UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20162017
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: 001-36827
pdvWireless, Inc.
(Exact name of registrant as specified in its charter)
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Delaware | 33-0745043 |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
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3 Garret Mountain Plaza Suite 401 Woodland Park, New Jersey | 07424 |
(Address of principal executive offices) | (Zip Code) |
(973) 771-0300
(Registrant’s telephone number, including area code)
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), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☐ | Accelerated filer | ☒ |
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
At October 31, 2016, 14,324,779November 1, 2017, 14,438,005 shares of the registrant’s common stock were outstanding.
pdvWireless, Inc.
FORM 10-Q
For the quarterly period ended September 30, 20162017
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | |
28 | ||
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes statements of our expectations, intentions, plans, and beliefs that constitute “forward-looking statements.” These forward-looking statements are principally, but not solely, contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements include, but are not limited to, statements about our strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements contained herein that are not historical facts. Our forward-looking statements are generally, but not always, accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “should,” “will,” “may,” “plan,” “goal,” “can,” “could,” “continuing,” “ongoing,” “intend” or other words that convey the uncertainty of future events or outcomes. We have based these forward-looking statements on our current expectations and projections about future events and financial, market and business trends. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. Many of these risks, uncertainties and other factors are beyond our ability to control, influence, or predict. The most significant of these risks, uncertainties and other factors are described in “Item 1A—Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended March 31, 20162017 filed with the Securities and Exchange Commission (the “SEC”) on June 13, 2016.6, 2017 and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 filed with the SEC on August 8, 2017. As a result, investors are urged not to place undue reliance on any forward-looking statements. These forward-looking statements reflect our views and assumptions only as of the date such forward-looking statements were made. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
3
PARTPART I. FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
pdvWireless, Inc.
ConsolidatedConsolidated Balance Sheets
September 30, 2017 and March 31, 2017
(dollars in thousands, except share data)
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| September 30, |
| March 31, |
| September 30, |
| March 31, | |||||
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| 2016 |
| 2016 |
| 2017 |
| 2017 | |||||
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ASSETS | ASSETS | ASSETS | |||||||||||
Current Assets |
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Cash and cash equivalents |
| $ | 136,958,632 |
| $ | 153,462,865 |
| $ | 110,543 |
| $ | 124,083 | |
Accounts receivable, net of allowance for doubtful accounts |
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| 652,564 |
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| 528,283 | |||||||
Accounts receivable, net of allowance for doubtful accounts of $59 and $53 |
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| 713 |
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| 636 | |||||||
Inventory |
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| 37,984 |
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| 93,203 |
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| 64 |
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| 128 | |
Prepaid expenses and other current assets |
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| 547,879 |
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| 906,952 |
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| 480 |
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| 874 | |
Total current assets |
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| 138,197,059 |
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| 154,991,303 |
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| 111,800 |
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| 125,721 | |
Property and equipment, net |
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| 14,760,039 |
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| 15,119,766 | |||||||
Property and equipment |
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| 14,111 |
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| 14,509 | |||||||
Intangible assets |
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| 104,427,183 |
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| 103,655,459 |
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| 106,353 |
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| 104,676 | |
Capitalized patent costs, net |
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| 217,005 |
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| 222,359 |
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| 204 |
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| 210 | |
Other assets |
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| 328,346 |
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| 60,073 |
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| 471 |
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| 370 | |
Total assets |
| $ | 257,929,632 |
| $ | 274,048,960 |
| $ | 232,939 |
| $ | 245,486 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities |
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Accounts payable and accrued expenses |
| $ | 2,954,924 |
| $ | 3,780,697 |
| $ | 2,676 |
| $ | 3,399 | |
Accounts payable - officers |
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| 18,808 |
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| 44,159 |
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| 38 |
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| 36 | |
Current portion of note payable |
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| 494,545 |
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| 494,545 |
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| 497 |
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| 497 | |
Deferred revenue |
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| 791,375 |
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| 744,605 |
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| 828 |
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| 789 | |
Total current liabilities |
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| 4,259,652 |
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| 5,064,006 |
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| 4,039 |
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| 4,721 | |
Long-term portion of note payable |
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| 497,265 |
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| 497,265 | |||||||
Deferred revenue, net of current portion |
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| 5,421,159 |
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| 5,647,773 | |||||||
Noncurrent liabilities |
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Deferred revenue |
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| 4,640 |
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| 5,033 | |||||||
Deferred income taxes |
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| 7,804 |
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| 6,498 | |||||||
Other liabilities |
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| 1,011,043 |
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| 654,536 |
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| 1,940 |
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| 1,338 | |
Total liabilities |
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| 11,189,119 |
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| 11,863,580 |
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| 18,423 |
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| 17,590 | |
Commitments and contingencies |
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Stockholders' equity |
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Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized and no shares outstanding at September 30, 2016 and March 31, 2016 |
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| — | |||||||
Common stock, $0.0001 par value per share, 100,000,000 shares authorized and 14,324,779 shares issued and outstanding at September 30, 2016 and 14,300,790 issued and outstanding at March 31, 2016 |
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| 1,441 |
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| 1,438 | |||||||
Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized and no shares outstanding at September 30, 2017 and March 31, 2017 |
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Common stock, $0.0001 par value per share, 100,000,000 shares |
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| 1 |
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| 1 | |||||||
Additional paid-in capital |
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| 328,108,508 |
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| 325,669,088 |
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| 333,295 |
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| 330,566 | |
Accumulated deficit |
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| (81,369,436) |
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| (63,485,146) |
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| (118,780) |
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| (102,671) | |
Total stockholders' equity |
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| 246,740,513 |
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| 262,185,380 |
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| 214,516 |
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| 227,896 | |
Total liabilities and stockholders' equity |
| $ | 257,929,632 |
| $ | 274,048,960 |
| $ | 232,939 |
| $ | 245,486 |
See accompanying notes to consolidated financial statements
4
Consolidated Statements of Operations
Three and Six Months Ended September 30, 2017 and 2016
(dollars in thousands, except share data)
(Unaudited)
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| Three months ended |
| Six months ended |
| Three months ended |
| Six months ended | ||||||||||||||||
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| September 30, |
| September 30, |
| September 30, | ||||||||||||||||
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| 2016 |
| 2015 |
| 2016 |
| 2015 |
| 2017 |
| 2016 |
| 2017 |
| 2016 | ||||||||
Operating revenues |
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Service revenue |
| $ | 885,271 |
| $ | 622,019 |
| $ | 1,650,576 |
| $ | 1,270,681 |
| $ | 1,163 |
| $ | 885 |
| $ | 2,268 |
| $ | 1,651 |
Spectrum lease revenue |
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| 182,186 |
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| 182,186 |
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| 364,372 |
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| 364,372 |
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| 182 |
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| 182 |
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| 364 |
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| 364 |
Other revenue |
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| 74,050 |
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| 7,253 |
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| 172,341 |
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| 17,265 |
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| 168 |
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| 74 |
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| 346 |
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| 172 |
Total operating revenues |
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| 1,141,507 |
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| 811,458 |
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| 2,187,289 |
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| 1,652,318 |
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| 1,513 |
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| 1,141 |
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| 2,978 |
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| 2,187 |
Cost of revenue |
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Sales and service |
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| 1,674,941 |
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| 490,585 |
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| 3,258,722 |
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| 865,759 |
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| 1,911 |
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| 1,675 |
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| 3,612 |
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| 3,258 |
Gross profit (loss) |
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| (533,434) |
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| 320,873 |
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| (1,071,433) |
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| 786,559 | ||||||||||||
Gross loss |
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| (398) |
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| (534) |
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| (634) |
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| (1,071) | ||||||||||||
Operating expenses |
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General and administrative |
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| 5,476,566 |
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| 4,588,841 |
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| 13,222,566 |
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| 8,311,247 |
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| 4,995 |
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| 5,477 |
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| 9,876 |
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| 13,222 |
Sales and support |
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| 1,219,744 |
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| 885,007 |
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| 2,435,985 |
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| 1,696,682 |
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| 1,703 |
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| 1,220 |
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| 3,390 |
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| 2,436 |
Product development |
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| 621,923 |
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| 336,200 |
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| 1,194,844 |
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| 641,097 |
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| 628 |
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| 622 |
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| 1,180 |
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| 1,195 |
Total operating expenses |
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| 7,318,233 |
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| 5,810,048 |
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| 16,853,395 |
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| 10,649,026 |
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| 7,326 |
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| 7,319 |
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| 14,446 |
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| 16,853 |
Loss from operations |
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| (7,851,667) |
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| (5,489,175) |
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| (17,924,828) |
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| (9,862,467) |
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| (7,724) |
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| (7,853) |
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| (15,080) |
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| (17,924) |
Interest expense |
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| (1,363) |
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| — |
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| (2,727) |
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| — |
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| (1) |
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| (1) |
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| (1) |
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| (3) |
Interest income |
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| 25,529 |
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| 29,293 |
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| 48,058 |
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| 51,513 |
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| 184 |
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| 26 |
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| 297 |
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| 48 |
Other income (expense) |
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| (4,793) |
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| 1,250 |
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| (4,793) |
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| 1,250 |
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| (2) |
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| (5) |
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| (20) |
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| (5) |
Loss before income taxes |
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| (7,543) |
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| (7,833) |
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| (14,804) |
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| (17,884) | ||||||||||||
Income tax expense |
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| 656 |
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| — |
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| 1,305 |
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| — | ||||||||||||
Net loss |
| $ | (7,832,294) |
| $ | (5,458,632) |
| $ | (17,884,290) |
| $ | (9,809,704) |
| $ | (8,199) |
| $ | (7,833) |
| $ | (16,109) |
| $ | (17,884) |
Net loss per common share basic and diluted |
| $ | (0.54) |
| $ | (0.38) |
| $ | (1.24) |
| $ | (0.70) |
| $ | (0.57) |
| $ | (0.54) |
| $ | (1.12) |
| $ | (1.24) |
Weighted-average common shares used to compute basic |
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| 14,383,224 |
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| 14,379,082 |
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| 14,379,366 |
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| 13,938,243 |
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| 14,447,499 |
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| 14,383,224 |
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| 14,442,769 |
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| 14,379,366 |
See accompanying notes to consolidated financial statements
5
Consolidated Statement of Stockholders’ EquityEquity/(Deficiency)
(Unaudited)
For the six months endedSix Months Ended September 30, 20162017
(dollars in thousands, except share data)
(Unaudited)
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| Number of Shares |
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| Number of Shares |
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| Preferred |
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| Preferred |
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| Preferred |
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| Preferred |
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| Stock |
| Common |
| Stock |
| Common |
| Additional |
| Accumulated |
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| Stock |
| Common |
| Stock |
| Common |
| Additional |
| Accumulated |
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| Series AA |
| Stock |
| Series AA |
| Stock |
| Paid-in Capital |
| Deficit |
| Total | Series AA |
| Stock |
| Series AA |
| Stock |
| Paid-in Capital |
| Deficit |
| Total | ||||||||||
Balance at March 31, 2016 | — |
| 14,384,594 |
| $ | — |
| $ | 1,438 |
| $ | 325,669,088 |
| $ | (63,485,146) |
| $ | 262,185,380 | ||||||||||||||||||
Balance at March 31, 2017 | — |
| 14,442,368 |
| $ | — |
| $ | 1 |
| $ | 330,566 |
| $ | (102,671) |
| $ | 227,896 | ||||||||||||||||||
Equity based compensation* | — |
| 23,989 |
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| — |
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| 3 |
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| 2,439,420 |
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| — |
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| 2,439,423 | — |
| 15,715 |
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| — |
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| — |
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| 2,515 |
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| — |
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| 2,515 |
Stock option exercises | — |
| 11,081 |
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| — |
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| — |
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| 214 |
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| — |
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| 214 | ||||||||||||||||||
Net loss | — |
| — |
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| — |
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| — |
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| — |
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| (17,884,290) |
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| (17,884,290) | — |
| — |
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| — |
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| — |
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| — |
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| (16,109) |
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| (16,109) |
Balance at September 30, 2016 | — |
| 14,408,583 |
| $ | — |
| $ | 1,441 |
| $ | 328,108,508 |
| $ | (81,369,436) |
| $ | 246,740,513 | ||||||||||||||||||
Balance at September 30, 2017 | — |
| 14,469,164 |
| $ | — |
| $ | 1 |
| $ | 333,295 |
| $ | (118,780) |
| $ | 214,516 | ||||||||||||||||||
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* includes restricted shares issued.
