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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 
For the quarterly period ended September 30, 2002
 
Commission File Number: 000-28217
 
 
AIRNET COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
 
 
Delaware
  
59-3218138
(State or Other Jurisdiction of
  
(I.R.S. Employer
Incorporation or Organization)
  
Identification No.)
 
3950 Dow Road, Melbourne, Florida 32934
(Address of Principal Executive Offices) (Zip Code)
 
(321) 984-1990
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check x whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
 
Indicate by check x whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes ¨ No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
CLASS OUTSTANDING AT SEPTEMBER 30, 2002
 
Common stock, par value $.001: 23,846,445 shares
 
 

Table of Contents
 
AIRNET COMMUNICATIONS CORPORATION
 
INDEX
           
Page No.
PART I.
   
FINANCIAL INFORMATION:
       
           
    
                 Condensed Balance Sheets (Unaudited)
     
  3
    
                 Condensed Statements of Operations (Unaudited)
     
  4
    
                 Condensed Statements of Cash Flows (Unaudited)
     
  5
         
  6
         
11
         
16
PART II.
   
OTHER INFORMATION:
       
         
16
         
16
         
16
 

2

Table of Contents
PART I.    FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS.
 
AIRNET COMMUNICATIONS CORPORATION
CONDENSED BALANCE SHEETS
(In Thousands)
 
    
Unaudited
    
Sept. 30, 2002
   
Dec. 31, 2001
ASSETS
              
Cash and cash equivalents
   
$
4,343
   
$
4,702
Accounts receivable—net of allowance for doubtful accounts of $4.0 million and $3.4 million at Sept. 30, 2002 and Dec. 31, 2001, respectively
   
 
3,079
   
 
5,796
Inventories
   
 
14,997
   
 
21,871
Notes receivable
   
 
991
   
 
775
Other
   
 
1,055
   
 
1,880
    
  
TOTAL CURRENT ASSETS
   
 
24,465
   
 
35,024
Property and equipment, net
   
 
8,440
   
 
11,498
Long-term notes receivable, less current portion (net of allowance for doubtful accounts of $0.1 million and $1.4 million at Sept. 30, 2002 and Dec. 31, 2001, respectively)
   
 
328
   
 
1,216
Other long-term assets
   
 
2,184
   
 
2,137
    
  
TOTAL ASSETS
   
$
35,417
   
$
49,875
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Accounts payable
   
$
3,083
   
$
5,224
Accrued payroll and other expenses
   
 
3,400
   
 
2,817
Current portion of capital lease obligations
   
 
93
   
 
367
Customer deposits
   
 
472
   
 
548
Deferred revenues
   
 
1,562
   
 
2,637
    
  
TOTAL CURRENT LIABILITIES
   
 
8,610
   
 
11,593
    
  
LONG-TERM LIABILITIES
              
Long-term accounts payable
   
 
1,216
   
 
2,022
Dividends payable—series B redeemable convertible preferred stock
   
 
3,300
   
 
1,500
Capital lease obligations less current portion
   
 
24
   
 
48
    
  
TOTAL LONG-TERM LIABILITIES
   
 
4,540
   
 
3,570
    
  
TOTAL LIABILITIES
   
 
13,150
   
 
15,163
Redeemable convertible preferred stock (liquidation value of $60,000,000 plus accrued dividends)
   
 
17,794
   
 
16,344
TOTAL STOCKHOLDERS’ EQUITY
   
 
4,473
   
 
18,368
    
  
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
   
$
35,417
   
$
49,875
    
  
 
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS

3

Table of Contents
 
AIRNET COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
    
Unaudited
  
    
Three months ended Sept. 30,
     
Nine months ended Sept. 30,
  
    
2002
     
2001
     
2002
     
2001
  
NET REVENUES
   
$
7,305
 
   
$
2,127
 
   
$
21,026
 
   
$
10,407
 
COST OF REVENUES
   
 
5,457
 
   
 
3,246
 
   
 
15,441
 
   
 
13,722
 
WRITE-DOWN OF EXCESS AND OBSOLETE INVENTORY
   
 
—  
 
   
 
417
 
   
 
—  
 
   
 
7,253
 
    
  
  
  
Gross profit (loss)
   
 
1,848
 
   
 
(1,536
)
   
 
5,585
 
   
 
(10,568
)
    
  
  
  
OPERATING EXPENSES:
                                    
