AirNet Communications Announces Fourth Quarter and Year-End 2005 Financial Results.MELBOURNE Melbourne, city, Australia Melbourne, city (1991 pop. 2,761,995), capital of Victoria, SE Australia, on Port Phillip Bay at the mouth of the Yarra River. Melbourne, Australia's second largest city, is a rail and air hub and financial and commercial center. , Fla. -- AirNet Communications Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ANCC ANCC American Nurses Credentialing Center ANCC Association Nationale des Cardiaques Congénitaux ANCC Army-Navy Country Club (Arlington, VA) ANCC Area Nine Cable Council (state mandated government body in UK) ): Fourth Quarter Results and Recent Events --Net 4Q Revenue was $3.8M which was within the forecasted range representing a 37.9% decrease from 4Q 2004 revenue --Gross Margins for 4Q were $1.4M or 37.0% compared to $1.8M or 28.7% in 4Q 2004 --Loss from Operations was $2.1M compared with our 4Q 2004 loss of $4.4M reflecting non-cash stock option charges of $39K and $2.4M respectively --Net Loss Attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to Common Stock in 4Q 2005 was $4.8M or ($0.38) per share --Cash Used in Operating Activities for 4Q 2005 was ($3.3M) vs. ($3.8M) in 4Q, 2004 --Received the prestigious GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. World Award at the 3GSM World Congress in Barcelona Barcelona (bär'səlō`nə, Catalan bär'səlō`nə, Span. bär'thālō`nä), city (1990 pop. 4,738,354), capital of Barcelona prov. and chief city of Catalonia, NE Spain, on the Mediterranean Sea. for Best Radio Access Product in 2006 --Received $1M in orders from a government communications customer for maintenance and other related services --Announced the closing of a $7.0M convertible secured financing facility with Laurus Funds AirNet Communications Corporation (NASDAQ:ANCC) today reported financial results for its fourth quarter and year-ended December December: see month. 31, 2005. Financial Results for the Fourth Quarter and Year-End year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. Fourth Quarter: The Company reported net revenue of $3.8 million in the fourth quarter, compared to $6.1 million in the fourth quarter of 2004. Gross margins for the fourth quarter were $1.4 million or 37.0% compared to year ago margins of $1.8 million or 28.7%. Equipment margins improved from 24.1% in the fourth quarter of 2004 to 30.6% in 2005 due to a higher content of direct sales. Services margins were 58.4% in fourth quarter 2005 compared to 45.3% in 2004. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the fourth quarter were $3.5 million compared to $6.2 million in the fourth quarter of 2004 driven primarily by a decrease in general and administrative expenses. G&A expenses were $0.7 million versus $2.2 million in 2004 attributable to reduced non-cash stock option charges. The loss from operations was $2.1 million, compared to a loss of $4.4 million in the fourth quarter of 2004. The loss from operations in both quarters included $0.04 million and $2.4 million respectively of non-cash stock option charges that resulted from the granting of options to employees following the senior secured debt transaction in 2003. The fourth quarter 2005 net loss attributable to common stock was $4.8 million or ($0.38) per share vs. $6.7 million loss or ($0.69) per share in the fourth quarter, 2004. Cash used in operating activities for the fourth quarter was $3.3 million, compared to a use of cash of $3.8 million in the fourth quarter of 2004. This decrease in cash consumption was primarily impacted by accelerated cash collections. Financing activity for the quarter generated $5.6 million of cash (net of expenses) from the convertible secured financing facility with Laurus Master Fund offset by a $2.0 million prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. to TECORE on the 2003 senior debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay . Per share amounts for the fourth quarter of 2005 results were based on 12.7 million weighted average shares and exclude shares issuable upon the conversion of the remaining unconverted secured convertible debt and shares underlying outstanding options because the effect of including those shares would be anti-dilutive. The number of shares issued and outstanding and potentially dilutive totaled 28.2 million as of December 31, 2005. All share and per share amounts reflect the 1-for-10 reverse stock split effected December 9, 2004. 