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[ x
]
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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[ ]
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Utah
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87-0454148
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( State or other jurisdiction
of incorporation)
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(IRS
Employer Identification
Number)
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Item
1.
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Financial
Statements
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Condensed
Consolidated Balance Sheets as of June 30, 2009
(unaudited)
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||
and
December 31, 2008
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4
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Condensed
Consolidated Statements of Operations for the Three and Six Months
Ended
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||
June
30, 2009 and 2008 (unaudited)
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5
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Condensed
Consolidated Statements of Cash Flows for the Six Months
Ended
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June
30, 2009 and 2008 (unaudited)
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6
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Notes
to Condensed Consolidated Financial Statements
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7
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and
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Results
of Operations
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15
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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17
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Item
4.
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Controls
and Procedures
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18
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PART
II. OTHER INFORMATION
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Item
1.
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Legal
Proceedings
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18
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Item
1A.
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Risk Factors |
18
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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18
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Item
3.
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Defaults
Upon Senior Securities
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19
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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19
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Item
5.
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Other
Information
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19
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Item
6.
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Exhibits
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20
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Signatures
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21
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Exhibit
31.1
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22 | |
Exhibit
31.2
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23 | |
Exhibit
32.1
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24 |
June
30,
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December
31,
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|||||||
2009
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2008
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|||||||
(unaudited)
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* | |||||||
Assets
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||||||||
Current
assets:
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||||||||
Cash and
equivalents
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$ | 11,892 | $ | 12,943 | ||||
Accounts receivable – trade,
net
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692 | 867 | ||||||
Inventory, net
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1,031 | 1,107 | ||||||
Net
assets of discontinued operations (Note 2)
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1 | 16 | ||||||
Other current
assets
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74 | 49 | ||||||
Total
current assets
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13,690 | 14,982 | ||||||
Property
and equipment, net
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358 | 381 | ||||||
Other
assets:
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||||||||
Intangible assets,
net
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120 | 124 | ||||||
Deposits
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68 | 33 | ||||||
Total
assets
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$ | 14,236 | $ | 15,520 | ||||
Liabilities
and stockholders’ equity
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||||||||
Current
liabilities:
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||||||||
Accounts
payable
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$ | 512 | $ | 832 | ||||
Accrued
severance
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- | 451 | ||||||
Accrued expenses
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236 | 450 | ||||||
Net
liabilities of discontinued operations (Note 2)
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8 | 8 | ||||||
Current portion of capital lease
obligations
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113 | 86 | ||||||
Total
current liabilities
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869 | 1,827 | ||||||
Capital
lease obligations, less current portion
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27 | 77 | ||||||
Total
liabilities
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896 | 1,904 | ||||||
Stockholders’
equity:
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||||||||
Preferred
stock, $.001 par value, 2,000,000 authorized, none issued and
outstanding
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- | - | ||||||
Common
stock, $.0005 par value, 250,000,000 authorized, 3,091,000 issued in
2009 and 2008, respectively.
