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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED DECEMBER 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0 - 1325
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MULTIBAND CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of incorporation or organization)
41 - 1255001
(IRS Employer Identification No.)
9449 Science Center Drive, New Hope, Minnesota 55428
(Address of principal executive offices)
Telephone (763) 504-3000 Fax (763) 504-3060
The Company's Internet Address: www.multibandusa.com
(Registrant's telephone number, facsimile number, and Internet address)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock (no par value)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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 mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by references in Part III of this Form 10-K or any amendment to
this Form 10-K / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes |_| No |X|
As of June 30, 2004 (the most recently completed fiscal second quarter),
the aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the average high and low prices on such
date as reported by the Nasdaq Smallcap was approximately $50,361,036.
As of April 13, 2005, there were 28,479,578 outstanding shares of the
registrant's common stock, no par value stock.
Documents Incorporated By Reference
Portions of the registrant's definitive proxy statement to be filed within
120 days after the end of the fiscal year covered by this report are
incorporated by reference into Part III hereof.
Table of 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 the Registrant's Common Equity Related
Shareholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Consolidated Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Item 8. Consolidated Financial Statements and
Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B None
Part III
Item 10. Directors, Executive Officers, Promoters and Control
Persons of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13 Certain Relationships and Related Transactions
Item 14 Principal Accountant Fees and Services
Item 15 Exhibits and Financial Statement Schedules.
Signatures
Item 1
Business
Multiband Corporation (Multiband), (f/k/a Vicom, Incorporated)., is a
Minnesota corporation formed in September 1975. Multiband has one operating
division: 1) Multiband Consumer Services (MCS, legally known as Corporate
Technologies, USA, Inc. dba Multiband), which encompasses the subsidiary
corporations, Multiband USA, Inc., URON, Inc., Minnesota Digital Universe, Inc.,
and Rainbow Satellite Group, LLC.
Multiband completed an initial public offering in June 1984. In November
1992, Multiband became a non-reporting company under the Securities Exchange Act
of 1934. In July 2000, Multiband regained its reporting company status. In
December, 2000, Multiband stock began trading on the NASDAQ stock exchange under
the symbol VICM. In July 2004, the symbol was changed to MBND concurrent with
the Company's name change from Vicom, Incorporated to Multiband Corporation.
Multiband's website is located at: www.multibandusa.com.
From its inception until December 31, 1998, Multiband operated as a
telephone interconnect company only. Effective December 31, 1998, Multiband
acquired the assets of the Midwest region of Enstar Networking Corporation
(ENC), a data cabling and networking company. In late 1999, in the context of a
forward triangular merger, Multiband to expand its range of computer products
and related services, purchased the stock of Ekman, Inc. d/b/a Corporate
Technologies, and merged Ekman, Inc. into the newly formed surviving
corporation, Corporate Technologies, USA, Inc. (MBS). MBS provided voice, data
and video systems and services to business and government. The MBS business
segment was sold effective March 31, 2005. All referenced to financial
information and descriptions of business in this Form 10-K have been revised to
reflect only our continuing operations and all references to our now
discontinued Multiband Business Services have been eliminated. MCS began in
February 2000. MCS, the Company's continuing operating division, provides voice,
data and video services to multiple dwelling units (MDUs), including apartment
buildings, condominiums and time share resorts. During 2004 the Company
purchased video subscribers in a number of separate transactions, the largest
one being Rainbow Satellite Group, LLC. During 2004 the Company also purchased
the stock of Minnesota Digital Universe, Inc., which made the Company the
largest master service operator in MDU's for DirecTV satellite television in the
United States.
Multiband Consumer Services
Since 2000, Multiband has offered voice, data and video services to
residents of the multi dwelling unit (MDU) market. Our experience in this market
suggests that property owners and managers are currently looking for a solution
that will satisfy two problems. The first problem that they are dealing with is
how to satisfy the residents who desire to bring satellite television service to
the unit without being visually unattractive or a structural/maintenance
problem. The second is how to provide competitive access for local and long
distance telephone cable television and internet services. Our MCS offering
addresses these problems and provides the consumer several benefits, including:
o Lower Cost Per Service
o Blended Satellite and Cable Television Package
o Multiple Feature Local Phone Services (features such as call
waiting, call forwarding and three-way calling)
o Better than Industry Average Response Times
o One Number for Billing and Service Needs
o One Bill for Local, Long Distance Cable Television and Internet
o "Instant On" Service Availability
As we develop and market this package, we keep a marketing focus on two
levels of customer for this product. The primary decision-makers are the
property owners/managers. Their concerns are focused on delivering their
residents reliability, quality of service, short response times, minimized
disruptions on the property, minimized alterations to the property and value
added services. Each of these concerns is addressed in our contracts with the
property owner, which includes annual reviews and 10 year terms as service
providers on the property. The secondary customer is the end-user. We provide
the property with on-going marketing support for their leasing agents to deliver
clear, concise and timely information on our services. This will include simple
sign up options that should maximize our penetration of the property.
When taken as a whole, and based on Multiband 's interpretations of U.S.
Census Bureau statistics, cable television, telephone and internet services
currently generate over $170 billion of revenues annually in the U.S, with an
estimated 26 million households living in MDUs. These statistics indicate stable
growing markets with demand that is likely to deliver significant values to
businesses that can obtain a subscriber base of any meaningful size.
Multiband Consumer Industry Analysis
Strategy
For the near future, the services described below will be offered
primarily in New York, California, Minnesota, Florida, Illinois, Missouri and
North Dakota. Our primary competition will come from the local incumbent
providers of telephone and cable television services.
Local Telephone Service
We compete with the former Bell System companies such as Verizon
Communications (Verizon) and Qwest Communications International, Inc. (Qwest)
for local telephone services. Although those companies have become the standard
for local telephone service, we believe we have the ability to underprice their
service while maintaining high levels of customer satisfaction.
Cable Television Service
We compete with Comcast Corporation (Comcast), Time Warner and others for
pay-TV customers. Comcast and Time-Warner are national cable television service
providers. We have a significant consumer benefit in that we are establishing
private rather than public television systems, which allows us to deliver a
package that is not laden with local "public access" stations that clog the
basic service package. In essence, we will be able to deliver a customized
service offering to each property based upon pre-installation market research
that we perform. The pricing of our service is also untariffed which allows for
flexible and competitive "bundling" of services.
Long Distance Telephone Service
Cingular-Wireless, LLC (Cingular), WorldCom Inc. dba MCI (MCI), and Sprint
Corporation (Sprint) are our principal competitors in providing long distance
telephone service. They offer new products almost weekly. Our primary concern in
this marketplace is to assure that we are competitive with the most recent
advertised offerings in the "long distance wars." We will meet this challenge by
staying within a penny of the most current offering, while still maintaining a
high gross margin on our product. We accomplish this through various carrier
agency associations. We expect to generate a high penetration in our long
distance services amongst our local service subscribers because private property
owners in the shared tenant environment (similar to a hotel environment) are not
required to offer multiple long distance carriers to their tenants.
Internet Access Service
The clear frontrunners in this highly unregulated market are America
Online, Inc. and CompuServe Corp. They compete with local exchange carriers,
long distance carriers, Internet backbone companies and many local ISPs
(Internet Service Providers). Competition has driven this to a flat rate
unlimited access dial-up service market. The general concern among consumers is
the quality of the connection and the speed of the download. Our design provides
the highest connection speeds that are currently available. The approach that we
will market is "blocks of service." Essentially, we deliver the same high bit
rate service in small, medium and large packages, with an appropriate per unit
cost reduction for those customers that will commit to a higher monthly
expenditure.
Market Description
We are currently marketing Multiband services to MDU properties primarily
throughout Minnesota, North Dakota, Missouri, Florida, New York, California and
Illinois. We will target properties that range from 50 to 150 units on a
contiguous MDU property for television and Internet access only. We will survey
properties that exceed 150 units for the feasibility of local and long distance
telephone services.
We are initially concentrating on middle to high-end rental complexes. We
are also pursuing resort area condominiums. A recent U.S. Census Bureau table
indicates that there are more than 65,000 properties in the United States that
fit this profile. Assuming an average of 100 units per complex, our focus is on
a potential subscriber base of 6,500,000.
A recent Property Owners and Manager Survey, published by the U.S. Census
Bureau , shows that the rental properties are focusing on improving services and
amenities that are available to their tenants. These improvements are being
undertaken to reduce tenant turnover, relieve pricing pressures on rents and
attract tenants from competing properties. We believe that most of these owners
or managers are not interested in being "in the technology business" and will
use the services that we are offering. Various iterations of this package will
allow the owners to share in the residual income stream from the subscriber
base.
Minnesota Digital Universe, Inc. (MDU, Inc.)
