologies, LLC, a Texas limited liability company (“BOT”), and 10% (or3,000,000 shares) to Outback Management Services, L.L.C., a Texas limitedliability company. Following the acquisition BOT beneficially owns 35% of the86,100,829 outstanding voting securities of the Company, and consequently isconsidered by management of the Company to have acquired control of theCompany. Another effect of the acquisition was the expansion of the Company’sbroadband and wireless division, as well as its coverage of wirelesscommunications customers in the North Texas area. Sustainable operating revenuefrom BOW’s current customer base is approximately $35,000 per quarter. Thisacquisition was accounted for using the purchase method of accounting, wherebythe net assets and liabilities of BOW were recorded at their fair value and anyexcess of purchase price over that fair value was recorded as intangible assetsin the Company’s Balance Sheet.

 

The following is a condensed balance sheet disclosing the actual fairvalues of BOW’s assets and liabilities at the acquisition date.

 

| ASSETS                                |   |      |      |
|---------------------------------------|--------|-----------|-----------|
|                                  |   |      |      |
| Cash and cash equivalents             |   | $         | 19,343    |   |
| Accounts receivable                   |   | 10,249    |      |
| Prepaid consulting fees               |   | 206,500   |      |
| Fixed assets, net                     |   | 273,305   |      |
| Intangible asset                      |   | 1,189,319 |      |
|                                  |   |      |      |
| Total assets                          |   | $         | 1,698,716 |   |
|                                  |   |      |      |
| LIABILITIES  AND EQUITY               |   |      |      |
|                                  |   |      |      |
| Accounts payable and accrued expenses |   | $         | 168,916   |   |
| Notes payable                         |   | 29,800    |      |
| Equity                                |   | 1,500,000 |      |
|                                  |   |      |      |
| Total liabilities and equity          |   | $         | 1,698,716 |   |

 

The following represents the approximate pro-forma effect assuming themerger with BOW had occurred on October 1, 2003, the beginning of the Company’scurrent fiscal year.

 

----

 
| ** **                                                 | ** ** | **Year Ended**         | ** ** |
|------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                 | ** ** | **September 30, 2004** | ** ** |
| ** **                                                 | ** ** | ** **             | ** ** |
| Net loss, as reported                                      |       | $                      | (1,326,701 | ) |
| Additional estimated BOW net loss                          |       | (24,000                | )          |
|                                                       |       |                   |       |
| Pro-forma net loss                                         |       | $                      | (1,350,701 | ) |
|                                                       |       |                   |       |
| Weighted average shares outstanding                        |       | 40,968,071             |       |
| Adjustment to reflect common stock issued  to Bold members |       | 22,377,049             |       |
|                                                       |       |                   |       |
| Pro-forma weighted average shares  outstanding             |       | 63,345,120             |       |
|                                                       |       |                   |       |
| Loss per share, as reported                                |       | $                      | (.03       | ) |
|                                                       |       |                   |       |
| Pro-forma loss per share                                   |       | $                      | (.02       | ) |

 

**5.  ACQUISITON OF ASSETS**

 

The Company completed an acquisition of certain assets from RegionalWireless Networks (“RWN”) in January 2004. The assets acquired from RWN are primarily located in Wichita Falls,Texas and consisted of equipment, contracts and other intangible assetsutilized in generating revenue from wireless internet contracts.  The acquired assets increased the operatingrevenue of the Company by approximating $30,000 per quarter.  The agreement to acquire the assets calledfor cash payments of $105,000 and the issuance of 3,800,000 shares of commonstock of the Company valued at $190,000 at the closing date. Additionally, theagreement guarantees the value of the common stock issued to amount to $450,000on January 31, 2005.  The agreement callsfor any difference in value to be paid to the seller in cash.  This contingent consideration has not beenreflected in the cost of the assets acquired. The excess of cost over fair value of the assets acquired has beenrecorded as intangible assets.  A portionof the intangible assets acquired, consisting of a non-compete agreement,amounted to $1,000.  The balance of theexcess of cost over the fair value of the assets acquired, amounting to $247,058has been recorded as goodwill.  Goodwillrecorded will be accounted for in accordance with SFAS No. 142.  Accordingly, goodwill will not be amortized,rather it will be tested for impairment annually.

