(Mark
One)
|
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
|
FOR
THE PERIOD ENDING JUNE 30, 2007
|
|
OR
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
|
FOR
THE TRANSITION PERIOD FROM
TO
|
COMMISSION
FILE NUMBER 0 - 1325
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
June
30,
|
June
30,
|
||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||
REVENUES
|
$
|
3,921,726
|
$
|
4,501,737
|
$
|
8,306,681
|
$
|
8,905,781
|
|||||
COSTS
AND EXPENSES
|
|||||||||||||
Cost
of products and services (exclusive of depreciation and amortization
shown
separately below)
|
1,871,238
|
1,937,898
|
4,049,284
|
3,994,425
|
|||||||||
Selling,
general and administrative
|
2,308,426
|
2,909,038
|
4,697,682
|
5,881,261
|
|||||||||
Depreciation
and amortization
|
995,068
|
1,308,614
|
2,044,766
|
2,611,070
|
|||||||||
Total
Costs and Expenses
|
5,174,732
|
6,155,550
|
10,791,732
|
12,486,756
|
|||||||||
LOSS
FROM OPERATIONS
|
(1,253,006
|
)
|
(1,653,813
|
)
|
(2,485,051
|
)
|
(3,580,975
|
)
|
|||||
OTHER
EXPENSE
|
|||||||||||||
Interest
expense
|
(168,010
|
)
|
(325,523
|
)
|
(321,417
|
)
|
(630,204
|
)
|
|||||
Other
income
|
141,037
|
35,949
|
164,094
|
77,386
|
|||||||||
Total
Other Expense
|
(26,973
|
)
|
(289,574
|
)
|
(157,323
|
)
|
(552,818
|
)
|
|||||
LOSS
FROM CONTINUING OPERATIONS
|
(1,279,979
|
)
|
(1,943,387
|
)
|
(2,642,374
|
)
|
(4,133,793
|
)
|
|||||
INCOME
FROM DISCONTINUED OPERATIONS
|
-
|
-
|
-
|
2,200
|
|||||||||
NET
LOSS
|
(1,279,979
|
)
|
(1,943,387
|
)
|
(2,642,374
|
)
|
(4,131,593
|
)
|
|||||
Preferred
Stock Dividends
|
120,474
|
2,522,342
|
360,401
|
2,785,448
|
|||||||||
LOSS
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
(1,400,453
|
)
|
$
|
(4,465,729
|
)
|
$
|
(3,002,775
|
)
|
$
|
(6,917,041
|
)
|
|
BASIC
AND DILUTED - LOSS PER COMMON SHARE
|
|||||||||||||
Loss
from continuing operations
|
(.20
|
)
|
(.67
|
)
|
(.42
|
)
|
(1.05
|
)
|
|||||
Income
from discontinued operations
|
.00
|
.00
|
.00
|
.00
|
|||||||||
LOSS
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
(.20
|
)
|
(.67
|
)
|
(.42
|
)
|
(1.05
|
)
|
|||||
WEIGHTED
AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED
|
7,093,071
|
6,703,070
|
7,086,462
|
6,567,873
|
|
June
30, 2007
|
December
31, 2006
|
|||||
(unaudited)
|
(audited)
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|
|
|||||
Cash
and cash equivalents
|
$
|
618,150
|
$
|
1,020,975
|
|||
Accounts
receivable, net
|
1,561,389
|
2,018,393
|
|||||
Inventories
|
153,151
|
343,815
|
|||||
Prepaid
expenses and other
|
199,988
|
181,767
|
|||||
Current
portion of notes receivable
|
7,439
|
6,116
|
|||||
Total
Current Assets
|
2,540,117
|
3,571,066
|
|||||
PROPERTY
AND EQUIPMENT, NET
|
2,768,342
|
3,359,842
|
|||||
OTHER
ASSETS
|
|||||||
Goodwill
|
509,086
|
509,086
|
|||||
Intangible
assets, net
|
7,548,142
|
9,124,980
|
|||||
Assets
held for sale
|
-
|
1,244,236
|
|||||
Notes
receivable - long-term, net
|
57,615
|
63,740
|
|||||
Other
assets
|
134,744
|
113,106
|
|||||
Total
Other Assets
|
8,249,587
|
11,055,148
|
|||||
TOTAL
ASSETS
|
$
|
13,558,046
|
$
|
17,986,056
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Checks
issued in excess of cash in bank
|
$
|
-
|
$
|
319,244
|
|||
Current
portion of long-term debt
|
622,051
|
1,255,994
|
|||||
Current
portion of note payable - stockholder
|
-
|
24,739
|
|||||
Current
portion of capital lease obligations
|
460,296
|
444,921
|
|||||
Accounts
payable
|
2,826,493
|
2,557,409
|
|||||
Accrued
liabilities
|
2,301,120
|
2,977,356
|
|||||
Customer
deposits
|
60,707
|
61,332
|
|||||
Current
