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, 1999.
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
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
4860 Robb Street, Suite 101,
Wheat Ridge, Colorado 80033
- ---------------------------- ----------
(Zip Code)
(303) 421-4063
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(Issuer's telephone number, including area code)
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(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 November 10, 1999, the Registrant had outstanding 92,200,479 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, 1999
Table of Contents
<TABLE>
<CAPTION>
Page No.
Part I
<S> <C>
Item 1. Financial Statements
Balance Sheets as of September 30,1999 (unaudited) and December 31, 1998.................................3
Statements of Operations for the Three and Nine Months Ended
September 30, 1999 and 1998 (unaudited)...........................................................4
Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 (unaudited)...........................................................5
Notes 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......................................................................................8
Year 2000 Compliance.....................................................................................9
Forward Looking Statements...............................................................................9
Part II
Item 5. Other Information.......................................................................................10
Item 6. Exhibits and Reports on Form 8-K........................................................................10
</TABLE>
2
<PAGE>
Part I
Item 1. Financial Statements
Antennas America, Inc.
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(unaudited)
----------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 150,300 $ 17,555
Accounts receivable, less allowance for doubtful accounts 483,756 336,732
Inventory 462,478 300,366
Prepaid expenses 10,374 21,938
----------------------------------
Total current assets 1,106,908 676,591
Property and equipment, at cost, net of accumulated
depreciation 390,037 404,814
Other assets:
Deferred tax asset, noncurrent - 335,373
Intangible assets, net of accumulated amortization 39,043 40,539
Deposits and other long term assets 34,060 23,588
----------------------------------
Total assets $1,570,048 $ 1,480,905
==================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 575,388 $ 351,793
Notes payable-others 333,282 97,799
Note payable-bank - 209,892
Notes payable-officers 33,274 33,274
Current portion of capital lease obligations 63,812 62,657
Accrued expenses 77,218 77,548
----------------------------------
Total current liabilities 1,082,974 832,963
Other long-term obligations - 6,000
Capital lease obligations, less current portion 13,137 60,027
Notes payable-others, less current portion - 116,345
Notes payable-officers, less current portion 105,755 110,948
----------------------------------
Total liabilities 1,201,866 1,126,283
Commitments
Stockholders' equity:
Common stock, $.0005 par value, 250,000,000 shares authorized, 85,141,050 and
75,371,847 shares issued and outstanding
September 30, 1999 and December 31, 1998, respectively 42,571 37,686
Additional paid-in capital 1,429,182 937,839
Accumulated deficit (1,103,571) (620,903)
----------------------------------
Total stockholders' equity 368,182 354,622
----------------------------------
Total liabilities and stockholders' equity $1,570,048 $ 1,480,905
==================================
See accompanying notes.
</TABLE>
3
<PAGE>
Antennas America, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
----------------------------------- -----------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales, net $ 1,531,866 $807,560 $ 3,195,345 $ 2,224,112
Cost of sales 1,210,986 472,434 2,417,638 1,412,630
----------------------------------- -----------------------------------
Gross profit 320,880 335,126 777,707 811,482
General and administrative expenses 291,823 308,717 822,945 907,905
----------------------------------- -----------------------------------
Income (loss) from operations 29,057 26,409 (45,238) (96,423)
Other income (expense):
Interest expense (41,335) (22,996) (102,173) (61,096)
Other income 17 25,902 116 25,971
----------------------------------- -----------------------------------
Total other income (expense) (41,318) 2,906 (102,057) (35,125)
----------------------------------- -----------------------------------
Income (loss) before income taxes (12,261) 29,315 (147,295) (131,548)
Provision for (benefit from) income taxes 385,271 9,968 335,373 (44,726)
----------------------------------- -----------------------------------
Net income (loss) $ (397,532) $ 19,347 $ (482,668) $ (86,822)
=================================== ===================================
Net income (loss) per share $(0.01) $0.00 $(0.01) $0.00
Weighted average shares outstanding 76,711,610 75,359,712 75,830,586 74,450,787
See accompanying notes.
