DELAWARE
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77-0289371
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(State
or other jurisdiction of
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(IRS
Employer Identification No.)
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incorporation
or organization)
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Page
Number
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||
PART
I. FINANCIAL STATEMENTS
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3
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Item
1
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Condensed
Consolidated Financial Statements (unaudited)
|
|
Condensed
Consolidated Balance Sheet
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3
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Condensed
Consolidated Statements of Operations
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4
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Condensed
Consolidated Statements of Cash Flows
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5-6
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Notes
to Condensed Consolidated Financial Statements
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7
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Item
2
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Management's
Discussion and Analysis
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16
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Item
3
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Controls
and Procedures
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20
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PART
II. OTHER INFORMATION
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||
Item
1
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Legal
Proceedings
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20
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Item
2
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Unregistered
Sales of Equity Securities and Use of Proceeds
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20
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Item
3
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Defaults
Upon Senior Securities
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21
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Item
4
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Submission
of Matters to a Vote of Securities Holders
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21
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Item
5
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Other
Information
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21
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Item
6
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Exhibits
and Reports on Form 8-K
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21
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Signatures
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23
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Certifications
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24-26
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March
31,
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December
31,
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||||||
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2006
|
2005
|
|||||
(unaudited)
|
|||||||
ASSETS
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|||||||
Current
assets:
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|||||||
Cash
and cash equivalents
|
$
|
626
|
$
|
380
|
|||
Accounts
receivable, net of allowances of $756
|
1,351
|
1,152
|
|||||
Inventory
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1,190
|
197
|
|||||
Prepaid
expenses and notes receivable
|
346
|
447
|
|||||
Total
current assets
|
3,513
|
2,176
|
|||||
Property
and equipment, net
|
757
|
622
|
|||||
WaveRider
note receivable
|
—
|
250
|
|||||
Excess
of purchase price and goodwill
|
26,738
|
11,990
|
|||||
Total
assets
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$
|
31,008
|
$
|
15,038
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Bank
loan
|
$
|
41
|
$
|
759
|
|||
Accounts
payable
|
3,295
|
1,683
|
|||||
Other
accrued liabilities
|
3,677
|
2,521
|
|||||
Deferred
revenue
|
1,376
|
862
|
|||||
Liabilities
of discontinued operations
|
184
|
184
|
|||||
Notes
payable
|
878
|
898
|
|||||
Current
maturities of long-term debt
|
966
|
2,379
|
|||||
Total
current liabilities
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10,417
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9,286
|
|||||
Long-term
debt, less current maturities
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1,515
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1,544
|
|||||
Total
liabilities
|
11,932
|
