SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 1998.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from __________ to __________
Commission file number 0-18122
ANTENNAS AMERICA, INC.
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(Exact name of small business issuer as specified in its charter)
Utah 87-0454148
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization No.)
4860 Robb Street, Suite 101,
Wheat Ridge, Colorado 80033
- ---------------------------- -----------------------
(Zip Code)
(303) 421-4063
------------------------------------------------
(Issuer's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes __X__ No _____
As of September 30, 1998, the Registrant had outstanding 75,414,648 shares of
its common stock, par value $.0005.
Transitional Small Business Disclosure Format (Check One):
Yes _____ No __X__
<PAGE>
ANTENNAS AMERICA, INC.
FORM 10-QSB
SEPTEMBER 30, 1998
TABLE OF CONTENTS
Page No.
Part I
Item 1. Financial Statements
Balance Sheet as of September 30,1998...................................3
Statements of Operations for the Three and Nine Months Ended
September 30, 1998 and 1997.........................................4
Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997.........................................5
Note to Financial Statements............................................6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition...............................................7
Results of Operations...................................................7
Financial Condition.....................................................7
Year 2000 Compliance....................................................8
Forward Looking Statements..............................................9
Part II
Item 5. Other Information...................................................10
Item 6. Exhibits and Reports on Form 8-K....................................10
2
<PAGE>
ANTENNAS AMERICA, INC.
BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
ASSETS
Current assets:
Cash $ 44,177
Accounts receivable, trade 410,404
Inventories 378,468
Prepaid expenses 59,199
Deferred tax asset 102,000
------------
Total current assets 994,248
Property and equipment, net 443,655
Other assets:
Deferred tax asset, non-current 145,333
Intangible assets 45,015
Deposits 14,425
-------------
Total assets $1,642,676
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank $ 225,959
Notes payable - others 208,255
Current portion of leases payable 59,353
Accounts payable and accrued expenses 426,254
------------
Total current liabilities 919,821
Leases payable 70,851
Notes payable - officer 139,783
------------
Total liabilities 1,130,455
Stockholders' equity:
Common stock, $.0005 par value,
250,000,000 shares authorized,
75,414,648 shares issued and outstanding 37,707
Additional paid-in capital 927,513
Common stock options outstanding 10,000
Accumulated Deficit (462,999)
-------------
Total stockholders' equity 512,221
-------------
Total liabilities and stockholders' equity $1,642,676
=============
See accompanying note to financial statements.
3
<PAGE>
ANTENNAS AMERICA, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ---------------------------------------
1998 1997 1998 1997
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Sales, net $ 807,560 $ 695,600 $2,224,112 $2,055,582
Cost of sales 451,258 383,584 1,267,234 1,112,106
---------- ---------- ---------- ----------
Gross profit 356,302 312,016 956,878 943,476
Selling, general and administrative 329,893 274,339 1,053,301 763,309
---------- ---------- ---------- ----------
expenses
Income (loss) from operations 26,409 37,677 (96,423) 180,167
Other income (expense):
Interest expense (22,996) (15,555) (61,096) (49,429)
Other income 25,902 - 25,971 -
---------- ---------- ---------- ----------
Income (loss) before income taxes 29,315 22,122 (131,548) 130,738
Income tax expense (benefit) 9,968 7,521 (44,726) 44,450
---------- ---------- ---------- ----------
Net income (loss) $ 19,347 $ 14,601 $ (86,822) $ 86,288
========== ========== ========== ==========
Shares outstanding 75,414,648 73,189,422 75,414,648 73,189,422
</TABLE>
See accompanying note to financial statements.
4
<PAGE>
ANTENNAS AMERICA, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
<S> <C> <C>
Net income (loss) $ (86,822) $ 86,288
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 82,700 25,200
Noncash expense for issuance of stock and stock options 34,650 -
Interest added to note payable 12,686 6,647
Salary expense added to note payable 3,077 -
Gain from debt cancellation (24,862) -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (82,719) (178,439)
(Increase) decrease in inventory 130,086 (110,769)
(Increase) decrease in deferred tax asset (44,724) 44,450
(Increase) decrease in prepaid expenses 26,541 3,127
(Increase) decrease in other assets (3,813) 7,639
Increase (decrease) in accounts payable and
accrued expenses 5,478 87,529
--------- ---------
Total adjustments 139,100 (114,616)
Net cash provided by (used in) operating activities 52,278 (28,328)
--------- ---------
Cash flows from investing activities:
Patent acquisition costs (14,665) (4,228)
Acquisition of plant and equipment (68,241) (173,398)
--------- ---------
Net cash used in investing activities (82,906) (177,626)
--------- ---------
Cash flows from financing activities:
Repayment of bank note (24,771) -
Proceeds of new borrowing - 272,551
Repayment of notes and leases payable (62,506) (57,900)
Proceeds from equipment refinancing 32,104 -
Repayment of officer loans (1,000) (43,138)
Proceeds from exercise of options, net 69,336 -
Common stock subscriptions - 15,000
--------- ---------
Net cash provided by financing activities 13,163 186,513
--------- ---------
Decrease in cash (17,465) (19,441)
Cash and cash equivalents, beginning of period 61,642 55,636
--------- ---------
Cash and cash equivalents, end of period $ 44,177 $ 36,195
========= =========
Supplemental cash flow information:
Cash paid for interest $ 43,718 $ 42,782
Cash paid for income taxes $ - $ -
Non-cash investing and financing activities:
Capital lease obligations incurred $ 43,135 $ -
Issuance of common stock options $ 40,000 $ -
Issuance of common stock for directors' fees $ 4,650 $ -
Tax benefit related to stock options $ 5,100 $ -
</TABLE>
See accompanying note to financial statements.