See accompanying notes to consolidated financial statements
6
Consolidated Statements of Cash Flows
Six Months Ended September 30, 2017 and 2016
(dollars in thousands)
(Unaudited)
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| Six months ended |
| Six months | ||||||||
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| September 30, |
| September 30, | ||||||||
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| 2016 |
| 2015 |
| 2017 |
| 2016 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
| $ | (17,884,290) |
| $ | (9,809,704) |
| $ | (16,109) |
| $ | (17,884) |
Adjustments to reconcile net loss to net cash used by operating activities |
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Depreciation and amortization |
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| 1,041,450 |
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| 128,448 |
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| 1,374 |
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| 1,041 |
Stock-based compensation expense |
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| 2,439,423 |
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| 2,455,611 | ||||||
Non-cash compensation expense attributable to stock awards |
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| 2,515 |
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| 2,439 | ||||||
Deferred income taxes |
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| 1,305 |
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| — | ||||||
Bad debt expense |
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| 13,727 |
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| (229) |
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| 16 |
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| 14 |
Loss on disposal of assets |
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| 26 |
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| — | ||||||
Changes in operating assets and liabilities |
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Accounts receivable |
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| (138,008) |
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| (4,065) |
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| (93) |
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| (138) |
Inventory |
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| 55,219 |
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| — |
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| 64 |
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| 55 |
Prepaid expenses and other assets |
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| 90,800 |
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| 95,515 |
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| 294 |
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| 91 |
Accounts payable and accrued expenses |
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| (825,773) |
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| (2,717,517) |
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| (722) |
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| (826) |
Accounts payable - officers |
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| (25,351) |
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| 1,617 |
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| 2 |
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| (25) |
Deferred revenue |
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| (393,319) |
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| (356,198) |
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| (353) |
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| (393) |
Other liabilities |
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| 336,938 |
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| 139,597 |
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| 373 |
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| 336 |
Net cash flows used by operating activities |
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| (15,289,184) |
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| (10,066,925) |
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| (11,308) |
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| (15,290) |
CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchases of intangible assets |
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| (503,491) |
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| (1,141,986) |
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| (1,677) |
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| (503) |
Purchases of equipment |
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| (710,497) |
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| (4,211,917) |
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| (769) |
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| (710) |
Payments for patent costs |
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| (1,061) |
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| (5,640) |
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| — |
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| (1) |
Net cash used by investing activities |
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| (1,215,049) |
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| (5,359,543) |
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| (2,446) |
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| (1,214) |
CASH FLOWS FROM FINANCING ACTIVITIES |
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|
|
|
|
|
|
|
|
|
|
|
Net proceeds from follow-on offering |
|
| — |
|
| 64,792,220 | ||||||
Proceeds from option exercise |
|
| — |
|
| 40,001 | ||||||
Proceeds from stock option exercise |
|
| 214 |
|
| — | ||||||
Net cash provided from financing activities |
|
| — |
|
| 64,832,221 |
|
| 214 |
|
| — |
Net change in cash and cash equivalents |
|
| (16,504,233) |
|
| 49,405,753 |
|
| (13,540) |
|
| (16,504) |
CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the period |
|
| 153,462,865 |
|
| 119,873,668 |
|
| 124,083 |
|
| 153,463 |
End of the period |
| $ | 136,958,632 |
| $ | 169,279,421 |
| $ | 110,543 |
| $ | 136,959 |
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|
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|
See accompanying notes to consolidated financial statements
7
Notes to Consolidated Financial Statements
(Unaudited)
1. |
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pdvWireless, Inc. (formerly known as Pacific DataVision, Inc., the(the “Company”) is a private wireless communications carrier focused on utilizing its spectrum assets to develop and provideroffer next generation network and mobile communication solutions for critical infrastructure and enterprise customers. The Company is the largest holder of licensed spectrum in the Part 90 900 MHz band (i.e., 896-901 MHz paired with 935-940 MHz) throughout the contiguous United States, plus Hawaii, Alaska and Puerto Rico.
The Company’s first priority involves pursuing regulatory initiatives at the Federal Communications Commission (“FCC”) with the goal of modernizing and realigning the 900 MHz band to increase its usability and capacity, including for the future potential deployment of broadband and other advanced technologies and services. At the same time, the Company is exploring and developing network and mobile workforce communicationscommunication solutions, leveraging its spectrum to address the unmet needs of its targeted critical infrastructure and location based solutions thatenterprise customers. For its first offering, the Company has deployed push-to-talk (“PTT”) networks and offers its DispatchPlusTM two-way radio service to businesses in seven major metropolitan market areas throughout the United States, including Atlanta, Baltimore/Washington, Chicago, Dallas, Houston, New York and Philadelphia. DispatchPlus allows the enterprise customers to increase the productivity of its customers’their field-based workers and the efficiency of their dispatch and call center operations. The Company has launchedis pursuing opportunities to offer additional network and is operating private push-to-talk (“PTT”) networks in seven major markets within the United States. Its proprietarymobile communication solutions to critical infrastructure and industry-validated suite of mobile communicationsenterprise customers with its existing spectrum and workforce management applications improve team communicationcurrently available non-broadband technologies and, field documentation across a wide array of industries, including transportation, distribution, construction, hospitality, waste management and field services. At the same time,if the Company is pursuing a numbersuccessful with its FCC efforts, through the deployment of broadband and other spectrum opportunities and initiatives, including but not limited to, a Federal Communications Commission (“FCC”) regulatory process aimed at the realignment of its spectrum to be able to deploy broadband technologies to enterprises.
The Company is currently operating wide-area, enhanced two-way radio networks that offer PTT communications services to primarily dispatch-centric, small and medium-sized businesses in the seven major markets. In June 2015, the Company commercially launched its PTT service, which it markets as DispatchPlus™, in the greater Houston, Texas metropolitan area. The Company commenced service in six additional major metropolitan markets during fiscal 2016, including: Dallas, Atlanta, Philadelphia, Chicago, the greater New York area and Baltimore/Washington. In addition, in a number of markets, the Company has deployed, or is in the process of deploying, additional sites to expand its coverage areas in these markets based on specific customer opportunities and/or its assessment of market opportunities.
The Company offers its DispatchPlus communications solutions, which combines pdvConnect™, its proprietary suite of mobile communication and workforce management applications, with state-of-the-art digital network architecture and mobile devices supplied by Motorola Solutions, Inc. and its subsidiaries (“Motorola”). Developed for dispatch-centric businesses, pdvConnect is an easy to use and efficient mobile communication and workforce management solution that enables businesses to locate and communicate with their field workers and improve the documentation of work events and job status. Also built with the commercial dispatch user in mind, Motorola’s digital network architecture allows the Company to provide highly reliable, instant and wide-area PTT communication services to its customers.
The Company expects that its DispatchPlus business will become its principal near-term operating business. The Company primarily markets its DispatchPlus service to customers indirectly through third-party dealers selected from Motorola’s nationwide dealer network and other select wireless dealers. The Company supports its indirect sales representatives by providing them with training, marketing and advertising support from its internal sales and marketing team. The Company enters into contracts directly with end users of its DispatchPlus communication solutions, including those introduced to it through its indirect dealer network.
Concurrently with launching and operating its DispatchPlus business, the Company is pursuing initiatives to increase the efficiency and capacity of its spectrum licenses, including the filing (together with the Enterprise Wireless Alliance) of a Joint Petition for Rulemaking with the FCC proposing a realignment of a portion of the 900 MHz spectrum from narrowband to broadband. In September 2016, an item was circulated with the Commissioners’ office at the FCC related to the Joint Petition. The Company is currently waiting for the FCC Commissioners to formally vote on and if approved, then publicly file the item. The FCC’s action may take a number of forms ranging from: a Notice of Proposed Rulemaking, to a Notice of Inquiry, to a dismissal of the Joint Petition without further action. Although the FCC has not announced a decision on the Joint Petition, the Company currently believes that the most likely outcome is that the FCC will adopt a Notice of Inquiry as the next step in the process. A Notice of Inquiry is a vehicle for the FCC to gather additional information for the record. If the FCC elects to adopt a Notice of Inquiry, it could request additional information and input on the optimal use of the 900 MHz band generally. A Notice of Inquiry could also request information on the specific issues and proposed solutions raised by us and other commentators in the Joint Petition proceeding, as well as in other proceedings involving the 900 MHz spectrum that were initiated by third parties. The adoption of a Notice of Inquiry does not mean that the FCC has accepted or denied the Joint Petition, or that the Joint Petition will or will not ultimately result in a Notice of Proposed Rulemaking. The Company continues to
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believe in the merits of its proposal, and that the Joint Petition is consistent with the FCC’s past practices and policies. Nevertheless, obtaining a favorable result from the FCC may take a significant amount of time and resources. Moreover, there is no assurance that the FCC will ultimately approve the Company’s Joint Petition or will conduct a rulemaking proceeding along the lines originally advocated by the Company.
In addition to this regulatory action, the Company is also pursuing a number of additional initiatives related to spectrum andadvanced wireless service opportunities, including but not limited to:
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In addition, the Company recently elected to participate in the First Responder Network Authority (“FirstNet”) bid process. This opportunity involved government plans and a related process to provide use of spectrum and a substantial amount of funding for the build-out and operation of a dedicated Nationwide Public Safety Broadband Network (“NPSBN”) that also may be used, on a non-priority, excess capacity basis, to meet the wireless service needs of commercial customers. On October 17, 2016, the Company received written notice from the Contracting Officer of the U.S. Department of the Interior that its proposal for the FirstNet NPSBN was no longer being considered for the award. offerings.
Prior to acquiring its 900 MHz spectrum, the Company was engaged in the development and sale of its wireless communications applications, marketed primarily under the name pdvConnect. The Company continues to be engaged in these business activities and primarily offers these applications indirectly to the end users of two Tier I wireless communications carriers in the United States and, until July 2015, one international wireless communications carrier under licensing agreements between the Company and these carriers. The Company also offers these applications directly to end users.
The Company was originally incorporated in California in 1997, and reincorporated in Delaware in 2014. In November 2015, the Company changed its name from Pacific DataVision, Inc. to pdvWireless, Inc. The Company maintains offices in Woodland Park, New Jersey, Reston, Virginia and San Diego, California. It also maintains a sales office in West Conshohocken, Pennsylvania.
During the year ended March 31, 2016, the Company began offering its DispatchPlus service in seven major metropolitan areas throughout the United States. The Company developed DispatchPlus to address the needs of enterprises that value a tailored PTT solution addressing the management of their mobile workforce. These businesses typically operate within industry verticals such as construction, distribution, transportation, field services, waste management and hospitality. Given the nature of their operations, DispatchPlus offers these businesses several advantages over telephony and data-based services, including an easy-to-operate, one-touch button efficiency of communications and rugged equipment optimal for field use. The operation of the Company’s DispatchPlus business is separate from, and not contingent on, the initiatives it is pursuing at the FCC or its other spectrum-related activities.
The Company’s revenues are derived substantially from its DispatchPlus and pdvConnectTM offerings. The DispatchPlus service combines pdvConnect, a proprietary suite of mobile communication and workforce management applications, with advanced digital network architecture and mobile devices supplied by Motorola. Developed for dispatch-centric businesses, and historically offered to customers who utilize Tier 1 cellular networks, pdvConnect is an easy to use and efficient mobile communication and workforce management solution that enables businesses to locate and communicate with their field workers and improve the documentation of work events and job status. Also built with the commercial dispatch customer in mind, Motorola’s digital network architecture allows the Company to provide highly reliable, instant and wide-area PTT communication services to its customers.
The Company expects that its DispatchPlus business will become its principal near term operating business. However, sales of its DispatchPlus service have been slower to ramp-up than initial expectations. The Company primarily markets its DispatchPlus service to customers indirectly through third-party dealers selected from Motorola’s nationwide dealer network and other select wireless dealers. The Company supports its indirect sales representatives by providing them with training, marketing and advertising support from its internal sales and marketing team. The
8
Company typically enters into contracts directly with end users of its DispatchPlus communication solutions, including those introduced to it through its indirect dealer network.
The Company’s spectrum is its most valuable asset. Although the Company can use its spectrum for its existing DispatchPlus business and for other narrowband and wideband wireless services, many of the future business opportunities that the Company has identified require higher bandwidth than allowed by the current configuration of its spectrum. As a result, the Company is pursuing a number of initiatives to increase the usability and capacity of its spectrum.
In November 2014, the Company and the Enterprise Wireless Alliance (“EWA”) submitted a Joint Petition for Rulemaking to the FCC to propose the realignment of a portion of the 900 MHz band from narrowband to broadband. In response to the Joint Petition, the FCC issued a public notice requesting comments from interested parties and asked a number of questions about the proposal. A number of parties, including several incumbent licensees, filed comments with the FCC expressing their views, including both support and opposition. In May 2015, the Company and the EWA filed proposed rules with the FCC related to the Joint Petition. Comments on the proposed rules were filed in June 2015, and reply comments in July 2015.
On August 4, 2017, the FCC issued a Notice of Inquiry (“NOI”) that the Company believes signifies the FCC’s interest in conducting a serious and comprehensive evaluation of the current and future rules governing the 900 MHz band. In the NOI, the FCC announced that it had commenced a proceeding to examine whether it would be in the public interest to change the existing rules governing the 900 MHz band to enable increased access to spectrum, improved spectrum efficiency and expanded flexibility for a variety of potential uses and applications, including broadband and other advanced technologies and services. The FCC stated that the purpose of the NOI was to gather information from interested parties to assist the FCC in its decision making process. The FCC requested interested parties, including the Company, to comment on a number of questions related to three potential options for the 900 MHz band: (i) retaining the current configuration of the 900 MHz band, but increasing operational flexibility, (ii) reconfiguring a portion or all of the 900 MHz band to support broadband and other advanced technologies and services or (iii) retaining the current 900 MHz band licensing and eligibility rules. Because the FCC is requesting information on multiple options for the 900 MHz band, the NOI effectively supersedes the Joint Petition and other pending proposals that involved the 900 MHz band. However, a broadband reconfiguration option included in the NOI is consistent with the Company’s Joint Petition proposal, and all information the Company previously provided to the FCC to support the realignment and modernization of the 900 MHz band will remain relevant. The full text of the NOI is available on the FCC’s public website at https://www.fcc.gov/document/900-mhz-notice-inquiry.
On October 2, 2017, the Company and EWA filed a joint response to the FCC’s NOI. The full text of the comments is available on the FCC’s public website at https://ecfsapi.fcc.gov/file/100312461354/EWA-PDV%20NOI%20Comments%2017-200%20%2010-02-17.pdf.
On October 24, 2017, the Company and EWA, together with Southern Company Services, Inc., the Utilities Technology Council and Sensus USA, Inc. filed jointly with the FCC a motion for extension of the period in which to file reply comments to a date beyond November 1, 2017, the reply comment due date set under the FCC’s rules, to permit continued dialog, discussion and information sharing among the parties potentially to result in narrowing or mutually acceptable solution of issues that had been raised in the comment round of the NOI proceeding. In an order adopted October 26, 2017 and released on October 27, 2017, the FCC denied the joint motion, retaining the November 1, 2017 reply comment due date, but noting that any agreement or consensus subsequently reached among the parties could be brought to the FCC’s attention in ex parte filings after the November 1, 2017 due date. Accordingly, the Company, together with EWA, filed reply comments with the FCC by the November 1st deadline. The full text of the reply comments is available on the FCC’s public website at https://ecfsapi.fcc.gov/file/1101748620344/EWA-PDV%20Reply%20Comments%20%2017-200%20%2011-01-17.pdf.
