SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING MARCH 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ____________
COMMISSION FILE NUMBER 0-21061
SPEEDCOM WIRELESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-2044990
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
7020 PROFESSIONAL PARKWAY EAST
SARASOTA, FL 34240
(941) 907-2300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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 Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) Yes[x] No[ ], and (2) has been subject to such
filing requirements for the past 90 days Yes[x] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the last practicable date: April 27, 2001 - 9,500,723 common
shares, $.001 par value.
Transitional small business disclosure format (check one): Yes [ ] No [x]
SPEEDCOM WIRELESS CORPORATION
FORM 10-QSB/A FOR THE PERIOD ENDED MARCH 31, 2001
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 2001 and December 31, 2000 3
Statements of Operations for the three months ended
March 31, 2001 and 2000 4
Statements of Cash Flows for the three months ended
March 31, 2001 and 2000 5
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION
Item 2. Recent Sales of Unregistered Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 19
Exhibit Index 19
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SPEEDCOM WIRELESS CORPORATION
BALANCE SHEETS
March 31, December 31,
2001 2000
---------------------------------
Assets (unaudited)
Current assets:
Cash $ 193,112 $ 227,066
Accounts receivable, net of allowances of $305,561 and $296,330 in
2001 and 2000, respectively 1,806,198 1,788,206
Leases receivable 571,767 43,389
Inventories, net 1,892,825 2,388,283
Prepaid expenses and other current assets 635,213 732,753
---------------------------------
Total current assets 5,099,115 5,179,697
Accounts receivable -- 586,578
Property and equipment, net 1,075,747 956,133
Leases receivable 888,289 36,157
Other assets, net 269,394 158,405
Investments 90,910 76,994
Software license 827,500 --
---------------------------------
Total assets $ 8,250,955 $ 6,993,964
=================================
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 1,948,680 $ 2,673,570
Accrued expenses 804,472 700,815
Current portion of loans from stockholders 796,236 336,780
Current portion of deferred revenue 120,884 90,047
Current portion of notes and capital leases payable 483,092 52,901
---------------------------------
Total current liabilities 4,153,364 3,854,113
Loans from stockholders, net of current portion 1,500,000 203,733
Deferred revenue, net of current portion 32,837 50,141
Notes and capital leases payable, net of current portion 46,192 57,294
Common stock to be issued 650,000 --
Stockholders' equity:
Common stock, $.001 par value, 30,000,000 shares authorized,
9,325,523 and 9,289,529 shares issued and outstanding in 2001
and 2000, respectively 9,325 9,289
Preferred stock, 10,000,000 shares authorized -- --
Additional paid-in capital 8,024,213 7,889,817
Accumulated deficit (6,164,976) (4,995,423)
Notes receivable - related party -- (75,000)
---------------------------------
Total stockholders' equity 1,868,562 2,828,683
---------------------------------
Total liabilities and stockholders' equity $ 8,250,955 $ 6,993,964
=================================
See accompanying notes.
3
SPEEDCOM WIRELESS CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended March 31,
2001 2000
------------------------------
Net revenues $ 4,017,275 $ 1,846,599
Operating costs and expenses:
Cost of goods and services 2,234,491 844,205
Salaries and related 1,315,406 682,874
General and administrative 850,982 351,780
Selling expenses 518,722 132,662
Provision for bad debt 1,674 --
Depreciation and amortization 107,200 15,000
------------------------------
5,028,475 2,026,521
------------------------------
Loss from operations (1,011,200) (179,922)
Other income (expense):
Interest expense, net (160,766) (1,476)
Other income, net 2,413 3,222
------------------------------
(158,353) 1,746
------------------------------
Net loss $ (1,169,553) $ (178,176)
==============================
Net loss per common share:
Basic and diluted $ (0.13) $ (0.02)
==============================
Shares used in computing basic and diluted net loss
per share 9,313,863 7,662,726
==============================
See accompanying notes.
4
SPEEDCOM WIRELESS CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31,
2001 2000
----------------------------
Operating activities
Net loss $ (1,169,553) $ (178,176)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 107,200 15,000
Provision for bad debt 1,674 --
Common stock issued for services 10,000 --
Amortization of original issue discount 93,390 --
Changes in operating assets and liabilities:
Restricted cash -- 35,671
Accounts receivable (766,088) (456,140)
Leases receivable (47,510) --
Inventories 495,458 (189,673)
Prepaid expenses and other current assets 97,540 (80,141)
Intangibles (210,000) --
Other assets (124,905) (674)
Accounts payable and accrued expenses (62,791) (68,842)
Deferred revenue 13,533 --
----------------------------
Net cash used in operating activities (1,562,052) (922,975)
Investing activities
Purchases of equipment (194,314) (166,781)
----------------------------
Net cash used in investing activities (194,314) (166,781)
Financing activities
Proceeds from sale of common stock and warrants 94,432 2,004,091
Proceeds from loans from stockholders 1,770,000 (45,639)
Proceeds from issuance of notes -- 40,000
Payments of notes and capital leases (142,020) (308,003)
----------------------------
Net cash provided by financing activities 1,722,412 1,690,449
----------------------------
Net (decrease) increase in cash (33,954) 600,693
Cash at beginning of period 227,066 108,564
----------------------------
Cash at end of period $ 193,112 $ 709,257
============================
See accompanying notes.