The Company, through its MDU, Inc. subsidiary, also serves as a master service
operator for DirecTV, a provider of satellite television service. DirecTV is the
largest provider of satellite television services in the United States with
approximately 13 million subscribers. DirecTV competes with the leading cable
companies and with Echostar, America's second largest provider of satellite
television. The Company, through its direct operations, markets DirecTV
services. The MDU, Inc. subsidiary allows the Company to offer satellite
television services to residents of Multi-dwelling-units through a network of
affiliated operators.
Number of Units/Customers
At April 1, 2005, MCS had 36,816 subscriptions for its services, (1,386
voice subscriptions, 31,177 video subscriptions and 4,253 internet
subscriptions).
Employees
As of March 31, 2005, Multiband employed three full-time management
employees, four accounting personnel, and six information technology employees.
As of that same date, MCS had 33 full-time employees, consisting of eight in
sales and marketing, seven in technical positions, sixteen in customer service
and related support, and two in management.
Risk Factors
Our operations and our securities are subject to a number of risks,
including but not limited to those described below. If any of the following
risks actually occur, the business, financial condition or operating results of
Multiband and the trading price or value of our common stock could be materially
adversely affected.
General
Multiband, since 1998, has taken several significant steps to reinvent and
reposition itself to take advantage of opportunities presented by a shifting
economy and industry environment.
Recognizing that voice, data and video technologies in the late twentieth
century were beginning to systematically integrate as industry manufacturers
were evolving technological standards from "closed" proprietary networking
architectures to a more "open" flexible and integrated approach, Multiband,
between 1998 and 2001, purchased three competitors which, in the aggregate,
possessed expertise in data networking, voice and data cabling and video
distribution technologies.
In early 2000, Multiband created its MCS division, employing the
aforementioned expertise, to provide communications and entertainment services
(local dial tone, long distance, high-speed internet and expanded satellite
television services) to residents in (MDUs) on one billing platform, which the
Company developed internally.
The specific risk factors, as detailed below, should be analyzed in the
context of the Company's anticipated MCS related growth.
Net Losses
The Company had net losses of $9,783,962 for the fiscal year ended
December 31, 2004, $4,365,004 for the fiscal year ended December 31, 2003, and
$4,438,059 for the fiscal year ended December 31, 2002. Multiband may never be
profitable.
The prolonged effects of generating losses without additional funding may
restrict our ability to pursue our business strategy. Unless our business plan
is successful, an investment in our common stock may result in a complete loss
of an investor's capital.
If we cannot achieve profitability from operating activities, we may not
be able to meet:
o our capital expenditure objectives;
o our debt service obligations; or
o our working capital needs.
Goodwill
In June 2001, the Financial Accounting Standards Board (FASB) adopted
Statement of Financial Accounting Standards (SFAS) 142, "Goodwill and Other
Intangible Assets" which changed the amortization rules on recorded goodwill
from a monthly amortization to a periodic "impairment" analysis for fiscal years
beginning after December 15, 2001. In 2004, the Company recorded an impairment
charge of $527,879 related to Multiband Business Services. In 2004, the Company
wrote off $2,221,000 worth of goodwill related to discontinued operations. As of
December 31, 2004, the Company had remaining recorded goodwill of $812,366
related to the purchase of Rainbow Satellite Group, LLC.
Deregulation
Several regulatory and judicial proceedings have recently concluded, are
underway or may soon be commenced that address issues affecting operations and
those of our competitors, which may cause significant changes to our industry.
We cannot predict the outcome of these developments, nor can we assure you that
these changes will not have a material adverse effect on us. Historically, we
have been a reseller of products and services, not a manufacturer or carrier
requiring regulation of its activities. Pursuant to Minnesota statutes, our
Multiband activity is specifically exempt from the need to tariff our services
in MDU's. However, the Telecommunications Act of 1996 provides for significant
deregulation of the telecommunications industry, including the local
telecommunications and long-distance industries. This federal statute and the
related regulations remain subject to judicial review and additional
rule-makings of the Federal Communications Commission, making it difficult to
predict what effect the legislation will have on us, our operations, and our
competitors.
Dependence on Strategic Alliances
Several suppliers, or potential suppliers of Multiband, such as McLeod,
WorldCom, WS Net, XO Communications and others have filed for bankruptcy in
recent years. While the financial distress of its suppliers or potential
suppliers could have a material adverse effect on Multiband's business,
Multiband believes that enough alternate suppliers exist to allow the Company to
execute its business plans. The Company is also highly dependent on its Master
System Operator agreement with DirecTV which expires in May 2007. Although an
alternate provider of satellite television services, Echostar, exists, the
termination of its agreements with DirecTV could have a material adverse effect
on Multiband's business.
Changes in Technology
A portion of our projected future revenue is dependent on public
acceptance of broadband, and expanded satellite television services. Acceptance
of these services is partially dependent on the infrastructure of the internet
and satellite television which is beyond Multiband's control. In addition, newer
technologies, such as video-on-demand, are being developed which could have a
material adverse effect on the Company's competitiveness in the marketplace if
Multiband is unable to adopt or deploy such technologies.
Attraction and Retention of Employees
Multiband's success depends on the continued employment of certain key
personnel, including executive officers. If Multiband were unable to continue to
attract and retain a sufficient number of qualified key personnel, its business,
operating results and financial condition could be materially and adversely
affected. In addition, Multiband's success depends on its ability to attract,
develop, motivate and retain highly skilled and educated professionals with a
wide variety of management, marketing, selling and technical capabilities.
Competition for such personnel is intense and is expected to increase in the
future.
Intellectual Property Rights
Multiband relies on a combination of trade secret, copyright, and
trademark laws, license agreements, and contractual arrangements with certain
key employees to protect its proprietary rights and the proprietary rights of
third parties from which Multiband licenses intellectual property. Multiband
also relies on agreements with owners of MDUs which grant the Company rights of
access for a specific period to MDU premises whereby Multiband is allowed to
offer its voice, data, and video services to individual residents of the MDUs.
If it was determined that Multiband infringed the intellectual property rights
of others, it could be required to pay substantial damages or stop selling
products and services that contain the infringing intellectual property, which
could have a material adverse effect on Multiband's business, financial
condition and results of operations. Also, there can be no assurance that
Multiband would be able to develop non-infringing technology or that it could
obtain a license on commercially reasonable terms, or at all. Multiband's
success depends in part on its ability to protect the proprietary and
confidential aspects of its technology and the products and services it sells.
There can be no assurance that the legal protections afforded to Multiband or
the steps taken by Multiband will be adequate to prevent misappropriation of
Multiband's intellectual property.
Variability of Quarterly Operating Results; Seasonality
Variations in Multiband's revenues and operating results occur from
quarter to quarter as a result of a number of factors, including customer
engagements commenced and completed during a quarter, the number of business
days in a quarter, employee hiring and utilization rates, the ability of
customers to terminate engagements without penalty, the size and scope of
assignments and general economic conditions. Because a significant portion of
Multiband's expenses are relatively fixed, a variation in the number of customer
projects or the timing of the initiation or completion of projects could cause
significant fluctuations in operating results from quarter to quarter. Further,
Multiband has historically experienced a seasonal fluctuation in its operating
results, with a larger proportion of its revenues and operating income occurring
during the third quarter of the fiscal year.
Certain Anti-Takeover Effects
Multiband is subject to Minnesota statutes regulating business
combinations and restricting voting rights of certain persons acquiring shares
of Multiband. These anti-takeover statutes may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a large block of Multiband's securities, or the removal of incumbent
management.
Volatility of Multiband's Common Stock
The trading price of our common stock has been and is likely to be
volatile. The stock market has experienced extreme volatility, and this
volatility has often been unrelated to the operating performance of particular
companies. We cannot be sure that an active public market for our common stock
will continue after this offering. Investors may not be able to sell the common
stock at or above the price they paid for their common stock, or at all. Prices
for the common stock will be determined in the marketplace and may be influenced
by many factors, including variations in our financial results, changes in
earnings estimates by industry research analysts, investors' perceptions of us
and general economic, industry and market conditions.
Future Sales of Our Common Stock May Lower Our Stock Price
If our existing shareholders sell a large number of shares of our common
stock, the market price of the common stock could decline significantly. The
perception in the public market that our existing shareholders might sell shares
of common stock could depress our market price.
Competition
We face competition from others who are competing for a share of the MDU
market, including other satellite companies and cable companies. Some of these
companies have significantly greater assets and resources than we do.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of
federal securities law. Terminology such as "may," "will," "expect,"
"anticipate," "believe," "estimate," "continue," "predict," or other similar
words, identify forward-looking statements. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other forward-looking information. Forward-looking statements
appear in a number of places in this prospectus and include statements regarding
our intent, belief or current expectation about, among other things, trends
affecting the industries in which we operate, as well as the industries we
service, and our business and growth strategies. Although we believe that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions, forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those predicted in the forward-looking statements as a result of
various factors, including those set forth in "Risk Factors."
