<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PRUSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING SEPTEMBER 30, 2000
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)
1748 INDEPENDENCE BLVD. C-5
SARASOTA, FL 34243
(941) 358-9283
(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: September 30, 2000 - 9,171,736
Common shares, $.001 par value.
Transitional small business disclosure format (check one): Yes [x] No [ ].
1
<PAGE>
SPEEDCOM WIRELESS CORPORATION
FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 2000
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 2000 and December 31, 1999 3
Statements of Operations for the three and nine months ended
September 30, 2000 and 1999 4
Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 19
Exhibit Index 20
2
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
SPEEDCOM WIRELESS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 533,920 $ 108,564
Restricted cash -- 35,671
Accounts receivable, net of allowances of $210,543 and $143,371 in
2000 and 1999, respectively 1,701,717 515,155
Inventories, net 1,345,995 553,004
Prepaid expenses and other current assets 280,797 7,182
-----------------------------
Total current assets 3,862,429 1,219,576
Property and equipment, net 725,433 199,199
Other assets, net 56,332 44,284
-----------------------------
Total assets $ 4,644,194 $ 1,463,059
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities:
Accounts payable $ 779,830 $ 817,092
Accrued expenses 736,383 362,134
Loans from stockholder -- 45,639
Current portion of deferred revenue 108,407 83,005
Current notes and capital leases payable 52,901 328,781
-----------------------------
Total current liabilities 1,677,521 1,636,651
Accrued expenses, net of current portion -- 12,000
Deferred revenue, net of current portion 33,158 63,616
Notes and capital leases payable 72,255 99,154
Convertible subordinate debt 40,000 --
Stockholders' equity (deficit):
Common stock, $.001 par value, 20,000,000 shares
authorized, 9,171,736 and 7,351,323 shares
issued and outstanding 9,172 7,351
Additional paid-in capital 6,602,326 2,061,943
Accumulated deficit (3,695,238) (2,417,656)
Notes receivable - related party (95,000) --
-----------------------------
Total stockholders' equity (deficit) 2,821,260 (348,362)
-----------------------------
Total liabilities and stockholders' equity (deficit) $ 4,644,194 $ 1,463,059
=============================
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
SPEEDCOM WIRELESS CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 3,182,673 $ 1,726,783 $ 7,183,655 $ 3,738,608
Operating costs and expenses:
Cost of installation revenues 1,756,529 873,449 3,886,256 2,017,121
Salaries and related 719,272 419,208 2,433,880 1,248,636
General and administrative 770,365 184,708 1,320,768 469,049
Selling expenses 319,320 91,317 555,056 131,077
Bad debts expense 182,821 -- 207,299 --
Depreciation and amortization 31,032 8,849 61,032 26,549
-------------------------------- -------------------------------
3,779,339 1,577,531 8,464,291 3,892,432
-------------------------------- -------------------------------
(Loss)/income from operations (596,666) 149,252 (1,280,636) (153,824)
Other income/(expense):
Interest expense, net (2,216) (32,077) (10,434) (73,645)
Other income, net -- 12,033 13,488 12,033
-------------------------------- -------------------------------
(2,216) (20,044) 3,054 (61,612)
-------------------------------- -------------------------------
Net (loss)/income $ (598,882) $ 129,208 $(1,277,582) $ (215,436)
================================ ===============================
Net (loss)/income per share:
Basic $ (0.07) $ 0.02 $ (0.16) $ (0.03)
================================ ===============================
Shares used in computing basic
net (loss)/income per share 8,505,279 7,098,943 8,075,241 7,021,162
================================ ===============================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
SPEEDCOM WIRELESS CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
2000 1999
---------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,277,582) $ (215,436)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 61,032 26,549
Bad debts 207,299 --
Provision for inventory obsolescence 11,000 --
Gain on sale of assets -- (2,900)
Common stock issued for services 5,000 --
Changes in operating assets and liabilities:
Restricted cash 35,671 72,869
Accounts receivable (1,393,861) (699,477)
Inventories (803,991) 233,949
Prepaid expenses and other assets (273,615) (13,042)
Other assets (12,048) (7,928)
Accounts payable and accrued expenses 324,987 (190,498)
Deferred revenue (5,056) --
--------------------------------
Net cash used in operating activities (3,121,164) (795,914)
INVESTING ACTIVITIES
Proceeds from sale of equipment -- 2,900
Purchases of equipment (587,266) (69,403)
--------------------------------
Net cash used in investing activities (587,266) (66,503)
FINANCING ACTIVITIES
Net (payments) proceeds from factor (111,731) 598,294
Proceeds from sales of common stock 4,665,714 365,749