</TABLE>
4
<PAGE>
Antennas America, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended September 30,
1999 1998
--------------------------------------
(unaudited)
<S> <C> <C>
Operating activities
Net loss $ (482,668) $ (86,822)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 82,771 82,700
Noncash expense for issuance of stock and options 1,500 34,650
Accrued interest on notes payable added to principal 14,252 12,686
Accrued salary added to note payable 4,776 3,077
Amortization of note discount 4,000 -
Deferred tax expense (benefit) 335,373 (44,724)
Changes in operating assets and liabilities:
Increase in accounts receivable (147,024) (82,719)
(Increase) decrease in inventory (162,112) 130,086
Decrease in prepaid expenses 11,564 26,541
Increase in other assets (10,472) (3,813)
Increase (decrease) in accounts payable and accrued expenses 217,265 (19,384)
--------------------------------------
Net cash provided by (used in) operating activities (130,775) 52,278
Investing activities
Patent acquisition costs (4,539) (14,665)
Acquisition of plant and equipment (61,959) (68,241)
--------------------------------------
Net cash used in investing activities (66,498) (82,906)
Financing activities
Reductions in revolving credit line (209,892) (24,771)
Proceeds from new short term debt 200,000 -
Repayment of notes and leases payable (138,270) (62,506)
Proceeds from private placement, net 488,728 -
Proceeds from equipment refinancing - 32,104
Proceeds from exercise of options, net - 69,336
Repayment of officer loans (10,548) (1,000)
--------------------------------------
Net cash provided by financing activities 330,018 13,163
--------------------------------------
Net increase (decrease) in cash 132,745 (17,465)
Cash, beginning of period 17,555 61,642
--------------------------------------
Cash, end of period $ 150,300 $ 44,177
======================================
Supplemental cash flow information:
Cash paid for interest $ 86,557 $ 42,782
See accompanying notes.
</TABLE>
5
<PAGE>
Antennas America, Inc.
Notes to Financial Statements
September 30, 1999
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1999 and 1998 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. For further information,
refer to the financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1998.
Note 2. Equity Transactions
On September 8, 1999, the Company's Board of Directors approved
financing through a private placement offering of shares of units with each Unit
consisting of one share of restricted common stock of the Corporation and one
redeemable Common Stock Purchase Warrant to purchase one share of common stock
for $.0525 per unit. A minimum of 6,000,000 units and maximum of 22,000,000
Units were authorized to be sold for a maximum offering of $1,150,000. The
Warrants included in the Units will entitle the holder to purchase one share of
common stock at an exercise price of $.175 per share and will become exercisable
on the date on which a registration statement concerning the transfer of the
shares included in the Units and the shares underlying the Warrants is declared
effective. The Warrants expire one year after becoming exercisable and may be
called for redemption by the Company at the price of $.001 per Warrant at any
time that the Warrants are exercisable after the weighted average trading price
for the Corporation's common stock is at least $.2275 per share for 20 of 30
consecutive business days.
As of September 30, 1999, the Company had received $511,688 of gross
proceeds from the private placement which is reflected in the financial
statements. As of November 10, 1999, approximately $370,000 of additional funds
had been received subsequent to September 30, 1999.
Note 3. Income Taxes
The Company recorded a valuation allowance in the third quarter of 1999
for its deferred tax asset which is primarily attributable to the net operating
loss carryover in accordance with Statement of Financial Accounting Standard No.
109 (SFAS 109), Accounting for Income Taxes. At December 31, 1998, the
realization of this deferred tax asset was evaluated based on future earnings
projections at that time and no valuation reserve was deemed necessary. However,
based on current results and the near term financial forecasts of the Company,
an evaluation of the reserve at the third quarter determined that it is more
likely than not that some portion or all of the net operating loss asset may not
be realized and therefore a valuation allowance for the full amount was
recorded.
Note 4. Reclassifications
Certain amounts in the September 30, 1998 financial statements have
been reclassified to conform with the September 30, 1999 presentation.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Antennas America, Inc.
