AirNet Communications Corporation (NASDAQ:ANCC): 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 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 World Award
at the 3GSM World Congress in Barcelona 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 31, 2005. Financial Results for the
Fourth Quarter and Year-End 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 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 to TECORE on
the 2003 senior debt financing. 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 totaling $9.3 million
with an EPS 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
on the 2003 debt, 3) $5.6 million of stock option compensation
expense, and 4) $0.3 million of loss on extinguishment 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 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 base stations currently
deployed by an incumbent supplier. For the trial, the operator
requires certain key performance indicators to be achieved while
the SuperCapacity, adaptive array base station is configured at
higher spectrum reuse 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 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 that its independent registered
public accounting firm, BDO Seidman, LLP, 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 in the annual financial statements included in Form 10-K.
About AirNet AirNet Communications Corporation is a leader in
wireless base stations and other telecommunications equipment that
allow service operators to cost-effectively and simultaneously
offer high-speed wireless data and voice services to mobile
subscribers. AirNet's patented broadband, 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 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. AirNet has 68 patents issued or filed; and has
received the coveted World Award for Best Radio Access Product in
2006 and for Best Technical Innovation in 1998 from the GSM
Association, 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 Statement Under the
Private Securities Litigation Reform Act of 1995 and Other
Applicable Law Certain statements in this news release may
constitute forward-looking statements within the meaning of the
United States 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 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 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
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 -0- *T 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 ============
============= *T
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