Item 2:
Properties
Multiband and its subsidiaries lease principal offices located at 2000
44th Street SW, Fargo, ND 58103 and 9449 Science Center Drive, New Hope,
Minnesota 55428. We have no foreign operations. The main Fargo office lease
expires in 2017 and covers approximately 22,500 square feet. The Fargo base rent
ranges from $23,565 to $30,377 per month. The New Hope office lease expires in
2013 and covers approximately 47,000 square feet. The New Hope base rent ranges
from $18,389 to $25,166 per month. Both the New Hope and Fargo leases have
provisions that call for the tenants to pay net operating expenses, including
property taxes, related to the facilities. Both offices have office, warehouse
and training facilities.
Multiband considers its current facilities adequate for its current needs
and believes that suitable additional space would be available as needed.
Item 3:
Legal Proceedings
The Company is involved in legal actions in the ordinary course of
business, including an action brought by Private Investor's Equity Group (PIEG)
brought in the third quarter of 2004, which seeks damages in excess of $75,000
over an alleged financing fee owed. The Company believes the claims are without
merit and is vigorously defending against the action. However, as of December
31, 2004, with the possible exception of the aforementioned PIEG proceeding,
Multiband was not engaged in any pending legal proceedings where, in the opinion
of the Company, the outcome is likely to have a material adverse effect upon the
business, operating results and financial condition of the Company.
Item 4:
Submission of Matters to a Vote of Security Holders
The Company did not submit matters to a vote of security holders during
the last quarter of the fiscal year covered by this report.
PART II
Item 5:
Market for the Registrant's Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities
Through May 17, 2000, Multiband's common stock was traded and quoted on
the OTC Bulletin Board(R) ("OTCBB") under the symbol "VICM." From May 18, 2000
until August 21, 2000, the common stock was quoted under the VICM symbol on the
Pink Sheets(R) operated by Pink Sheets LLC. From August 21, 2000, to December
12, 2000, Multiband's common stock was traded and quoted on the OTCBB under the
VICM symbol. Since then, the stock has been traded and quoted on the Nasdaq
Smallcap market system. In July 2004, the symbol was changed to MBND to coincide
with the Company's name change to Multiband Corporation. The table below sets
forth the high and low bid prices for the common stock during each quarter in
the two years ended December 31, 2003 and December 31, 2004 as provided by
Nasdaq.
Quarter Ended High Bid Low Bid
------------- -------- -------
March 31, 2003 ....................... $ 1.37 $ .77
June 30, 2003 ........................ 2.49 1.03
September 30, 2003 ................... 2.20 1.52
December 31, 2003 .................... 1.85 1.23
March 31, 2004 ....................... 1.68 1.04
June 30, 2004 ........................ 2.70 1.30
September 30, 2004 ................... 1.45 .96
December 31, 2004 .................... 1.78 1.01
As of March 31, 2005, Multiband had 637 shareholders of record of its
common stock and 28,434,584 shares of common stock outstanding. As of that date,
eight shareholders held a total of 27,931 of Class A Preferred, two shareholders
held 8,700 shares of Class B Preferred, five shareholders held a total of
125,400 shares of Class C Preferred, one shareholder held a total of 150,000
shares of Class F Preferred, 14 shareholders held a total of 45,245 shares of
Class G Preferred, 8 shareholders held a total of 4.8 shares of Class H
Preferred, and four shareholders held a total of 100,000 shares of Class I
Preferred.
Recent Sales of Unregistered Securities
In 2004, the Company, via accredited investor purchasers of common stock,
exercise of warrants, or other conversion into common stock, issued 2.3 million
common shares at various prices, netting proceeds of approximately $3.2 million.
The Company in 2004 issued $212,110 worth of its common stock to Pyramid
Trading LP in connection with conversion of a note payable and accrued interest.
The common stock was issued at various prices pursuant to a formula tied to the
trading price of the Company's common stock.
The Company in 2004 issued $230,909 worth of its common stock to Laurus
Master Fund Ltd in connection with conversion of a note payable. The common
stock was issued at a conversion rate of $1.40.
At various other times in 2004, the Company issued $194,575 worth of
common stock in connection with conversion of interest and notes payable. The
common stock was issued at various prices pursuant to a formula tied to the
trading price of the Company's common stock.
In 2004 the Company repurchased 27,500 shares of common stock for $62,975
from a former officer of the Company.
The Company, during 2004, issued $452,450 worth of Class G Preferred Stock
and $1,083,341 worth of Class H Preferred Stock to various accredited investors.
In connection with these sales, we relied on the exemption from
registration provided by Sections 4(2) and 4(6) of the Securities Act of 1933,
as well as Rule 506 of Regulation D based on (i) our belief that the issuances
did not involve a public offering, (ii) the transactions involved fewer than 35
purchasers, and (iii) because we had a reasonable basis to believe that each of
the shareholders were either accredited or otherwise had sufficient knowledge
and sophistication, either alone or with a purchaser representative, to
appreciate and evaluate the risks and merits associated with their investment
decision.
Common Stock
Holders of common stock are entitled to one vote per share in all matters
to be voted upon by shareholders. There is no cumulative voting for the election
of directors, which means that the holders of shares entitled to exercise more
than 50% of the voting rights in the election of directors are able to elect all
of the directors. Multiband's Articles of Incorporation provide that holders of
the Company's common stock do not have preemptive rights to subscribe for and to
purchase additional shares of common stock or other obligations convertible into
shares of common stock which may be issued by the Company.
Holders of common stock are entitled to receive such dividends as are
declared by Multiband's Board of Directors out of funds legally available for
the payment of dividends. Multiband presently intends not to pay any dividends
on the common stock for the foreseeable future. Any future determination as to
the declaration and payment of dividends will be made at the discretion of the
Board of Directors. In the event of any liquidation, dissolution or winding up
of Multiband, and subject to the preferential rights of the holders of the Class
A Preferred, Class B Preferred, Class C Preferred, Class D Preferred and Class E
Preferred, the holders of common stock will be entitled to receive a pro rata
share of the net assets of Multiband remaining after payment or provision for
payment of the debts and other liabilities of Multiband.
All of the outstanding shares of common stock are fully paid and
non-assessable. Holders of common stock of Multiband are not liable for further
calls or assessments.
The Company's Board of Directors has not declared any dividends on our
common stock since our inception, and does not intend to pay out any cash
dividends on our common stock in the foreseeable future. We presently intend to
retain all earnings, if any, to provide for our growth. The payment of cash
dividends in the future, if any, will be at the discretion of the Board of
Directors and will depend upon such factors as earnings levels, capital
requirements, our financial condition and other factors deemed relevant by our
Board of Directors.
Preferred Stock
In December 1998, Multiband issued 2,550 shares of Class A Preferred for $23,638
and 37,550 shares of Class B Preferred for $359,893. The Class B Preferred was
offered to certain note holders at a conversion rate of $10.00 per share of
Class B Preferred. Each share of Class A Preferred and Class B Preferred is
non-voting (except as otherwise required by law) and convertible into five
shares of common stock, subject to adjustment in certain circumstances. Each
holder of a share of Class A Preferred or Class B Preferred has a five-year
warrant to purchase one share of common stock at $3.00 per share, subject to
adjustment. During 2001, Multiband issued 67,655 shares of Class A Preferred for
$676,556.
In June 2000, Multiband issued 80,500 shares of Class C Preferred for
$805,000. The Class C Preferred was offered to certain note holders at a
conversion rate of $10.00 a share. In September 2000, Multiband issued an
additional 72,810 shares of Class C Preferred for $728,100. Each share of Class
C Preferred is non-voting (except as otherwise required by law) and convertible
into two shares of Multiband common stock, subject to adjustment in certain
circumstances.
In November 2000, Multiband issued 72,500 shares of Class D Preferred for
$490,332. The Class D Preferred was sold to eight accredited investors at $10.00
per share. Each share of Class D Preferred is non-voting (except as otherwise
required by law) and convertible into two and one-half shares of Multiband
Common Stock, subject to adjustment in certain circumstances.
In the second quarter of 2002, Preferred Class D stocks were redeemed;
$100,000 converted to Common Stock, and $300,000 converted to a Note Payable.
In the fourth quarter of 2002, Multiband issued 70,000 shares of Class E
Preferred for $700,000, with $600,000 related to conversion of a note payable
from a director of the Company into Preferred Stock.
In the first quarter of 2003, $72,000 worth of Class C Preferred Stock was
issued to an officer of the Company in a conversion of accounts payable. Also in
the first quarter of 2003, $76,500 worth of Class E Preferred Stock was issued
to a member of the Board for his purchase of Multiband assets.