Research and development
   
 
3,046
 
   
 
4,440
 
   
 
9,688
 
   
 
22,760
 
Sales and marketing
   
 
1,391
 
   
 
1,716
 
   
 
4,353
 
   
 
10,541
 
General and administrative
   
 
912
 
   
 
2,516
 
   
 
3,500
 
   
 
8,838
 
    
  
  
  
Total costs and expenses
   
 
5,349
 
   
 
8,672
 
   
 
17,541
 
   
 
42,139
 
    
  
  
  
LOSS FROM OPERATIONS
   
 
(3,501
)
   
 
(10,208
)
   
 
(11,956
)
   
 
(52,707
)
TOTAL OTHER INCOME (EXPENSE) NET
   
 
159
 
   
 
206
 
   
 
352
 
   
 
797
 
    
  
  
  
LOSS BEFORE EXTRAORDINARY GAIN
   
 
(3,342
)
   
 
(10,002
)
   
 
(11,604
)
   
 
(51,910
)
EXTRAORDINARY GAIN ON VENDOR SETTLEMENTS
   
 
673
 
   
 
461
 
   
 
704
 
   
 
461
 
    
  
  
  
NET LOSS
   
 
(2,669
)
   
 
(9,541
)
   
 
(10,900
)
   
 
(51,449
)
ACCRETION OF DISCOUNT—REDEEMABLE PREFERRED STOCK
   
 
(511
)
   
 
(407
)
   
 
(1,450
)
   
 
(606
)
PREFERRED DIVIDENDS
   
 
(600
)
   
 
(600
)
   
 
(1,800
)
   
 
(900
)
    
  
  
  
NET LOSS ATTRIBUTABLE TO COMMON STOCK
   
$
(3,780
)
   
$
(10,548
)
   
$
(14,150
)
   
$
(52,955
)
    
  
  
  
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS—Basic and diluted
   
$
(0.16
)
   
$
(0.44
)
   
$
(0.59
)
   
$
(2.23
)
    
  
  
  
WEIGHTED AVERAGE SHARES OUTSTANDING—Basic and diluted
   
 
23,833,296
 
   
 
23,791,179
 
   
 
23,815,218
 
   
 
23,783,648
 
    
  
  
  
LOSS PER SHARE—BASIC AND DILUTED
                                    
Loss before extraordinary gain
   
$
(0.14
)
   
$
(0.42
)
   
$
(0.49
)
   
$
(2.18
)
Extraordinary gain on vendor settlements
   
 
0.03
 
   
 
0.02
 
   
 
0.03
 
   
 
0.02
 
    
  
  
  
Net loss
   
$
(0.11
)
   
$
(0.40
)
   
$
(0.46
)
   
$
(2.16
)
    
  
  
  
Loss attributable to common stock
   
$
(0.16
)
   
$
(0.44
)
   
$
(0.59
)
   
$
(2.23
)
    
  
  
  
 
 
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS

4

Table of Contents
 
AIRNET COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
 
    
UNAUDITED
  
    
Nine months ended Sept. 30,
  
    
2002
     
2001
  
OPERATING ACTIVITIES:
                  
NET CASH USED IN OPERATING ACTIVITIES
   
$
(185
)
   
$
(40,405
)
    
  
INVESTING ACTIVITIES:
                  
Cash paid for acquisition of capital assets
   
 
(89
)
   
 
(3,977
)
Proceeds from the disposal of fixed assets
   
 
132
 
   
 
51
 
    
  
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
   
 
43
 
   
 
(3,926
)
    
  
FINANCING ACTIVITIES:
                  
Net proceeds from issuance of preferred and common stocks
   
 
46
 
   
 
29,603
 
Repayments (issuance) of notes receivable to officers
   
 
35
 
   
 
(1,217
)
Principal payments on capital lease obligations
   
 
(298
)
   
 
(1,086
)
    
  
Dividends payable—Series B
   
 
—  
 
   
 
—  
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
   
 
(217
)
   
 
27,300
 
    
  
NET DECREASE IN CASH AND CASH EQUIVALENTS
   
 
(359
)
   
 
(17,031
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
 
4,702
 
   
 
28,867
 
    
  
CASH AND CASH EQUIVALENTS, END OF PERIOD
   
$
4,343
 
   
$
11,836
 
    
  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
                  
Cash paid during the period for interest
   
$
8
 
   
$