2005 Year-End Results: The Company reported net revenue of $19.6 million for fiscal year 2005, compared to $20.6 million in fiscal year 2004, representing a 4.6% decrease in revenue over 2004. The loss from operations was $14.1 million for the year and included $5.6 million of non-cash stock option charges that resulted from the granting of stock options to employees following the senior secured debt transaction compared to a loss of $18.9 million which included $9.3 million of non-cash stock option charges in 2004. Gross margins for the year were $7.0 million or 35.4% compared to year ago gross margins of $5.8 million or 28.2%. The 2005 net loss attributable to Common Stockholders was $17.7 million or ($1.41) per share, compared to a $26.2 million loss or ($3.77) per share in 2004. The 2005 loss included non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. totaling $9.3 million with an EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. impact of ($0.74) per share; in 2004 non-cash charges were $16.7 million with an EPS impact of ($2.41). The components of the 2005 charge include 1) $2.3 million associated with the conversion feature of the debt, 2) $1.2 million of accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. on the 2003 debt, 3) $5.6 million of stock option compensation expense, and 4) $0.3 million of loss on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of senior debt. Cash used in operating activities for the year was $4.7 million, compared to a use of cash of $8.7 million in fiscal year 2004. Financing activity for the year generated $4.6 million of net cash primarily from the $7 million Secured Convertible Facility completed in November November: see month. 2005 with Laurus Master Fund, compared to financing activity of $10.1 million in 2004. Large Operator Field Trial Update On March 20, 2006, AirNet Communications concluded the most recent phase of field trial testing of the SuperCapacity, adaptive array base station with a large operator in a dense urban, major metropolitan market. The purpose of the field trial, first announced last year, has been to enable the large operator to observe and evaluate the performance of the SuperCapacity, adaptive array base station in a live, commercial environment in comparison to the existing tri-sectored narrowband In communications, transmission rates up to T1 speeds (1.544 Mbps). The upper limit is moving target. At one time, narrowband meant 150 bps (that is 150 bits per second!). Then, the upper limit became 2,400 bps. Later, it moved to 64 Kbps. Contrast with wideband and broadband. base stations currently deployed by an incumbent Refers to an entity that is currently in power. For example, in politics, the "incumbent senator" is the person who holds that office today. An "incumbent company" is an organization that has been providing goods and services for some time. See ILEC. supplier. For the trial, the operator requires certain key performance indicators Key Performance Indicators (KPI) are financial and non-financial metrics used to quantify objectives to reflect strategic performance of an organization. KPIs are used in Business Intelligence to assess the present state of the business and to prescribe a course of action. to be achieved while the SuperCapacity, adaptive array base station is configured con·fig·ure tr.v. con·fig·ured, con·fig·ur·ing, con·fig·ures To design, arrange, set up, or shape with a view to specific applications or uses: at higher spectrum reuse reuse - Using code developed for one application program in another application. Traditionally achieved using program libraries. Object-oriented programming offers reusability of code via its techniques of inheritance and genericity. levels when compared to the existing tri-sectored narrowband base stations currently deployed, prior to making any purchases or commitments. The test sessions of the field trial were conducted between the hours of 12:00 AM (midnight) and 4:00 AM, which typically has less live traffic than daytime Daytime may refer to:
hours. The performance improvements demonstrated by the SuperCapacity, adaptive array base station during the final testing sessions have been encouraging to AirNet. AirNet has recommended that the large operator implement an additional phase of testing during higher volume traffic hours which AirNet believes will demonstrate continued improvements to targeted key performance indicators. The large operator is currently reviewing the test data and preparing an internal assessment of the results from the recent testing phase and evaluating AirNet's proposal for additional higher traffic testing. The SuperCapacity, adaptive array base stations remain deployed at this time pending the large operator's decision as to the next steps. The future viability of AirNet is strongly tied to the successful conclusion of this field trial. Going Concern The Company also announced Tuesday Tuesday: see week. that its independent registered public accounting firm, BDO Seidman BDO Seidman, LLP is the United States arm of BDO International, one of the largest accounting firms outside of the Big Four. History BDO Seidman, LLP was founded as Seidman and Seidman in New York City in 1910 by Maximillian L. Seidman. , LLP LLP - Lower Layer Protocol , had informed the Company that its report issued