Payments from loans from stockholder (45,639) 6,348
Borrowings of long-term debt 40,000 223,300
Payments of capital leases (191,048) (1,772)
Purchase of stock (223,510) --
--------------------------------
Net cash provided by financing activities 4,133,786 1,191,919
--------------------------------
Net increase in cash 425,356 329,502
Cash at beginning of year 108,564 --
--------------------------------
Cash at end of period $ 533,920 $ 329,502
===============================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
SPEEDCOM WIRELESS CORPORATION
Notes to Financial Statements
(unaudited)
1. BUSINESS
Speedcom Wireless International Corporation was incorporated in Florida on March
16, 1994. 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, telco
operators and private organizations in over 60 countries use Speedcom products
to provide "last-mile" wireless connectivity between multiple buildings at
speeds up to 100 Mbps and distances of up to 25 miles. Speedcom Wireless
International 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 (the Company or Speedcom) and continue the business of
Speedcom Wireless International Corporation (Old Speedcom). Pursuant to the
terms of the merger agreement, LTI affected a 1 for 4.26 reverse stock split
prior to the merger. The reverse stock split reduced the number of LTI's
outstanding common shares to 655,958, the number of LTI's stock warrants to
1,966,927 and the number of LTI's purchase options to 39,950. The merger was
also effected with the issuance by LTI of 8,515,778 shares of its common stock,
on a 1.146 for 1 basis, for the outstanding common shares of Old Speedcom, which
included an additional 1,084,873 shares issued to Old Speedcom shareholders as a
closing adjustment under the merger agreement. The number of shares of Old
Speedcom stock issuable upon exercise of all outstanding stock options and
warrants as of September 30, 2000 is 3,602,846.
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
represents 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 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. All
shares, options and warrants issued by Speedcom prior to the merger have been
retroactively restated for all periods presented to reflect the 1.146 for 1
merger exchange ratio.
6
<PAGE>
SPEEDCOM WIRELESS CORPORATION
Notes to Financial Statements
(unaudited)
The accompanying financial statements have been prepared pursuant to the rules
and regulations of the 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 and regulations. The accompanying financial statements should be
read in conjunction with the Company's annual financial statements and notes
thereto included in the LTI Registration Statement on Form S-4.
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 nine months ended September 30,
2000 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000.
3. INVENTORIES
A summary of inventories at September 30, 2000 and December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
2000 1999
------------------------------------
(UNAUDITED)
<S> <C> <C>
Component parts $ 832,587 $458,385
Completed assemblies 513,408 94,619
------------------------------------
$1,345,995 $553,004
====================================
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment at September 30, 2000 and December 31, 1999
is as follows:
<TABLE>
<CAPTION>
2000 1999
------------------------------------
(UNAUDITED)
<S> <C> <C>
Computer and office equipment $ 636,731 $ 215,069
Automobiles 51,737 43,637
Leasehold improvements 62,283 18,706
Furniture and fixtures 70,466 16,775
Construction in progress 98,643 29,526
------------------------------------
919,860 323,713
Less accumulated depreciation (194,427) (124,514)
------------------------------------
$ 725,433 $ 199,199
====================================
</TABLE>
7
<PAGE>
SPEEDCOM WIRELESS CORPORATION
Notes to Financial Statements
(unaudited)
5. ACCRUED EXPENSES
A summary of accrued expenses at September 30, 2000 and December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
2000 1999
-----------------------
(UNAUDITED)
<S> <C> <C>
Accrued Payroll $374,802 $ 79,956
Other 361,581 282,178
-----------------------
$736,383 $362,134
=======================
</TABLE>
6. STOCKHOLDERS' EQUITY
During the nine months ending September 30, 2000, the following shares of common
stock were issued:
<TABLE>
<CAPTION>
Number of Shares Price
-----------------------------------------------------------------------
<S> <C>
110,026 2.18
229,220 2.84
656 3.05
383,657 3.49
84,238 4.36
47,755 5.24
136,631 6.98
</TABLE>
Included in the above are shares of common stock with detachable warrants to
purchase up to 84,238 shares of common stock at an exercise price of $8.72 per
share, for $4.36 per unit. These warrants have a term of two years. Also
included in the above are 47,755 shares of common stock with detachable warrants
to purchase up to 114,610 shares of common stock at $6.54 per share, for $5.24
per unit. These warrants expired on October 7, 2000 without being exercised.
