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 June 30, 2004
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 Incorporation or Organization) |
(I.R.S. Employer 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
The number of shares outstanding of each of the issuer’s classes of common stock as of August 6, 2004, was:
65,736,904 Common stock, par value $.001 per share
AIRNET COMMUNICATIONS CORPORATION
INDEX
| Page | ||||
| PART I. | FINANCIAL INFORMATION: | |||
| Item 1. | Financial Statements | |||
| 4 | ||||
| 5 | ||||
| Condensed Statements of Changes in Stockholders’ Equity (Unaudited) |
6 | |||
| 7 | ||||
| 8 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 28 | ||
| Item 4. | Controls and Procedures | 28 | ||
| PART II. | OTHER INFORMATION: | |||
| Item 1. | Legal Proceedings | 29 | ||
| Item 2. | Changes in Securities and Use of Proceeds | 29 | ||
| Item 5. | Other Information | 30 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 30 | ||
Page 2 of 35
TRADEMARK AND TRADE NAMES
The stylized AirNet mark, AirNet®, AdaptaCell®, AirSite®, Backhaul Free™, RapidCell™, TripCap™, and SuperCapacity™ are trademarks of AirNet Communications Corporation.
All other trademarks, service marks and/or trade names appearing in this document are the property of their respective holders.
In this document, the words “we,” “our,” “ours,” and “us” refer only to AirNet Communications Corporation and not any other person or entity.
Page 3 of 35
AIRNET COMMUNICATIONS CORPORATION
CONDENSED BALANCE SHEETS
(In Thousands)
| June 30, 2004 |
Dec. 31, 2003 | |||||
| (unaudited) | ||||||
| ASSETS |
||||||
| CURRENT ASSETS: |
||||||
| Cash and cash equivalents |
$ | 8,660 | $ | 5,060 | ||
| Accounts receivable - net of allowance for doubtful accounts of $ 275 at June 30, 2004 and Dec 31, 2003, respectively. |
5,176 | 3,849 | ||||
| Inventories |
9,833 | 11,687 | ||||
| Notes receivable |
— | 257 | ||||
| Other |
660 | 1,262 | ||||
| TOTAL CURRENT ASSETS |
24,329 | 22,115 | ||||
| Property and equipment, net |
4,262 | 5,553 | ||||
| Deposits |
71 | 71 | ||||
| Other long-term assets |
2,247 | 2,318 | ||||
| TOTAL ASSETS |
$ | 30,909 | $ | 30,057 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| CURRENT LIABILITIES: |
||||||
| Accounts payable |
$ | 2,621 | $ | 2,622 | ||
| Accrued payroll and other expenses |
2,801 | 3,459 | ||||
| Current portion of capital lease obligations |
19 | 65 | ||||
| Customer deposits |
1,195 | 2,081 | ||||
| Deferred revenues |
798 | 575 | ||||
| TOTAL CURRENT LIABILITIES |
7,434 | 8,802 | ||||
| LONG-TERM LIABILITIES |
||||||
| Long-term debt |
11,000 | 10,000 | ||||
| Long-term accounts payable |
— | 69 | ||||
| Capital lease obligations, less current portion |
— | 5 | ||||
| Other long term liabilities |
1,292 | 617 | ||||
| TOTAL LONG-TERM LIABILITIES |
12,292 | 10,691 | ||||
| TOTAL LIABILITIES |
19,726 | 19,493 | ||||
| STOCKHOLDERS’ EQUITY |
11,183 | 10,564 | ||||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY |
$ | 30,909 | $ | 30,057 | ||
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
Page 4 of 35
AIRNET COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Amounts)
| UNAUDITED |
||||||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| REVENUES |
||||||||||||||||
| Equipment Revenues |
$ | 3,694 | $ | 3,180 | $ | 6,214 | $ | 4,621 | ||||||||
| Services Revenues |
1,748 | 1,260 | 3,233 | 1,614 | ||||||||||||
| Total Net Revenues |