with the Company's financial statements as of and for the year ended December 31, 2005 will include a paragraph that describes conditions that give rise to substantial doubt about the Company's ability to continue as a going concern. This paragraph is consistent with the going-concern paragraph received by the Company in fiscal years 2001 through 2004. Such conditions and management's plans concerning those matters will be disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the annual financial statements included in Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . About AirNet AirNet Communications Corporation is a leader in wireless base stations and other telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. equipment that allow service operators to cost-effectively and simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics offer high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. wireless data and voice services to mobile subscribers. AirNet's patented broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). , software-defined AdaptaCell(R) SuperCapacity(TM) adaptive array base station solution provides a high-capacity base station with a software upgrade path to high-speed data. The Company's RapidCell(TM) base station provides government communications users with up to 96 voice and data channels in a compact, rapidly deployable design capable of processing multiple GSM protocols simultaneously. The Company's AirSite(R) Backhaul (1) The original definition of backhaul was to transmit a telephone call or data beyond its normal destination point and then back again in order to utilize available personnel (operators, agents, etc.) or network equipment that is not located at the destination location. Free(TM) base station carries wireless voice and data signals back to the wireline network, eliminating the need for a physical backhaul link, thus reducing operating costs operating costs npl → gastos mpl operacionales . AirNet has 68 patents issued or filed; and has received the coveted cov·et v. cov·et·ed, cov·et·ing, cov·ets v.tr. 1. To feel blameworthy desire for (that which is another's). See Synonyms at envy. 2. To wish for longingly. See Synonyms at desire. World Award for Best Radio Access Product in 2006 and for Best Technical Innovation in 1998 from the GSM Association (GSM Association, Dublin, Ireland, www.gsmworld.com) A membership association founded in 1987 that promotes the development and evolution of the GSM communications standard worldwide. , representing over 400 operators around the world. More information about AirNet may be obtained by visiting the AirNet Web site at http://www.airnetcom.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 and Other Applicable Law Certain statements in this news release may constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Private Securities Litigation Reform Act of 1995 (the Reform Act), Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities and Exchange Act of 1934. These forward-looking statements may relate to anticipated financial performance, management's plans and objectives for future operations, business prospects, market conditions, financial forecasts and other matters. All statements contained in this news release that do not relate to matters of historical fact should be considered forward-looking statements, and are generally identified by words such as "anticipate," "prospects," "believe," "estimate," "expect," "intend," "plan" and "objective" and other similar expressions. Readers should not place undue reliance on the forward-looking statements contained in this news release. Such statements are based on management's beliefs and assumptions and on information currently available to management and are subject to risks, uncertainties and changes in condition, significance, value and effect. Such risks or uncertainties include the following: there can be no assurance that the Company will be successful in obtaining new business or that any of the Company's OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and resellers will purchase any further products from the Company; that the Company will be successful in the conclusion of the large operator field trial or that a successful field trial will lead to any new business; that the Company's lenders may foreclose fore·close v. fore·closed, fore·clos·ing, fore·clos·es v.tr. 1. a. To deprive (a mortgagor) of the right to redeem mortgaged property, as when payments have not been made. b. on all assets of the Company (including all intellectual property rights) in the event of a default under the security agreement associated with existing senior debt and convertible debt, and that the Company may not be able to continue to operate as a going concern in the absence of new investment capital. These and other risks are detailed in reports and documents filed by the Company with the United States Securities and Exchange Commission. Such risks, uncertainties and changes in condition, significance, value and effect, many of which are beyond the Company's control, could cause the Company's actual results and other future events to differ materially from those anticipated. The Company does not, however, assume any obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. The stylized styl·ize tr.v. styl·ized, styl·iz·ing, styl·iz·es 1. To restrict or make conform to a particular style. 