The Company continues to believe in the merits of our broadband approach, and that it would be in the public interest for the FCC to realign the 900 MHz band to enable broadband and other advanced technologies and services. Nevertheless, obtaining a favorable result from the FCC may take a significant amount of time and resources.
9
Moreover, there is no assurance that following the conclusion of the NOI process, the FCC will ultimately propose and adopt rules that will allow us to utilize our spectrum to offer broadband and other advanced technologies and services.
To prepare for the filings with the FCC and to build support for a 900 MHz broadband realignment, the Company has met, and intends to continue to meet, with a number of incumbent licensees, critical infrastructure businesses and other interested parties in the 900 MHz band. The goals with these discussions have been: (i) building consensus for the proposed reconfiguration of the 900 MHz band to support broadband and other advanced technologies and services; (ii) resolving any technology or other concerns raised by incumbent licensees; (iii) educating critical infrastructure businesses on how broadband capabilities could enhance their operations and initiatives (for example, supporting grid modernization requirements or monitoring and/or controlling their own system or network elements via machine-to-machine type services); (iv) gaining a better understanding of the size of the operational incumbent base and the nature of the systems they are currently operating; and (v) evaluating and proposing voluntary license relocation opportunities to certain incumbent licensees.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to allowance for doubtful accounts, estimated useful lives of depreciable assets, asset retirement obligations, the carrying amount of long-lived assets under construction in process, valuation allowance on the Company’s deferred tax assets, and recoverability of intangible assets. Moreover, in certain circumstances, requirements associated with relevant US GAAP guidance can impact the Company’s estimates and assumptions. The Company is also required to make certain estimates with regard to the valuation of awards and forfeiture rates for its share-based award programs. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the applicable period accordingly,period. Accordingly, actual results could materially differ from those estimates.
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The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, including PDV Spectrum Holding Company, LLC formed in April 2014. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated interim financial statements as of September 30, 2016 have been prepared in accordance with the requirements of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) pertaining to reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2016. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements. Certain information and disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures included herein are adequate to make the information presented not misleading and all adjustments considered necessary for a fair presentation have been included. In the opinion of management, the Company’s results for the three and six months ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year or any future financial period.
Reclassifications
Certain prior year amounts have been reclassified to conform to the presentation of the corresponding amounts in the financial statements for the three and six months ended September 30, 2016.2017. These reclassifications had no effect on previously reported results of operations, cash flows, assets, liabilities or equity for the yearsperiods presented.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less at the time of purchase are considered cash equivalents. Cash equivalents are stated at cost, which approximates the quoted market value and include amounts held in money market funds.
Allowance for Doubtful Accounts
An allowance for uncollectible receivables is estimated based on a combination of write-off history, aging analysis and any specific known troubled accounts. The Company reviews its allowance for uncollectible receivables on a quarterly basis. Past due balances meeting specific criteria are reviewed individually for collectability. At September 30, 20162017 and March 31, 2016,2017, management provided an allowance of $9,352approximately $59,000 and $2,633,$53,000, respectively, for certain slow paying accounts.
10
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the applicable lease term. The carrying amount at the balance sheet date of long-lived assets under construction in process include construction costs to date on capital projects that have not been completed, assets being constructed that are not ready to be placed into service, and assets that are not currently in service. These costs are transferred to property and equipment when substantially all of the activities necessary to prepare the assets for their intended use are completed. Depreciation commences upon completion.
10
Accounting for Asset Retirement Obligations
An asset retirement obligation is evaluated and recorded as appropriate on assets for which the Company has a legal obligation to retire. The Company records a liability for an asset retirement obligation and the associated asset retirement cost at the time the underlying asset is acquired and put into service. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation, if any.Over time, the liability is accreted to its present value and the capitalized cost is depreciated over the estimated useful life of the asset.
The Company enters into long-term leasing arrangements primarily for tower site locations. The Company constructs assets at these locations and, in accordance with the terms of many of these agreements, the Company is obligated to restore the premises to their original condition at the conclusion of the agreements, generally at the demand of the other party to these agreements. The Company recognizes the fair value of a liability for an asset retirement obligation and capitalizes that cost as part of the cost basis of the related asset, depreciating it over the useful life of the related asset.asset.Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability is recognized in the Consolidated Statement of Operations.
As of September 30, 2016,2017, the Company had an asset retirement obligationobligations of $223,114.approximately $0.3 million.
Intangible Assets
Intangible assets are wireless licenses that will be used to provide the Company with the exclusive right to utilize designated radio frequency spectrum to provide wireless communication services. While licenses are issued for only a fixed time, generally ten years, such licenses are subject to renewal by the FCC. License renewals have occurred routinely and at nominal cost in the past. There are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the Company’s wireless licenses. As a result, the Company has determined that the wireless licenses should be treated as an indefinite-lived intangible asset. The Company will evaluate the useful life determination for its wireless licenses each year to determine whether events and circumstances continue to support their treatment as an indefinite useful life asset.
The licenses are tested for impairment annually on an aggregate basis, as the Company will be utilizing the wireless licenses on an integrated basis as a part of developing its nationwide network. Before employing detailed impairment testing, the Company first evaluates the likelihood of impairment by considering relevant qualitative factors that may have a significant bearing on fair value. If it determines that it is more likely than not that the wireless licenses are impaired, it will apply a quantitative analysis including detailed testing methodologies. Otherwise, it concludes that no impairment exists. In the event a quantitative analysis is required, the Company considers estimates of valuation methods to perform the test of the fair values of the wireless licenses using, among other things, market based and discounted cash flow approaches.
Long-Lived Asset Impairment
The Company evaluates long-lived assets, other than intangible assets with indefinite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Asset groups are determined at the lowest level for which identifiable cash flows are largely independent of cash flows of other groups of assets and liabilities. When the carrying amount of a long-lived asset group is not recoverable and exceeds its fair value, an impairment loss is recognized equal to the excess of the asset group’s carrying value over the estimated fair value.
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Revenue Recognition
The Company recognizes revenue in the period that persuasive evidence of an arrangement exists, delivery of the product has occurred or services have been rendered, it is able to determine the amount of revenue and when the collection of such amount is considered probable. In accordance with the guidance provided in Accounting Standards Codification (“ASC”) Topic 605-45-45, (Revenue Recognition – Principal Agent Considerations), the Company has determined that it is the primary obligor with respect to the service revenue derived from sales of the Company’s software applications through its Tier I domestic carrier partners. As a result, revenue is recorded at the gross amount billed to end-user customers for sales through these carrier partners. The Company recognized service revenue for its international carrier (which business relationship terminated in July 2015) on the net amount billed since it has determined that it is not the primary obligor. The Company also sells service and applications directly to end-users, which are billed and collected directly by the Company.
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In September 2014, Motorola paid the Company an upfront, fully-paid leasing fee of $7.5 million in order to lease a portion of the Company’s wireless spectrum licenses. The payment of the fee is accounted for as deferred revenue on the Company’s Consolidated Balance Sheets. The Company recognizes leasing revenue in accordance with ASC Topic 840, Leases.(Leases). The fee is amortized using the straight-line method over the lease term of approximately ten years, which represents the time period in which the benefits of the leased property are expected to be depleted.
The Company evaluates certain transactions for its DispatchPlus service offering to determine whether they should be viewed as a Multiple Element Arrangement as provided in ASC Topic 605-25. Judgment is required to properly identify the accounting units of the multiple deliverable transactions and to determine the manner in which revenue should be allocated among the units of accounting. Multiple deliverable arrangements are presumed to be bundled transactions, and the total consideration is measured and allocated to the separate transactions based on their relative selling price with certain limitations. The relative selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price or third partythird-party evidence of selling price if VSOE does not exist. If neither VSOE nor third party evidence of selling price exist, the Company uses its best estimate of the selling price for the deliverable. The Company has determined that the rental of user devices in connection with service contracts for its DispatchPlus service are multiple deliverable arrangements.
Cost of Revenue
The Company’s cost of revenue relating to its DispatchPlus service offering includes the cost of operating its dispatch network and its cloud-based solutions, and to a lesser degree, the costs associated with the sales of itsthe relevant user devices. In addition, cost of revenue associated with the sales of the Company’s software applications through its wireless carrier partners includes the portion of service revenue retained by its domestic Tier 1 carrier partners pursuant to its agreements with these parties, which may include network services, connectivity, SMS service, sales, marketing, billing and other ancillary services. With respect to its recently launched DispatchPlus service offering, the Company’s cost of revenue includes the costs of operating its dispatch network and its cloud-based solutions and to a lesser degree, the costs associated with the sales of the relevant user devices.
Stock Compensation
The Company accounts for stock options in accordance with US GAAP, which requires the measurement and recognition of compensation expense, based on the estimated fair value of awards granted to employees, directors, and directors.consultants. The Company estimates the fair value of share-based awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense in the Company’s statements of operations over the requisite service periods. In the event the participant’s employment by or engagement with (as a director or otherwise) the Company terminates before exercise of the options granted, the stock options granted to the participant shall immediately expire and all rights to purchase shares thereunder shall immediately cease and expire and be of no further force or effect, other than applicable exercise rights for vested shares that may extend past the termination date as provided for in the participant’s applicable option award agreement. Additionally, the Compensation Committee adopted an Executive Severance Plan (the “Severance Plan”) in February 2015, and the Company subsequently entered into Severance Plan Participation Agreements with its executive officers and certain key employees. In addition to providing participants with severance payments, the Severance Plan provides for accelerated vesting and extends the exercise period for outstanding equity awards if the Company terminates a participant’s service for reasons other than cause, death or disability or the participant terminates his or her service for good reason, whether before or after a change of control (each of such terms as defined in the Severance Plan).
To calculate option-based compensation, the Company uses the Black-Scholes option-pricing model. The Company’s determination of fair value of option-based awards on the date of grant using the Black-Scholes model is affected by assumptions regarding a number of subjective variables.
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The fair value of restricted stock, restricted stock units and performance units are measured based upon the quoted closing market price for the stock on the date of grant. The compensation cost for the restricted stock and restricted stock units is recognized on a straight-line basis over the vesting period. The compensation cost for the performance units is recognized when the performance criteria are expected to be complete.
No tax benefits werehave been attributed to the share-based compensation expense because the Company maintainedmaintains a full valuation allowance for all net deferred tax assets.
12Effective April 1, 2017, the Company adopted ASU No. 2016-09,
TableCompensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of Contentsthe accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the new guidance, all excess tax benefits and tax deficiencies, including tax benefits of dividends on share-based payment awards, should be recognized as income tax expense or benefit in the income statement, eliminating the notion of the additional paid-in-capital (“APIC”) pool. The excess tax benefits will be classified as operating activities along with other income tax cash flows rather than financing activities in the statement of cash flows. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. ASU 2016-09 also allows entities to elect to either estimate the total number of awards that are expected to vest or account for forfeitures when they occur. Additionally, ASU 2016-09 clarifies that cash payments to tax authorities in connection with shares withheld to meet statutory tax withholding requirements should be presented as a financing activity in the statement of cash flows. The Company has elected to continue its past practice of estimating the total number of awards expected to vest and adopted the provisions of ASU 2016-09 related to changes in the consolidated statements of cash flows on a retrospective basis.
Net Loss Per Share of Common Stock
Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. For purposes of the diluted net loss per share calculation, preferred stock, stock options, restricted stock and warrants are considered to be potentially dilutive securities. Because the Company has reported a net loss for the three and six months ended September 30, 20162017 and 2015,2016, diluted net loss per common share is the same as basic net loss per common share for those periods.
Common stock equivalents resulting from potentially dilutive securities approximated 770,000926,000 and 900,000709,000 at September 30, 20162017 and March 31, 2016,2017, respectively, and have not been included in the diluteddilutive weighted average shares of common stock outstanding, as their effects are anti-dilutive.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), ("ASU 2014-09") which supersedes current revenue recognition guidance, including most industry-specificindustry specific guidance. ASU 2014-09 requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services, and also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenue that is recognized. The guidance, as stated in ASU 2014-09, is effective for annual and interim periods beginning after December 15, 2016. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date by one year, with early adoption on the original effective date permitted. UnderThe standard can be applied using a full retrospective method or a modified retrospective method of adoption. The Company expects to adopt the standard in 2018 using the full retrospective method and continues to assess the impact of this ASU 2014-09, twoon its results of operations, financial position and cash flows. Based on its preliminary assessment, the Company expects the adoption methods are allowed. Under one method, a company may applyof this ASU will result in: (i) contract cost assets that will be established to reflect costs that will be deferred as incremental contract acquisition costs (incremental contract acquisition costs generally relate to commissions paid to sales associates); and (ii) increased disclosure, including qualitative and quantitative disclosures about the rules tonature, amount, timing and uncertainty of revenue and cash flows arising from contracts in all reporting periods presented, subject to certain allowable exceptions. Underwith customers. However, the other method, a company may apply the rules to all contracts existing asadoption of January 1, 2018 (provided early adoptionthis ASU is not elected), recognizing an adjustmentexpected to retained earnings forhave a material impact on the cumulative effect of the changeCompany's financial position and providing additional disclosures comparing results to previous rules. The Company is evaluating the impact the new guidance will have on its consolidated financial statements and has not made any decision regarding early adoption.
In August 2014, FASB issued ASU 2014-15, Presentation of Financial Statements. This ASU requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in the U.S. auditing standards. Specifically, the ASU (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plan, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). This standard is effective for the fiscal years ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements and has not made any decision regarding early adoption.cash flows.