5
SPEEDCOM WIRELESS CORPORATION
STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited)
Three Months Ended March 31,
2001 2000
----------------------------
Supplemental disclosure of noncash activities
Conversion of accounts receivable to lease receivable $ 1,333,000 --
Conversion of accounts payable to notes payable $ 558,442 --
Common stock to be issued for software license $ 650,000 --
Conversion of debt to equity $ 40,000 --
See accompanying notes.
6
SPEEDCOM WIRELESS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Business
SPEEDCOM Wireless Corporation (SPEEDCOM or the Company) was incorporated in
Florida on March 16, 1994 and reincorporated in Delaware on September 26, 2000.
The Company manufactures and installs custom broadband wireless networking
equipment for business and residential customers internationally. Through its
Wave Wireless Networking division, the Company manufactures a variety of
broadband wireless products, including the Speedlan family of wireless ethernet
bridges and routers. Internet service providers, telephone company operators and
private organizations in over 60 countries use SPEEDCOM products to provide
"last-mile" wireless connectivity between multiple buildings at speeds up to 155
Megabits per second and distances up to 25 miles. SPEEDCOM Wireless Corporation
is an ISO 9001 registered company.
2. Basis of Presentation
On September 26, 2000, SPEEDCOM Wireless International Corporation merged with
LTI Holdings, Inc. (LTI). The parties renamed the combined company SPEEDCOM
Wireless Corporation and continued the business of SPEEDCOM Wireless
International Corporation (Old SPEEDCOM).
Since LTI was a non-operating shell company, the merger was treated as a
recapitalization of the Company for accounting purposes. As a result, the
Company recorded the transaction as the issuance of common stock for the net
monetary assets of LTI (principally cash), accompanied by a recapitalization of
equity. The Company recorded a net increase in equity of $1,215,937, which
represented the total net assets of LTI. The Company has recorded the
transaction to reflect the shares outstanding under the current structure. There
has been no change in the basis under which the assets and liabilities of the
Company are recorded. Accordingly, except as specifically noted to the contrary,
(1) the financial information herein that predates the merger consists of
information about Old SPEEDCOM, and (2) all references to SPEEDCOM or the
Company refer to Old SPEEDCOM before the merger and to the combined company
after the merger. The financial statements presented in this Form 10-QSB/A
reflect the financial position of the remaining legal entity, LTI, which
subsequently changed its name to SPEEDCOM Wireless Corporation. All shares,
options and warrants issued by SPEEDCOM prior to the merger have been
retroactively restated for all periods presented.
The accompanying financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC). Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules
7
and regulations. The accompanying financial statements should be read in
conjunction with the Company's annual financial statements and notes thereto
included in Company's Form 10-KSB.
In the opinion of management, the financial statements reflect all adjustments
(consisting of only normal and recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows for those
periods presented. Operating results for the three months ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2001.
3. Inventories
A summary of inventories at March 31, 2001 and December 31, 2000 is as follows:
2001 2000
------------------------------------
(unaudited)
Component parts $ 438,705 $ 1,156,966
Completed assemblies 1,454,120 1,231,317
------------------------------------
$ 1,892,825 $ 2,388,283
====================================
4. Property and Equipment
A summary of property and equipment at March 31, 2001 and December 31, 2000 is
as follows:
2001 2000
------------------------------------
(unaudited)
Computer and office equipment $ 987,909 $ 822,006
Automobiles 51,737 51,737
Leasehold improvements 116,204 86,207
Furniture and fixtures 140,672 135,415
Store and warehouse 94,131 101,719
Construction in progress 49,989 49,244
------------------------------------
1,440,642 1,246,328
Less accumulated depreciation (364,895) (290,195)
------------------------------------
$ 1,075,747 $ 956,133
====================================
Property and equipment included computer and office equipment of $67,797
acquired under capital lease arrangements at March 31, 2001 and December 31,
2000. Depreciation expense amounted to $74,700 and $15,000 for the three months
ended March 31, 2001 and 2000, respectively. Amortization of assets under
capital lease arrangements is included in depreciation expense.