 

Cash flow and other information relative to the acquired assetsfollows:

 
| Approximate fair value of identifiable  assets acquired:    |   |   |   |
|-------------------------------------------------------------|--------|--------|--------|
| Equipment                                                   |   | $      | 46,922 |   |
| Inventory                                                   |   | 3,000  |   |
| Non-compete agreement                                       |   | 1,000  |   |
| Cash paid for acquisition of assets                         |   | 25,000 |   |
| Amount payable for acquisition of assets at  March 31, 2004 |   | 80,000 |   |
|                                                             |        |        |        |  |

 

No liabilities of RWN were assumed in the acquisition of assets.  To reach the guaranteed value of the commonstock issued in the acquisition of RWN assets, the Company's stock would haveto have a value of approximately $.12 per share on January 31, 2005.

 

During the year ended September 30, 2004 the Company re-evaluated theinventory related to the RWN purchase and subsequently reclassified $102,000 ofthe inventory to property and equipment as it was determined that thisequipment had been deployed. Also, the Company accrued $34,000 of interest andlate fees related to the $80,000 amount owed due to the terms of the purchaseagreement.

 

**6.  EQUITY TRANSACTIONS**

 

During the year ended September 30, 2004, the Company issued 805,000shares of its Series B cumulative preferred stock through private placements.730,000 shares of Series B cumulative preferred stock were issued at a price of$.10 per share for total proceeds of $73,000. 75,000 shares of Series Bcumulative preferred stock were issued at a price of $.08 per share resultingin total proceeds of $6,000. The cumulative preferred stock earns a dividend atthe rate of 6 percent per annum, payable semi-annually.  At September 30, 2004, 805,000 shares ofcumulative Series B preferred stock were outstanding. In October of 2004, theCompany marketed a second private placement consisting of Series C convertiblepreferred stock. To date the Company has

 

----

 

sold 200,000 shares at a price of $1.00 per share resulting in proceedsof $125,000 and marketable equity securities valued at $75,000. The proceeds of$125,000 were used to facilitate working capital needs during the first quarterended December 31, 2004. The marketable equity securities are being liquidatedperiodically to facilitate working capital needs.

 

During the years ended September 30, 2004 and 2003, the Company enteredinto several agreements in which shares were exchanged for services.  Stock issued in connection with theseservices was valued at the current sales price of common stock.  On April 2, 2004, the Company issued6,330,000 shares of common stock valued at $.10 per share to various employeesand consultants for past services.  Sincethe service period occurred prior to the issuance of these shares, the Companyrecognized $546,235 in expense in the three months ended March 31, 2004 relatedto the issuance of these shares.  $86,765of the share value was used to reduce previously recorded liabilities.

 

In addition, effective June 30, 2004, the Company issued 4,500,000shares of common stock in connection with the execution of a service agreementbetween the Company and MAC Partners LP (“MAC”). The service agreement allowsMAC to provide management and administrative services as well as providingaccess to various forms of capital investments designed to infuse workingcapital into the Company. At September 30, 2004, MAC had been issued a total of5,000,000 shares of common stock for its management services.

 

On April 13, 2003, the Company effected a 100 to 1 reverse stock split,where 1 share of common stock was issued for each 100 shares of common stockpreviously owned.  The reverse stocksplit has been accounted for retroactively in the financial statements as if ithad occurred on September 30, 2002. Accordingly, the Company’s outstanding shares and net loss per sharepresented in these financial statements reflects the effect of the reversestock split.  In connection with thereincorporation of the Company, the original shareholders received 100,000shares (10,000,000 prior to the reverse stock split) of common stock.

 

In July 1999, the Company commenced a private offering of 150,000cumulative Series A preferred shares at $6.00 per unit.  During the year ended September 30, 2002, theCompany commenced a similar private offering of 150,000 cumulative Series Apreferred shares.  The Series A preferredstock earned a dividend at the rate of 6 percent per annum, payablesemi-annually.  The Board, exercising itsdiscretion, redeemed all Series A preferred shares by exchanging one share ofcommon stock for each share of preferred stock outstanding on September 16,2003.