liabilities of discontinued operations
|
-
|
125,000
|
|||||
Deferred
service obligations and revenue
|
396,905
|
819,316
|
|||||
Mandatory
redeemable preferred stock, 24,126 and 28,000 Class F preferred
shares
|
241,256
|
280,000
|
|||||
Total
Current Liabilities
|
6,908,828
|
8,865,311
|
|||||
LONG-TERM
LIABILITIES
|
|||||||
Long-term
debt, net
|
2,607,525
|
2,969,764
|
|||||
Capital
lease obligations, net of current portion
|
354,459
|
491,672
|
|||||
Total
Liabilities
|
9,870,812
|
12,326,747
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
STOCKHOLDERS'
EQUITY
|
|||||||
Cumulative
convertible preferred stock, no par value:
|
|||||||
8%
Class A (26,658 shares issued and outstanding, $279,909 liquidation
preference)
|
400,657
|
400,657
|
|||||
10%
Class B (4,370 and 7,470 shares issued and outstanding, $45,885
and
$78,435 liquidation preference)
|
43,700
|
49,700
|
|||||
10%
Class C (122,710 and 124,130 shares issued and outstanding, $1,227,100
and
$1,241,300 liquidation preference)
|
1,575,900
|
1,593,476
|
|||||
10%
Class F (150,000 shares issues and outstanding, $1,500,000 liquidation
preference)
|
1,500,000
|
1,500,000
|
|||||
8%
Class G (38,195 shares issued and outstanding, $381,950 liquidation
preference)
|
161,431
|
161,431
|
|||||
6%
Class H (2.0 shares issued and outstanding, $200,000 liquidation
preference)
|
-
|
-
|
|||||
Variable
rate % Class I (57,500 shares issued and outstanding, $5,750,000
liquidation preference)
|
-
|
-
|
|||||
Common
stock, no par value (7,119,743 and 7,033,632 shares issued and
outstanding)
|
27,464,019
|
26,873,255
|
|||||
Stock
subscriptions receivable
|
(200,148
|
)
|
(229,927
|
)
|
|||
Options
and warrants
|
45,526,734
|
45,093,001
|
|||||
Accumulated
deficit
|
(72,785,059
|
)
|
(69,782,284
|
)
|
|||
Total
Stockholders' Equity
|
3,687,234
|
5,659,309
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
13,558,046
|
$
|
17,986,056
|
|||
SIX
MONTHS ENDED
JUNE
30,
|
|||||||
2007
|
2006
|
||||||
(unaudited)
|
(unaudited)
|
||||||
OPERATING
ACTIVITIES
|
|||||||
Net
loss
|
$
|
(2,642,374
|
)
|
$
|
(4,131,593
|
)
|
|
Adjustments
to reconcile net loss to net cash flows from operating
activities
|
|||||||
Depreciation
and amortization
|
2,052,752
|
2,709,244
|
|||||
Amortization
of deferred compensation
|
-
|
29,480
|
|||||
Amortization
of original issue discount
|
16,589
|
246,818
|
|||||
Loss(gain)
on sale of property and equipment
|
(284,516
|
)
|
2,859
|
||||
Warrants
issued for services
|
42,300
|
607
|
|||||
Gain
on debt extinguishment
|
(118,040
|
)
|
-
|
||||
Common
stock issued for services
|
-
|
1,156
|
|||||
Stock
based compensation expense
|
391,433
|
485,521
|
|||||
Change
in allowance for doubtful accounts on accounts receivable
|
(40,000
|
)
|
(173,200
|
)
|
|||
Change
in reserve for stock subscriptions and interest receivable
|
30,000
|
21,434
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
488,075
|
493,135
|
|||||
Inventories
|
188,229
|
18,736
|
|||||
Prepaid
expenses and other
|
138,403
|
40,929
|
|||||
Other
assets
|
(21,638
|
)
|
35,988
|
||||
Accounts
payable and accrued liabilities
|
(324,974
|
)
|
(143,701
|
)
|
|||
Deferred
service obligations and revenue
|
(414,289
|
)
|
48,253
|
||||
Liabilities
of discontinued operations
|
(125,000
|
)
|
(250,000
|
)
|
|||
Customer
deposits
|
_
_ _(625
|
)
|
(2,150
|
)
|
|||
Net
cash flows from operating activities
|
(623,675
|
)
|
(566,484
|
)
|
|||
INVESTING
ACTIVITIES
|
|||||||
Purchases
of property and equipment
|
(240,881
|
)
|
(580,049
|
)
|
|||
Purchases
of intangible assets
|
-
|
(10,750
|
)
|
||||