8
5. Accrued Expenses
A summary of accrued expenses at March 31, 2001 and December 31, 2000 is as
follows:
2001 2000
------------------------------------
(unaudited)
Accrued payroll $ 271,685 $ 287,252
Accrued commissions 86,604 109,052
Other 446,183 304,511
------------------------------------
$ 804,472 $ 700,815
====================================
6. Loans from Stockholders
SPEEDCOM issued a $250,000 promissory note to the Company's President in
December 2000. The note bears an interest rate of the greater of 12% or DLJ's
standard margin rate plus 1.5%. The note is payable in December 2001 or at the
closing of an equity offering by the Company of at least $5,000,000, whichever
is earlier. The Company concurrently granted a total of 25,000 warrants with a
$3.60 strike price in connection with this note. The proportionate fair value of
the warrants amounted to $62,500 and has been recorded as an addition to paid-in
capital and as an original issue discount reducing the carrying value of the
note. The discount is being amortized to interest expense over the remaining
life of the note. The balance of the note at March 31, 2001 amounted to
$207,353.
In January 2001, SPEEDCOM issued a promissory note to the Company's President
for $250,000, payable in April 2001 or at the closing of an equity or debt
offering by the Company of at least $1,000,000, whichever is earlier. The loan's
maturity date was extended in March 2001 by mutual consent. The note bears an
interest rate of the greater of 12% or DLJ's standard margin plus 1.5%. In
addition, the Company immediately granted a total of 7,000 warrants with an
exercise price of $5.40, plus 4,500 warrants with an exercise price of $5.40,
which vest one-third each month for the first three months of the note. The
proportionate fair value of the warrants amounted to $45,000 and has been
recorded as an addition to paid-in capital and as an original issue discount
reducing the carrying value of the note. The discount is being amortized to
interest expense over the remaining life of the note. The balance of the note at
March 31, 2001 amounted to $239,120. This note was repaid in April 2001.
The Company issued a $252,000 non-interest bearing promissory note in December
2000, with beneficial conversion features. The note is due in December 2001,
payable in cash or 70,000 shares of common stock, at the holder's option. The
70,000 shares were worth $115,500 more than the face value of the note based on
the per-share value at the date of the note. This amount has been recorded as an
addition to paid-in capital and as an original issue discount reducing the
carrying value of the note. The discount is being amortized to interest expense
over the remaining life of the note. The balance of the note at March 31, 2001
amounted to $170,358.
In December 2000, the Company issued a $200,000 non-interest bearing promissory
note, with beneficial conversion features. The note is due in January 2002,
payable in cash or 50,000 shares
9
of common stock, at the holder's option. The 50,000 shares were worth $37,500
more than the face value of the note based on the per-share value at the date of
the note. This amount has been recorded as an addition to paid-in capital and as
an original issue discount reducing the carrying value of the note. The discount
is being amortized to interest expense over the remaining life of the note. The
balance of the note at March 31, 2001 amounted to $172,103.
Also in December 2000, the Company issued a $10,800 non-interest bearing
promissory note with beneficial conversion features. The note is due in December
2001, payable in cash or 3,000 shares of common stock at the holder's option.
The 3,000 shares were worth $4,950 more than the face value of the note based on
the per-share value at the date of the note. This amount has been recorded as an
addition to paid-in capital and as an original issue discount reducing the
carrying value of the note. The discount is being amortized to interest expense
over the remaining life of the note. The balance of the note at March 31, 2001
amounted to $7,302.
In March 2001, SPEEDCOM borrowed $1,500,000 in senior secured debt from
shareholders. The loan is due February 2005 and carries an interest rate of 8%.
There were 150,000 warrants with a strike price of $6.00 issued in conjunction
with the loan. This loan was repaid in April 2001.
During January 2000, the Company issued a 10% convertible subordinated
promissory note for $40,000, due for payment in January 2003. The note was
convertible into 10,000 shares of common stock at any time during its term. The
note was subordinate to all other debt instruments. The $40,000 note and accrued
interest was converted in January 2001.
7. Notes and Capital Leases Payable
A summary of notes and capital leases payable at March 31, 2001 and December 31,
2000 is as follows:
2001 2000
-------------------------------
(unaudited)
10.5% bank note payable in monthly installments through $ 42,446 $ 46,631
June 2003, secured by equipment and inventories
8%-10.6% automobile loans payable in monthly 26,233 29,460
installments through January 2003, secured by equipment
Capital lease obligations 29,175 34,104
12% promissory note payable in monthly installments 122,205 --
through June 2001
12% promissory note payable in monthly installments 148,167 --
through July 2001
5% promissory note payable in monthly installments 161,058 --
through August 2001
-------------------------------
529,284 110,195
Less current portion (483,092) (52,901)
-------------------------------
$ 46,192 $ 57,294
===============================
10
The 12% promissory note payable in monthly installments through July 2001 was
repaid in April 2001.