 

**7.  OPERATING LEASES**

 

The Company entered into lease agreements for office in Texas.  The office lease is for a term of 24 monthscommencing on November 1, 2003 at $1,850 per month. Rent expense was $47,850and $48,742 for the years ended September 30, 2004 and 2003.

 

The Companyentered into an agreement, effective September 30, 2004, for roof access withinthe city of Iowa Park, Texas.  Theagreement terms specify six monthly installments of $425 per month.

 

The following is a schedule of future minimum rent payments due:

 
| Year ending September 30: |   |   |   |
|---------------------------|--------|--------|--------|
|                      |   |   |   |
| 2005                      |   | $      | 24,750 |   |
| 2006                      |   | 1,850  |   |
|                      |   | $      | 26,600 |   |

 

The Companyhas entered into various lease agreements, primarily to provide signal generation.  These agreements are short-term in nature,generally month to month, with no agreement containing a commitment longer thansix months.

 

**8.  STOCK OPTIONS**

 

The Company has granted stock options under a Stock Option Plan to keyemployees for valuable services to the Company. Under the Plan, a maximum of 10,000 shares (as adjusted for the reversestock split) may be granted.  The Companyauthorized 10,000 shares and granted 4,670 shares under the Plan (as adjustedfor the reverse stock split).  All optionshave an eight year term from the exercise date.

 

----

 

The following summarizes the option activity under the Plan (asadjusted for the reverse stock split):

 
| ** **                      | ** ** | **Number of Shares** | ** ** | **Option Price** | ** ** |
|---------------------------------|------------|----------------------|------------|------------------|------------|
|                            |       |                 |       |             |       |
| Outstanding, September 30, 2001 |       | 990                  |       | $                | .10        |   |
|                            |       |                 |       |             |       |
| Granted                         |       | 2,000                |       |             |       |
| Exercised                       |       | (650                 | )          |             |       |
| Canceled or expired             |       | (200                 | )          |             |       |
|                            |       |                 |       |             |       |
| Outstanding, September 30, 2002 |       | 2,140                |       |             |       |
|                            |       |                 |       |             |       |
| Granted                         |       | —               |       |             |       |
| Exercised                       |       | —               |       |             |       |
| Canceled or expired             |       | —               |       |             |       |
|                            |       |                 |       |             |       |
| Outstanding, September 30, 2003 |       | 2,140                |       |             |       |
|                            |       |                 |       |             |       |
| Granted                         |       | —               |       |             |       |
| Exercised                       |       | —               |       |             |       |
| Canceled or expired             |       | —               |       |             |       |
|                            |       |                 |       |             |       |
| Outstanding, September 30, 2004 |       | 2,140                |       |             |       |
|                                 |            |                      |            |                  |            |  |

 

The vestingperiod of the remaining options is as follows:

 
|   | Vested and exercisable |   | 2,140 |   |   |   |
|--------|------------------------|--------|-------|--------|--------|--------|

 

No compensation costs have been recognized under the Plan and theCompany has elected the disclosure only provisions of SFAS No. 123.  The fair value of the options vested andexercisable is immaterial as of September 30, 2004 and 2003.

 

**9.  NOTES PAYABLE**

 

At September 30, 2004 the Company maintained notes payable due to itssenior lender currently carrying a principal balance of $382,427 and accruedinterest of $11,958. Of this principal amount $302,455 is due within twelvemonths and is shown as current liabilities on the Company’s Balance Sheet.

 

The notes bear terms as follows:

Principal and interest balance of $306,487. During December of 2004,the Company made a $100,000 payment on this note and refinanced the principalbalance of $200,000. The terms of this note $200,000 note bears interest at 8%with a maturity date of March 15, 2005.

 

Principal and interest balance of $2,544. This note bears interest at12% with a maturity date of January 10, 2005. The Company is in negotiationswith its senior lender regarding this note.

 

Principal and interest balance of $24,606. This note bears interest at7.25% with a maturity date of April 1, 2008.

 

Principal and interest balance of $35,999. This note bears interest at6.60% with a maturity date of July 23, 2008.

 

Principal and interest balance of $24,749. This note bears interest at4.50% with a maturity date of November 15, 2008.