5,442 | 4,440 | 9,447 | 6,235 | ||||||||||||
| COST OF REVENUES |
||||||||||||||||
| Equipment Cost of Revenues |
2,924 | 2,526 | 4,954 | 3,631 | ||||||||||||
| Services Cost of Revenues |
1,157 | 785 | 1,832 | 1,108 | ||||||||||||
| Write-down of excess and obsolete inventory |
— | 196 | 200 | 196 | ||||||||||||
| Total Cost of Revenues |
4,081 | 3,507 | 6,986 | 4,935 | ||||||||||||
| Gross profit |
1,361 | 933 | 2,461 | 1,300 | ||||||||||||
| OPERATING EXPENSES (1): |
||||||||||||||||
| Research and development |
2,645 | 2,062 | 5,852 | 4,589 | ||||||||||||
| Sales and marketing |
658 | 536 | 1,458 | 1,355 | ||||||||||||
| General and administrative |
2,354 | 815 | 4,769 | 1,808 | ||||||||||||
| Total costs and expenses |
5,657 | 3,413 | 12,079 | 7,752 | ||||||||||||
| LOSS FROM OPERATIONS |
(4,296 | ) | (2,480 | ) | (9,618 | ) | (6,452 | ) | ||||||||
| OTHER (EXPENSE) INCOME, NET |
||||||||||||||||
| Interest income |
24 | 24 | 39 | 55 | ||||||||||||
| Non-cash debt conversion interest charge |
(1,000 | ) | — | (2,000 | ) | — | ||||||||||
| Interest charged on convertible debt |
(334 | ) | — | (676 | ) | — | ||||||||||
| Interest Expense |
(1 | ) | (71 | ) | (3 | ) | (126 | ) | ||||||||
| Other income |
2 | 1 | 8 | 2 | ||||||||||||
| TOTAL OTHER EXPENSE NET |
(1,309 | ) | (46 | ) | (2,632 | ) | (69 | ) | ||||||||
| NET LOSS |
(5,605 | ) | (2,526 | ) | (12,250 | ) | (6,521 | ) | ||||||||
| PREFERRED DIVIDENDS |
— | (600 | ) | — | (1,200 | ) | ||||||||||
| NET LOSS ATTRIBUTABLE TO COMMON STOCK HOLDERS |
$ | (5,605 | ) | $ | (3,126 | ) | $ | (12,250 | ) | $ | (7,721 | ) | ||||
| NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS - BASIC AND DILUTED |
$ | (0.09 | ) | $ | (0.13 | ) | $ | (0.22 | ) | $ | (0.32 | ) | ||||
| WEIGHTED AVERAGE SHARES OUTSTANDING - USED IN CALCULATING BASIC AND DILUTED LOSS PER SHARE |
63,304,472 | 23,854,132 | 56,461,319 | 23,852,865 | ||||||||||||
| 1) | Operating expenses include non-cash stock compensation expenses of $2,294 and $4,631 for the three and six month periods ended June 30, 2004, respectively. |
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
Page 5 of 35
AIRNET COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2004
(In thousands except shares)
| Common Stock |
Additional Paid in Capital |
Accumulated Deficit |
Deferred Stock-Based Compensation |
Note Receivable- Officer and Former Officer |
Total |
||||||||||||||||||||
| Shares |
Amount |
||||||||||||||||||||||||
| BALANCE DECEMBER 31, 2003 |
48,680,789 | $ | 49 | $ | 269,184 | $ | (242,920 | ) | $ | (15,644 | ) | $ | (105 | ) | $ | 10,564 | |||||||||
| Beneficial conversion feature - debt |
— | — | 1,000 | — | — | — | 1,000 | ||||||||||||||||||
| Exercise of common stock options |
14,047 | — | 5 | — | — | — | 5 | ||||||||||||||||||
| Exercise of Warrants |
1,284,947 | 1 | 11 | — | — | — | 12 | ||||||||||||||||||
| Deferred stock based compensation |
— | — | 64 | — | (64 | ) | — | — | |||||||||||||||||
| Amortization of deferred stock-based compensation |
— | — | — | — | 2,387 | — | 2,387 | ||||||||||||||||||
| Forfeiture of common stock options |
— | — | (109 | ) | — | 109 | — | — | |||||||||||||||||
| Net loss |
— | — | — | (6,645 | ) | — | — | (6,645 | ) | ||||||||||||||||
| BALANCE MARCH 31, 2004 |
49,979,783 | $ | 50 | $ | 270,155 | $ | (249,565 | ) | $ | (13,212 | ) | $ | (105 | ) | $ | 7,323 | |||||||||
| Beneficial conversion feature - debt |
— | — | 1,000 | — | — | — | 1,000 | ||||||||||||||||||