In the third quarter of 2003 $25,000 worth of Class B Preferred Stock was
purchased by an accredited investor.
In addition, during 2003 $133,100 worth of Class C Preferred Stock was
redeemed.
During the second quarter of 2004, $776,500 worth of Class E Preferred
Stock was converted into Common Stock at a price of $1.25 per share. During the
third quarter of 2004, two million dollars worth of Class F Preferred Stock was
issued. During the fourth quarter of 2004, $452,450 worth of Class G Preferred
Stock was issued and $1,083,341 worth of Class H Preferred Stock was issued.
In the first quarter of 2005, the company issued $10,000,000 worth of
Class I Preferred Stock.
The holders of the Class A Preferred, Class B Preferred, Class C
Preferred, Class D Preferred, Class E Preferred, Class F Preferred, Class G
Preferred and Class H Preferred (collectively, "Preferred Stock") are entitled
to receive, as and when declared by the Board, out of the assets of the Company
legally available for payment thereof, cumulative cash dividends calculated
based on the per share stated value of the Preferred Stock. The per annum
dividend rate is eight percent (8%) for the Class A Preferred and ten percent
(10%) for the Class B Preferred, Class C Preferred and Class F Preferred,
fourteen percent (14%) for the Class D Preferred, fifteen percent (15%) for the
Class E Preferred, to be paid in kind, eight percent (8%) for the Class G
Preferred and six percent (6%) for the Class H Preferred. Dividends on the Class
A Preferred, Class C Preferred, Class D Preferred, Class F Preferred and Class G
Preferred are payable quarterly on March 31, June 30, September 30, and December
31 of each year. Dividends on the Class B Preferred are payable monthly on the
first day of each calendar month. Dividends on the Class H Preferred are payable
semiannually on June 30 and December 31 of each year. Dividends on the Preferred
Stock accrue cumulatively on a daily basis until the Preferred Stock is redeemed
or converted.
In the event of any liquidation, dissolution or winding up of Multiband,
the holders of the Class A Preferred and Class B Preferred will be entitled to
receive a liquidation preference of $10.50 per share, and the holders of the
Class C Preferred, Class D Preferred, Class E Preferred, Class F Preferred and
Class G Preferred will be entitled to receive a liquidation preference of $10.00
per share, each subject to adjustment. Holders of the Class H Preferred will be
entitled to receive a liquidation preference of $100,000 per share. Any
liquidation preference shall be payable out of any net assets of Multiband
remaining after payment or provision for payment of the debts and other
liabilities of Multiband.
Multiband may redeem the Preferred Stock, in whole or in part, at a
redemption price of $10.50 per share for the Class A Preferred and the Class B
Preferred and $10.00 per share for the Class C Preferred, Class D Preferred,
Class E Preferred, Class F Preferred and Class G Preferred (subject to
adjustment, plus any earned and unpaid dividends) on not less than thirty days'
notice to the holders of the Preferred Stock, provided that the closing bid
price of the common stock exceeds $4.00 per share (subject to adjustment) for
any ten consecutive trading days prior to such notice. Upon Multiband's call for
redemption, the holders of the Preferred Stock called for redemption will have
the option to convert each share of Preferred Stock into shares of common stock
until the close of business on the date fixed for redemption, unless extended by
Multiband in its sole discretion. Preferred Stock not so converted will be
redeemed. No holder of Preferred Stock can require Multiband to redeem his or
her shares.
Item 6:
Selected Consolidated Financial Data
The following selected financial data should be read in conjunction with
our consolidated financial statements including the accompanying notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The data for each of the fiscal years in the three year period
ended December 31, 2004, have been derived from our consolidated financial
statements and accompanying notes contained in this prospectus. The Statement of
Operations Data for the year ended December 31, 2001 and 2000 and the Balance
Sheet data at December 31, 2002, 2001 and 2000 have been derived from our
audited consolidated financial statements which are not contained in this
filing.
Statement of Operations Data 2004 2003 2002 2001 2000
- ----------------------------- ------------ ------------ ------------ ------------ ------------
Revenues .................... $ 11,067,834 $ 1,441,118 $ 577,221 $ 265,996 $ 73,319
Cost of products and services
$ 5,943,395 $ 884,536 $ 418,093 $ 226,432 $ 105,617
Gross profit ................ $ 5,124,439 $ 556,582 $ 159,128 $ 39,564 $ (32,298)
% of revenues ............... 46.3% 38.6% 27.6% 14.9% (44.05)%
Selling, general and
administrative expenses ... $ 5,960,050 $ 2,647,870 $ 1,971,584 $ 2,555,144 $ 2,870,657
% of revenues ............... 53.9% 183.0% 641.6% 960.6% 3915.30%
Depreciation and amortization $ 3,432,779 $ 1,065,650 $ 1,193,306 1,165,610 830,181
Loss from Operations ........ $ (4,268,390) $ (3,156,938) $ (3,005,762) $ (3,681,190) $ (3,733,136)
Other expense net ........... $ (1,058,252) $ (548,476) $ (1,439,069) $ (1,070,802) $ (280,962)
Minority interest in
subsidiary ............... $ 0 $ 33,366 $ 0 $ 0 $ 0
Loss before income taxes .... $ (5,326,642) $ (3,672,048) $ (4,444,831) $ (4,751,992) $ (4,014,098)
Income tax provision ........ $ 0 $ 0 $ 0 $ 0 $ 8,849
Net Loss from Continuing
Operations ............... $ (5,326,642) $ (3,672,048) $ (4,444,831) $ (4,751,992) $ (4,022,947)
Discontinued operations ..... $ (4,457,320) $ (692,956) 6,772 $ (573,560) (212,884)
Net Loss .................... $ (9,783,962) $ (4,365,004) $ (4,438,059) $ (5,325,552) $ (4,235,831)
Loss attributable to common
stockholders ............. $(10,374,417) $ (4,613,693) $ (4,591,637) $ (5,758,221) $ (5,082,011)
Loss per common share-basic
and diluted .............. $ (.42) $ (.27) $ (.38) $ (.66) $ (0.72)
Weighted average shares
outstanding .............. 23,307,594 16,112,231 11,735,095 8,762,814 7,009,751
Balance Sheet Data 2004 2003 2002 2001 2000
- ----------------------------- ------------ ------------ ------------ ------------ ------------
Working capital
(deficiency) ............. $ (8,931,414) $ 1,118,792 $ (252,870) $ 426,549 $ 2,870,114
Total assets ................ $ 26,653,712 $ 13,902,885 $ 10,347,316 $ 12,209,681 $ 15,614,573
Long-term debt .............. $ 3,498,657 $ 2,262,891 $ 3,273,350 $ 3,311,870 $ 3,362,083
Stockholders' equity ........ $ 8,549,431 $ 5,807,711 $ 2,642,285 $ 4,184,001 $ 5,876,352
Item 7:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion of the financial condition and results of
operations of Multiband should be read in conjunction with the Condensed
Consolidated Financial Statements and the Notes thereto included elsewhere in
this report.
Years Ended December 31, 2004 and December 31, 2003.
This discussion does not include the results of discontinued operations.
Results of Operations
The following table sets forth certain items.
2004 2003
------- -------
Revenues
Multiband 0% 0%
MCS 100% 100%
------- -------
Total Revenues 100% 100%
======= =======
Cost of Sales
Multiband 0% 0%
MCS 53.70% 61.38%
------- -------
Total Cost of Sales 53.70% 61.38%
======= =======
Gross Margin 46.30% 38.62%
Selling, General and Administrative expenses 53.85% 183.73%
Operating loss from continuing operations (48.12%) (254.81%)
Loss from discontinued operations (40.27%) (48.08%)
Net Loss (88.40%) (302.89%)
Revenues:
Total revenues from continuing operations increased 668.0% from $1,441,118
in 2003 to $11,067,834 in 2004. This significant increase in revenues is
primarily due to the Company's acquisition of subscriber related assets in 2004
which produced a material increase in consumer recurring revenues. These
acquisitions led primarily to the Company in 2004 growing from approximately
6,800 subscribers to approximately 30,000 subscribers. The Company's revenues
are expected to increase in 2005, even without further acquisitions, as the
Company will experience a full year's worth of revenues from these acquisitions
made in 2004.
Gross Margin:
The Company's Gross Margin was $5,124,430 in 2004 compared to $556,582 in
2003. The significant increase in Gross Margin resulted from the aforementioned
increase in revenues due primarily to acquisitions. For 2004, Gross Margin, as a
percentage of total revenues, was 46.30% versus 38.62% for 2003. The Company
expects Gross Margin percentages to remain stable in future periods due to the
relatively predictable nature of its consumer recurring revenues.