In February 2016, the FASB issued ASU 2016-02, Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a
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right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The ASU also requires disclosure of key information about leasing arrangements to increase the transparency and comparability among organizations. The accounting for lessors does not fundamentally change except for changes to conform and align guidance to the lessee guidance as well as to the new revenue recognition guidance in ASU 2014-09. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted.
13
In March 2016, ASU 2016-02 requires reporting organizations to take a modified retrospective transition approach (as opposed to a full retrospective transition approach). The Company decided not to early adopt the FASB issuedASU. The Company is evaluating the potential impact that ASU 2016-09, Compensation - Stock Compensation, Improvements to Employee Share-Based Payment Accounting (Topic 718). This update is intended to provide simplification of the accounting for share based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This update is effective for our fiscal year beginning April 1, 2017. Early adoption is permitted.2016-02 may have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-08,Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The effective date and transition requirements for this amendment is the same as the effective date and transition requirements of ASU 2014-09, which is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. The Company is currently assessing the impactadoption of this ASU is not expected to have a material impact on its consolidatedthe Company's financial statements.position and cash flows.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing. ASU 2016-10 is intended to reduce the cost and complexity of applying the guidance in the FASB's new revenue standard on identifying performance obligations, and is also intended to improve the operability and understandability of the licensing implementation guidance. The effective date for ASU 2016-10 is the same as for ASU 2014-09. ManagementThe adoption of this ASU is evaluatingnot expected to have a material impact on the impactCompany's financial position and cash flows.
In January 2017, the newFASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminated Step 2 from the goodwill impairment test, which required entities to compute the implied fair value of goodwill by determining the fair value of the reporting unit's assets and liabilities as if they were assets acquired and liabilities assumed in a business combination. Instead of Step 2, entities performing their annual impairment test will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. Entities will continue to have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The adoption of ASU 2017-04 will be effective for annual, or any interim, goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this guidance willis not expected to have an effect on itsthe Company’s consolidated financial statements.
In August 2016,May 2017, the FASB issued ASU 2016-15,2017-09, ClassificationCompensation - Stock Compensation (Topic 718) Scope of Certain Cash Receipts and Cash PaymentsModification Accounting. The amendments in ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in the statementTopic 718. The adoption of cash flows under Topic 230, Statement of Cash Flows, and Other Topics. ASU 2016-15 is2017-09 will become effective for annual reporting periods and interim periods therein, beginning after December 15, 2017. The2017 with prospective application. Although the Company is currently evaluating the impact that it will have on its financial position, it does not expect the adoption of this guidance to havebelieve there will be a material impact on itsthe consolidated financial statements.
Subsequent Events Evaluation by Management
Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that thesethe financial statements were issued.
3. Property and equipment
Property and equipment consist of the following at September 30, 2016 and March 31, 2016:
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|
|
|
|
|
| Estimated |
| September 30, |
| March 31, | ||
| useful life |
| 2016 |
| 2016 | ||
Network sites and equipment | 5-10 years |
| $ | 13,116,853 |
| $ | 11,258,725 |
Computer equipment | 5-7 years |
|
| 917,754 |
|
| 860,018 |
Furniture and fixture and other equipment | 2-5 years |
|
| 940,589 |
|
| 660,065 |
Leasehold improvements | Shorter of the lease term or 5 years |
|
| 140,689 |
|
| 140,689 |
|
|
|
| 15,115,885 |
|
| 12,919,497 |
Less accumulated depreciation |
|
|
| 2,425,401 |
|
| 1,396,119 |
|
|
|
| 12,690,484 |
|
| 11,523,378 |
Construction in process |
|
|
| 2,069,555 |
|
| 3,596,388 |
Property and equipment, net |
|
| $ | 14,760,039 |
| $ | 15,119,766 |
14
3. Property and Equipment
Property and equipment consists of the following at September 30, 2017 and March 31, 2017 (in thousands):
|
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|
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|
|
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|
|
|
|
|
|
| Estimated |
| September 30, |
| March 31, | ||
| useful life |
| 2017 |
| 2017 | ||
Network sites and equipment | 5-10 years |
| $ | 14,884 |
| $ | 13,999 |
Computer equipment | 5-7 years |
|
| 956 |
|
| 944 |
Computer software | 1-3 years |
|
| 10 |
|
| 13 |
Furniture and fixture and other equipment | 2-5 years |
|
| 1,428 |
|
| 1,091 |
Leasehold improvements | Shorter of the lease term or 10 years |
|
| 345 |
|
| 141 |
|
|
|
| 17,623 |
|
| 16,188 |
Less accumulated depreciation |
|
|
| 4,916 |
|
| 3,590 |
|
|
|
| 12,707 |
|
| 12,598 |
Construction in process |
|
|
| 1,404 |
|
| 1,911 |
Property and equipment, net |
|
| $ | 14,111 |
| $ | 14,509 |
Depreciation expense for the three and six months ended September 30, 20162017 amounted to $551,452$0.7 million and $1,035,035, respectively. For the three and six months ended September 30, 2015, depreciation expense was $76,549 and $123,358,$1.4 million, respectively. For the three and six months ended September 30, 2016, depreciation expense was approximately $504,000$0.6 million and $948,000$1.0 million, respectively. For the three and six months ended September 30, 2017, approximately $0.6 million and $1.3 million of such depreciation expense was classified as cost of revenue, while the remainder for each period was classified as operating expense in the Company’s Consolidated Statements of Operations. For the three and six months ended September 30, 2015,2016, approximately $50,000$0.5 million and $83,000$0.9 million of such depreciation expense was classified as cost of revenue, while the remainder for each period was classified as operating expensesexpense in the Company’s Consolidated Statements of Operations. Leasehold improvements include certain allowances for tenant improvements related to the expansion of the Company’s corporate headquarters. Construction in process includes the expenditures related to the costs to establish the Company’s dedicated wide-area, two-way radio dispatch networknetworks in certain metropolitan areas.
4.Intangible Assets
Wireless licenses are considered indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization but instead are tested for impairment annually, or more frequently if an event indicates that the asset might be impaired. The Company believes that no impairment indicators existed as of September 30, 2016 that2017 for which the Company would require it to perform impairment testing.recognize impairment.
During the six months ended September 30, 2016,2017, the Company entered into agreements with several third parties in multiple U.S. markets to acquire wireless licenses for cash consideration, upon FCC approval. In addition, during
Intangible assets consist of the six months endedfollowing at September 30, 2016, the Company entered into a barter agreement whereby it will provide the use of the Company’s network, radios,2017 and installation of equipment in exchange for wireless licenses.March 31, 2017 (in thousands):
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|
|
|
|
| Wireless Licenses | |
Balance at March 31, |
| $ | |
Acquisitions |
|
| |
Balance at September 30, |
| $ | |
|
|
|
|
5. Accounts Payable - officers
Accounts payable - officers represents unreimbursed expenses including travel lodging, and mealentertainment expenses incurred by the Company’s officers. At September 30, 20162017 and March 31, 2016,2017, the accounts payable to officers amounted to $18,808approximately $38,000 and $44,159,$36,000, respectively.
15
6. Promissory Note Payable
On October 23, 2015, the Company entered into a promissory note in the amount of $1,289,013 with a third party in exchange for wireless licenses. The term of the note is through March 15, 2018 and bears a fixed rate of interest, of 0.55% per annum, which is based on the Short Term Applicable Federal Rate on the closing date. As of September 30, 2016,2017, the Company’s outstanding borrowings were $991,810, of which $494,545 is in current liabilities on the Company’s Consolidated Balance Sheets.approximately $0.5 million.
7. Income Taxes
The Company recorded income tax expense of $0.7 million and $1.3 million for the three and six months ended September 30, 2017 compared to none in the prior year. The Company’s tax provision for both periods had federalan unusual relationship to the pre-tax loss due primarily to the existence of a deferred tax asset valuation allowance at the beginning of both periods. The tax expense recorded in the three and statesix months ended September 30, 2017 resulted from $1.8 million and $3.6 million, respectively, of tax amortization of the Company’s indefinite-lived intangible assets ($1.3 million net operating loss carryforwards of tax) that is not available to offset existing deferred tax assets. The Company expects the indefinite-lived intangible assets to result in approximately $55.3$2.6 million atof income tax expense for the full fiscal year 2018 (as previously discussed in Note 9 of the Company’s Annual Report on Form 10-K for the year ended March 31, 2016, which expire in varying amounts from 2021 through 2036.
The Company has deferred tax assets of approximately $20.2 million relating to these net operating loss carryforwards and stock compensation plans at March 31, 2016. Federal net operating loss carryforwards are subject to limitations as a result of a change in ownership. State net operating loss carryforwards are subject to limitations, which differ from federal law in that they may not allow the carryback of net operating losses, and have shorter carryforward periods. Due to the uncertainty with respect to the realization of these deferred tax assets, the Company recorded a valuation allowance for the entire amount. The difference between the tax benefit at the statutory rate and the effective tax rate is primarily attributable to a full valuation allowance placed upon the deferred tax asset.
The Company recognizes the effect of tax positions only when they are more likely than not to be sustained. The Company’s management has determined that it had no uncertain tax positions that would require financial statement
15
recognition or disclosure. The Company is no longer subject to U.S. federal, state or local income tax examinations for periods prior to 2013.2017).
8. Stock Acquisition Rights, Stock Options and Warrants
The Company established the pdvWireless, Inc. 2014 Stock Plan (the “2014 Stock Plan”) to attract, retain and reward individuals who contribute to the growth of the Company. This 2014 Stock Plan superseded previous stock plans. However, under such previous plans, 45,78243,275 stock options remained vested and outstanding of which 45,540 stock options were vested as of September 30, 2016.2017.
As of September 30, 2016, 2,538,2342017, 2,788,234 shares of common stock were authorized and reserved for issuance under itsthe 2014 Stock Plan. The shares authorized and reserved for issuance under the 2014 Stock Plan will continue to increase each subsequent anniversary through January 1, 2024 by an amount equal to the lessorlesser of 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or a lesser amount determined by the Board of Directors. The Board exercised its discretion to limit the number of shares added to the Company’s 2014 Stock Plan in 2017 to 250,000 shares. Based on the Company’s outstanding shares on January 1, 2017, up to 717,018 additional shares of common stock could have been added to the 2014 Stock Plan in 2017. The Board, however, elected to limit the annual increase in 2017 to 250,000 shares based on its review of the Company’s outstanding equity awards, the potential dilution to stockholders upon exercise of these awards, the Company’s hiring plans and the shares remaining available for grant under the Plan. The Board will continue to use its discretion, as needed, each year to determine the appropriate share replenishment level going forward.
Restricted Stock and Restricted Stock Units
A summary of Restricted Stocknon-vested restricted stock activity for the six months ended September 30, 20162017 is as follows:
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|
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|
|
| Weighted |
|
|
| Weighted | ||
|
| Restricted |
| Average Grant |
| Restricted |
| Average Grant | ||
|
| Stock |
| Day Fair Value |
| Stock |
| Day Fair Value | ||
Restricted stock at March 31, 2016 |
| 140,872 |
| $ | 26.47 | |||||
Non-vested restricted stock at March 31, 2017 |
| 127,457 |
| $ | 25.10 | |||||
Granted |
| 31,489 |
|
| 20.47 |
| 121,321 |
|
| 23.00 |
Forfeited |
| (4,200) |
|
| 29.85 |
| (888) |
|
| (23.49) |
Vested |
| (16,603) |
|
| 26.30 |
| (17,190) |
|
| 22.13 |
Restricted stock at September 30, 2016 |
| 151,558 |
| $ | 25.14 | |||||
Non-vested restricted stock at September 30, 2017 |
| 230,700 |
| $ | 24.22 |
16
The Company recognizes compensation expense for restricted stock on a straight line basis over the explicit vesting period. Vested restricted stock units are settled and issuable upon the earlier ofvesting date (or the next open trading date if the employee ceases to be an employee ofvesting date occurs during a closed window under the CompanyCompany’s insider trading policy) or a date certain in the future. Stock compensation expense related to restricted stock was approximately $393,000$0.4 million and $728,000$0.9 million for the three and six months ended September 30, 2016. There was no stock compensation expense related to restricted stock2017 and approximately $0.4 million and $0.7 million for the three and six months ended September 30, 2015.2016. Stock compensation expense for restricted stock is accounted for in general and administrative expense in the Company’s Consolidated Statement of Operations. At September 30, 2016,2017, there was $3.2$4.7 million of unvested compensation expense related to the restricted stock, which is expected to be recognized over a weighted average period of 3.02.9 years.
Performance Stock Units
A summary of the Performance Stock Unitperformance stock unit activity for the threesix months ended September 30, 20162017 is as follows:
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|
|
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|
|
| Weighted |
|
|
| Weighted | ||
|
|
|
| Average |
|
|
| Average | ||
|
| Performance |
| Grant Day |
| Performance |
| Grant Day | ||
|
| Stock |
| Fair Value |
| Stock |
| Fair Value | ||
Performance units at March 31, 2016 |
| 37,295 |
| $ | 25.81 | |||||
Performance units at March 31, 2017 |
| 37,295 |
| $ | 25.81 | |||||
Granted |
| — |
|
| — |
| 71,843 |
|
| 22.75 |
Forfeited |
| — |
|
| — |
| — |
|
| — |
Vested |
| — |
|
| — |
| — |
|
| — |
Performance units at September 30, 2016 |
| 37,295 |
| $ | 25.81 | |||||
Performance units at September 30, 2017 |
| 109,138 |
| $ | 23.80 |
The Company awarded performance stock units were awarded in May 2017 and January 2016 and2016. The units represent the number of shares of the Company’s common stock that the recipient would vest in and receive contingent upon the Company’s attainment of the applicable performance goals. Thegoal. For the outstanding performance stock units, will vest in full upon attainment of the performance goals. Performance is based upon achievement,goal requires the Company to obtain, prior to January 13, 2020, of (A)(i) a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (B)(ii) the lack of objection by the Company's Board of Directors to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms, and technical and operational rules) set forth or referenced in the Final Order.