During August 2000, 9,004 options were exercised for $2.62 per share. The
Company also issued 313,990 shares of stock for finders fees and costs incurred
in connection with the merger as discussed in footnote 2 above. Pursuant to the
merger as discussed above and in footnote 2, in September LTI effected a 1 for
4.26 reverse stock split which reduced the number of LTI's
8
<PAGE>
SPEEDCOM WIRELESS CORPORATION
Notes to Financial Statements
(unaudited)
outstanding common shares to 655,958, the number of LTI's stock warrants to
1,966,927 and the number of LTI's purchase options to 39,950. The merger was
also effected with the issuance by LTI of 8,515,778 shares of its common stock,
on a 1 for 1.146 basis, for the outstanding common shares of Old Speedcom, which
included an additional 1,084,873 shares issued to Old Speedcom shareholders as a
closing adjustment under the merger agreement. Net proceeds on the sales of
stock and warrants during the first nine months of 2000 amounted to $4,665,714.
The number of shares of Old Speedcom stock issuable upon exercise is 3,602,846.
The merger agreement did not change the terms of the issued stock options.
In addition to sales of stock and warrants for cash, during May 2000 the Company
issued 28,653 shares of common stock to a board member in exchange for a
$95,000, 6% promissory note and two months of consulting services. A value of
$100,000 was ascribed to the common stock issued, based upon the then most
recent sale of common stock at a price of $3.49 per share. The value was
allocated to the face value of the note receivable in the amount of $95,000
(contra-equity) and deferred consulting services (expense) in the amount of
$5,000.
During the nine months ending September 30, 2000, the Company repurchased
179,373 shares of its common stock, for cash.
During the period from January 1999 to September 1999, the Company sold 238,527
shares of its $.001 par value common stock at a per share price of $1.96. During
the period from October to December 1999, the Company sold 289,390 shares of its
$.001 par value common stock at a per share price of $2.18. Of the total shares
sold, 110,026 shares were unissued at December 31, 1999. These shares were
issued subsequent to December 31, 1999. The net proceeds on sales of stock
during the nine months ending September 30, 1999 were $365,749.
9
<PAGE>
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" 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 90 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. Internet service
providers, telco 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 100 Mbps and distances of more than 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.
10
<PAGE>
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Net revenues 100% 100% 100% 100%
Operating costs and expenses:
Cost of installation revenues 55% 50% 54% 54%
Salaries and related 23% 24% 34% 33%
General and administrative 24% 11% 18% 12%
Selling expenses 10% 5% 8% 4%
Bad debts expense 6% 0% 3% 0%
Depreciation and amortization 1% 1% 1% 1%
-------------------------------- -------------------------------
119% 91% 118% 104%
-------------------------------- -------------------------------
(Loss) income from operations (19)% 9% (18)% (4)%
Other income (expense):
Interest expense, net 0% (2)% 0% (2)%
Other income, net 0% 0% 0% 0%
-------------------------------- -------------------------------
0% (2)% 0% (2)%
-------------------------------- -------------------------------
Net (loss) income (19)% 7% (18)% (6)%
================================ ===============================
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
Net revenues increased 92% from approximately $3,739,000 in the nine months
ended September 30, 1999 to approximately $7,184,000 in the nine months ended
September 30, 2000. This increase was due to Speedcom executing its business
plan in a growing market for broadband wireless in 2000 coupled with Speedcom's
poor performance in the first nine months of 1999 due to its operating in a
capital constrained position. Cost of installation revenues increased 93% from
approximately $2,017,000 in the nine months ended September 30, 1999 to
approximately $3,886,000 in the nine months ended September 30, 2000, due
primarily to increases in the Company's revenues.