Selling, General and Administrative Expenses
These expenses from continuing operations increased 125.08% to $5,960,050
in 2004, compared to $2,647,870 in 2003. The increase in expenses was directly
related to the Company's increase in revenues. Furthermore, the Company's
integration of various accounting, information technology and customer service
activities from its 2004 acquisitions produced material start up and additional
expense. Selling, general and administrative expenses were, as a percentage of
revenues, 53.85 % for 2004 and 183.73% for 2003. The Company expects these
expenses to decline as a percentage of revenues throughout 2005 as the
aforementioned integration expenses should be mitigated.
Interest Expense
Interest expense was $1,055,488 for 2004 versus $488,156 for 2003,
reflecting an increase in debt related to acquisitions.
Net Loss
The Company, in 2004, showed a net loss of $9,783,962, inclusive of the
loss from discontinued operations, which totaled $4,457,320. The Company's net
loss in 2003 totaled $4,365,004 which included a discontinued operations loss of
$692,956. Included in the loss from discontinued operations was an impairment of
goodwill of $2,748,879 for the year ended December 31, 2004 (see Note 1 to the
consolidated financial statements for further detail).
Years Ended December 31, 2003 and December 31, 2002
Results of Operations
The following table sets forth certain items from the Company's
consolidated statements of operations expressed as a percentage of total
revenue.
2003 2002
------- -------
Revenues
Multiband 0% 0%
MCS 100.0% 100.0%
------- -------
Total Revenues 100.0% 100.0%
======= =======
Cost of Sales
Multiband 0% 0%
MCS 61.38% 72.43%
------- -------
Total Cost of Sales 61.38% 72.43%
======= =======
Gross Margin 38.62% 27.57%
Selling, General and Administrative 183.73% 341.56%
expenses
Operating loss from continuing operations (254.81%) (770.04%)
Loss from discontinued operations (48.08%) (1.17%)
Net Loss (302.89%) (768.87%)
Revenues
Total revenues increased 149.7% to $1,441,118 in 2003 from $577,221 in
2002.
This increase is due to the expansion of MCS services to nineteen
apartment properties and eighteen timeshare properties.
Gross Margin
The Company's gross margin was $556,582 for 2003, as compared to $159,128
for 2002. The increase of 249.8% in 2003 was due to the aforementioned revenue
increase. For 2003, gross margin, as a percentage of total revenues, was 38.6%
versus 27.6% for 2002. The Company expects gross margins to maintain or even
slightly increase in future periods as recurring revenues become a greater
percentage of the Company's overall revenue mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 34.3% to
$2,647,870, compared to $1,971,584 in 2002. This increase in expenses is
primarily related to increased payroll and facility expense and costs incurred
for re-branding Vicom operating divisions as Multiband. Increased payroll
primarily resulted from acquisition related payroll expense and increase in
officer compensation in 2003. Selling, general and administrative expenses were,
as a percentage of revenues, 183.7% for 2003 and 341.5% for 2002.
Interest Expense
Interest expense was $488,156 for 2003, versus $1,256,965 for 2002
reflecting a substantial decrease in Original Issue Discount expense associated
with long term debt and a significant decrease in cash interest expense
associated with notes payable.
Net Loss
In 2003, the Company incurred a net loss of $4,365,004 compared to a net
loss of $4,438,059 for 2002.
Unaudited Quarterly Results
The following table sets forth certain unaudited quarterly operating
information for each of the eight quarters in the two-year period ending
December 31, 2004. This data includes, in the opinion of management, all normal
recurring adjustments necessary for the fair presentation of the information for
the periods presented when read in conjunction with the Company's consolidated
financial statements and related notes thereto. Results for any previous fiscal
quarter are not necessarily indicative of results for the full year or for any
future quarter. The Company has historically experienced a seasonal fluctuation
in its operating results, with a larger proportion of its revenues in the third
quarter of the fiscal year.
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Dec.31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2004 2004 2004 2003 2003 2003 2003
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Revenues:
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Vicom 0 0 0 0 0 0 0 0
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
MCS 3,475,576 3,918,342 2,911,261 762,655 429,141 418,897 357,961 235,120
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Total
Revenues 3,475,576 3,918,342 2,911,261 762,655 429,141 418,897 357,961 235,120
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Cost of Sales 1,889,980 1,952,631 1,712,280 410,962 290,391 238,336 202,065 153,647
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Gross Margin 1,585,597 1,965,711 1,198,981 351,693 138,750 180,561 155,896 81,473
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
SG&A Expense 2,148,570 1,845,547 1,137,780 828,153 931,304 592,868 649,768 474,136
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Depreciation &
Amortization 881,826 1,048,031 1,150,677 352,245 295,131 279,812 263,330 227,379
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Operating Loss (1,444,800) (927,867) (1,089,476) (828,705) (1,087,685) (692,119) (757,202) (620,042)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Interest Expense (382,854) (254,314) (188,986) (229,334) (135.411) (97,977) (113,580) (131,795)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Other Income
(Expenses) 13,403 (15,423) 6,851 14,863 (12,136) 323 5,548 (63,290)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Minority
Interest 38,170 (3,460) (1,392) 0
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Net Loss Before
Taxes (1,814,251) (1,197,604) (1,271,611) (1,043,176) (1,197,062) (793,233) (866,626) (815,127)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Income Tax
(Benefit)
Provision 0 0 0 0 0 0 0 0
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Income (loss)
from continuing
operations (1,814,251) (1,197,604) (1,271,611) (1,043,176) (1,197,062) (793,233) (866,626) (815,127)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Discontinued
Operations (3,149,780) (653,989) (179,863) (473,688) (434,537) (39,389) (68,038) (150,992)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Net Loss (4,964,031) (1,851,593) (1,451,474) (1,516,864) (1,631,599) (832,622) (934,664) (966,119)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Loss Per Common
Share Basic and
Diluted (.20) (.07) (.06) (.08) (.09) (.05) (.06) (.07)
- ----------------- ------------- ------------ ------------ ------------- ------------ ------------- ------------ -----------
Liquidity and Capital Resources
Year Ended December 31, 2004
Available working capital for 2004 decreased to $8,931,414 primarily due to
acquisition related debt load. Accounts receivable increased by $ 1,125,668 in
2004 due to a significant increase in consumer revenues. Current liabilities
increased in 2004 $8,298,728 due primarily to higher accounts payable and
accrued liabilities directly related to the increase in consumer revenues. In
addition, current maturities of long-term debt increased $500,000 and short-term
debt increased $4.5 million as of December 31, 2004 versus December 31, 2003 due
to the short-term debt issued related to the 2004 acquisitions. Inventories
decreased by $135,024 due to the Company's need to carry less inventory in its
consumer services division versus its discontinued business services division.
Total long term debt and capital lease obligations increased by $1,717,015
during the year ended December 31, 2004. Multiband paid out $74,902 related to
capital lease obligations and $345,578 related to long term debt during the year
ended December 31, 2004 versus $276,069 paid out in 2003.
The Company used $748,704 for capital expenditures during 2004, as compared to
$526,936 in 2003. This increase was related to additional purchases required as
a result of the business acquisitions made during 2004. Capital expenditures in
2005 are expected to be consistent with those in 2004.
In November 2004, the Company borrowed $2,166,667 from a group of accredited
institutional investors. The notes are convertible into shares of common stock
at $1.00 per share. The notes accrue interest at the rate of 6% per annum, which
interest is payable semi-annual in cash or common stock at the Company's
election.
Net cash used by operations in 2004 was $2,289,645 as compared to cash used by
operations in 2003 of $2,580,248. This reduction reflects improved performance
from operations, exclusive of non cash expenses. During the years ended December
31, 2004 and December 31, 2003, the Company incurred significant net losses.
Although the majority of those losses were due to non-cash expenses, the Company
in 2004 still continued to incur cash losses as well due to general corporate
expense. However, those cash losses decreased significantly in 2004 versus 2003
by the on-going additions of MCS properties in the Company's portfolio which
provided improved cash flows.
The Company, as is common in the cable and telecommunications industries,
uses earnings before interest, taxes, depreciation, and amortization ("EBITDA")
as a measure of performance to demonstrate earnings exclusive of interest and
non-cash events. EBITDA is not, and should not be considered an alternative to
net income, income from operations, or any other measure for determining
operating performance or liquidity, as determined under accounting principals
generally accepted in the United States.
The most directly comparable GAAP reference in the Company's case is the removal
of interest, depreciation, amortization and other non cash charges. The
following table reconciles Company EBITDA to our consolidated net loss as
computed under GAAP.