16
For the three and six months ended September 30, 2017 and 2016 there was no stock compensation expense recognized for the performance units. At September 30, 2016,2017, there was approximately $963,000$2.6 million of unvested compensation expense of the performance units.
Stock Options
A summary of Stock Optionstock option activity for the six months ended September 30, 20162017 is as follows:
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|
|
|
|
|
|
|
| Weighted | |
|
|
|
| Average | |
|
| Options |
| Exercise Price | |
Options outstanding at March 31, 2016 |
| 1,693,200 |
| $ | 22.91 |
Granted during the period |
| 52,250 |
|
| 25.10 |
Forfeited/Exercised/Expired during the period |
| (36,730) |
|
| 31.59 |
Options outstanding at September 30, 2016 |
| 1,708,720 |
| $ | 22.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted | |
|
|
|
| Average | |
|
| Options |
| Exercise Price | |
Options outstanding at March 31, 2017 |
| 1,733,595 |
| $ | 22.79 |
Granted during the period |
| 236,195 |
|
| 24.89 |
Exercised during the period |
| (3,081) |
|
| (17.36) |
Forfeited/Expired during the period |
| (8,801) |
|
| (27.30) |
Options outstanding at September 30, 2017 |
| 1,957,908 |
| $ | 23.04 |
The stock options to purchase shares of common stock awarded during the six months ended September 30, 20162017 have a ten-year contractual life and 25% will vest on the first anniversary of grant, and the remainder will vest in three equal annual installments thereafter. In addition, a stock option to purchase 100,000 shares of common stock awarded to a consultant during the six months ended September 30, 2017 vests monthly over four years. Shares granted to employees are subject to vesting, future settlement conditions and other such terms as determined by the Board of Directors.
17
Additional information regarding Stock Optionsstock options outstanding at September 30, 20162017 is as follows:
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| |||
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| Weighted |
|
|
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|
|
|
|
| Weighted | |||||
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
| Average |
|
|
|
|
|
| Weighted |
|
|
|
|
| Average | |||||
|
|
|
|
|
|
| Average |
| Weighted |
|
|
| Exercise Price |
|
|
|
|
|
| Average |
| Weighted |
|
|
| Exercise Price | ||||||
Exercise | Exercise |
| Number |
| Remaining |
| Average |
| Options |
| of Shares | Exercise |
| Number |
| Remaining |
| Average |
| Options |
| of Shares | ||||||||||
Prices | Prices |
| Outstanding |
| Life in Years |
| Exercise Price |
| Exercisable |
| Exercisable | Prices |
| Outstanding |
| Life in Years |
| Exercise Price |
| Exercisable |
| Exercisable | ||||||||||
$ | 13.25 | - | $ | 20.00 |
| 1,153,493 |
| 7.45 |
| $ | 19.74 |
| 610,251 |
| $ | 19.50 | 13.25 | - | $ | 20.00 |
| 1,128,537 |
| 6.55 |
| $ | 19.74 |
| 855,099 |
| $ | 19.66 |
| 20.01 | - |
| 46.23 |
| 470,000 |
| 8.76 |
|
| 25.72 |
| 158,062 |
|
| 25.52 | 20.01 | - |
| 46.23 |
| 748,820 |
| 8.5 |
| 25.33 |
| 262,665 |
|
| 25.57 | |
| 46.25 | - |
| 72.85 |
| 85,227 |
| 8.37 |
|
| 47.94 |
| 23,164 |
|
| 48.02 | 46.24 | - |
| 72.85 |
| 80,551 |
| 7.59 |
| 47.87 |
| 40,426 |
|
| 47.88 | |
|
|
|
|
| 1,708,720 |
| 7.86 |
| $ | 22.79 |
| 791,477 |
| $ | 21.54 |
|
|
|
| 1,957,908 |
| 7.34 |
| $ | 23.04 |
| 1,158,190 |
| $ | 21.99 |
The Black-Scholes option model requires weighted average assumptions to be used for calculation of the Company’s stock compensation expense. The assumptions used during the six months ended September 30, 20162017 were: the expected life of the awards was 5 years; the risk-free interest rate ranged from 1.07%range was 1.8% to 1.71%2.3%; the expected volatility ranged from 40.0% to 47.0%was 49.05%; and the expected dividend yield was 0.0%. There was; and a 2%3% forfeiture rate used for the calculation.rate.
Performance Stock Options
A summary of the Performance Stock Optionsperformance stock options as of September 30, 20162017 is as follows:
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|
|
|
|
|
|
| Performance Options |
| Weighted Average |
| Performance Options |
| Weighted Average | ||
Performance options outstanding at March 31, 2016 |
| 50,000 |
| $ | 25.81 | |||||
Performance options outstanding at March 31, 2017 |
| 50,000 |
| $ | 25.81 | |||||
Performance options granted |
| — |
|
| — |
| 129,945 |
|
| 25.84 |
Performance options forfeited/expired |
| — |
|
| — |
| — |
|
| — |
Performance options outstanding at September 30, 2016 |
| 50,000 |
| $ | 25.81 | |||||
Performance options outstanding at September 30, 2017 |
| 179,945 |
| $ | 25.83 |
17
common stock with an exercise price of $28.10 and $22.75, respectively. During the year ended March 31, 2016, the Company awarded an executive officer an optionperformance stock options to purchase 50,000 shares of common stock with an exercise price of $25.81 that vests immediately upon meeting certain performance conditions.$25.81. These options have a ten-year contractual life. The performance stock options will vest in full upon attainment ofcontingent the performance goals. Performance is based uponCompany’s achievement, prior to January 13, 2020, of (A)(i) a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (B)(ii) the lack of objection by the Company's Board of Directors to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms, and technical and operational rules) set forth or referenced in the Final Order.
Stock compensation expense related to the amortization of the fair value of stock options issued was approximately $681,000$0.9 million and $1,711,000$1.6 million for the three and six months ended September 30, 2016,2017, respectively. For the three and six months ended September 30, 2015,2016, stock compensation expense was $1,106,000approximately $0.7 million and $2,456,000,$1.7 million, respectively. There was no stock compensation expense related to the performance stock options issued for the three and six months ended September 30, 20162017 and 2015.2016. Stock compensation expense is included as part of general and administrative expense in the accompanying Consolidated Statement of Operations. The weighted average fair value for the stock option awards granted during the six months ended September 30, 20162017 was $10.37.$11.02. As of September 30, 2016,2017, there was approximately $4.4$6.6 million of unrecognized compensation cost related to non-vested sharestock options granted under the Company’s stock option plans, of which $3.9$4.6 million pertains to the non-performance based stock options and $0.5$2.0 million pertains to the performance based stock options. The cost is expected to be recognized over a weighted-average period of 2.53.1 years.
Warrants
A summary of Warrant activity is as follows:
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|
|
|
|
|
| Weighted | |
|
|
|
| Average | |
|
| Warrants |
| Exercise Price | |
Warrants outstanding at March 31, 2016 |
| 6,039 |
| $ | 82.79 |
Expired |
| (6,039) |
|
| (82.79) |
Warrants outstanding at September 30, 2016 |
| — |
| $ | - |
The outstanding warrants were not exercised and expired in June 2016.
Motorola Investment
On September 15, 2014, Motorola invested $10.0 million to purchase 500,000 Class B Units of the Company’s subsidiary, PDV Spectrum Holding Company, LLC (at a price equal to $20.00 per unit). The Company owns 100% of the Class A Units in this subsidiary. Motorola has the right at any time to convert its 500,000 Class B Units into
18
500,000 shares of the Company’s common stock. The Company also has the right to force Motorola’s conversion of these Class B Units into shares of its common stock on the occurrence of certain corporate events or at its election after September 15, 2016.election. Motorola is not entitled to any assets, profits or distributions from the operations of the subsidiary. In addition, Motorola’s conversion ratio from Class B Units to shares of the Company’s common stock is fixed on a one-for-one basis, and is not dependent on the performance or valuation of either the Company or the subsidiary. The Class B Units have no redemption or call provisions and can only be converted into shares of the Company’s common stock. Management has determined that this investment does not meet the criteria for temporary equity or non-controlling interest due to the limited rights that Motorola has as a holder of Class B Units, and accordingly has presented this investment as part of its permanent equity within Additional Paid-in Capital in the accompanying consolidated financial statements.
18
9. Supplemental Disclosure of Cash FlowInformation
The Company paid in cash $8,345$9,000 in taxes and did not make any payments for interest during the six months ended September 30, 2016.2017. The Company paid in cash $800$8,000 in taxes and did not make any payments for interest during the six months ended September 30, 2015.2016.
During the six months ended September 30, 2017, the Company entered into a lease agreement with a landlord that included a Tenant Allowance of $202,000 that it utilized in the expansion of its corporate headquarters. The Tenant Allowance is included in other liabilities.
During the six months ended September 30, 2016, the Company entered into a barter transaction with a third party whereby it acquired wireless licenses valued at approximately $307,000 consisting of approximately $268,000 related to use of the Company’s network along with radios and $39,000 in cash (see Note 5).cash. The Company capitalized Asset Retirement Obligations that amounted to $19,568$24,000 and $19,000 for the six months ended September 30, 2016.
2017 and 2016, respectively.
10. Commitments and Contingencies
Leasing Obligations
The Company is obligated under certain lease agreements for office space whichwhose leases expire on various dates from January 7, 20172019 through MayMarch 31, 2020.2027, which includes a ten-year lease extension for its corporate headquarters. The Company entered into multiple lease agreements for tower space related to its DispatchPlus business. The lease expiration dates range from February 28, 2020 to June 30, 2026.
Rent expense amounted to approximately $488,000$0.7 million and $909,000$1.3 million, for the three and six months ended September 30, 2017, respectively, of which approximately $0.4 million and approximately $0.8 million, respectively, was classified as cost of revenue and the remainder of approximately $0.3 million and $0.5 million, respectively, was classified in operating expenses in the Consolidated Statements of Operations. Total rent expense amounted to approximately $0.5 million and $0.9 million, for the three and six months ended September 30, 2016, respectively, of which approximately $378,000$0.4 million and $684,000$0.7 million, respectively, was classified as cost of revenue inand the Consolidated Statements of Operations for the three and six months ended September 30, 2016, respectively. The remainder of the rent expense of $110,000approximately $0.1 million and $225,000$0.2 million, respectively, was classified in operating expenses in the Consolidated Statements of Operations for the same periods, respectively. Total rent expense was approximately $126,000 and $222,000 for the three and six months ended September 30, 2015, of which approximately $36,000 and $60,000, respectively, was classified as cost of revenue. The remainder of the rent expense $89,500 and $162,000, respectively, was classified as operating expenses in the Consolidated Statements of Operations for the same periods.Operations. At September 30, 2016,2017, accumulated deferred rent payable amounted to approximately $788,000$1.7 million and is included as part of other liabilities in the accompanying Consolidated Balance Sheet.
Aggregate rentals, under non-cancelable leases for office and tower space (exclusive of real estate taxes, utilities, maintenance and other costs borne by the Company), for the remaining terms of the leases following the six months ended September 30, 2017 are as follows:follows (in thousands):
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Period Ending March 31, |
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|
| |||
2017 (6 months) |
| $ | 561,982 | |||
2018 |
|
| 1,141,606 | |||
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|
| |||
2018 (6 months) |
| $ | 860 | |||
2019 |
|
| 1,596,483 |
|
| 2,155 |
2020 |
|
| 1,737,115 |
|
| 2,108 |
2021 |
|
| 1,267,731 |
|
| 1,836 |
After 2021 |
|
| 4,097,249 | |||
2022 |
|
| 1,476 | |||
After 2022 |
|
| 5,267 | |||
Total |
| $ | 10,402,166 |
| $ | 13,702 |
Litigation
The Company is not involved in any material legal proceedings or other litigation matters at this time. However, from time to time, the Company may be involved in litigation that arises from the ordinary operations of the business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, the Company believes the resulting liabilities would not have a material adverse effect on its financial condition or results of operations.
11. Concentrations of Credit Risk
Financial instruments whichthat potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable.
The Company places its cash and temporary cash investments with financial institutions for which credit loss is not anticipated.
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The Company sells its current software applications product and extends credit predominately through two domestic third-party carriers. The Company maintains allowances for doubtful accounts based on factors surrounding the write-off history, historical trends, and other information.
12. Business Concentrations
For the three and six months ended September 30, 2017, the Company had one Tier 1 domestic carrier that accounted for approximately 40% of operating revenues. For the three months ended September 30, 2016, the Company had two Tier 1 domestic carriers that accounted for approximately 35% and 14% of operating revenues, respectively. For the six months ended September 30, 2016, thesethe Company had two Tier 1 carriers that accounted for approximately 34% and 15% of operating revenues, respectively. The two Tier 1 carriers accounted for approximately 43% and 22% of operating revenues for the three months ended September 30, 2015 and 43% and 22% for the six months ended September 30, 2015.
As of September 30, 20162017 and March 31, 2016,2017, the Company had twoone Tier 1 domestic carrierscarrier that accounted for approximately 46%66% and 23% and 49% and 32%67%, respectively, of accounts receivable.
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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis of the financial condition and results of operations of pdvWireless, Inc. (“pdv,PDV,” the “Company”, “we”, “us”, or “our”) should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2016,2017, filed with the SEC on June 13, 2016.6, 2017. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those identified or referenced in “Item 1A—Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K. As a result, investors are urged not to place undue reliance on any forward-looking statements. Except to the limited extent required by applicable law, the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.