8. Shareholder's Equity
In January 2001, SPEEDCOM acquired worldwide exclusive rights for six years to
PacketHop(TM), a revolutionary wireless routing software developed by SRI
International (SRI). PacketHop(TM) overcomes the traditional need for a direct
line of sight between a base station and an end user's location. Under the terms
of the agreement, SPEEDCOM obtains worldwide exclusive rights for six years (and
perpetually on a non-exclusive basis thereafter) to SRI's PacketHop(TM)
technology in the fixed wireless infrastructure market for the primary
frequencies below 6 GHz. SRI International is entitled to receive a total of
325,000 shares of common stock of SPEEDCOM to be issued in four traunches. The
first traunch was granted in January for 100,000 shares at $6.50 per share. The
first traunch was due on signing of the agreement. The remaining traunches are
due on achievement of certain performance criteria. The shares were issued in
April and as of March 31, 2001, these shares were included in the Software
license and Common stock to be issued line items on the balance sheet. The
remaining three traunches are based on certain performance criteria that have
not been achieved and have not been recorded. SPEEDCOM also has paid $210,000 in
cash, included in the Software license line item on the balance sheet, which is
being amortized over the six years of the agreement. For the three months ended
March 31, 2001, $32,500 has been amortized of the Software license.
9. Subsequent Event
In April 2001, SPEEDCOM borrowed $3,000,000 from a Connecticut based hedge fund.
The loan is due in April 2002 and bears interest at 9% for the first 90 days and
12% thereafter. As part of the transaction, SPEEDCOM issued warrants to acquire
333,333 shares of SPEEDCOM common stock at $5.00 per share. Additional warrants
are issuable contingent upon the date on which the loan is repaid. The holder of
the loan has certain rights of first refusal on subsequent financings. Interest
is due under the loan in quarterly installments with principal payable in total
at the maturity date of the loan. The Company obtained net proceeds of
approximately $2,700,000 for this bridge loan which was used to repay certain
short-term debt and payables and for general working capital.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion in this document contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended that involve risks and uncertainties, such as statements concerning
growth and future operating results; developments in markets and strategic
focus; new products and services and product technologies and future economic,
business and regulatory conditions. Such forward-looking statements are
generally accompanied by the words such as "plan", "estimate", "expect",
"believe", "should", "would", "could", "anticipate", "may"
11
and other words that convey uncertainty of future events or outcomes. These
forward-looking statements and other statements made elsewhere in this report
are made in reliance on the Private Securities Litigation Reform Act of 1995.
The section below entitled "Certain Factors That May Affect Future Results,
Financial Condition and Market Price of Securities" sets forth material factors
that could cause actual results to differ materially from these statements.
Overview
SPEEDCOM is a multi-national company based in Sarasota, Florida. The Company
employs approximately 115 people. Through its Wave Wireless Networking division,
SPEEDCOM manufactures a variety of broadband wireless products, including its
Speedlan family of wireless ethernet bridges and routers. Through its
InstallGuys division, SPEEDCOM provides wireless installations and services.
Internet service providers, telephone company operators and private
organizations in more than 60 countries use SPEEDCOM products to provide
"last-mile" wireless connectivity between multiple buildings at speeds up to 155
Megabits per second and distances up to 25 miles.
Results of Operations
The following table sets forth the percentage of net revenues represented by
certain items in the Company's Statements of Operations for the periods
indicated.
Three Months Ended March 31,
--------------------------------
2001 2000
--------------------------------
Net revenues 100% 100%
Operating costs and expenses:
Cost of goods and services 55% 46%
Salaries and related 33% 37%
General and administrative 21% 19%
Selling expenses 13% 7%
Provision for bad debt 0% 0%
Depreciation and amortization 3% 1%
--------------------------------
125% 110%
--------------------------------
Loss from operations (25)% (10)%
Other income (expense):
Interest expense, net (4)% 0%
Other income, net 0 % 0%
--------------------------------
(4)% (0)%
--------------------------------
Net loss (29)% (10)%
================================
12
Three Months Ended March 31, 2001 and March 31, 2000
Net revenues increased 118% from approximately $1,847,000 in the three months
ended March 31, 2000 to approximately $4,017,000 in the three months ended March
31, 2001. This increase was due to SPEEDCOM executing its business plan of
expanding the business in a growing market for broadband wireless in 2001. Cost
of goods and services increased 165% from approximately $844,000 for the three
months ended March 31, 2000 to approximately $2,234,000 for the three months
ended March 31, 2001, due primarily to increases in the Company's revenues and a
larger contribution of sales from the Install Guys division. Revenues from
customers in foreign geographic areas increased to 45% of revenues for the three
months ended March 31, 2001 as compared to 25% of revenues the three months
ended March 31, 2000. The percentage of sales that are from international
customers is expected to increase slightly or remain stable throughout the year
ended December 31, 2001.
Salaries and related, general and administrative and selling expenses increased
by 130% from approximately $1,167,000 for the three months ended March 31, 2000
to approximately $2,685,000 for the three months ended March 31, 2001. This
increase was primarily due to an increase in employee headcount which increased
salaries and related expenses approximately $632,000, spending on investor
relations of approximately $72,000, increased spending on marketing and
promotion, such as attendance at industry trade shows, of approximately $118,000
and engineering related to the Packethop(TM) product of approximately $65,000.