Salaries and related, general and administrative and selling expenses increased
by 133% from approximately $1,849,000 in the first nine months of 1999 to
approximately $4,310,000 in the nine months ended September 30, 2000. This
increase was primarily due to an increase in employee headcount and increased
spending on marketing and promotion, such as attendance at industry trade shows
coupled with an unusually low expense level in the first nine months of 1999 due
to the Company operating in a capital constrained position. Additionally,
Speedcom incurred the cost of two years of financial audits in the first nine
months of 2000 but did not incur any expense for an audit in the first nine
months of 1999.
11
<PAGE>
Interest expense decreased by approximately $64,000, or 86%, from approximately
$74,000 for the nine months ended September 30, 1999 to approximately $10,000
for the nine months ended September 30, 2000. This decrease was due to the
decrease in borrowings under Speedcom's factoring line as a result of an
infusion of equity in the first nine months of 2000 and continued amortization
of Speedcom's inventory based loan facility.
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
Net revenues increased 84% from approximately $1,727,000 in the three months
ended September 30,1999 to approximately $3,183,000 in the three months ended
September 30, 2000. This increase was due to Speedcom executing its business
plan in a growing market for broadband wireless in 2000 coupled with Speedcom's
poor performance in the three months of 1999 due to its operating in a capital
constrained position. Cost of installation revenues increased 101% from
approximately $873,000 in the three months ended September 30, 1999 to
approximately $1,757,000 in the three months ended September 30, 2000, due
primarily to increases in the Company's revenues.
Salaries and related, general and administrative and selling expenses increased
by 160% from approximately $695,000 in the three months ending September 30,
1999 to approximately $1,809,000 in the three months ended September 30, 2000.
This increase was primarily due to an increase in employee headcount and
increased spending on marketing and promotion, such as attendance at industry
trade shows coupled with an unusually low expense level in the three months of
ending September 30, 1999 due to the Company operating in a capital constrained
position.
Interest expense decreased by approximately $30,000, or 93%, from approximately
$32,000 for the three months ended September 30, 1999 to approximately $2,000
for the three months ended September 30, 2000. This decrease was due to the
decrease in borrowings under Speedcom's factoring line as a result of an
infusion of equity in the three months ending September 30, 2000 and continued
amortization of Speedcom's inventory based loan facility.
INCOME TAXES
At September 30, 2000, Speedcom had net operating loss carry-forwards (NOL's)
for federal income tax purposes of approximately $11,000,000. The NOL's expire
through the year 2020. The carry-forwards acquired in connection with the merger
are subject to certain limitations which ultimately may prevent use of such
NOL's prior to their expiration, as prescribed by Section 382 of the Internal
Revenue Code of 1986, as amended, and the corresponding regulations.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1999 Speedcom used approximately
$796,000 for its operating activities. This was primarily due to increases
in accounts receivable (due to
12
<PAGE>
increases in sales) and its net loss for the period. Speedcom's cash flow
from financing activities increased due to the receipt of approximately
$366,000 from the sale of its common stock and net payments from factored
receivables of approximately $598,000 during the first nine months of 1999.
As of September 30, 1999, Speedcom had cash of approximately $330,000.
During the nine months ended September 30, 2000, Speedcom used approximately
$3,121,000 for its operating activities. This was primarily due to increases in
accounts receivable (due to increases in sales) and its net loss for the period.