5
<PAGE>
ANTENNAS AMERICA, INC.
NOTE TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of September 30, 1998, and the results of
operations and cash flows for the periods presented. All such adjustments are of
a normal recurring nature. The results of operations for the periods presented
are not necessarily indicative of the results for the full year.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in Form 10-KSB for the year ended December
31, 1997. These financial statements should be read in conjunction with the
financial statements and notes included in the Form 10-KSB.
6
<PAGE>
ANTENNAS AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
Results Of Operations
The Company's net results for the three and nine months ended September 30,
1998 were income of $19,347 and a loss of $86,822, respectively, as compared
with net income of $14,601 and $86,288, respectively, for the three and nine
months ended September 30, 1997. The 33% increase in income for the three month
period ended September 30, 1998 is attributable to a 16% increase in revenues
and the in-house manufacturing of certain components that were outsourced in the
same period last year. Operating results for the nine month period were affected
by several factors including the transition to a new antenna system for one of
the Company's largest O.E.M. customers, the maintenance of production overhead
despite the seasonal lag in sales of the local TV antenna systems, increased
marketing costs, increases in general and administrative expenses incurred to
support the Company's ongoing higher sales levels, and contractual investor
relations consulting fees of $30,000 and certain one-time related costs
amounting to an additional $47,000.
Sales were $807,560 and $2,224,112, respectively, for the three and nine
month periods ended September 30, 1998, as compared to $695,600 and $2,055,582,
respectively, for the three and nine month periods ended September 30, 1997.
These results reflect the Company's increase in sales to O.E.M. and commercial
customers. The Company's planned introduction of its new line of local TV
antennas was delayed until the first quarter of 1999, and therefore there was
not an increase in sales of local TV antennas for the 1998 periods. This delayed
introduction of these new products is anticipated to result in sales for the
fourth quarter of 1998 being at approximately the same level as sales for the
third quarter.
The Company has recently announced that some of its commercial consumer
products will be sold under the GE brand name through Jasco Products beginning
in January 1999. With this important development the Company is working to
develop additional products to expand its consumer electronics business that
could provide both short term and long term opportunities to the Company.
Gross profit margin (gross profit divided by net sales) varies on a
quarterly basis due to a number of factors, including product mix, production
volume for certain of the Company's O.E.M. customers and new product start up
costs. Gross profit margins in 1998 have been reduced by the pass-through
purchases of certain components required by the Company's O.E.M. customers to
manufacture and assemble the customers' proprietary wireless products and offset
by the increase in profit margins due to the investment in manufacturing
equipment to manufacture certain components previously outsourced by the
Company. For the three months and nine months ended September 30, 1998, gross
profit margin was 44% and 43% as compared to 45% and 46%, respectively, for the
three and nine months ended September 30, 1997.
Financial Condition
Compared to December 31, 1997, the Company's total assets as of September
30, 1998, increased $15,605 to $1,642,676. Liabilities decreased $16,659 to
$1,130,455. Stockholders' equity improved from $479,957 to $512,221. The
issuance of common stock and options and the exercise of options increased
equity by $119,086 which was offset by the net loss for the period of $86,822.
As of September 30, 1998, the Company continues to operate on a positive
cash flow basis from its operations. However, due to the seasonal nature of
several of the new products introduced by the Company in the same period last
year, the Company is adjusting its operation to a more seasonal revenue stream.
Management is in the process of determining the best way to increase the
Company's capitalization to better meet the fluctuations and demand of the
Company's new and existing products.