Overview
We are a private wireless communications carrier and provider of mobile workforce communication and location based solutions focused on increasingutilizing our spectrum assets to develop and offer next generation network and mobile communication solutions to critical infrastructure and enterprise customers. We are the productivitylargest holder of licensed spectrum in the Part 90 900 MHz band (i.e., 896-901 MHz paired with 935-940 MHz) throughout the contiguous United States, plus Hawaii, Alaska and Puerto Rico. On average, we hold approximately 60% of the channels in our customers’ field-based workers andportion of the efficiency of their dispatch and call center operations. We have launched and are operating push-to-talk (“PTT”) networks900 MHz band in seven major markets withinthe top 20 metropolitan market areas in the United States. Our proprietary and industry-validated suite of mobile communications and workforce management applications improve team communication and field documentation across a wide array of industries, including transportation, distribution, construction, hospitality, waste management and field services. At the same time, we are pursuing a number of spectrum opportunities and initiatives, including but not limited to, a Federal Communications Commission (“FCC”) regulatory process aimed at the realignment of our spectrum to be able to deploy broadband technologies to enterprises. We maintain offices in Woodland Park, New Jersey, Reston, Virginia, and San Diego, California. We also maintain a sales office in West Conshohocken, Pennsylvania.
WeAs our first priority, we are currently operating wide-area,pursuing regulatory initiatives at the Federal Communications Commission (“FCC”) with the goal of modernizing and realigning the 900 MHz band to increase its usability and capacity, including for the future deployment of broadband and other advanced technologies and services. At the same time, we are exploring and developing network and mobile communication solutions, leveraging our spectrum to address the unmet needs of our targeted critical infrastructure and enterprise customers. For our first offering, we have deployed push-to-talk (“PTT”) networks and offer our DispatchPlusTM two-way radio networks that offer PTT communications services to primarily dispatch-centric, small and medium-sized businessesservice in seven major markets. metropolitan market areas, including Atlanta, Baltimore/Washington, Chicago, Dallas, Houston, New York and Philadelphia. DispatchPlus allows our enterprise customers to increase the productivity of their field-based workers and the efficiency of their dispatch and call center operations. We are pursuing opportunities to offer additional network and mobile communication solutions to critical infrastructure and enterprise customers with our existing spectrum and currently available non-broadband technologies and, if we are successful with our FCC efforts, through the deployment of broadband and other advanced wireless service offerings.
Our spectrum is our most valuable asset. Although we can use our spectrum for our existing DispatchPlus business and for other narrowband and wideband wireless services without the need to obtain any further FCC authorizations or rule modifications, many of the future business opportunities that we have identified require higher bandwidth than we possess given the current configuration of our spectrum. As a result, we are pursuing a number of initiatives to increase the usability, efficiency and capacity of our 900 MHz spectrum.
In November 2014, we and the Enterprise Wireless Alliance (“EWA”) submitted a Joint Petition for Rulemaking to the FCC to propose the realignment of a portion of the 900 MHz band from narrowband to broadband. In response to the Joint Petition, the FCC issued a public notice requesting comments from interested parties and asked a number of questions about the proposal. A number of parties, including several incumbent licensees, filed comments with the FCC expressing their views, including both support and opposition. In May 2015, we and the EWA filed proposed rules with the FCC related to the Joint Petition. Comments on the proposed rules were filed in June 2015, and reply comments in July 2015.
On August 4, 2017, the FCC issued a Notice of Inquiry (“NOI”) that we commercially launchedbelieve signifies the FCC’s interest in conducting a serious and comprehensive evaluation of the current and future rules governing the 900 MHz band. In the NOI, the FCC announced that it had commenced a proceeding to examine whether it would be in the public interest to change the existing rules governing the 900 MHz band to enable increased access to spectrum, improved spectrum efficiency and expanded flexibility for a variety of potential uses and applications, including broadband and other advanced technologies and services. The FCC stated that the purpose of the NOI was to gather information from interested parties to assist the FCC in its decision-making process. The FCC requested interested parties, including us, to comment on a number of questions related to three potential options for the 900 MHz band: (i) retaining the current configuration of the 900 MHz band, but increasing
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operational flexibility, (ii) reconfiguring a portion or all of the 900 MHz band to support broadband and other advanced technologies and services or (iii) retaining the current 900 MHz band licensing and eligibility rules. Because the FCC is requesting information on multiple options for the 900 MHz band, the NOI effectively supersedes the Joint Petition and other pending proposals that involved the 900 MHz band. However, a broadband reconfiguration option included in the NOI is consistent with our Joint Petition proposal, and all information we previously provided to the FCC to support the realignment and modernization of the 900 MHz band will remain relevant. The full text of the NOI is available on the FCC’s public website at https://www.fcc.gov/document/900-mhz-notice-inquiry.
On October 2, 2017, we and EWA filed a joint response to the FCC’s NOI. The full text of the comments is available on the FCC’s public website at https://ecfsapi.fcc.gov/file/100312461354/EWA-PDV%20NOI%20Comments%2017-200%20%2010-02-17.pdf.
On October 24, 2017, we and EWA, together with Southern Company Services, Inc., the Utilities Technology Council and Sensus USA, Inc. filed jointly with the FCC a motion for extension of the period in which to file reply comments to a date beyond November 1, 2017, the reply comment due date set under the FCC’s rules, to permit continued dialog, discussion and information sharing among the parties potentially to result in narrowing or mutually acceptable solution of issues that had been raised in the comment round of the NOI proceeding. In an order adopted October 26, 2017 and released on October 27, 2017, the FCC denied the joint motion, retaining the November 1, 2017 reply comment due date, but noting that any agreement or consensus subsequently reached among the parties could be brought to the FCC’s attention in ex parte filings after the November 1, 2017 due date. Accordingly, we, together with EWA, filed reply comments with the FCC by the November 1st deadline. The full text of the reply comments is available on the FCC’s public website at https://ecfsapi.fcc.gov/file/1101748620344/EWA-PDV%20Reply%20Comments%20%2017-200%20%2011-01-17.pdf.
We continue to believe in the merits of our broadband approach, and that it would be in the public interest for the FCC to realign the 900 MHz band to enable broadband and other advanced technologies and services. Nevertheless, obtaining a favorable result from the FCC may take a significant amount of time and resources. Moreover, there is no assurance that following the conclusion of the NOI process, the FCC will ultimately propose and adopt rules that will allow us to utilize our spectrum to offer broadband and other advanced technologies and services.
To prepare for filings with the FCC and to build support for a 900 MHz broadband realignment, we have met, and intend to continue to meet, with a number of incumbent licensees, critical infrastructure businesses and other interested parties in the 900 MHz band. The goals with these discussions have been: (i) building consensus for the proposed reconfiguration of the 900 MHz band to support broadband and other advanced technologies and services; (ii) resolving any technology or other concerns raised by incumbent licensees; (iii) educating critical infrastructure businesses on how broadband capabilities could enhance their operations and initiatives (for example, supporting grid modernization requirements or monitoring and/or controlling their own system or network elements via machine-to-machine type services); (iv) gaining a better understanding of the size of the operational incumbent base and the nature of the systems they are currently operating; and (v) evaluating and proposing voluntary license relocation opportunities to certain incumbent licensees.
In Fiscal 2016, we began offering our commercial PTT service, which we market as DispatchPlus™,DispatchPlus, in the greater Houston, Texas metropolitan area. We commenced service in six additionalseven major metropolitan markets during fiscal 2016, including:areas throughout the United States, including Atlanta, Baltimore/Washington, Chicago, Dallas, Atlanta, Philadelphia, Chicago, the greaterHouston, New York area and Baltimore/Washington. In addition, inPhiladelphia. We developed DispatchPlus to address the needs of enterprises that value a numbertailored PTT solution addressing the management of markets,their mobile workforce. These businesses typically operate within industry verticals such as construction, distribution, transportation, field services, waste management and hospitality. Given the nature of their operations, DispatchPlus offers these businesses several advantages over telephony and data-based services, including an easy-to-operate one-touch button, efficiency of communications and rugged equipment optimal for field use. The operation of our DispatchPlus business is separate from, and not contingent on, the initiatives we have deployed, or are inpursuing at the process of deploying, additional sites to expand our coverage areas in these markets based on specific customer opportunities and/FCC or our assessment of market opportunities. other spectrum-related activities.
We offerOur revenues are derived substantially from our DispatchPlus communications solutions, whichand pdvConnectTM offerings. Our DispatchPlus service combines pdvConnect™,pdvConnect, our proprietary suite of mobile communication and workforce management applications, with state-of-the-artadvanced digital network architecture and mobile devices manufacturedsupplied by Motorola Solutions, Inc. and its subsidiaries (“Motorola”). Developed for dispatch-centric businesses, and historically offered to customers who utilize Tier 1 cellular networks, pdvConnect is an easy to use and efficient mobile communication and workforce management solution that enables businesses to locate and communicate with their field workers and improve the documentation of work events and job status. Also built with the
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commercial dispatch usercustomer in mind, Motorola’s digital network architecture allows us to provide highly reliable, instant and wide-area PTT communication solutionsservices to our customers.
We offer customers our DispatchPlus service at a competitive monthly price that we believe is more attractive than the price they would pay for comparable services and functionality from the large Tier 1 carriers. We intend to continue to enhance DispatchPlus and our future wireless business solutions to meet the demands of our customers based on their industry and individualized business needs. We also back our services with an enterprise-grade, dedicated customer support team.
We expect that our DispatchPlus business will become our principal near term operating business. We primarily market our DispatchPlus service to customers indirectly through third-party dealers selected from Motorola’s nationwide dealer network and other select wireless dealers. We support our indirect sales representatives by providing them with training, marketing and advertising support from our internal sales and marketing team. We are also implementing a number of sales initiatives, including lead generation programs and hiring additional sales resources. We believe this approach of utilizing existing wireless dealers to serve as our indirect sales representatives, coupled with our focused direct sales and marketing efforts and initiatives, will enable us to establish a presence in our markets and help to reduce the upfront costs of establishing a nationwide sales and distribution network. We enter into contracts directly with end users of our DispatchPlus communications solutions, including those introduced to us through our indirect dealer network.
To date, sales of our DispatchPlus service have been slower to ramp-up than our initial expectations for a number of reasons, including, but not limited to, the performance of our indirect third-party sales representatives, longer initial sales cycle,cycles, and coverage gaps in certain markets due to delays in our deployment of planned sites or our need to add additional sites. We continue to develop and implement sales and marketing programs for our DispatchPlus service to drive increased customer acquisition and revenue growth. Progress in the growth of our sales funnel andThe positive customer feedback drive ourwe receive provides us with optimism about our future sales opportunities. Further, weWe are currently focusing our resources onin the seven markets where we have commenced service.
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That focus includes trialing and implementing a number of sales and marketing initiatives and strategies aimed at increasing sales of our DispatchPlus service and developingcontinuing to develop and grow a predictable sales funnel and process. These initiatives include:
· | Identifying and targeting high-value, |
· | Focusing our |
· | Developing and bringing to market innovative features that continue to differentiate us from other wireless communications service providers that provide PTT solutions; |
· | Providing additional incentive programs, both to our third-party sales representatives and to our customer prospects; |
· | Building and trialing a |
· | Orienting our sales and marketing organizational structure to track the distinct channels of distribution we are employing in |
· | Developing a centralized business development and telesales team to increase the flow of qualified |
· |
|
We intend to continue to focus our efforts on the initial seven markets where we have commenced service until we determine which sales and marketing approaches produce the best results.prove out our DispatchPlus business model in those markets. We have continued, however, to prepareprepared for the potential future rollout of our DispatchPlus service in more than thirteen additional markets by completing initial network designs, and in some markets, pursuingperforming additional site development efforts, including site selection and lease negotiation.activities. We believe this approach will allow us to more quickly and effectively proceed with new market deployments when we determine it is best to do so. We also believe this approach will provide us with additional time and financial flexibility to refine our longer termlonger-term strategies, including those related to our Joint Petition for Rulemaking with the FCC.
Concurrently with launchingFCC initiatives and operating our DispatchPlus business, we are pursuing initiatives to increase the efficiency and capacity of the spectrum licenses we hold, including filing (together with the Enterprise Wireless Alliance) a Joint Petition for Rulemaking with the FCC proposing a realignment of a portion of the 900 MHz spectrum from narrowband to broadband. In September 2016, an item was circulated with the Commissioners’ offices at the FCC related to the Joint Petition. We are currently waiting for the FCC Commissioners to formally vote on and if approved, then publicly file the item. The FCC’s action may take a number of forms ranging from: a Notice of Proposed Rulemaking, to a Notice of Inquiry, to a dismissal of the Joint Petition without further action. Although the FCC has not announced a decision on the Joint Petition, we currently believe that the most likely outcome is that the FCC will adopt a Notice of Inquiry as the next step in the process. A Notice of Inquiry is a vehicle for the FCC to gather additional information for the record. If the FCC elects to adopt a Notice of Inquiry, it could request additional information and input on the optimal use of the 900 MHz band generally. A Notice of Inquiry could also request information on the specific issues and proposed solutions raised by us and other commentators in the Joint Petition proceeding, as well as in other proceedings involving the 900 MHz spectrum that were initiated by third parties. The adoption of a Notice of Inquiry does not mean that the FCC has accepted or denied our Joint Petition, or that our Joint Petition will or will not ultimately result in a Notice of Proposed Rulemaking. We continue to believe in the merits of our proposal, and that our Joint Petition is consistent with the FCC’s past practices and policies. Nevertheless, obtaining a favorable result from the FCC may take a significant amount of time and resources. Moreover, there is no assurance that the FCC will ultimately approve our Joint Petition or will conduct a rulemaking proceeding along the lines originally advocated by us.
In addition to this regulatory action, we are also pursuing a number of broadband and additional spectrum and wireless service opportunities, including but not limited to:
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In addition, we have recently elected to participate in the First Responder Network Authority (“FirstNet”) bid process. This opportunity involved government plans and a related process to provide use of spectrum and a substantial amount of funding for the build-out and operation of a dedicated Nationwide Public Safety Broadband Network (“NPSBN”) that also may be used, on a non-priority, excess capacity basis, to meet the wireless service needs of commercial customers. On October 17, 2016, we received written notice from the Contracting Officer of the U.S. Department of the Interior that our proposal for the FirstNet NPSBN was no longer being considered for the award.