Additionally, SPEEDCOM incurred higher professional fees for legal and
accounting services due to the fact that the Company was a public entity in the
first quarter of 2001 and a private entity in the first quarter of 2000.
Net interest expense increased by approximately 10792%, from approximately
$1,000 for the three months ended March 31, 2000 to approximately $161,000 for
the three months ended March 31, 2001. This increase was due to the addition of
notes payable and loans from stockholders during the fourth quarter of 2000 and
the first quarter of 2001.
Net loss increased 556% from approximately $178,000, or $.02 per share, in the
three months ended March 31, 2000 to approximately $1,170,000, or $.13 per
share, in the three months ended March 31, 2001, as a result of the foregoing
factors.
Taxes
At March 31, 2001, SPEEDCOM had net operating loss carryforwards (NOLs) for
federal income tax purposes of approximately $4,400,000. The NOLs expire at
various dates through the year 2020.
Liquidity and Capital Resources
During the three months ended March 31, 2001, SPEEDCOM used approximately
$1,562,000 of cash for its operating activities. This was primarily due to
increases in accounts receivable (due to increases in sales) and the net loss
for the period. SPEEDCOM purchased approximately
13
$194,000 of fixed assets during the three months ending March 31, 2001 as
compared to approximately $167,000 during the same period in 2000, a 17%
increase. To fund this growth in assets and sales, SPEEDCOM raised approximately
$1,722,000 through the issuance of promissory notes and loans from stockholders.
In April 2001, SPEEDCOM entered into a one-year $3,000,000 bridge loan. The loan
is due in April 2002 and bears interest at 9% for the first 90 days and 12%
thereafter. As part of the transaction, SPEEDCOM issued warrants to acquire
333,333 shares of SPEEDCOM common stock at $5.00 per share. The proceeds of the
bridge note will be used to repay certain short-term debt and payables and for
general working capital. The Company obtained net proceeds of approximately
$2,700,000 for this bridge loan. Additional warrants are issuable contingent
upon the date on which the loan is repaid. The holder of the loan has certain
rights of first refusal on subsequent financings. Interest is due under the loan
in quarterly installments with principal payable in total at the maturity date
of the loan.
During the three months ended March 31, 2000 SPEEDCOM used approximately
$923,000 for its operating activities. This was primarily due to increases in
accounts receivable and inventory and its net loss for the period. SPEEDCOM's
cash flow used for financing activities increased due to the receipt of
approximately $2,004,000 from the sale of its common stock during the first
three months of 2000.
The Company believes that current resources are sufficient to execute its
business plan for 2001. However, the Company may seek additional capital to take
advantage of opportunities that may arise. This additional capital could come
from the sale of common or preferred stock, the exercise of outstanding
warrants, or from borrowings. Any material acquisitions of complementary
businesses, products or technologies could also require additional equity or
debt financing. There can be no assurance that such financing will be available
on acceptable terms, if at all.
Certain Factors That May Affect Future Results, Financial Condition and Market
Price of Securities
If we do not raise additional capital, we may not be able to fulfill our
business plan.
In order to take advantage of possible opportunities in 2001 and to execute our
business plan for 2002, we may need to raise additional financial capital. If we
are unsuccessful in raising that capital, we may not have sufficient funding to
purchase necessary goods and services to execute our business plan.
We may not be able to compete successfully in the fixed wireless broadband
market in view of rapid technological change and the resources required to deal
with technological change.
The markets for our products and the technologies utilized in the industry in
which we operate evolve rapidly and depend on key technologies, including
wireless local area networks, wireless packet data, modem and radio
technologies. SPEEDCOM is developing a series of next
14
generation products, which incorporates the PacketHop(TM) licensed technology
from SRI. Delays in developing these products could have a negative effect on
our future competitiveness as the industry is constantly changing as new
technologies are developed.
The fixed wireless broadband market is at an early stage of development and is
rapidly evolving. As is typical for a new and rapidly evolving industry, demand
and market acceptance for recently introduced wireless networking products and
services are subject to a high level of uncertainty. Market acceptance of
particular products cannot be predicted; however, it is likely that new products
will not be generally accepted unless they operate at higher speeds and are sold
at lower prices. While the number of businesses recognizing the value of
wireless solutions is increasing, we do not know whether sufficient demand for
our products will emerge and become sustainable. Prospects must be evaluated due
to the risks encountered by a company in the early stages of marketing new
products or services, particularly in light of the uncertainties relating to the
new and evolving markets in which we operate. There can be no assurance that we
will succeed in addressing any or all of these risks, and the failure to do so
would reduce demand for SPEEDCOM's products.
We could encounter future competition from larger wireless, computer and
networking equipment companies. We could also encounter additional future
competition from companies that offer products that replace or are alternatives
to radio frequency wireless solutions including, for example, products based on
infra-red technology or laser technology and systems that utilize existing
telephone wires (such as DSL) or cables within a building as a wired network
backbone or satellite systems outside of buildings.