2. To represent conventionally; conventionalize. AirNet mark, AirNet(R), AdaptaCell(R) and AirSite(R) are registered trademarks with the U.S. Patent and Trademark Office. SuperCapacity(TM), iBSS(TM), RapidCell(TM) and Backhaul Free(TM), are trademarks of AirNet Communications Corporation. Other names are registered trademarks or trademarks of their respective companies or organizations. Financial Schedules --Condensed Statements of Operations --Cash Flow Summary --Condensed Balance Sheets
FINANCIAL STATEMENTS
(all numbers in $000's except per share data and shares outstanding)
CONDENSED STATEMENTS OF OPERATIONS
For the three months ended For the year ended
December 31, December 31,
2005 2004 2005 2004
------ ------ ------ ------
(Unaudited)
REVENUES
Equipment Revenues $ 2,295 $ 5,286 $ 13,674 $ 15,699
Services Revenues 1,517 849 5,968 4,901
----------- ---------- ----------- ----------
Total Net Revenues 3,812 6,135 19,642 20,600
COST OF REVENUES
Equipment Cost of
Revenues 1,569 4,004 9,495 11,919
Services Cost of
Revenues 629 372 2,482 2,681
Write-down of
excess and obsolete
inventory 204 - 714 200
----------- ---------- ----------- ----------
Total Cost of
Revenues 2,402 4,376 12,691 14,800
----------- ---------- ----------- ----------
GROSS PROFIT 1,410 1,759 6,951 5,800
OPERATING EXPENSES
Research and
development 2,330 3,271 11,058 12,304
Sales and marketing 488 769 2,835 3,056
General and
administrative 654 2,164 7,108 9,370
----------- ---------- ----------- ----------
Total Operating
expenses 3,472 6,204 21,001 24,730
----------- ---------- ----------- ----------
LOSS FROM
OPERATIONS (1) (2,062) (4,445) (14,050) (18,930)
----------- ---------- ----------- ----------
OTHER (EXPENSE)
INCOME, NET
Interest Income 56 40 199 109
Amortization expense
on discount of
convertible debt (2,125) (2,007) (2,251) (6,027)
Interest charged on
convertible debt (328) (283) (1,221) (1,325)
Other interest
expense (52) (24) (55) (28)
Loss on
extinguishment of
debt (303) - (303) -
Other, net (0) 2 14 12
----------- ---------- ----------- ----------
TOTAL OTHER EXPENSE,
NET (2,752) (2,272) (3,617) (7,259)
----------- ---------- ----------- ----------
NET LOSS ATTRIBUTABLE
TO COMMON
STOCKHOLDERS $ (4,814) $ (6,717) $ (17,667) $ (26,189)
=========== ========== =========== ==========
NET LOSS PER SHARE
ATTRIBUTABLE TO
COMMON STOCKHOLDERS
- BASIC AND DILUTED $ (0.38) $ (0.69) $ (1.41) $ (3.77)
=========== ========== =========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING -
USED IN CALCULATING
BASIC AND DILUTED
LOSS PER SHARE 12,678,563 9,711,444 12,537,026 6,937,749
=========== ========== =========== ==========
(1) Loss from Operations includes non-cash stock compensation expenses
of $39 and $2,350 for the three months ended December 31, 2005, and
2004 respectively, and $5,561 and $9,342 for the years ended
December 31, 2005, and 2004 respectively.
CASH FLOW SUMMARY
For the For the
three months ended year ended
December 31, December 31,
2005 2004 2005 2004
------ ------ ------ ------
(Unaudited)
CASH USED IN OPERATING ACTIVITIES $(3,326) $(3,792) $(4,707) $(8,730)
CASH USED IN INVESTING ACTIVITIES (34) (247) (515) (453)
CASH PROVIDED BY FINANCING
ACTIVITIES 3,590 1,002 4,601 10,079
------- ------- ------- -------
NET CHANGE IN CASH $ 230 $(3,037) $ (621) $ 896
======= ======= ======= =======
CONDENSED BALANCE SHEETS
December 31, December 31,
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,335 $ 5,957
Accounts receivable - net 2,798 3,228
Accounts receivable - related party 791 2,995
Inventories 9,656 9,960
Prepaid expenses 638 627
Other 57 279
------------ -------------
TOTAL CURRENT ASSETS 19,275 23,046
Property and equipment, net 2,685 3,665
Deposits 58 71
Software development and licensing 1,697 2,117
Other long-term assets 18 90
------------ -------------
TOTAL ASSETS $23,733 $28,989
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,589 $ 3,151
Current portion of notes payable, net of
discount 2,246 -
Current portion of capital lease
obligations - 5
Customer deposits 660 1,437
Deferred revenues 1,120 325
Other accrued expenses 2,329 2,219
------------ -------------
TOTAL CURRENT LIABILITIES 7,944 7,137
TOTAL LONG-TERM LIABILITIES 5,070 994
TOTAL STOCKHOLDERS' EQUITY 10,719 20,858
------------ -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $23,733 $28,989
============ =============
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