Prior to acquiring our 900 MHz spectrum, we were engaged in the development and sale of wireless communications applications, marketed primarily under the name pdvConnect. We continue to be engaged in these business activities and primarily offer these applications indirectly to the end users of two Tier 1 wireless communications carriers in the United States and, until July 2015, one international wireless communications carrier, under licensing agreements between these carriers and us. We also offer these applications directly to end users.activities.
Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared in accordance with US GAAP,accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, our actual results could differ materially from those estimates.based on such estimates and assumptions. Further, to the extent that there are differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical performance, as these policies relate to the more significant areas involving our judgments and estimates.
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We believe that the areas described below are the most critical to aid in fully understanding and evaluating our reported financial results, as they require management’s most significant judgments in the application of accounting policy or in making estimates and assumptions that are inherently uncertain and that may change in subsequent periods. Our significant accounting policies are set forth in Note 2 to our consolidated financial statements. Of those policies, we believe that the policies discussed below may involve a higher degree of judgment and may be more critical to an accurate reflection of our financial condition and results of operations.
Revenue Recognition.We recognize revenue in the period that persuasive evidence of an arrangement exists, delivery of the product has occurred or services have been rendered, we are able to determine the amount of revenue and when the collection of such amount is considered probable. In accordance with the guidance provided in Accounting Standards Codification (“ASC”) Topic 605-45-45, (Revenue Recognition – Principal Agent Considerations), we have determined that we are the primary obligor with respect to the service revenue derived from sales of our software applicationspdvConnect through our Tier I domestic carrier partners. As a result, revenue is recorded at the gross amount billed to end-user customers for sales through these carrier partners. We recognized service revenue for our international carrier (which business relationship terminated in July 2015) on the net amount billed since we determined that we are not the primary obligor. We also sell service and applications directly to end-users, which are billed and collected directly by us.
In September 2014, Motorola paid us an upfront, fully-paid leasing fee of $7.5 million in order to lease a portion of our wireless spectrum licenses. The payment of the fee is accounted for as deferred revenue on our Consolidated Balance Sheets. We recognize leasing revenue in accordance with ASC Topic 840, Leases.(Leases). The fee is amortized using the straight-line method over the lease term of approximately ten years, which represents the time period in which the benefits of the leased property are expected to be depleted.
We evaluate certain transactions for our DispatchPlus service offering to determine whether they should be viewed as a Multiple Element Arrangement as provided in ASC Topic 605-25. Judgment is required to properly identify the accounting units of the multiple deliverable transactions and to determine the manner in which revenue should be allocated among the units of accounting. Multiple deliverable arrangements are presumed to be bundled transactions, and the total consideration is measured and allocated to the separate transactions based on their relative selling price with certain limitations. The relative selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price or third-party evidence of such selling price if VSOE does not exist. If neither VSOE nor third party evidence of selling price exist, we use ourthe Company uses its best estimate of the selling price for the deliverable. We determined that the rental of user devices in connection with service contracts for our DispatchPlus service are multiple deliverable arrangements.
Stock compensation.For purposes of calculating stock-based compensation, we estimate the fair value of stock options using a Black-Scholes option-pricing model. The determination of the fair value of option-based compensation utilizing the Black-Scholes model is affected by a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The expected term and volatility is based on the historical volatility of our common stock along with comparable public companies within our industry since we have a short history regarding these variables. The risk-free interest rate assumption is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of the options. The dividend yield assumption is zero since we have never paid and do not anticipate paying any cash dividends in the foreseeable future. In addition, we will continue to estimate the number of equity awards that are expected to vest based on historical forfeiture rates.
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The fair value of restricted stock and performance stock units are measured based on the quoted closing market price for the stock at the date of grant. The compensation cost for restricted stock is recognized on a straight-line basis over the vesting period. The compensation cost for the performance stock units is recognized when the performance criteria are complete.
We have not attributed tax benefits to the share-based compensation expense because we maintain a full valuation allowance for all net deferred tax assets.
Property and equipment. Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the applicable lease term. The carrying amount at the balance sheet date of long-lived assets under construction in process includes construction costs to date on capital projects that have not been completed, assets being constructed that are not ready to be placed in service, and assets that are not currently in service. These costs will be transferred to property and equipment when substantially all of the activities necessary to prepare the assets for their intended use are completed. Depreciation commences upon completion.
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Intangible Assets. Intangible assets are wireless licenses that will be used to provide us with the exclusive right to utilize designated radio frequency spectrum to provide wireless communication services. While licenses are issued for only a fixed time, generally ten years, such licenses are subject to renewal by the FCC. License renewals have occurred routinely and at nominal cost.cost in the past. There are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the company’sour wireless licenses. As a result, we have determined that the wireless licenses areshould be treated as an indefinite-lived intangible asset. We will evaluate the useful life determination for our wireless licenses each year to determine whether events and circumstances continue to support our treatment as an indefinite useful life. life asset.
The licenses are tested for impairment on an aggregate basis, sinceas we will be utilizing the wireless licenses on an integrated basis as a part of developing our nationwide network. Before employing detailed impairment testing, we first evaluate the likelihood of impairment by considering relevant qualitative factors that may have a significant bearing on fair value. If we determine that it is more likely than not that the wireless licenses are impaired, we will apply a quantitative analysis including detailed testing methodologies. Otherwise, we will conclude that no impairment exists. In the event a quantitative analysis is required, we will consider estimates of valuation methods to perform the test of the fair values of the wireless licenses using, among other things, market based and discounted cash flow approaches.
Long-Lived Asset Impairment. We evaluate long-lived assets for impairment, other than intangible assets with indefinite lives, whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Asset groups are determined at the lowest level for which identifiable cash flows are largely independent of cash flows of other groups of assets and liabilities. When the carrying amount of a long-lived asset group is not recoverable and exceeds its fair value, an impairment loss is recognized equal to the excess of the asset group’s carrying value over the estimated fair value.
Income taxes. We followutilize the asset and liability method of accounting for income taxes. Under this method, taxes consistdeferred tax assets and liabilities are recognized for the expected future tax consequences of taxes currently payable plus those deferred due to temporary differences between the financial statement carrying amounts and the tax bases of certain assets and liabilities usingas well as from net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates expected to beis recognized in effect whenoperations in the temporary differences reverse.period that includes the enactment date. A valuation allowance is providedestablished when it is estimated that it is more likely than not that some portion or the entiretax benefit of a deferred tax asset will not be realized.
Accounting for uncertainty in income taxes. We recognize the effect of tax positions only when they are more likely than not to be sustained. Our management has determined that we had no uncertain tax positions that would require financial statement recognition or disclosure. We are no longer subject to U.S. federal, state or local income tax examinations for periods prior to 2013.
JOBS Act. As an emerging growth company, or EGC, under the JOBS Act we are eligible for exemptions from various reporting requirements applicable to other public companies that are not EGCs, including, but not limited to:
· | Not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002; |
· | Reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and |
· | Exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
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As an EGC, we are also eligible to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, we could delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Nevertheless, we have elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards onno later than the relevant dates on which adoption of such standards is required for other public companies.
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Results of Operations
Comparison of the three and six months ended September 30, 20162017 and 20152016
The following table sets forth our results of operations for the three and six months ended September 30, 20162017 and 2015.2016. The period-to-period comparison of financial results is not necessarily indicative of the financial results we will achieve in future periods.
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| Three months ended |
| Six months ended |
| Three months ended |
| Six months ended | ||||||||||||||||
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| September 30, |
| September 30, | ||||||||||||||||||||
(dollars in thousands, except share data) |
| September 30, |
| September 30, | ||||||||||||||||||||
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| 2016 |
| 2015 |
| 2016 |
| 2015 |
| 2017 |
| 2016 |
| 2017 |
| 2016 | ||||||||
Operating revenues |
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| (Unaudited) |
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| (Unaudited) |
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| (Unaudited) |
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| (Unaudited) |
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| (Unaudited) |
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| (Unaudited) |
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| (Unaudited) |
|
| (Unaudited) |
Service revenue |
| $ | 885,271 |
| $ | 622,019 |
| $ | 1,650,576 |
| $ | 1,270,681 |
| $ | 1,163 |
| $ | 885 |
| $ | 2,268 |
| $ | 1,651 |
Spectrum lease revenue |
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| 182,186 |
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| 182,187 |
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| 364,372 |
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| 364,373 |
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| 182 |
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| 182 |
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| 364 |
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| 364 |
Other revenue |
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| 74,050 |
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| 7,252 |
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| 172,341 |
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| 17,264 |
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| 168 |
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| 74 |
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| 346 |
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| 172 |
Total operating revenues |
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| 1,141,507 |
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| 811,458 |
| $ | 2,187,289 |
| $ | 1,652,318 |
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| 1,513 |
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| 1,141 |
| $ | 2,978 |
| $ | 2,187 |
Cost of revenue |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and service |
|
| 1,674,941 |
|
| 490,585 |
|
| 3,258,722 |
|
| 865,759 |
|
| 1,911 |
|
| 1,675 |
|
| 3,612 |
|
| 3,258 |
Gross profit (loss) |
|
| (533,434) |
|
| 320,873 |
|
| (1,071,433) |
|
| 786,559 | ||||||||||||
Gross loss |
|
| (398) |
|
| (534) |
|
| (634) |
|
| (1,071) | ||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 5,476,566 |
|
| 4,588,841 |
|
| 13,222,566 |
|
| 8,311,247 |
|
| 4,995 |
|
| 5,477 |
|
| 9,876 |
|
| 13,222 |
Sales and support |
|
| 1,219,744 |
|
| 885,007 |
|
| 2,435,985 |
|
| 1,696,682 |
|
| 1,703 |
|
| 1,220 |
|
| 3,390 |
|
| 2,436 |
Product development |
|
| 621,923 |
|
| 336,200 |
|
| 1,194,844 |
|
| 641,097 |
|
| 628 |
|
| 622 |
|
| 1,180 |
|
| 1,195 |
Total operating expenses |
|
| 7,318,233 |
|
| 5,810,048 |
|
| 16,853,395 |
|
| 10,649,026 |
|
| 7,326 |
|
| 7,319 |
|
| 14,446 |
|
| 16,853 |
Loss from operations |
|
| (7,851,667) |
|
| (5,489,175) |
|
| (17,924,828) |
|
| (9,862,467) |
|
| (7,724) |
|
| (7,853) |
|
| (15,080) |
|
| (17,924) |
Interest expense |
|
| (1,363) |
|
| — |
|
| (2,727) |
|
| — |
|
| (1) |
|
| (1) |
|
| (1) |
|
| (3) |
Interest income |
|
| 25,529 |
|
| 29,293 |
|
| 48,058 |
|
| 51,513 |
|
| 184 |
|
| 26 |
|
| 297 |
|
| 48 |
Other income (expense) |
|
| (4,793) |
|
| 1,250 |
|
| (4,793) |
|
| 1,250 |
|
| (2) |
|
| (5) |
|
| (20) |
|
| (5) |
Loss before income taxes |
|
| (7,543) |
|
| (7,833) |
|
| (14,804) |
|
| (17,884) | ||||||||||||
Income tax expense |
|
| 656 |
|
| — |
|
| 1,305 |
|
| — | ||||||||||||
Net loss |
| $ | (7,832,294) |
| $ | (5,458,632) |
| $ | (17,884,290) |
| $ | (9,809,704) |
| $ | (8,199) |
| $ | (7,833) |
| $ | (16,109) |
| $ | (17,884) |
Net loss per common share basic and diluted |
| $ | (0.54) |
| $ | (0.38) |
| $ | (1.24) |
| $ | (0.70) |
| $ | (0.57) |
| $ | (0.54) |
| $ | (1.12) |
| $ | (1.24) |
Weighted-average common shares used to compute basic |
|
| 14,383,224 |
|
| 14,379,082 |
|
| 14,379,366 |
|
| 13,938,243 |
|
| 14,447,499 |
|
| 14,383,224 |
|
| 14,442,769 |
|
| 14,379,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues. Overall operating revenues increased by $0.3$0.4 million, or 41%33%, to $1.5 million for the three months ended September 30, 2017 from $1.1 million for the three months ended September 30, 2016 from $0.8 million for2016. The increase in the three months ended September 30, 2015. Operating revenue increased $0.5 million, or 32%, for the six months ended September 30, 2016 to $2.2 million from $1.7 million for the six months ended September 30, 2015. The increases in the three and six months ended September 30, 2016 areis primarily attributable to the increase in our DispatchPlus business, which was launched in June 2015.business. The $0.3 and $0.4 million increase in service revenue for the three and six months ended September 30, 2016, respectively,2017 resulted primarily from thean increase in number of DispatchPlus business.subscribers. Other revenue, which primarily consists of equipment sales and rentals for the DispatchPlus business, increased by approximately $0.1 million, or 921%127%, to $0.1$0.2 million during the three months ended September 30, 20162017 compared to the three months ended September 30, 2015. For2016. Operating revenues increased $0.8 million, or 36%, to $3.0 million for the six months ended September 30, 2016, other2017 from $2.2 million for the six months ended September 30, 2016. The increase resulted from the growth in our DispatchPlus business. The $0.6 million increase in service revenue was due to the increase in DispatchPlus subscribers. Other revenue, which primarily consists of equipment sales and rentals for the DispatchPlus business, increased by approximately $0.2 million, or 898%101%, to $0.2 millionfor the six months ended September 30, 2017 compared to the six months ended September 30, 2015.2016.