 

At September 30, 2004 the Company had notes payable with a principalbalance totaling $90,750 due to MAC for capital infusions made directly by MAC.These notes bear interest ranging from 7% to 12% per annum. Accrued interest onthese notes totaled $1,921 at September 30, 2004.

 

At September 30, 2004 the Company had notes payable with a principalbalance totaling $112,343 due to its chief operating officer for capitalinfusions made directly by its officer. These notes bear interest ranging from7% to 12% per annum. Accrued interest on these notes totaled $2,805 atSeptember 30, 2004.

 

**10. RELATED PARTY TRANSACTIONS**

 

During the year ended September 30, 2004 the Company’s chief operating officer made loans to the Company totaling $112,343. These loans were for necessary working capital to maintain the Company’s wireless broadband network. These loans bear interest ranging from 7% to 12% and include an 18% default provision. These loans are classified as current liabilities on the Company’s Balance Sheet.

 

----

 

The Company entered into a management services agreement with MAC Partners, LP (“MAC”) effective June 30, 2004.    MAC initially received 4,500,000 of the Company’s common stock valued at $.05 per share to execute the agreement. On September 1, 2004 MAC received an additional 500,000 shares of the Company’s common stock valued at $.04 per the terms of the management services agreement. MAC also made loans to the Company totaling $90,751 for working capital needs. These loans bear interest ranging from 7% to 12% and include an 18% default provision. These loans are classified as current liabilities on the Company’s Balance Sheet.

 

Two stockholders have employment agreements which commenced on January 1, 1999 and originally continued until December 20, 2004. The agreements provided for annual salaries of $120,000 per year. Of these amounts, $258,871 remained unpaid at September 30, 2002. The stockholders agreed to reduced payments amounting to $48,000 and waived further accrual of salary under these agreements. The $48,000 remained unpaid at September 30, 2003. As a result of the salary reductions, $210,871 has been included as other income in the accompanying statement of operations for the year ended September 30, 2003.

 

Certain Company employees had various amounts of unpaid salaries at September 30, 2003 amounting to $60,926.

 

**11. COMMITMENTS AND CONTINGENCIES**

 

The Companyhas become subject to various other claims and other legal matters in thecourse of conducting its business. The Company believes that neither suchclaims and other legal matters nor the cost of prosecuting and/or defendingsuch claims and other legal matters will have a material adverse effect on theCompany’s results of operations, financial condition or cash flows.

 

**12. SUPPLEMENTAL CASH FLOW INFORMATION**

 

Significantnon-cash transactions are summarized as follows:

** **
| ** **                                       | ** ** | **Year Ended September 30,** | ** ** |
|--------------------------------------------------|------------|------------------------------|------------|
| ** **                                       | ** ** | **2004**                     | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                       | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Common stock issued to retire liabilities        |       | $                            | 126,623    |   | $ | — |   | $ | — |   |
| Common stock issued for services                 |       | $                            | 982,148    |   | $ | 555,925 |   | $ | 1,298,662 |   |
| Common stock issued in acquisition of  assets    |       | $                            | 190,000    |   | $ | — |   | $ | — |   |
| Common stock issued in acquisitions              |       | $                            | 1,363,647  |   | $ | — |   | $ | — |   |
| Preferred stock converted to common stock        |       | $                            | —     |   | $ | 7,537 |   | $ | — |   |
| Preferred stock dividend paid with common  stock |       | $                            | —     |   | $ | 144,295 |   | $ | — |   |
| Preferred dividends payable                      |       | $                            | —     |   | $ | 144,295 |   | $ | 63,251 |   |

 

**13.SUBSEQUENT EVENTS**

** **

On October 20,2004, the Company executed a Membership Interests Purchase Agreement to acquire100% membership interest in Palancar Broadband LLC, a Texas limited liabilitycompany, for 1,000,000 shares of its restricted common stock. As of January 13,2005, the Company is in the process of completing final arrangements withPalancar Broadband LLC.

 

The Companyhas entered into four separate Letters of Intent to acquire small regionalwireless networks. These regional wireless networks, if acquired, would expandthe Company's current network and increase area coverage and customer revenuebase. The Company plans to close on some or all of these Letters of Intentduring the second quarter of its fiscal year end September 30, 2005.

 

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