Three Months Ended December 31, Twelve Months Ended December 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
EBITDA $ (549,569) $ (792,446) $ (838,373) $(2,091,288)
Interest Expense, other (102,203) 23,862 (211,669) (69,133)
Depreciation and Amortization (881,828) (295,129) (3,432,779) (1,065,652)
Loss from discontinued operations (3,149,780) (434,537) (4,457,320) (692,956)
Other Non Cash Expense associated with
common stock issuance (280,651) (133,349) (843,818) (445,975)
----------- ----------- ----------- -----------
Net Loss $(4,964,031) $(1,631,599) $(9,783,962) $(4,365,004)
=========== =========== =========== ===========
In February 2005, the Company sold ten million dollars worth of Class I
convertible preferred stock. With this investment and the Company's anticipated
EBITDA for 2005 based on 2004 trends, Multiband management believes that it can
meet the anticipated liquidity and capital resource requirements of its business
in 2005.
Year Ended December 31, 2003
Available working capital for 2003 increased $1,371,662 primarily to a
stronger cash position due to investing activities. Multiband successfully
completed an offering of institutional financing in the second half of 2003
raising net proceeds of $2,223,150. Multiband had a decrease of $289,890 in
accounts receivable as a result of a reduction in sales. Current liabilities
increased in 2003 by $1,373,968 as a result of higher current portion of long
term debt and accrued liabilities. Inventories increased by $509,762 primarily
due to a planned expansion to provide wireless intranet service.
Total long term debt and capital lease obligation decreased by $1,010,459
during the year ended December 31, 2003. Multiband paid out $75,301 related to
capital lease obligations and $200,768 related to long term debt during the year
ended December 31, 2003 versus $1,069,433 paid out in 2002.
The Company used $526,936 for capital expenditures during 2003, as
compared to $1,275,434 in 2002. The decrease was primarily attributed to a
reduction in self-financed MCS construction. In 2004 capital expenditures are
expected to be limited to the Company's internal information technology
infrastructure and are expected to be less than 2003 expenditures.
In 2003, the Company reached an agreement to convert the remaining
$962,000 of a Note Payable to equity. Terms of the conversion state the note
will be converted to equity over a 14 month period at a price generally
equivalent to a 10% discount to market price.
In November of 2003, the Company borrowed $1,500,000 and issued a
three-year warrant to the lender to purchase 535,000 common shares at $2.21 per
share through November 2006. The debt is also convertible into common stock of
the Company at a conversion rate of $1.40 per share through November 2006.
On June 30, 2003, the Company borrowed $124,000 as an unsecured note from
a stockholder of the Company, with monthly payments of $5,600 at an interest
rate of 7.85%.
Net cash used by operations in 2003 was $2,580,248 as compared to cash
used by operations in 2002 of $869,721. The cash used by operations in 2003 is
due primarily to net operating losses and a reduction in the wholesale line of
credit. During the years ended December 31, 2003, and December 31, 2002, the
Company incurred significant net losses. Although the majority of these losses
were due to non-cash expenses, The Company still continued to incur cash losses
as well due to general corporate expense. The on-going addition of MCS
properties in the Company's portfolio provided additional cash flows in 2003 and
those cash flows are projected to improve in 2004 with additional expansions.
Management of Multiband believes that, for the near future, cash generated from
new investments combined with existing credit facilities are adequate to meet
the anticipated liquidity in capital resource requirements of its business,
contingent upon Company operating results for the next twelve months.
Critical Accounting Policies
Impairment of Long-Lived Assets
The Company's long-lived assets include property, equipment and leasehold
improvement. At December 31, 2004, the Company had net property and equipment of
$4,372,474 , which represents approximately 16% of the Company's total assets.
The estimated fair value of these assets is dependent on the Company's future
performance. In assessing for potential impairment for these assets, the Company
considers future performance. If these forecasts are not met, the Company may
have to record an impairment charge not previously recognized, which may be
material. In 2004 and 2003, the Company did not record any impairment. In 2002
the Company recorded impairment of $119,480 on property, plant and equipment.
Impairment of Goodwill
We periodically evaluate acquired businesses for potential impairment
indicators. Our judgments regarding the existence of impairment indicators are
based on legal factors, market conditions and operational performance of our
acquired businesses. Future events could cause us to conclude that impairment
indicators exist and that goodwill associated with our acquired businesses,
which amounts to $812,366, as of December 31, 2004, may be impaired. Any
resulting impairment loss could have a material adverse impact on our financial
condition and results of operations. In 2004, the Company recorded an impairment
charge of $527,879 related to Multiband Business Services. In 2004, the Company
wrote off $2,221,000 worth of goodwill from discontinued operations. During the
years ended December 31, 2003 and 2002 , the Company did not record any
impairment losses related to goodwill.
Inventories
We value our inventory at the lower of the actual cost or the current estimated
market value of the inventory. We regularly review inventory quantities on hand
and record a provision for excess and obsolete inventory. Rapid technological
change, frequent new product development, and rapid product obsolescence that
could result in an increase in the amount of obsolete inventory quantities on
hand characterize our industry.
Recent Accounting Pronouncements
In November 2004, FASB issued SFAS No. 151 "Inventory Costs" which amends the
guidance in ARB No. 43, Chapter 4 "Inventory Pricing," to clarify the accounting
for abnormal amounts of idle facility expense, freight, handling costs, and
wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated
that under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges. SFAS No. 151 requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal." In addition, SFAS No, 151 requires that allocation
of fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. SFAS No. 151 shall be effective for
inventory costs incurred during fiscal years beginning after June 15, 2005.
Earlier application is permitted for inventory costs incurred during fiscal
years beginning after the date SFAS No. 151 was issued. SFAS No. 151 shall be
applied prospectively. The Company does not expect the adoption of SFAS No. 151
to have a material effect on its consolidated financial statements.
In December 2004, FASB issued SFAS No. 153 "Exchanges of Nonmonetary Assets"
which amends APB Opinion No. 29, "Accounting for Nonmonetary Transactions." APB
No. 29 is based on the principle that exchanges of nonmonetary assets should be
measured based on the fair value of the assets exchanged. The guidance in that
Opinion, however, included certain exceptions to that principle. SFAS No. 153
amends APB No. 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. SFAS No. 153 shall
be effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. Earlier application is permitted for nonmonetary
asset exchanges occurring in fiscal periods beginning after the date SFAS No.
153 was issued. SFAS No. 153 shall be applied prospectively. The Company does
not expect the adoption of SFAS No. 153 to have a material effect on its
consolidated financial statements.
In December 2004, FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment", that focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. This
statement replaces SFAS No. 123, "Accounting for Stock-Based Compensation", and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Beginning with the quarterly period that begins July 1, 2006, the Company will
be required to expense the fair value of employee stock options and similar
awards. As a public company, the Company is allowed to select from two
alternative transition methods, each having different reporting implications.
The impact of SFAS No. 123R for the year ending December 31, 2006 is estimated
to range from approximately $150,000 and $200,000 based on the value of the
options outstanding as of December 31, 2004 that will vest during the third and
fourth quarters of 2006. This estimate does not include any expenses for options
that may be granted and vested during 2005.
In December 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46 (Revised December 2003), "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51" (FIN 46R). This standard
replaces FIN 46, Consolidation of Variable Interest Entities" that was issued in
January 2003. FIN 46R modifies or clarifies various provisions of FIN 46. FIN
46R addresses the consolidation of business enterprises of variable interest
entities (VIEs), as defined by FIN 46R. FIN 46R exempts certain entities from
its requirements and provides for special effective dates for entities that have
fully or partially applied FIN 46 prior to issuance of FIN 46R. Otherwise,
application of FIN 46R is required in financial statements of public entities
that have interest in structures commonly referred to as special purpose
entities for periods ending after December 15, 2003. Application by the Company
for all other types of VIEs is required in financial statements for periods
ending no later than the quarter ended January 31, 2005. The adoption of FIN 46R
did not have a material effect on the Company's consolidated financial
statements.
Disclosures about Contractual Obligations and Commercial Commitments
The following summarizes our contractual obligations at December 31, 2004,
and the effect these contractual obligations are expected to have on our
liquidity and cash flows in future periods (in thousands):
Total 1 Year or Less 1-3 Years Over 3 Years
----------- ----------- ----------- -----------
Operating Leases $ 6,684,000 $ 530,000 $ 1,644,000 $ 4,510,000
Capital Leases 778,640 247,531 508,841 22,268
Long Term Debt 6,532,081 1,524,527 4,881,391 126,163
Wholesale Line of Credit 926,201 926,201 -- --
Short Term Debt 4,481,099 4,481,099 -- --
Note Payable Stockholder 84,801 84,801 -- --
----------- ----------- ----------- -----------
Total $19,486,822 $ 7,794,159 $ 7,034,232 $ 4,658,431
=========== =========== =========== ===========
Forward Looking Statements
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, and similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements including those made in this document. In order to
comply with the terms of the Private Securities Litigation Reform Act, the
Company notes that a variety of factors could cause the Company's actual results
and experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. The risks
and uncertainties that may affect the operations, performance, developments and
results of the Company's business include the following: national and regional
economic conditions; pending and future legislation affecting the IT and
telecommunications industry; stability of foreign governments; market acceptance
of the Company's products and services; the Company's continued ability to
provide integrated communication solutions for customers in a dynamic industry;
and other competitive factors. Because these and other factors could affect the
Company's operating results, past financial performance should not necessarily
be considered as a reliable indicator of future performance, and investors
should not use historical trends to anticipate future period results.