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2 | 2 | ||||||
Additional
paid-in capital
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20,751 | 20,735 | ||||||
Accumulated
deficit
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(7,413 | ) | (7,121 | ) | ||||
Total
stockholders’ equity
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13,340 | 13,616 | ||||||
Total
liabilities and stockholders’ equity
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$ | 14,236 | $ | 15,520 |
Three
Months Ended June 30,
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Six
Months Ended June 30,
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|||||||||||||||
2009
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2008
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2009
|
2008
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|||||||||||||
Sales,
net
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$ | 1,226 | $ | 1,727 | $ | 2,313 | $ | 3,608 | ||||||||
Cost
of sales
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707 | 1,056 | 1,357 | 2,216 | ||||||||||||
Gross
profit
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519 | 671 | 956 | 1,392 | ||||||||||||
Operating
expenses:
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||||||||||||||||
Selling,
general and administrative expenses
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531 | 941 | 1,273 | 1,871 | ||||||||||||
Loss
from continuing operations
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(12 | ) | (270 | ) | (317 | ) | (479 | ) | ||||||||
Other
income (expense):
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||||||||||||||||
Interest and other expense,
net
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(6 | ) | (22 | ) | (9 | ) | (31 | ) | ||||||||
Other income
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15 | 104 | 48 | 222 | ||||||||||||
Total
other income
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9 | 82 | 39 | 191 | ||||||||||||
Loss
from continuing operations before income taxes
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(3 | ) | (188 | ) | (278 | ) | (288 | ) | ||||||||
Provision
for income taxes
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- | - | - | - | ||||||||||||
Loss
from continuing operations
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$ | (3 | ) | $ | (188 | ) | $ | (278 | ) | $ | (288 | ) | ||||
Loss
from discontinued operations
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(2 | ) | (8 | ) | (14 | ) | (15 | ) | ||||||||
Net
loss
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$ | (5 | ) | $ | (196 | ) | $ | (292 | ) | $ | (303 | ) | ||||
Net
loss per share – continuing operations – basic and diluted
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$ | (.00 | ) | $ | (.06 | ) | $ | (.09 | ) | $ | (.09 | ) | ||||
Net
loss per share – discontinued operations – basic and
diluted
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$ | (.00 | ) | $ | (.00 | ) | $ | (.00 | ) | $ | (.01 | ) | ||||
Net
loss per share – basic and diluted
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$ | (.00 | ) | $ | (.06 | ) | $ | (.09 | ) | $ | (.10 | ) | ||||
Weighted
average shares – basic and diluted
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3,091,000 | 3,091,000 | 3,091,000 | 3,091,000 |
Six
Months Ended June 30,
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||||||||
2009
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2008
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|||||||
Operating
activities
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||||||||
Net
loss from continuing operations
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$ | (278 | ) | $ | (288 | ) | ||
Adjustments
to reconcile net loss from continuing operations to net cash used in
operating activities:
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||||||||
Depreciation and
amortization
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114 | 98 | ||||||
Non-cash expense for issuance of
stock and options
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16 | 18 | ||||||
Provision
for doubtful accounts
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- | 36 | ||||||
Changes in operating assets and
liabilities:
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||||||||
Accounts receivable,
trade
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175 | 339 | ||||||
Inventory
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76 | 52 | ||||||
Prepaids and other current
assets
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(24 | ) | (45 | ) | ||||
Other
assets
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(35 | ) | 3 | |||||
Accounts payable and accrued
expenses
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(985 | ) | (221 | ) | ||||
Net
cash used in continuing operations
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(941 | ) | (8 | ) | ||||
Net
cash provided by (used in) discontinued operations
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- | 2 | ||||||
Net
cash used in operating activities
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(941 | ) | (6 | ) | ||||
Investing
activities
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||||||||
Patent
acquisition costs
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(3 | ) | (12 | ) | ||||
Purchase
of plant and equipment
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(83 | ) | (43 | ) | ||||
Net
cash used in investing activities, continuing operations
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(86 | ) | (55 | ) | ||||
Financing
activities
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||||||||
Net
advances from line of credit
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- | 2,134 | ||||||
Net
repayment of line of credit and capital lease obligations
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(24 | ) | (2,482 | ) | ||||
Net
cash used in financing activities, continuing operations
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(24 | ) | (348 | ) | ||||
Net
change in cash
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(1,051 | ) | (409 | ) | ||||
Cash
and cash equivalents, beginning of period
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12,943 | 14,931 | ||||||
Cash
and cash equivalents, end of period
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$ | 11,892 | $ | 14,522 | ||||
Supplemental
cash flow information:
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Cash
paid for interest, continuing operations
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$ | 9 | $ | 31 | ||||
Issuance
of stock for accrued fees, continuing operations
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$ | - | $ | 3 | ||||