10,830
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|||||
Commitments
and contingencies (Note 9)
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|||||||
Stockholders'
equity:
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|||||||
Series
E Preferred Stock
|
332
|
332
|
|||||
Series
F Preferred Stock
|
661
|
661
|
|||||
Series
G Preferred Stock
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3,344
|
3,344
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|||||
Series
H Preferred Stock
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1,882
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—
|
|||||
Series
I Preferred Stock
|
2,823
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—
|
|||||
Series
J Preferred Stock
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9,612
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—
|
|||||
Common
stock, par value $0.0001 per share
|
|||||||
250
million shares authorized; 70,525 shares issued; 70,525 shares
outstanding
|
7
|
2
|
|||||
Treasury
stock, at cost; 30 shares
|
(74
|
)
|
(74
|
)
|
|||
Additional
paid-in capital
|
395,124
|
383,778
|
|||||
Accumulated
deficit
|
(394,635
|
)
|
(383,835
|
)
|
|||
Total
stockholders' equity
|
19,076
|
4,208
|
|||||
Total
liabilities and stockholders' equity
|
$
|
31,008
|
$
|
15,038
|
FOR
THE THREE MONTHS
|
|||||||
ENDED
MARCH 31,
|
|||||||
2006
|
2005
|
||||||
Sales
|
$
|
1,989
|
$
|
2,497
|
|||
Cost
of sales
|
1,588
|
2,545
|
|||||
Gross
profit
|
401
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(48
|
)
|
||||
Operating
expense:
|
|||||||
Research
and development
|
540
|
1,197
|
|||||
Selling
and marketing
|
518
|
1,235
|
|||||
General
and administrative
|
636
|
924
|
|||||
Restructuring
charges
|
—
|
5,362
|
|||||
Total
operating expenses
|
1,694
|
8,718
|
|||||
Loss
from operations
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(1,293
|
)
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(8,766
|
)
|
|||
Other
income (expenses):
|
|||||||
Interest
expense
|
(9,507
|
)
|
(219
|
)
|
|||
Other
income, net
|
—
|
187
|
|||||
Net
loss
|
(10,800
|
)
|
(8,798
|
)
|
|||
Preferred
stock accretions
|
—
|
(580
|
)
|
||||
Net
loss attributable to common stockholders
|
$
|
(10,800
|
)
|
$
|
(9,378
|
)
|
|
Basic
and diluted loss per common share
|
$
|
(0.45
|
)
|
$
|
(0.79
|
)
|
|
Shares
used in basic and diluted per share computation
|
23,774
|
11,816
|
March
31,
|
|||||||
2006
|
2005
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(10,800
|
)
|
$
|
(8,798
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
used
in operating activities:
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|||||||
Depreciation
|
65
|
244
|
|||||
Loss
on conversion of promissory notes
|
7,643
|
—
|
|||||
Amortization
of discounts on promissory notes and warrants
|
870
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23
|
|||||
Securities
issued to consultants
|
733
|
—
|
|||||
Gain
on disposal of property and equipment
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(30
|
)
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(242
|
)
|
|||
Gain
on vendor settlements
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(26
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)
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(92
|
)
|
|||
Loss
on restructuring
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—
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5,362
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
519
|
(651
|
)
|
||||
Inventory
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263
|
(727
|
)
|
||||
Prepaid
expenses and other assets
|
132
|
(116
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)
|
||||
Accounts
payable
|
310
|
552
|
|||||
Other
accrued liabilities
|
108
|
1,744
|
|||||
Net
cash provided (used) in operating activities
|
(213
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)
|
(2,701
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)
|
|||
Cash
flows from investing activities:
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|||||||
Acquisition
of property and equipment
|
—
|
(2
|
)
|
||||
Proceeds
from sale of patents
|
30
|
—
|
|||||
Net
cash received on acquisition of WaveRider
|
169
|
—
|
|||||
Proceeds
from sale of property and equipment
|
—
|
192
|
|||||
Net
cash used in vesting activities
|
199
|
190
|
|||||
Cash
flows from financing activities:
|
|||||||
Proceeds
(payments) on bank loan
|
(729
|
)
|
974
|
||||
Proceeds
from debt financing (net of cash fees of $101)
|
989
|
850
|
|||||
Payments
under capital lease obligations
|
—
|
(327
|
)
|
||||
Net
cash provided by (used in) financing activities
|
260
|
1,497
|
|||||
Effect
of exchange rate changes on cash
|
—
|
(2
|
)
|
||||
Net
decrease in cash and cash equivalents
|
246
|
(1,016
|
)
|
||||
Cash
and cash equivalents at beginning of the period
|
380
|
2,280
|
|||||
Cash
and cash equivalents at end of the period