Item 7A
Quantitative and Qualitative Disclosure About Market Risk
Multiband is not subject to any material interest rate risk as any current
lending agreements are at a fixed rate of interest except for the notes payable
to Laurus Master Fund, Ltd., which is three percent over the prime interest
rate, and the note payable to the Sellers of Rainbow Satellite Group, LLC, which
is at prime.
Item 8.
Consolidated Financial Statements and Supplementary Data
MULTIBAND CORPORATION AND SUBSIDIARIES
FKA: VICOM, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm 1
Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4 - 12
Consolidated Statements of Cash Flows 13
Notes to Consolidated Financial Statements 14 - 39
Supplemental Information
Report of Independent Registered Public Accounting Firm on
Supplementary Information 40
Valuation and Qualifying Accounts 41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Stockholders, Board of Directors, and Audit Committee
Multiband Corporation and subsidiaries (formerly known as Vicom, Incorporated
and subsidiaries)
We have audited the accompanying consolidated balance sheets of Multiband
Corporation and subsidiaries (formerly known as Vicom, Incorporated and
subsidiaries) as of December 31, 2004 and 2003, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2004. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Multiband Corporation and subsidiaries (formerly known as: Vicom, Incorporated
and subsidiaries) as of December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles generally accepted
in the United States of America.
/s/ VIRCHOW, KRAUSE & COMPANY, LLP
Minneapolis, Minnesota
March 8, 2005 (except as to Note 16, as to which the date is April 8, 2005).
MULTIBAND CORPORATION AND SUBSIDIARIES
(FKA: VICOM, INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2003
ASSETS
2004 2003
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 726,553 $ 2,945,960
Certificate of deposit 650,000 250,000
Accounts receivable, net 2,783,774 1,658,114
Inventories, net 231,993 367,017
Current assets of discontinued operations 634,307 1,606,800
Other current assets 146,334 96,550
------------ ------------
Total Current Assets 5,172,961 6,924,441
------------ ------------
PROPERTY AND EQUIPMENT, NET 4,372,474 3,538,415
------------ ------------
OTHER ASSETS
Goodwill 812,366 0
Intangible assets, net 16,081,635 503,625
Other assets of discontinued operations 47,975 2,800,168
Other assets 146,301 136,236
------------ ------------
Total Other Assets 17,088,277 3,440,029
------------ ------------
TOTAL ASSETS $ 26,633,712 $ 13,902,885
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued in excess of cash in bank $ 234,348 $ 147,398
Short-term debt 4,481,099 0
Wholesale line of credit 926,201 976,314
Current portion of long-term debt 1,524,527 998,813
Current portion of note payable - stockholder 84,801 81,554
Current portion of capital lease obligations 201,530 54,939
Accounts payable 2,561,611 1,771,699
Accrued liabilities 3,030,024 1,308,838
Contingent liability 222,700 0
Customer deposits 59,875 0
Current liabilities of discontinued operations 370,921 421,275
Deferred service obligations and revenue 406,738 44,819
------------ ------------
Total Current Liabilities 14,104,375 5,805,649
LONG-TERM LIABILITIES
Long-term debt, net 3,498,657 2,087,156
Note payable - stockholder, net of current portion -- 32,837
Capital lease obligations, net of current portion 481,249 142,898
------------ ------------
Total Liabilities 18,084,281 8,068,540
------------ ------------
MINORITY INTEREST IN SUBSIDIARY -- 26,634
------------ ------------
STOCKHOLDERS' EQUITY
Cumulative convertible preferred stock, no par value:
8% Class A ( 27,931 and 27,931 shares issued and outstanding, 419,752 419,752
$293,276 and $293,276 liquidation preference)
10% Class B (8,700 and 8,700 shares issued and outstanding, 62,000 62,000
$91,350 and $91,350 liquidation preference)
10% Class C (125,400 and 125,400 shares issued and outstanding, 1,611,105 1,611,105
$1,254,000 and $1,254,000 liquidation preference)
15% Class E (0 and 77,650 shares issued and outstanding, $0 and 0 438,964
$776,500 liquidation preference)
10% Class F (150,000 and 0 shares issues and outstanding, 1,500,000 0
$1,500,000 and $0 liquidation preference)
8% Class G (45,245 and 0 shares issued and outstanding, $452,450 179,897 0
and $0 liquidation preference)
6% Class H (11.5 and 0 shares issued and outstanding, $1,150,000 0 0
and $0 liquidation preference)
Common stock, no par value (25,784,490 and 19,036,805 shares issued; 16,888,291 7,726,505
25,781,818 and 19,019,786 shares outstanding)
Stock subscriptions receivable (391,264) (418,085)
Options and warrants 32,985,983 30,514,872
Unamortized compensation (1,724) (217,210)
Accumulated deficit (44,704,609) (34,330,192)
------------ ------------
Total Stockholders' Equity 8,549,431 5,807,711
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,633,712 $ 13,902,885
============ ============
See accompanying notes to consolidated financial statements.
MULTIBAND CORPORATION AND SUBSIDIARIES
(FKA: VICOM, INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2004, 2003 and 2002
- --------------------------------------------------------------------------------
2004 2003 2002
------------ ------------ ------------
REVENUES $ 11,067,834 $ 1,441,118 $ 577,221
------------ ------------ ------------
COST AND EXPENSES
Cost of products and services 5,943,395 884,536 418,093
Selling, general and administrative 5,960,050 2,647,870 1,971,584
Depreciation and amortization 3,432,779 1,065,650 1,193,306
------------ ------------ ------------
Total costs and expenses 15,336,224 4,598,056 3,582,983
------------ ------------ ------------
LOSS FROM OPERATIONS (4,268,390) (3,156,938) (3,005,762)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (1,055,488) (488,156) (1,256,965)
Interest income 8,805 10,406 52,174
Loss on sale of assets (26,217) 0 0
Other income 14,648 (70,726) (234,278)
------------ ------------ ------------
Total Other Expense (1,058,252) (548,476) (1,439,069)
------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST IN SUBSIDIARY (5,326,642) (3,705,414) (4,444,831)
Minority interest in subsidiary 0 33,366 0
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (5,326,642) (3,672,048) (4,444,831)
LOSS FROM DISCONTINUED OPERATIONS (4,457,320) (692,956) 6,772
------------ ------------ ------------
NET LOSS (9,783,962) (4,365,004) (4,438,059)
Preferred stock dividends 590,455 248,689 153,578
------------ ------------ ------------
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $(10,374,417) $ (4,613,693) $ (4,591,637)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE:
LOSS FROM CONTINUING OPERATIONS $ (.23) $ (.23) $ (.38)
============ ============ ============
LOSS FROM DISCONTINUED OPERATIONS $ (.19) $ (.04) $ (.00)
============ ============ ============
NET LOSS $ (.42) $ (.27) $ (.38)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 23,307,594 16,112,231 11,735,095
============ ============ ============
See accompanying notes to consolidated financial statements.