Acquisition
of property and equipment through capital lease
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$ | - | $ | 103 |
Three
Months Ended June 30,
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Six
Months Ended June 30,
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|||||||||||||||
2009
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2008
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2009
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2008
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|||||||||||||
Starworks
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Starworks
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Starworks
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Starworks
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|||||||||||||
Sales,
net
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$ | - | $ | - | $ | 1 | $ | 14 | ||||||||
Total
revenue
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- | - | 1 | 14 | ||||||||||||
Cost
of sales
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(5 | ) | 8 | 8 | 29 | |||||||||||
Total
cost of goods sold
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(5 | ) | 8 | 8 | 29 | |||||||||||
Gross
income (loss)
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5 | (8 | ) | (7 | ) | (15 | ) | |||||||||
Operating
expenses:
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Selling,
general and administrative expenses
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7 | - | 7 | - | ||||||||||||
Loss
from operations
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(2 | ) | (8 | ) | (14 | ) | (15 | ) | ||||||||
Other
income (expense):
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||||||||||||||||
Interest expense,
net
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- | - | - | - | ||||||||||||
Other income
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- | - | - | - | ||||||||||||
Total
other income (expense)
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- | - | - | - | ||||||||||||
Loss
before income taxes
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(2 | ) | (8 | ) | (14 | ) | (15 | ) | ||||||||
Provision
for income taxes
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- | - | - | - | ||||||||||||
Net
loss
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$ | (2 | ) | $ | (8 | ) | $ | (14 | ) | $ | (15 | ) |
Three Months Ended
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Six Months Ended
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|||||||||||||||
June 30, 2009
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June 30, 2008
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June 30, 2009
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June 30, 2008
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Stock
options
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$8 | $8 | $16 | $18 | ||||||||||||
Total
share-based compensation expense
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$8 | $8 | $16 | $18 |
Number
of
Shares
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Weighted
Average
Exercise
Price ($)
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Balance
at January 1, 2009
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47,500 | $5.38 | ||||||
Granted
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- | - | ||||||
Exercised
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- | - | ||||||
Forfeited
or expired
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7,500 | 5.25 | ||||||
Balance
at June 30, 2009
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40,000 | $5.40 |
Weighted
average contractual remaining term - options outstanding
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8.23
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Aggregate
intrinsic value - options outstanding
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-
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Options
exercisable
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16,000
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Weighted
average exercise price – options exercisable
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$5.40
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Aggregate
intrinsic value - options exercisable
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-
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Weighted
average contractual remaining term - options exercisable
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8.23
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Three
Months Ended June 30,
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Six
Months Ended June 30,
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|||||||||||||||
2009
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2008
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2009
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2008
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Net
loss from continuing operations
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$ | (3 | ) | $ | (188 | ) | $ | (278 | ) | $ | (288 | ) | ||||
Net
loss from discontinued operations
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(2 | ) | (8 | ) | (14 | ) | (15 | ) | ||||||||
Net
loss
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$ | (5 | ) | $ | (196 | ) | $ | (292 | ) | $ | (303 | ) | ||||
Continuing
Operations:
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||||||||||||||||
Denominator
for basic earnings per share - weighted average shares
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3,091 | 3,091 | 3,091 | 3,091 | ||||||||||||
Effect
of dilutive securities
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||||||||||||||||
Employee
stock options
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- | - | - | - | ||||||||||||
Common
stock warrants
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- | - | - | - | ||||||||||||
Denominator
for diluted earnings per share - weighted average shares and assumed
conversion
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3,091 | 3,091 | 3,091 | 3,091 | ||||||||||||
Basic
and diluted loss per share, continuing operations
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$ | (.00 | ) | $ | (.06 | ) | $ | (.09 | ) | $ | (.09 | ) | ||||
Discontinued
Operations:
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||||||||||||||||
Denominator
for basic earnings per share - weighted average shares
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3,091 | 3,091 | 3,091 | 3,091 | ||||||||||||
Effect
of dilutive securities
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||||||||||||||||
Employee
stock options