|
$
|
626
|
$
|
1,264
|
Supplemental
cash flow disclosures:
|
|||||||
Cash
paid for interest
|
$
|
140
|
$
|
25
|
|||
Non-cash
investing and financing activities:
|
|||||||
Warrants
issued in connection with convertible promissory notes
|
$
|
261
|
$
|
19
|
|||
Warrants
issued in connection with lease termination
|
$
|
—
|
$
|
233
|
|||
Conversion
of Series C Preferred stock into Common stock
|
$
|
—
|
$
|
10
|
|||
Conversion
of debt into Series J Preferred stock
|
$
|
2,869
|
$
|
—
|
Cash
on hand
|
$
|
413
|
||
Other
current assets
|
2,241
|
|||
Fixed
assets
|
200
|
|||
Current
liabilities
|
(2,787
|
)
|
||
Net
assets received
|
67
|
|||
Expenses
incurred on acquisition
|
(1,650
|
)
|
||
Goodwill
|
14,745
|
|||
Total
consideration received
|
$
|
13.161
|
||
Common
stock issued on closing
|
$
|
6,432
|
||
Preferred
stock issued on closing
|
4,705
|
|||
Warrants
issued on closing at fair value
|
1,492
|
|||
WaveRider
shares forfeited on merger
|
450
|
|||
Employee
stock options issued on closing at fair value
|
82
|
|||
Total
consideration given
|
$
|
13,161
|
||
The
cash effect of this transaction is summarized as follows:
|
||||
Cash
acquired on closing
|
$
|
413
|
Three
months ended March 31,
|
|||||||
2006
|
2005
|
||||||
Pro
forma consolidated revenue
|
$
|
4,094
|
$
|
4,637
|
|||
Pro
forma consolidated net loss
|
$
|
(13,146
|
)
|
$
|
(10,105
|
)
|
|
Pro
forma consolidated basic and diluted loss per share
|
$
|
(0.19
|
)
|
$
|
(0.17
|
)
|
Purchase
commitment
|
$
|
826
|
||
Accrued
warranty (a, b)
|
445
|
|||
Accrued
compensation and employee benefits
|
1,493
|
|||
Accrued
legal and accounting
|
262
|
|||
Value
added tax payable
|
240
|
|||
Other
|
411
|
|||
Balance
at March 31, 2006
|
$
|
3,677
|
a) |
A
summary of product warranty reserve activity for the three-month
period
ended March 31, 2006 is as follows:
|
Balance
at January 1, 2006
|
$
|
341
|
||
Additions
with acquisition of WaveRider
|
104
|
|||
Additions
relating to products sold
|
40
|
|||
Payments
|
(40
|
)
|
||
Balance
at March 31, 2006
|
$
|
445
|
Inventory
|
||||
Reserve
|
||||
Balance
at January 1, 2006
|
$
|
13,947
|
||
Additions
charged to Statement of Operations
|
113
|
|||
Balance
at March 31, 2006
|
$
|
14,060
|
Three
months ended March 31,
|
|||||||
2006
|
2005
|
||||||
North
America
|
$
|
679
|
$
|
198
|
|||
United
Kingdom
|
787
|
1,018
|
|||||
Europe
|
96
|
420
|
|||||
Asia
|
20
|
233
|
|||||
Latin
America
|
113
|
152
|
|||||
Other
regions
|
294
|
476
|
|||||
$
|
1,989
|
$
|
2,497
|
a) |
Conversion
of Series H and I Convertible Preferred Shares - Subsequent
to March 31, 2006, and in conjunction with the Company’s new financing,
all of the issued and outstanding shares of the Series H and I Convertible
Preferred Stock and the related warrants were exchanged for 353.7333
shares of Series J Convertible Preferred Stock and Series J Warrants
to
purchase 10,612,000 shares of Common
Stock.
|
b) |
Sale
of Series J Convertible Preferred Stock - Subsequent
to March 31, 2006, and up to May 19, 2006, the Company sold 198.533
shares
of Series J Convertible Preferred Stock and Series J Warrants to
purchase
5,956,000 shares of Common Stock for cash proceeds of $1,489,000,
less
cash fees of $176,900.
|
c) |
Designation
of Series J-1 Convertible Preferred Stock - Subsequent
to March 31, 2006, the Company designed 300 shares of its preferred
stock
as Series J-1 Convertible Preferred Stock. The Series J-1 Preferred
Stock
has a liquidation preference amount equal to $7,500 per share. Each
share
of Series J-1 Preferred Stock is convertible into a number of shares
of
common stock equal to the liquidation preference amount divided by
the
conversion price of $0.075.
|
2.1 |
Agreement
and Plan of Merger between Wave Wireless Corporation, WaveRider
Communications Inc. and Wave Acquisition Inc., incorporated by reference
to Annex A-1 to the Registrant’s Registration Statement on Form S-4 (File
No. 333-131357), filed with the Securities and Exchange Commission
on
January 27, 2006.
|
2.2 |
Amendment
to the Agreement and Plan of Merger between Wave Wireless Corporation,
WaveRider Communications Inc. and Wave Acquisition Inc., incorporated
by
reference to Annex A-2 to the Registrant’s Registration Statement on Form
S-4 (File No. 333-131357), filed with the Securities and Exchange
Commission on January 27, 2006.
|
4.1 |
Certificate
of Designations of the Relative Rights and Preferences of the
Series J
Convertible Preferred Stock, incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed with the Securities and Exchange Commission on April
6,
2006.
|
31.1 |
Certification
of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a).
|
31.2 |
Certification
of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a).
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
Date: May 22, 2006 | /s/ Charles W. Brown | |
Charles W. Brown, Chief Executive Officer |
||
(Principal Executive Officer) |