MULTIBAND COPORATION AND SUSIDIARIES
(FKA: VICOM, INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'STOCKHOLDERS' EQUITY
Years Ended December 31, 2004, 2003, and 2002
Cumulative Convertible Preferred Stock
8% Class A 10% Class B 10% Class C
---------------------- ---------------------- ----------------------
Shares Amount Shares Amount Shares Amount
---------- ---------- ---------- ---------- ---------- -----------
BALANCES, December 31, 2001 28,872 $433,867 8,700 $87,000 139,510 $1,800,447
Stock issued:
Cash - - - - - -
Reduction of stock subscriptions - - - - - -
receivable for fees related to equity
transactions
Acquisition of assets 1,859 18,590 - - - -
Guarantee of debt financing - - - - - -
Services rendered - - - - - -
Conversion of accounts payable - - - - - -
Conversion of notes payable and accrued
interest - - - - - -
Conversion of accrued interest - - - - - -
Conversion of preferred stock - - (2,500) (25,000) (2,500) (25,000)
Redemption of preferred stock (2,900) (29,000) - - (5,500) (55,000)
Discount on preferred stock related to
warrants issued - (5,205) - - - (21,040)
Interest receivable on stock subscription - - - - - -
receivable
Warrants issued:
Preferred stock - - - - - -
Common stock - - - - - -
Debt - - - - - -
Deferred compensation expense related to
stock options issued below fair market value - - - - - -
Deferred compensation expense - - - - - -
Restricted stock:
Issued and outstanding - - - - - -
Forfeited - - - - - -
Amortization expense - - - - - -
Embedded value with Pyramid Trading warrants - - - - - -
Preferred stock dividends - - - - - -
Net loss - - - - - -
---------- ---------- ---------- ---------- ---------- -----------
BALANCES, December 31, 2002 27,831 418,252 6,200 62,000 131,510 1,699,407
Stock issued:
Cash 100 1,000 2,500 25,000 - -
Exercise of warrants - - - - - -
Cashless exercise of warrants - - - - - -
Exercise of stock options - - - - - -
Reduction of stock subscriptions - - - - - -
receivable for fees related to equity
transactions
Acquisition of assets - - - - - -
Conversion of accounts payable - - - - 7,200 72,000
Conversion of notes payable - - - - - -
Conversion of accrued interest - - - - - -
Conversion of preferred stock - - - - (4,000) (40,000)
Conversion of dividends payable - - - - - -
Redemption of preferred stock - - - - (9,310) (93,100)
Intrinsic value of convertible feature - 500 - - - (27,202)
Discount on preferred stock related to
warrants issued - - - (25,000) - -
Stock subscriptions receivable:
Cash payments - - - - - -
Increase reserve - - - - - -
Interest collected - - - - - -
Warrants issued:
Preferred stock - - - - - -
Common stock - - - - - -
Debt - - - - - -
Services rendered - - - - - -
Deferred compensation expense related to
stock options issued below fair market value - - - - - -
Deferred compensation expense - - - - - -
Restricted stock:
Forfeited - - - - - -
Amortization expense - - - - - -
Embedded value with Laurus warrants - - - - - -
Preferred stock dividends - - - - - -
Net loss - - - - - -
---------- ---------- ---------- ---------- ---------- -----------
BALANCES, December 31, 2003 27,931 419,752 8,700 62,000 125,400 1,611,105
Stock issued:
Cash - - - - - -
Exercise of warrants - - - - - -
Cashless exercise of warrants - - - - - -
Reduction of stock subscriptions - - - - - -
receivable for fees related to equity
transactions
Acquisition of assets - remaining 50% - - - - - -
ownership of MBUSA
Acquisition of assets - URON, Inc. - - - - - -
Acquisition of assets - Satellite
Broadcasting Corporation and affiliates - - - - - -
Acquisition of assets - Minnesota Digital - - - - - -
Universe, Inc.
Acquisition of assets - Rainbow Satellite - - - - - -
Group, LLC.
Acquisition of assets - 21st Century - - - - - -
Satellite Communications
Property and equipment - - - - - -
Conversion of notes payable - - - - - -
Conversion of accrued interest - - - - - -
Conversion of preferred stock - - - - -
Conversion of dividends payable - - - - - -
In lieu of cash for services - - - - - -
In lieu of cash for other current assets - - - - - -
Stock repurchase - - - - - -
Conversion of preferred stock into note
payable - - - - - -
Intrinsic value of convertible feature
Discount on preferred stock related to - - - - - -
warrants issued
Stock subscriptions receivable: - - - - - -
Cash payments - - - - - -
Interest collected - - - - - -
Warrants issued for debt modification - - - - - -
Deferred compensation expense related to - - - - - -
stock options issued below fair market
value
Deferred compensation expense - - - - - -
Restricted stock:
Forfeited - - - - - -
Amortization expense - - - - - -
Preferred stock dividends - - - - - -
Net loss - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
BALANCES, December 31, 2004 27,931 $ 419,752 8,700 $ 62,000 125,400 $1,611,105
========== ========== ========== ========== ========== ==========
Cumulative Convertible Preferred Stock
14% Class D 15% Class E
---------------------- -----------------
Shares Amount Shares Amount
---------- ---------- ---------- --------
BALANCES, December 31, 2001 40,000 $417,500 - -
Stock issued:
Cash - - 10,000 100,000
Reduction of stock subscriptions - - - -
receivable for fees related to equity
transactions
Acquisition of assets - - - -
Guarantee of debt financing - - - -
Services rendered - - - -
Conversion of accounts payable - - - -
Conversion of notes payable and accrued
interest (30,000) (300,000) 60,000 600,000
Conversion of accrued interest - - - -
Conversion of preferred stock (10,000) (100,000) - -
Redemption of preferred stock - - - -
Discount on preferred stock related to
warrants issued - (17,500) - (304,222)
Interest receivable on stock subscription - - - -
receivable
Warrants issued:
Preferred stock - - - -
Common stock - - - -
Debt - - - -
Deferred compensation expense related to
stock options issued below fair market value - - - -
Deferred compensation expense - - - -
Restricted stock:
Issued and outstanding - - - -
Forfeited - - - -
Amortization expense - - - -
Embedded value with Pyramid Trading warrants - - - -
Preferred stock dividends - - - -
Net loss - - - -
---------- ---------- ---------- ---------
BALANCES, December 31, 2002 0 0 70,000 395,778
Stock issued:
Cash - - - -
Exercise of warrants - - - -
Cashless exercise of warrants - - - -
Exercise of stock options - - - -
Reduction of stock subscriptions - - - -
receivable for fees related to equity
transactions
Acquisition of assets - - 7,650 76,500
Conversion of accounts payable - - - -
Conversion of notes payable - - - -
Conversion of accrued interest - - - -
Conversion of preferred stock - - - -
Conversion of dividends payable - - - -
Redemption of preferred stock - - - -
Intrinsic value of convertible feature - - - -
Discount on preferred stock related to
warrants issued - - - (33,314)
Stock subscriptions receivable:
Cash payments - - - -
Increase reserve - - - -
Interest collected - - - -
Warrants issued:
Preferred stock - - - -
Common stock - - - -
Debt - - - -
Services rendered - - - -
Deferred compensation expense related to
stock options issued below fair market value - - - -
Deferred compensation expense - - - -
Restricted stock:
Forfeited - - - -
Amortization expense - - - -
Embedded value with Laurus warrants - - - -
Preferred stock dividends - - - -
Net loss - - - -
---------- ---------- ---------- ---------
BALANCES, December 31, 2003 0 0 77,650 438,964
Stock issued: - - - -
Cash
Exercise of warrants - - - -
Cashless exercise of warrants - - - -
Reduction of stock subscriptions - - - -
receivable for fees related to equity
transactions
Acquisition of assets - remaining 50% - - - -
ownership of MBUSA
Acquisition of assets - URON, Inc. - - - -
Acquisition of assets - Satellite
Broadcasting Corporation and affiliates
Acquisition of assets - Minnesota Digital - - - -
Universe, Inc.
Acquisition of assets - Rainbow Satellite - - - -
Group, LLC.
Acquisition of assets - 21st Century - - - -
Satellite Communications
Property and equipment - - - -
Conversion of notes payable
Conversion of accrued interest - - - -
Conversion of preferred stock (77,650) (438,964)
Conversion of dividends payable - - - -
In lieu of cash for services - - - -
In lieu of cash for other current assets - - - -
Stock repurchase - - - -
Conversion of preferred stock into note
payable - - - -
Intrinsic value of convertible feature
Discount on preferred stock related to - - - -
warrants issued
Stock subscriptions receivable: - - - -
Cash payments - - - -
Interest collected - - - -
Warrants issued for debt modification: - - - -
Deferred compensation expense related to - - - -
stock options issued below fair market
value
Deferred compensation expense - - - -
Restricted stock: - -
Forfeited - - - -
Amortization expense - - - -
Preferred stock dividends - - - -
Net loss - - - -
---------- ---------- ---------- ---------
BALANCES, December 31, 2004 0 $ 0 0 $ 0
========== ========== ========== =========
MULTIBAND CORPORATION AND SUBSIDIARIES
(FKA: VICOM, INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'STOCKHOLDERS' EQUITY
Years Ended December 31, 2004, 2003, and 2002
Cumulative Convertible Preferred Stock
10% Class F 8% Class G 6% Class H
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 2001 -- $ -- -- $ -- -- $ --
Stock issued:
Cash -- -- -- -- -- --
Reduction of stock subscriptions receivable
for fees related to equity transactions -- -- -- -- -- --
Acquisition of assets -- -- -- --
Guarantee of debt financing -- -- -- -- -- --
Services rendered -- -- -- -- -- --
Conversion of accounts payable -- -- -- -- -- --
Conversion of notes payable and accrued
interest -- -- -- -- -- --
Conversion of accrued interest -- -- -- -- -- --
Conversion of preferred stock -- --
Redemption of preferred stock -- --
Discount on preferred stock related to
warrants issued -- -- -- --
Interest receivable on stock subscription
receivable -- -- -- -- -- --
Warrants issued:
Preferred stock -- -- -- -- -- --
Common stock -- -- -- -- -- --
Debt -- -- -- --