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- | - | - | - | ||||||||||||
Common
stock warrants
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- | - | - | - | ||||||||||||
Denominator
for diluted earnings per share - weighted average shares and assumed
conversion
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3,091 | 3,091 | 3,091 | 3,091 | ||||||||||||
Basic
and diluted loss per share, discontinued operations
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$ | (.00 | ) | $ | (.00 | ) | $ | (.00 | ) | $ | (.01 | ) | ||||
Net
Loss:
|
||||||||||||||||
Denominator
for basic earnings per share - weighted average shares
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3,091 | 3,091 | 3,091 | 3,091 | ||||||||||||
Effect
of dilutive securities
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||||||||||||||||
Employee
stock options
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- | - | - | - | ||||||||||||
Common
stock warrants
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- | - | - | - | ||||||||||||
Denominator
for diluted earnings per share - weighted average shares and assumed
conversion
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3,091 | 3,091 | 3,091 | 3,091 | ||||||||||||
Basic
and diluted loss per share
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$ | (.00 | ) | $ | (.06 | ) | $ | (.09 | ) | $ | (.10 | ) |
June
30,
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December
31,
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|||||||
2009
|
2008
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Raw
materials
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$ | 397 | $ | 267 | ||||
Work
in progress
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9 | 32 | ||||||
Finished
goods
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625 | 808 | ||||||
1,031 | 1,107 | |||||||
Inventory
reserve
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- | - | ||||||
Net
inventory
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$ | 1,031 | $ | 1,107 |
June
30,
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December
31,
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|||||||
(Thousands
of dollars)
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2009
|
2008
|
||||||
Current
ratio (1)
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15.75
to 1
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8.20
to 1
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Working
capital (2)
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$ | 12,821 | $ | 13,155 | ||||
Total
debt
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$ | - | $ | - | ||||
Total
cash less debt
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$ | 11,892 | $ | 12,943 | ||||
Stockholders'
equity
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$ | 13,340 | $ | 13,616 | ||||
Total
liabilities to equity
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0.06
to 1
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0.14
to 1
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Exhibit
Number
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Description
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3.1
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Amended
and Restated Articles of Incorporation dated October 11, 2000
(1)
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3.2
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Bylaws
of the Company as amended and restated on March 25, 1998
(2)
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10.2
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Stock
Purchase Agreement, by and among Bluecoral limited, Winncom Technologies
Corp. and the Company dated as of July 28, 2006 (3)
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10.3
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Escrow
Agreement, dated July 28, 2006, by and among the Company, Bluecoral
Limited and Consumer Title Services, LLC (3)
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10.4
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Employment
Agreement effective January 31, 2008 between the Company and Randall P.
Marx (4)
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10.5
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Employment
Agreement effective November 1, 2007 between the Company and Monty R.
Lamirato (5)
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10.6
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Employment
Agreement effective November 1, 2007 between the Company and Steve C.
Olson (5)
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10.7
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Employment
Agreement effective November 1, 2007 between the Company and Richard L.
Anderson (5)
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31.1
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Officers’
Certifications of Periodic Report pursuant to Section 302 of
Sarbanes-Oxley Act of 2002
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32.1
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Officers’
Certifications of Periodic Report pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
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99.1
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Nominating
Policies and Procedures
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(1)
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Incorporated
by reference from the Company’s Form 10-KSB for December 31, 2000 filed on
April 2, 2001.
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(2)
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Incorporated
by reference from the Company’s Form 10-KSB for December 31, 1997 filed on
March 31, 1998.
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(3)
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Incorporated
by reference from the Company’s Form 8-K/A filed on August 2,
2006.
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(4)
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Incorporated
by reference from the Company’s Form 8-K filed on February 7,
2008.
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(5)
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Incorporated
by reference from the Company’s Form 8-K filed on November 8,
2007.
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ARC
WIRELESS SOLUTIONS, INC.
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|||
Date: August
13, 2009
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By:
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/s/ Jason Young | |
Jason
Young
Chief
Executive Officer
|
|||
Date: August 13, 2009 |
By:
|
/s/ Steve Olson | |
Steve
Olson
Chief
Technology Officer
|