For the Period Ended September 30, 1999
Results of Operations
Sales were $1,531,866 for the three month period ended September 30,
1999, as compared to $807,560 for the three month period ended September 30,
1998. The 90% increase in revenues resulted from the sales of the new local TV
antennas systems sold under the GE brand name through Jasco Products and
shipments under the contract from Thomson Consumer Electronics local TV antenna
system under the RCA brand name. Sales for the nine month period ended September
30, 1999 were $3,195,345 compared to $2,224,112 for the same period in 1998.
During the third quarter of 1999, due to the reasons described below,
the Company recorded a non-cash, non-recurring valuation allowance of $389,844
against its net operating loss carryforward that had been on the balance sheet
at full value. This valuation allowance was recorded in accordance with
Statement of Financial Accounting Standard No. 109 (SFAS 109), Accounting for
Income Taxes, based on the possibility that the Company may not be able to
utilize the previously recorded deferred tax asset. Although management believes
that the deferred tax asset will be utilized, this is not demonstrated by
existing operations primarily because of the Company's rapid expansion of its
business and new products which result in increased costs for investment,
advertising and development for new commercial products and wireless services.
Additionally, in line with previously stated plans to increase the number and
variety of its revenue streams, and to increase market share in the wireless
market, in November 1999 the Company has opened its new e-commerce web site. The
Company anticipates additional expenses associated with the advertising
initiatives to drive traffic to this site to sell the Company's new and existing
products and to inform potential customers of the Company's total antenna
solution capabilities.
After recording the non-cash, non-recurring $389,344 valuation
allowance expense in the third quarter, the Company's results for the three and
nine months periods ended September 30, 1999 were losses of $397,532 and
$482,668, respectively, as compared with income of $19,347 and a net loss of
$86,822 , respectively, for the three and nine month periods ended September 30,
1998. Not including the non-cash, non-recurring $389,844 valuation allowance
expense, the Company would have incurred a loss of approximately $8,000 for the
three month period ended September 30, 1999, and a loss of $92,000 for the nine
months ended September 30, 1999. The Company has significantly increased its
research and development costs by adding to its engineering staff, filing for
three new patents, and developing three new products relating to those patents.
The Company anticipates that these new products will have a positive effect on
both revenues and earnings in 2000.
If the Company begins to utilize its net operating loss carryforward
by generating future earnings, of which there is no assurance, there will be no
corresponding income tax expense for financial statement reporting purposes
until approximately $1.2 million of taxable income has been generated.
Therefore, if this occurs, the Company's statement of operations will be
impacted positively through the generation of future earnings of this amount,
with no corresponding tax expense.
Gross profit margins decreased to 21% and 24% for the three and nine
months ended September 30, 1999 from 41% and 36% for the same periods in 1998,
which impacted the net results. Contributing to the lower margins were the lower
than projected gross margins on the Company's new local TV antennas sold under
the GE brand name by Jasco Products, Inc. The lower gross margins were also due
to the Company's 1999 plan to increase its exposure to the wireless market by
offering more competitive antenna solutions to mature markets, such as local TV
reception that, due to the competitive nature of the local TV retail business,
incorporates lower gross margins than the Company's commercial products.
7
<PAGE>
Due to the Company's rapid growth in 1999, interest expense increased
for the three month period ended September 30, 1999 from the same period in 1998
by $18,339 and by $41,077 for the nine month period ended September 30, 1999
compared to 1998 due to larger borrowings under a new agreement with higher
interest rates and a loan agreement with a vendor to ramp up the Company's new
local TV antenna production. The Company expects interest expense to be reduced
significantly in the future due to the additional financing through a private
placement as discussed below in "Financial Condition".
Financial Condition
On September 8, 1999, the Company's Board of Directors approved
financing through a private placement offering of shares of units with each Unit
consisting of one share of restricted common stock of the Corporation and one
redeemable Common Stock Purchase Warrant to purchase one share of Common Stock
for $.0525 per unit. A minimum of 6,000,000 units and maximum of 22,000,000
Units were authorized to be sold for a maximum offering of $1,150,000. The
Warrants included in the Units will entitle the holder to purchase one share of
Common Stock at an exercise price of $.175 per share and will become exercisable
on the date on which a registration statement concerning the transfer of the
shares included in the Units and the shares underlying the Warrants is declared
effective. The Warrants expire one year after becoming exercisable and may be
called for redemption by the Company at the price of $.001 per Warrant at any
time that the Warrants are exercisable after the weighted average trading price
for the Corporation's Common Stock is at least $.2275 per share for 20 of 30
consecutive business days.