Major changes could render products and technologies obsolete or subject to
intense competition from alternative products or technologies or by improvements
in existing products or technologies. For example, Internet access and wireless
local loop equipment markets may stop growing, whether as a result of the
development of alternative technologies, such as fiber optic, coaxial cable or
satellite systems. Also, new or enhanced products developed by other companies
may be technologically incompatible with SPEEDCOM's products and render our
products obsolete.
Many of SPEEDCOM's current and potential competitors have significantly greater
financial, marketing, technical and other resources and, as a result, may be
able to respond more quickly to new or emerging technologies or standards and to
changes in customer requirements, or to devote greater resources to the
development, promotion and sale of products or to deliver competitive products
at a lower end user price. Current and potential competitors have established or
may establish cooperative relationships among themselves or with third parties
to increase the ability of their products to address the needs of SPEEDCOM's
existing and prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition could result in price
reductions, reduced operating margins and loss of market share by SPEEDCOM.
15
SPEEDCOM's reliance on limited sources of wireless and computer components could
result in delayed product shipment and higher costs and could damage customer
relationships.
Many of the key hardware and software components necessary for the assembly of
SPEEDCOM's products are only available from a single supplier or from a limited
number of suppliers. Our reliance on sole or limited source suppliers involves
several risks, including:
. suppliers could increase component prices significantly, without advance
notice;
. suppliers could discontinue or delay delivery of product components for
reasons such as inventory shortages, new product offerings, increased
cost of materials, destruction of manufacturing facilities, labor
disputes and bankruptcy; and
. in order to compensate for potential component shortages or
discontinuance, in the future we may hold more inventory than is
immediately required, resulting in increased inventory costs.
If our suppliers are unable to deliver or ration components to us, we could
experience interruptions and delays in manufacturing and sales, which could
result in cancellation of orders for products or the need to modify products.
This may cause substantial delays in product shipments, increased manufacturing
costs and increased product prices. Further, we may not be able to develop
alternative sources for these components in a timely way, if at all, and may not
be able to modify our products to accommodate alternative components. These
factors could damage our relationships with current and prospective customers
lasting longer than any underlying shortage or discontinuance.
Expanding indirect distribution channels may result in increased costs and lower
margins.
To increase revenues, we believe that we must increase the number of our
distribution partners. Management's strategy includes an effort to reach a
greater number of end users through indirect channels. SPEEDCOM is currently
investing, and plans to continue to invest, significant resources to develop
these indirect channels. These efforts may not generate the revenues necessary
to offset such investments. We will be dependent upon the acceptance of our
products by distributors and their active marketing and sales efforts relating
to our products. The distributors to whom we sell products are independent and
are not obligated to deal with SPEEDCOM exclusively or to purchase any specified
amount of products. Because SPEEDCOM does not generally fulfill orders by end
users of its products sold through distributors, SPEEDCOM will be dependent upon
the ability of distributors to accurately forecast demand and maintain
appropriate levels of inventory. Management expects that SPEEDCOM's distributors
will also sell competing products. These distributors may not continue, or may
not give a high priority to, marketing and supporting our products. This and
other channel conflicts could result in diminished sales through the indirect
channels. Additionally, because lower prices are typically charged on sales made
through indirect channels, increased indirect sales could adversely affect the
average selling prices and result in lower gross margins.
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Growth may divert management resources from current operations.
SPEEDCOM has significantly expanded its operations in recent years, and
anticipates that further expansion will be required to address potential growth
in the customer base and market opportunities. This expansion has placed, and
future expansion is expected to place, a significant strain on our management,
technical, operational, administrative and financial resources. SPEEDCOM will
need to effectively manage any expansion, which could divert attention and
resources from current operations. The expansion and planned expansion may be
inadequate to support future operations. We may be unable to attract, retain,
motivate and manage required personnel, including finance, administrative and
operations staff, or to successfully identify, manage and exploit existing and
potential market opportunities because of inadequate staffing. We may also be
unable to manage further growth in our multiple relationships with original
equipment manufacturers, distributors and other third parties.
Our international operations and sales involve significant risks that could
reduce sales and increase expenses.
We anticipate that revenues from customers outside North America will continue
to account for a significant portion of our total revenues for the foreseeable
future. Expansion of international operations has required, and will continue to
require, significant management attention and resources. In addition, we remain
heavily dependent on distributors to market, sell and support our products
internationally. International operations are subject to additional risks,
including the following:
. difficulties of staffing and managing foreign operations due to time
differences, language barriers and staffing constraints in the foreign
sales offices;
. longer customer payment cycles and greater difficulties in collecting
accounts receivable increase the amount of time that we have to fund our
purchase of the inventory sold;
. unexpected changes in regulatory requirements, exchange rates, trading
policies, tariffs and other barriers could increase our costs;
. uncertainties of laws and enforcement relating to the protection of
intellectual property could allow competitors to infringe on our
technology;
. limits on the ability to sue and enforce a judgment for accounts receivable
increase the risk of bad debt expense;
. potential adverse tax consequences could create additional expense; and
. political and economic instability in Latin America could limit our sales
in that region.