Speedcom purchased approximately $587,000 of fixed assets during the nine months
ending September 30, 2000 as compared to approximately $69,000 during the same
period in 1999, a 746% increase. To fund this growth in assets and sales,
Speedcom raised approximately $4,666,000 through the issuance of common stock
and warrants, through private investments and the reverse merger with LTI, as
described in footnote 2 to the financial statements. As of September 30, 2000,
Speedcom had cash of approximately $534,000.
The Company believes that its working capital, together with the cash generated
from operations, and financing facilities, will be sufficient to satisfy
anticipated sales growth and investment in manufacturing facilities and
equipment through its fiscal year 2000. However, due to the growth of Speedcom,
management believes that it will need to raise additional capital in 2001. 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
THE MARKET FOR WIRELESS NETWORKING IS AT AN EARLY STAGE OF DEVELOPMENT.
The wireless networking 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 wireless
LAN 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
increased value of wireless solutions is increasing, it is not known whether
this market will continue to develop such that 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 the Company operates. There can be no assurance that
the Company will succeed in addressing any or all of these risks, and the
failure to do so would have a material adverse effect on Speedcom's business,
financial condition and operating results.
13
<PAGE>
THERE IS INTENSE COMPETITION IN THE WIRELESS LAN MARKET.
The market for the Company's products is very competitive, and it is expected
that competition will increase in the future, both with respect to current
products and future products which the Company may develop. Within the wireless
industry, business is intensely competitive and is characterized by rapid
technological change, frequent introduction of new products and evolving
industry standards. Increased competition could adversely affect the Company's
revenues and profitability through pricing pressure, loss of market share and
other factors. Management believes that the principal competitive factors in the
wireless LAN market include:
- expertise and familiarity with 2.4 GHz spread spectrum technology, wireless
data communication protocols and LAN technology;
- product performance, features, functionality and reliability;
- price/performance characteristics;
- timeliness of new product introductions;
- adoption of emerging industry standards;
- customer service and support;
- size and scope of distribution network; and
- brand name.
While the Company believes that they are competitive in these regards, there can
be no assurance that it will be able to successfully compete as to these or
other factors or that competitive pressures that the Company faces will not
materially and adversely affect its business and operating results. The Company
also cannot assure that these will continue to be competitive factors in the
wireless LAN market and, if not, whether the Company will be able to
successively identify future competitive factors or be successful competing as
to those factors. Within the wireless LAN industry, the primary competitors are
Lucent Technologies, Aironet (part of Cisco Systems) and BreezeCom. The Company
also experiences competition from a number of smaller companies that provide
wireless data communication products, and it may encounter future competition
from other companies, both that have and have not announced their intentions to
offer competitive products and solutions. In addition, the Company could
encounter future competition from larger wireless, computer and networking
equipment companies. The Company also faces competition from its OEM customers
who have, or could acquire, their own wireless data communications research and
development capabilities. The Company could also encounter 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
or cables within a building as a wired network backbone or satellite systems
outside of buildings.
Many of the Company'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
14
<PAGE>
establish cooperative relationships among themselves or with third parties
to increase the ability of their products to address the needs of our 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 is likely to result in price reductions, reduced
operating margins and loss of market share, any of which could have a material
adverse effect on our business and operating results.
OUR RELIANCE ON LIMITED SOURCES OF WIRELESS AND COMPUTER COMPONENTS COULD
ADVERSELY AFFECT OUR BUSINESS.
Many of the key components necessary for the assembly of the Company's products
are only available from a single supplier or from a limited number of suppliers.
The Company has experienced delays and shortages in the supply of components in
the past and could experience delays and shortages in the future. The Company
generally does not maintain a significant inventory of components and does not
have long-term supply contracts with its suppliers. The Company's reliance on
sole or limited source suppliers involves several risks, including:
- suppliers could increase component prices significantly, without notice and
with immediate effect;
- suppliers could discontinue the manufacture or supply of components or
delay delivery of components used in products 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,
the Company may in the future hold more inventory than is immediately
required, resulting in increased inventory costs. If the Company's suppliers
are unable to deliver or ration components to it, the Company 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, the Company 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 its products to accommodate
alternative components. These factors could damage the relationships with
current and prospective customers lasting longer than any underlying shortage
or discontinuance. Any of these risks, if realized, could materially and
adversely affect the Company's business operating results and financial
condition.