7
<PAGE>
Year 2000 Compliance
Year 2000 compliance is the ability of computer hardware and software to
respond to the problems posed by the fact that computer programs traditionally
have used two digits rather than four digits to define an applicable year. As a
consequence, any of the Company's computer programs or equipment using internal
programs may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
interruption of operations, including temporar y inability to send invoices or
engage in normal business activities or to operate equipment such as telephone
systems, facsimile machines and production machinery.
To date, the Company has reviewed its financial accounting software and
system and has determined it is fully Year 2000 compliant. The Company has also
been informed by vendors that major pieces of office and production equipment
used by the Company are Year 2000 compliant. The Company has requested
documentation to support these assurances. There are two other key pieces of
production equipment used in the Company's manufacturing process that have not
been reviewed. For one piece, its functions may be performed manually so that
the Company does not believe it would be materially harmed if this piece of
equipment is not Year 2000 compliant. The other piece cannot be replaced with
manual processes but the functions performed by this equipment could be
subcontracted out if necessary at a cost that the Company does not believe would
be materially greater than the Company's cost of performing these functions. It
is anticipated that the Company's review of these pieces of equipment will be
completed by the end of this year.
The Company has initiated a review of its relationships with suppliers and
vendors to determine if there will be an impact to the Company's operations due
to a Year 2000 issue with a vendor's or supplier's system. The Company does not
rely on any sole source vendors, and most items can be obtained from alternate
sources if a preferred supplier is not able to meet the Company's needs. Because
this review is not completed, the Company has not yet developed a contingency
plan for any vendors that may not be Year 2000 compliant. The Company
anticipates that its contingency plan will include utilizing alternate suppliers
and vendors. Using alternate vendors may not be efficient for some products
though, due to required set up time for a new vendor. This vendor and supplier
review and a related contingency plan is expected to be completed by the end of
the first quarter of 1999.
8
<PAGE>
FORWARD LOOKING STATEMENTS
This report contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Company believes that the expectations
reflected in the forward looking statements and the assumptions upon which the
forward looking statements are based are reasonable, it can give no assurance
that such expectations and assumptions will prove to be correct. See the
Company's Annual Report on Form 10-KSB for additional statements concerning
important factors, such as demand for products, manufacturing costs and
competition, that could cause actual results to differ materially from the
Company's expectations.
9
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
Pursuant to Rule 14a-4(c) under the Securities Exchange Act of 1934, as
amended, the Company hereby notifies its stockholders that the proxies solicited
by the Company in connection with the Company's annual meeting to be held in
1999 will confer discretionary authority to vote on matters raised by
stockholders for which the Company did not have notice on or before March 23,
1999. In addition, if the Company receives notice on or before March 23, 1999 of
a matter that a stockholder intends to raise at the annual meeting of
stockholders to be held in 1999, the proxies solicited by the Company may
exercise discretion to vote on each such matter if the Company includes in its
proxy statement advice on the nature of the matter raised and how the Company
intends to exercise its discretion to vote on each such matter. However, the
Company may not exercise discretionary voting authority on a particular proposal
if the proponent of that proposal provides the Company with a written statement,
on or before March 23, 1999, that the proponent intends to deliver a proxy
statement and form of proxy to holders of at least the percentage of the
Company's voting shares required under applicable law to carry the proposal (the
"Required Percentage"), which would be a majority of the Company's outstanding
common stock or a majority of the shares of common stock represented at the
meeting, depending on the nature of the proposal, if the proponent includes the
same statement in its proxy materials filed under Rule 14a-6, and if the
proponent, immediately after soliciting the holders of the Required Percentage,
provides the Company with a statement from any solicitor or any other person
with knowledge that the necessary steps have been taken to deliver a proxy
statement and form of proxy to the holders of the Required Percentage.
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act Of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ANTENNAS AMERICA, INC.
Date: November 13, 1998 By: /s/ Randall P. Marx
---------------------
Randall P. Marx
Chief Executive Officer
and Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000826326
<NAME> Antennas America, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 44,177
<SECURITIES> 0
<RECEIVABLES> 410,404
<ALLOWANCES> 0
<INVENTORY> 378,468
<CURRENT-ASSETS> 994,248
<PP&E> 683,032
<DEPRECIATION> 239,377
<TOTAL-ASSETS> 1,642,676
<CURRENT-LIABILITIES> 919,821
<BONDS> 0
0
0
<COMMON> 37,707
<OTHER-SE> 474,514
<TOTAL-LIABILITY-AND-EQUITY> 1,642,676
<SALES> 2,224,112
<TOTAL-REVENUES> 2,224,112
<CGS> 1,267,234
<TOTAL-COSTS> 1,053,301
<OTHER-EXPENSES> 35,125
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,096
<INCOME-PRETAX> (131,548)
<INCOME-TAX> (44,726)
<INCOME-CONTINUING> (86,822)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,822)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