As of September 30, 1999, the Company had received $511,688 of gross
proceeds in funding from the private placement which is reflected in the
financial statements. These funds were used for working capital purposes and to
repay $11,000 of officer debt. As of November 10, 1999, approximately $370,000
additional funds had been received subsequent to September 30, 1999.
Compared to December 31, 1998, the Company's total assets as of
September 30, 1999 increased by $89,143 to $1,570,048. Increases in cash,
accounts receivable and inventory due to the private placement funds and higher
sales volume were offset by the decrease in assets associated with the deferred
tax asset valuation reserve as discussed in "Results of Operations".
The note payable to the bank as of December 31, 1998 was an asset-based
revolving credit line which bore interest at prime plus 6% (13.75%). This line
was discontinued by the bank as of January 31, 1999 and the Company then entered
into an accounts receivable purchase agreement with another division of the same
bank on February 1, 1999. Under the new arrangement, the bank will purchase 85
percent of approved accounts receivable from the Company, thereby reducing the
amount of accounts receivable by the amount of funds received by the Company
from the sale of those receivables.
The financing cost for this new arrangement is 1% of the receivable for
the first 10 days and 1/15 of 1% each day thereafter until the account is paid
in full. The maximum amount charged is 9% of the receivable. As of September 30,
1999, the Company showed $14,319 as accounts receivable relating to the unsold
15 percent of the accounts receivable which belong to the Company but which are
held by the bank as a reserve until the bank has been paid for the account
receivable by the customer.
8
<PAGE>
Liabilities increased $75,583 to $1,201,866. The previously outstanding
note payable to the bank was repaid using funds from the new account purchase
arrangement. In addition, effective February 16, 1999, an agreement was entered
into with one of the Company's distributors whereby the distributor advanced the
Company $200,000 at an interest rate of 12% until March 1, 2000, and at 14%
thereafter, and the Company granted the distributor options to purchase 500,000
shares of stock at a price of $.03 per share. The options were valued in the
transaction at $6,000. This amount was recorded as a discount to the note and
will be amortized using the straight line method over the life of the note. The
note will be paid back through a reduced price on product as product is shipped
and interest will be paid monthly. The funds advanced were used for working
capital purposes. Accounts payable increased since December 31, 1998 due to the
additional investment in inventory to support the sales increase.
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 temporary
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 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. To date, no vendors or suppliers have indicated that they anticipate any
Year 2000 issues, so no contingency plans have been required to be developed for
any vendors that may not be Year 2000 compliant. The Company anticipates that
its contingency plans that may be needed 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. Costs to date to
become Year 2000 compliant and expected costs in the future are not anticipated
to be significant.
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
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 a reasonable time before
the Company's mailing of proxy materials for that meeting. Based on current
planning for scheduling the annual meeting, notice must be received on or before
December 1, 1999 in order for the Company not to have discretionary authority.
In addition, if the Company receives notice on or before December 1, 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 December 1, 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.
Financial Data Schedule
(b) Reports on Form 8-K.
None.
10
<PAGE>
SIGNATURE
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 19, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 150,300
<SECURITIES> 0
<RECEIVABLES> 503,182
<ALLOWANCES> 19,426
<INVENTORY> 462,478
<CURRENT-ASSETS> 1,106,908
<PP&E> 687,171
<DEPRECIATION> 297,134
<TOTAL-ASSETS> 1,507,048
<CURRENT-LIABILITIES> 1,082,974
<BONDS> 0
0
0
<COMMON> 42,571
<OTHER-SE> 325,611
<TOTAL-LIABILITY-AND-EQUITY> 1,570,048
<SALES> 3,195,345
<TOTAL-REVENUES> 3,195,345
<CGS> 2,417,638
<TOTAL-COSTS> 822,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (102,057)
<INCOME-PRETAX> (147,295)
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<INCOME-CONTINUING> (482,668)
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