25
Cost of revenue. Cost of revenue for the three months ended September 30, 20162017 increased by approximately $1.2$0.2 million, or 241%14%, to $1.7$1.9 million from $0.5$1.7 million for three months ended September 30, 2015.2016. For the six months ended September 30, 2017, cost of revenue increased by $0.4 million, or 11%, to $3.6 million from $3.2 million for the six months ended September 30, 2016. The increase for the three monthsmonth and six month periods resulted primarily from $1.0 million inthe costs to maintain and operate our launched PTT networks for our DispatchPlus business. Cost
26
Gross profit (loss).loss. Gross profit (loss)loss decreased by $0.8$0.1 million for the three months ended September 30, 20162017 to ($0.50.4 million) from $0.3 million($0.5 million) for the three months ended September 30, 2015. For the six months ended September 30, 2016, gross profit2016. Gross loss decreased by $1.9 million, or 236%, to ($1.1 million) from $0.8$0.4 million for the six months ended September 30, 2015.The2017 to ($0.6 million) from ($1.1 million) for the six months ended September 30, 2016. The primary driver for the declinelower gross loss for the three and six month periods were the costs incurred to supportincreases in operating revenues, primarily from our DispatchPlus business.
General and administrative expenses. General and administrative expenses for the three months ended September 30, 2016 increased2017 decreased by $0.9$0.5 million, or 19%9%, to $5.5$5.0 million from $4.6$5.5 million for three months ended September 30, 2015.2016. The decrease in general and administrative expenses for the three months ended September 30, 2017 resulted primarily from lower consulting services due to $1.2 million spending for the First Net bid opportunity during the three months ended September 30, 2016. This decrease was partially offset by $0.4 million increased stock compensation costs and $0.2 million in headcount costs. For the six months ended September 30, 2016,2017, general and administrative expenses increasedcosts decreased by $4.9$3.3 million, or 59%25%, to $13.2$9.9 million from $8.3$13.2 million for the six months ended September 30, 2015.2016. The increase in general and administrative expenses for the three and six months ended September 30, 2016 resulteddecrease related primarily from $1.1 million andto $4.3 million respectively,in costs incurred for consulting services related to our spectrum initiatives, including principally the FirstNet bid opportunity. For the three months ended September 30, 2016, the increase was partially offset by $0.3 million in lower employer payroll taxes. The additional increaseopportunity for the six months ended September 30, 2016 resulted from2016. This decrease was partially offset by $0.5 million for increasedin higher headcount costs.
Sales and support expenses. Sales and support expenses increased by $0.3$0.5 million, or 38%39%, to $1.2$1.7 million for three months ended September 30, 20162017 from $0.9$1.2 million for the three months ended September 30, 2015.2016. For the six months ended September 30, 2016,2017, sales and support expenses increased by $0.7$1.0 million, or 44%39%, to $2.4$3.4 million from $1.7$2.4 million for the six months ended September 30, 2015. For the three and six months ended September 30, 2016, the2016. The increases were due primarily to a $0.2 million and $0.4 million, respectively, forin both periods resulted from increased headcount and related costs and $0.1 million and $0.3 million, respectively, for indirect commissions provided to our third-party sales representatives to support our DispatchPlus business.costs.
Product development expenses. Product development expenses increased by $0.3 million, or 85%, to $0.6 millionremained relatively flat for the three months ended September 30, 2016 from $0.3 million for the three months ended September 30, 2015. For theand six months ended September 30, 2016, product development expense increased by $0.6 million, or 86%,2017 as compared to $1.2 million from $0.6 million for the three months and six months ended September 30, 2015. The increases for both periods resulted primarily from an increase in headcount and the related costs. 2016.
Interest expense. Interest expense incurred for the three and six months ended September 30, 2017 and September 30, 2016 relates to our promissory note issued in October 2015 in connection with the acquisition of wireless licenses.
Interest income. The $0.1 million increase in interest income earned for the three months ended September 30, 2017 and the $0.2 million increase for the six months ended September 30, 2017 resulted from higher returns on the amounts held in our money market funds.
Income tax expense. The $0.7 million non-cash charge recorded for the three months ended September 30, 2017 and $1.3 million non-cash charge recorded for the six months ended September 30, 2017 was primarily a result of an adjustment to the valuation allowance against our deferred tax assets related to the tax amortization of the Company’s indefinite-lived intangible assets.
Liquidity and Capital Resources
At September 30, 2016,2017, we had cash and cash equivalents of $137.0$110.5 million.
Our accounts receivable areis heavily concentrated in two of ourone Tier 1 domestic carrier partners.partner. As of September 30, 2016,2017, our accounts receivable balance was approximately $653,000$0.7 million, of which approximately $303,000$0.5 million, or approximately 66%, was due from onethe third-party Tier 1 domestic carrier and approximately $152,000 was due from another third-party Tier 1 carrier, or approximately 46% and 23%, respectively, of our outstanding accounts receivable balance.partner.
Net cash used by operating activities. Net cash used in operating activities was $11.3 million for the six months ended September 30, 2017, as compared to $15.3 million for the six months ended September 30, 2016, as compared to $10.1 million for2016. The majority of net cash used by operating activities during the six months ended September 30, 2015.2017 resulted from the net loss of $16.1 million, which includes the costs incurred to support our DispatchPlus business, offset by a reduction in stock-based compensation of $2.5 million. The majority of net cash used by operating activities during the six months ended September 30, 2016 resulted from the net loss of $17.9 million, which includes the costs incurred to support our Dispatch PlusDispatchPlus business, partially offset by a reduction in stock-based compensation of $2.4 million. The net cash used in operating activities during the six months ended September 30, 2015 was attributable to the net loss of $9.8 million, which included the costs incurred to support our DispatchPlus business, and a $2.7 million decrease in accounts payable and accrued expenses, partially offset by stock-based compensation of $2.5 million.
Net cash used by investing activities. Net cash used in investing activities was approximately $1.2$2.4 million for the six months ended September 30, 2016,2017, as compared to $5.4$1.2 million used for the six months ended September 30, 2015.2016. The net cash used during the six months ended September 30, 2017 resulted from $1.7 million in wireless license acquisitions and $0.7 million for the continuing equipment purchases and construction costs related to the buildout of additional network sites for our DispatchPlus business. The net cash used during the six months ended September 30, 2016 resulted from $0.5 million in wireless license acquisitions and $0.7 million for the continuing equipment purchases and construction costs related to the buildout of our network for our DispatchPlus business. The net cash used in investing activities used during the six months ended September 30, 2015
2627
resulted from $1.1 million in wireless license acquisitions and $4.2 million for the equipment and construction costs related to the buildout of our PTT networks for our DispatchPlus business.
Net cash from financing activities. For the six months ended September 30, 2017, there was $0.2 million in cash provided by financing activities resulting from stock option exercises. For the six months ended September 30, 2016, there was no cash provided by financing activities. The $64.8 million net cash provided from financing activities in the six months ended September 30, 2015 resulted from the net proceeds from our follow-on public offering in May 2015.
During the year ended March 31, 2016, we commenced service in seven major metropolitan market areas within the United States, including Houston, Dallas, Atlanta, Philadelphia, Chicago, the greater New York area and Baltimore/Washington.
We estimate that the initial capital cost to deploy our PTT networks in major metropolitan areas will range from $1.5 million to $2.0 million per market, which amount includes the cost of equipment, design and buildout of our PTT networks.
We intend to continue to focus our efforts on the initial seven markets where we have commenceddeployed our DispatchPlus service until we determine which sales and marketing approaches produce the best results.prove out our DispatchPlus business model in those markets. We have continued, however, to prepareprepared for the rollout of our DispatchPlus service in more than thirteen additional markets by completing initial network designs and, in some markets, pursuingadditional site development efforts, including site selection and lease negotiation.activities. We believe this approach will allow us to more quickly and effectively proceed with new market deployments when we determine it is best to do so. We also believe this approach will provide us with additional time and financial flexibility to refine our longer-termlonger term strategies, including those related to our Joint Petition for Rulemaking with the FCC.FCC initiatives and related activities.
Our future capital requirements will depend on many factors, including: the timing and amount of the revenues we generate from our DispatchPlus services and other product offerings; the timingnetwork and extent of expendituresmobile communication solutions we elect to support the rollout of our PTT dispatch networks;offer; the development of new service offerings; the cost and success of our sales and marketing activities and initiatives; the timeline and results of our FCC initiatives and related activities; the FCC regulatory process we are pursuing to realign a portion of the 900 MHz spectrum from narrowband to broadband and theexpenses associated with our other spectrum initiatives we electinitiatives; and our ability to pursue. We have incurred costs in pursuing the FirstNet bid opportunitycontrol our operating expenses related to our DispatchPlus business and believe we may incur additional costs to wind down our efforts with respect to the FirstNet bid opportunity.spectrum activities and initiatives. We believe our cash and cash equivalents on hand will be sufficient to satisfymeet our financial obligations through at least the next 12 months.
On November 3, 2016, we filed a shelf registration statement (the “Shelf Registration Statement”) on Form S-3 with the SEC that was declared effective by the SEC on November 16, 2016, which permits us pending the SEC declaring the Shelf Registration Statement effective, to offer up to $100,000,000$100 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time. Our Shelf Registration Statement is intended to provide us with additional flexibility to access capital markets for general corporate purposes, which may include working capital, capital expenditures, repayment of debt, other corporate expenses and acquisitions of complementary products, technologies or businesses.
We cannot predict with certainty when, if ever, we will require additional capital to further fund our current or future business plan.plans and initiatives. Presently, we intend to cover our future operating expenses through cash on hand and from revenue derived primarily from our planned sales of our DispatchPlus and pdvConnect services and product offerings. With the recent commercial launch of seven markets (as noted above), revenues from our DispatchPlus business have only recently begun to be realized, and we have not recognized significant amounts of revenue from this business through September 30, 2016. Nevertheless, weWe may experience greater than expected cash usage to support our operating activities and business plan and/or our revenues may be lower than, or take more time to develop, than we anticipate. See “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2016,2017, filed with the SEC on June 13, 20166, 2017 for risks and uncertainties that could cause our operating costs to be more than we currently anticipate and/or our revenue and operating results to be lower than we currently anticipate. As a result, we cannot provide assurance that we will not require additional funding in the future to support our operations, including through the sale of securities pursuant to our Shelf Registration Statement.future. In addition, we continuously evaluate and may elect to acquire businesses, technologies or spectrum or license technologies from third parties for or in connection with our spectrum initiatives. We also intend to pursue the development and offering of additional next generation network and mobile communications solutions. As a result, we may decide to pursue raisingraise additional capital through debt or equity financing, including pursuant to our Shelf Registration Statement, to the extent we believe this is necessary to successfully complete these acquisitions or license these technologies or pursue spectrum or other business opportunities. However, we cannot be sure that additional financing will be available if and when needed, or that, if available, we can obtain financing on terms favorable to us and our stockholders. Any failure to obtain financing when required would have a material adverse effect on our business, operating results, financial condition and liquidity.
Off-balance sheet arrangements
As of September 30, 20162017 and March 31, 2016,2017, we did not have and do not have any relationships with unconsolidated entities or financial partnerships that were established for the purpose of facilitating off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
27
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our financial instruments consist of cash, cash equivalents, trade accounts receivable and accounts payable. We consider investments in highly liquid instruments purchased with original maturities of 90 days or less to be cash equivalents. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the highly liquid instruments in our portfolio, a 10% change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations.
Our operations are based in the United States and, accordingly, all of our transactions are denominated in U.S. dollars. We are currently not exposed to market risk from changes in foreign currency.
28
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, has concluded that our disclosure controls and procedures were effective as of the end of such period.
Changes in Internal Control over Financial Reporting
In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that no changes in our internal control over financial reporting occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
29
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
2830
We are not involved in any material legal proceedings.
In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q as well as the risk factors disclosed in our Annual Report on Form 10-K for the year ended March 31, 2016,2017, filed with the Securities and Exchange Commission (the “SEC”) on June 13, 2016.6, 2017 (the “Form 10-K”) and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed with the SEC on August 8, 2017 (the ”First Quarter Form 10-Q”). There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K.10-K and in our First Quarter Form 10-Q. Any of the risks discussed in this Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K and in our First Quarter Form 10-Q, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Use of Proceeds
On May 18, 2015, we completed a public offering of our common stock in which we raised net proceeds of approximately $64.8 million. We registered the shares of common stock issued in the offering on a Registration Statement on Form S-1 (File No. 333-203681), which the SEC declared effective on May 12, 2015. Through September 30, 2016,2017, we have used approximately $11.7$17.1 million of the net proceeds from this offering. We did not complete any transaction in which we paid any of these proceeds, directly or indirectly, to our directors or officers, to any person owning 10% or more of any class of our equity securities, to any associate of any of the foregoing, or to any of our affiliates. There has been no material change in the expected uses of the net proceeds from the offering as described in our Registration Statement.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
See Exhibit Index.
2931
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 hereunto duly authorized.
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| pdvWireless, |
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Date: | November |
| /s/ John C. Pescatore |
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| John C. Pescatore |
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| President and Chief Executive Officer (Principal Executive Officer) |
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| /s/ Timothy A. Gray |
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| Timothy A. Gray |
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| Chief Financial Officer (Principal Financial and Accounting Officer) |
3032
EXHIBIT INDEX
|
|
|
|
Exhibit | Description of Exhibit |
3.1(1) | |
| Amended and Restated Certificate of Incorporation of pdvWireless, Inc. (the “Company”). |
3.2(2) | |
| Certificate of Amendment No. 1 to Amended and Restated Certificate of Incorporation of the Company. |
3.3(3) | |
| |
4.1(1) | |
| |
4.2(1) | |
| |
4.3(1) | |
| |
4.4(1) | |
| |
| |
| |
32.1* | |
| |
32.2* | |
| |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
____________
(1)Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-201156), filed with the SEC on December 19, 2014.
(2)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on November 5, 2015.
(3)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on June 27, 2017.
*The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.