SPEEDCOM has a history of losses and may never achieve or sustain profitability.
We have incurred significant losses since our inception. SPEEDCOM intends to
decrease its operating expenses in an attempt to achieve profitability in the
fourth quarter of 2001, however revenues may not grow or even continue at their
current level. If revenues do not rapidly increase or if we are not able to
decrease expenses, we will never become profitable.
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Our common stock price is volatile.
Our stock and the Nasdaq stock market in general have experienced significant
price and volume fluctuations in recent months and the market prices of
technology companies have been highly volatile. In the past, following periods
of volatility in the market price of a company's securities, securities class
action litigation has often been instituted against that company. Such
litigation could result in substantial costs and diversion of management's
attention.
Our manufacturing capabilities are limited and could prevent us from keeping up
with customer demand.
SPEEDCOM has no experience in large-scale manufacturing. If our customers were
to place orders substantially greater than current levels, SPEEDCOM's present
manufacturing abilities may not be adequate to meet such demand. There can be no
assurance that we will be able to contract additional manufacturing personnel on
a timely basis.
Our concentrated ownership structure means that our two controlling shareholders
can control the outcome of any shareholder vote.
A majority of SPEEDCOM's common stock is currently controlled by Michael W.
McKinney and Barbara McKinney (the McKinneys). Therefore, certain corporate
actions, which the Board of Directors may deem advisable for the shareholders of
SPEEDCOM as a whole, such as a business combination, may not be approved by the
common shareholders if submitted to a vote, unless the McKinneys approve the
potential transaction.
SPEEDCOM is subject to extensive and unpredictable government regulation, which
could make our products obsolete, raise our development costs and create
opportunities for other competitors.
SPEEDCOM is subject to various FCC rules and regulations in the United States
and to other government regulations abroad. There can be no assurance that new
FCC regulations will not be promulgated or that existing regulations outside of
the United States would not adversely affect international marketing of
SPEEDCOM's products.
Regulatory changes, including changes in the allocation of available frequency
spectrum, could significantly impact operations by restricting development
efforts, rendering current products obsolete or increasing the opportunity for
additional competition. In September 1993 and in February 1995, the FCC
allocated additional spectrum for personal communications services. In January
1997, the FCC authorized 300 MHz of additional unlicensed frequencies in the 5
Gigahertz frequency range. In 2000, the FCC modified the rules for "frequency
hopping spread spectrum" radios to allow greater power utilization in certain
circumstances. These changes in the allocation of available frequency spectrum
could create opportunities for other wireless networking products and services
or shift the competitive balance between SPEEDCOM and its competitors.
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PART II. OTHER INFORMATION
Item 2. Recent Sales of Unregistered Securities
During the quarter ended March 31, 2001, the Company sold the following
securities which were not registered under the Securities Act. The purchases and
sales were exempt pursuant to Section 4(2) of the Securities Act (and/or
Regulation D promulgated thereunder) as transactions by an issuer not involving
a public offering , where the purchasers represented their intention to acquire
the securities for investment only, not with a view to distribution, and
received or had access to adequate information about the registrant.
1) 18,635 shares of common stock and warrants to purchase 150,000 shares of
common stock (exercise price $6.00 per share) were issued for a total of $40,000
cash and services. These securities were issued to 2 investors, 1 of which was
an accredited investor.
2) A $250,000 promissory note to Mr. Sanguinetti, our former president and an
accredited investor, together with 11,500 warrants for the purchase of common
stock (exercise price $5.40 per share).
3) 10,000 shares of common stock to an accredited investor pursuant to the terms
of a $40,000 convertible subordinated promissory note.
4) 100,000 shares of common stock to SRI International, an accredited investor
and our licensor, pursuant to the terms of our license agreement.