EXPANDING DISTRIBUTION CHANNELS MIGHT ADVERSELY AFFECT BUSINESS.
To increase revenues, the Company believes that it must increase the number of
distribution partners. Management's strategy includes an effort to reach a
greater number of end users through indirect channels. The Company is currently
investing, and plans to continue to invest, significant resources to develop
these indirect channels. This could adversely affect the Company's operating
results if these efforts do not generate the revenues necessary to offset such
investments. The Company will be dependent upon the acceptance of its products
by distributors and their active marketing and sales efforts relating to its
products. The distributors to whom the
15
<PAGE>
Company sells products are independent and are not obligated to deal with the
Company exclusively or to purchase any specified amount of products. Because the
Company does not generally fulfill orders by end users of its products sold
through distributors, the Company will be dependent upon the ability of
distributors to accurately forecast demand and maintain appropriate levels of
inventory. Management expects that the Company's distributors will also sell
competing products. These distributors may not continue, or may not give a high
priority to, marketing and supporting the Company's products. This and other
channel conflicts could result in diminished sales through the indirect channels
and adversely affect operating results. 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.
THE COMPANY MAY NOT BE ABLE TO MANAGE ITS GROWTH.
The Company has 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 the Company's management,
technical, operational, administrative and financial resources. The Company has
recently hired new employees, including a number of key managerial and
operations personnel, who have not yet been fully integrated into its
operations. The current and planned expansion of personnel, systems, procedures
and controls may be inadequate to support future operations. The Company 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. The Company may also be unable to manage further growth in
its multiple relationships with OEMs, distributors and other third parties. If
the Company is unable to manage growth effectively, its business, financial
condition and results of operations could be adversely affected.
THE COMPANY MAY FACE RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND SALES.
The Company anticipates that revenues from customers outside North America will
continue to account for a significant portion of its total revenues for the
foreseeable future. Expansion of international operations has required, and will
continue to require, significant management attention and resources. In
addition, the Company remains heavily dependent on distributors to market, sell
and support its products internationally. International operations are subject
to additional risks, including the following:
- difficulties of staffing and managing foreign operations;
- longer customer payment cycles and greater difficulties in collecting
accounts receivable;
- unexpected changes in regulatory requirements, exchange rates, trading
policies, tariffs and other barriers;
- uncertainties of laws and enforcement relating to the protection of
intellectual property;
- language barriers;
- limits on the ability to sue and enforce a judgment for accounts receivable;
- potential adverse tax consequences; and
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<PAGE>
- political and economic instability.
Similarly, the Company cannot accurately predict the impact that any future
fluctuations in foreign currency exchange rates may have on its operating
results and financial condition.
RAPID TECHNOLOGICAL CHANGE MAY ADVERSELY AFFECT THE MARKET ACCEPTANCE FOR THE
COMPANY'S PRODUCTS.
The markets for the Company's products and the technologies utilized in the
industry in which the Company operates evolve rapidly and depend on key
technologies, including wireless LAN, wireless packet data, modem and radio
technologies. These technologies may be replaced with alternative technologies
or may otherwise not achieve market acceptance that the Company is seeking. In
particular, there is a substantial risk that the wireless packet data technology
underlying the wireless internet access and broadband wireless local loop
products may not achieve market acceptance for use in application. 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,
satellite systems or otherwise. Also, new or enhanced products developed by
other companies may be technologically incompatible to Speedcom's products and
render the Company's products obsolete.
THE COMPANY HAS A HISTORY OF LOSSES, EXPECTS FUTURE LOSSES AND MAY NEVER ACHIEVE
OR SUSTAIN PROFITABILITY.
The Company has incurred significant losses since its inception, and expects to
continue to incur net losses for the foreseeable future. The Company intends to
increase its operating expenses, however revenues may not grow or even continue
at their current level. If revenues do not rapidly increase or if expenses
increase at a greater pace than revenues, the Company will never become
profitable.