Item 4. Submission of Matters to a Vote of Security Holders
This item is inapplicable, as there were not any matters submitted to a vote of
the Company's security holders during the first quarter of 2001.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits in the accompanying Index to Exhibits are filed as part
of this Quarterly Report on Form 10-QSB/A.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPEEDCOM Wireless Corporation
/s/ Michael W. Mckinney Chairman, Chief Executive November 16, 2001
--------------------------- Officer and Director
Michael W. McKinney
Exhibit Index
Number Description
2.1(1) Asset Purchase Agreement between Packaging Atlanta Corporation and
Laminating Technologies Inc. dated April 26, 1999
2.2 Agreement and Plan of Merger by and between SPEEDCOM Wireless
International Corporation and LTI Holdings, Inc., dated as of August
4, 2000 (included as Appendix A to the proxy statement/prospectus
filed as part of Form S-4 Registration Statement (File No. 333-43098)
and incorporated herein by reference)
3.1(8) Amended and Restated Certificate of Incorporation of SPEEDCOM
Wireless Corporation, as amended
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3.2(4) Amended and Restated Bylaws
3.3(6) Amended and Restated Bylaws of SPEEDCOM Wireless Corporation
4.1(2) Form of Bridge Note
4.2(2) Form of Warrant Agreement
4.3(2) Form of Underwriter's Unit Purchase Option
4.4(6) Purchase Agreement, dated April 13, 2001, by and among SPEEDCOM
Wireless Corporation and the Purchasers, as defined therein
4.5(6) Registration Rights Agreement, dated April 13, 2001, by and among
SPEEDCOM Wireless Corporation and the Purchasers, as defined
4.6(6) Form of Warrant of SPEEDCOM Wireless Corporation, dated April 13,
2001
4.7(7) Note and Warrant Purchase Agreement by and among SPEEDCOM Wireless
Corporation, S.A.C. Capital Associates, LLC, SDS Merchant Fund, L.P.,
Oscar Private Equity Investments, L.P. and Bruce Sanguinetti
4.8(7) Promissory Note for $500,000 issued to S.A.C. Capital Associates, LLC
4.9(7) Promissory Note for $250,000 issued to SDS Merchant Fund, L.P.
4.10(7) Promissory Note for $750,000 issued to Oscar Private Equity
Investments, L.P.
4.11(7) Promissory Note for $250,000 issued to Bruce Sanguinetti
4.12(7) Warrant No. W-1 to Purchase 146,667 Shares of Common Stock issued to
S.A.C. Capital Associates, LLC
4.13(7) Warrant No. W-2 to Purchase 73,333 Shares of Common Stock issued to
SDS Merchant Fund, L.P.
4.14(7) Warrant No. W-3 to Purchase 220,000 Shares of Common Stock issued to
Oscar Private Equity Investments, L.P.
4.15(7) Warrant No. W-4 to Purchase 73,333 Shares of Common Stock issued to
Bruce Sanguinetti
4.16(8) Purchase Agreement, dated August 23, 2001, by and among SPEEDCOM
Wireless Corporation and the Purchasers, as defined herein
4.17(8) Registration Rights Agreement, dated August 23, 2001, by and among
SPEEDCOM Wireless Corporation and the Purchasers, defined herein
4.18(8) Form of Series A Warrant of SPEEDCOM Wireless Corporation dated
August 23, 2001
4.19(8) Form of Series B Warrant of SPEEDCOM Wireless Corporation dated
August 23, 2001
4.20(8) Settlement Agreement between SPEEDCOM Wireless Corporation and I.W.
Miller Group, Inc. dated June 25, 2001
10.1(3) Registration Rights Agreement between the registrant and Michael E.
Noonan
10.2(2)* Amended and Restated 1996 Stock Option Plan
10.3(2)* Form of Indemnification Agreement
10.4(4)* Executive Employment Agreement between SPEEDCOM Wireless
International Corporation and Jay O. Wright
10.5(4)* Executive Employment Agreement between SPEEDCOM Wireless
International Corporation and Bruce Sanguinetti
10.6(4)* Executive Employment Agreement between SPEEDCOM Wireless
International Corporation and Michael McKinney
10.7(4)* Non-Qualified Stock Option Agreement
10.8(4)* Non-Qualified Stock Option Plan
10.9(9) Promissory Note for $250,000 issued to Bruce Sanguinetti dated
December 6, 2000.
10.10(9) Promissory Note for $40,000 issued to Bill Davis dated May 11, 2001.
10.11(9) Lease Agreement between SPEECOM Wireless Corporation and Lakewood
Ranch Properties, LLC.
10.12(9) Intellectual Property License Agreement between SPEEDCOM Wireless
Corporation and SRI International
16.1(5) Letter on change of certifying accountant
23.1(5) Consent of Independent Certified Public Accountants
24.1(8) Powers of Attorney
_________
(1) Incorporated by reference to the registrant's Definitive Proxy
Statement dated May 27, 1999.
(2) Incorporated by reference to the registrant's Registration Statement
on Form SB-2 (File No. 333-6711) filed with the SEC on June 24, 1996.
(3) Incorporated by reference to Amendment No. 1 to the registrant's
Registration Statement on Form SB-2 (File No. 333-6711) filed with
the SEC on July 31, 1996.
(4) Incorporated by reference to the Form 8-K filed October 11, 2000.
(5) Incorporated by reference to the Form 10-KSB filed April 17, 2001.
(6) Incorporated by reference to the Form 10-QSB filed May 14, 2001.
(7) Incorporated by reference to the Form 8-K filed July 2, 2001.
(8) Incorporated by reference to the Form S-3 filed September 18, 2001.
(9) Incorporated by reference to the Form 10-QSB filed November 14, 2001.
* Management contract or compensatory plan.
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