THE COMPANY'S COMMON STOCK PRICE MAY BE VOLATILE.
The stock market has experienced significant price and volume fluctuations, 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.
THERE ARE LIMITS TO OUR MANUFACTURING CAPACITIES AND ABILITIES.
Speedcom currently has limited manufacturing capability and has no experience in
large scale manufacturing. If the Company's customers were to place orders for
unexpectedly large quantities of products, Speedcom's present manufacturing
capacity could be inadequate to meet
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<PAGE>
such demand. There can be no assurance that the Company will be able to develop
or contract for additional manufacturing capacity on acceptable terms on a
timely basis.
THE COMPANY IS SUBJECT TO EXTENSIVE AND UNPREDICTABLE GOVERNMENT REGULATION.
The Company is subject to various FCC rules and regulations in the United
States. Current FCC regulations permit license-free operation in certain
FCC-certified bands in the radio spectrum. The Company's spread spectrum
wireless products are intended for unlicensed operation primarily in the
2.4-2.4835 GHz frequency bands. Operation in these frequency bands is governed
by rules set forth in Part 15 of the FCC regulations. The Part 15 rules are
designed to minimize the probability of interference to other users of the
spectrum and, thus, accord Part 15 systems secondary status. In the event that
there is interference between a primary user and a Part 15 user, a higher
priority user can require the Part 15 user to curtail transmissions that create
interference. In this regard, if users of the Company's products experience
excessive interference from primary users, market acceptance of the Company's
products could be adversely affected, thereby materially and adversely affecting
its business and results of operations. The FCC, however, has established
certain standards, which create an irrefutable presumption of noninterference
for Part 15 users and the Company believes that its products comply with these
requirements. The Company's products also will be subject to regulatory
requirements in international markets and, therefore, the Company will need to
monitor the development of spread spectrum regulations in certain countries that
represent potential markets for its products. The Company has limited experience
in gaining regulatory approval outside of the United States. There can be no
assurance that new regulations will not be promulgated, which could have a
material adverse effect on the Company's business and results of operations, 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
GHz frequency range. These changes in the allocation of available frequency
spectrum could create opportunities for other wireless networking products and
services. There can be no assurance that new regulations will not be
promulgated, which could have a material adverse effect on the Company's
business and results of operations.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Because LTI was a 1934 Act reporting company before the Speedcom/LTI merger, the
following information relates to the matters submitted to a vote of LTI's
stockholders in connection with the merger at a special meeting held on
September 29, 2000. The following proposals are
18
<PAGE>
described in the Form S-4 registration statement filed by LTI with the SEC with
respect to the merger on August 25, 2000:
- Proposal 1: Agreement and Plan of Merger with Speedcom
- Proposal 2: 1 for 4.26 reverse stock split in connection with the merger
- Proposal 3: Amendments to Certificate of Incorporation in connection with
the merger (including increasing the number of authorized shares)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Broker Non-
For Against Abstained Votes
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proposal 1 2,190,099 -- 780 584,221
----------------------------------------------------------------------------------------------------------
Proposal 2 2,188,219 1,680 980 584,221
----------------------------------------------------------------------------------------------------------
Proposal 3 2,188,899 1,000 980 584,221
----------------------------------------------------------------------------------------------------------
</TABLE>
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.
(b) Reports on Form 8-K
Form 8-K was filed on October 11, 2000 regarding a change in control
of the registrant in accordance with the merger with LTI Holdings,
Inc.
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
Date Signature Title
October 30, 2000 /s/ Michael W. McKinney Chairman and Chief Executive
------------------------ Officer, Director
Michael W. McKinney
19
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
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 Amended and Restated Certificate of Incorporation (included as Appendix B
to the proxy statement/prospectus filed as part of Form S-4 Registration
Statement (File No. 333-43098) and incorporated herein by reference)
3.2(4) Amended and Restated Bylaws
4.1(2) Form of Bridge Note
4.2(2) Form of Warrant Agreement
4.3(2) Form of Underwriter's Unit Purchase Option
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
27 Financial Data Schedule
(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.
20