Proceeds
from sale of property and equipment
|
1,174,486
|
-
|
|||||
Collections
on notes receivable
|
4,802
|
1,859
|
|||||
Net
cash flows from investing activities
|
938,407
|
(588,940
|
)
|
||||
FINANCING
ACTIVITIES
|
|||||||
Checks
issued in excess of cash in bank
|
(319,244
|
)
|
188,849
|
||||
Payments
on long-term debt
|
(142,569
|
)
|
(460,037
|
)
|
|||
Payments
on capital lease obligations
|
(121,838
|
)
|
(75,742
|
)
|
|||
Payments
on note payable to stockholder
|
(24,739
|
)
|
(2,837
|
)
|
|||
Payments
on mandatory redeemable preferred stock
|
(38,744
|
)
|
(53,334
|
)
|
|||
Payments
for stock issuance costs
|
(11,707
|
)
|
-
|
||||
Payments
received on stock subscriptions receivable
|
62
|
5,721
|
|||||
Redemption
of preferred stock
|
(45,200
|
)
|
(14,200
|
)
|
|||
Preferred
stock dividends
|
(13,578
|
)
|
(107,839
|
)
|
|||
Exercise
of stock options
|
-
|
18,000
|
|||||
Net
cash flows from financing activities
|
(717,557
|
)
|
(501,419
|
)
|
|||
DECREASE
IN CASH AND CASH EQUIVALENTS
|
(402,825
|
)
|
(1,656,843
|
)
|
|||
CASH
AND CASH EQUIVALENTS
|
|||||||
Beginning
of period
|
1,020,975
|
3,100,427
|
|||||
End
of period
|
$
|
618,150
|
$
|
1,443,584
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|||||||
Cash
paid for interest, net of amortization of original issue
discount
|
$
|
258,504
|
$
|
258,754
|
|||
SUPPLEMENTAL
DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|||||||
Conversion
of accrued interest into common stock
|
15,680
|
-
|
|||||
Conversion
of preferred stock into common stock
|
-
|
2,370,000
|
|||||
Current
liabilities converted to stock
|
-
|
28,653
|
|||||
Conversion
of notes payable into common stock
|
-
|
200,000
|
|||||
Conversion
of accrued dividends into common stock
|
474,291
|
363,114
|
|||||
Intrinsic
value of preferred dividends
|
21,624
|
-
|
|||||
Capital
lease obligations related to property and equipment
|
-
|
259,120
|
|||||
Common
stock issued for prepaid expense/service
|
112,500
|
-
|
|||||
Note
payable executed for prepaid expense/service
|
44,407
|
-
|
|||||
Debt
and interest assumed by Directech for other current asset
|
267,143
|
-
|
1.
|
Reduction
of operating expenses by controlling payroll, professional fees and
other
general and administrative
expenses.
|
2.
|
Sale
of video subscriber assets on a strategic basis. The Company, based
on
recent transactions, believes there is an active market for its
video
subscriber assets. The Company believes that it can sell these
assets,
under certain circumstances, at prices at or above their current
carrying
value. However, there is no guarantee that these sales will ultimately
be
favorable to the Company.
|
3.
|
Solicit
additional equity investment in the Company by either issuing preferred
or
common stock.
|
4.
|
Continue
to market Multiband services and acquire additional multi-dwelling
unit
customers.
|
5.
|
Control
capital expenditures by contracting Multiband services and equipment
through a landlord-owned equipment
program.
|
6.
|
Establish
market for wireless internet
services.
|
7.
|
Expansion
of call center support via sales of call center services to both
existing
and future system operators and to buyers of the Company’s video
subscribers.
|
June
30, 2007
|
December
31, 2006
|
||||||||||||
|
Gross
Carrying
|
Accumulated
|
Gross
Carrying
|
Accumulated
|
|||||||||
Amount
|
Amortization
|
Amount
|
Amortization
|
||||||||||
Intangible
assets subject to amortization
|
|||||||||||||
Domain
name
|
$
|
83,750
|
$
|
83,750
|
$
|
83,750
|
$
|
83,750
|
|||||
Right
of entry contracts
|
5,929,094
|
2,876,466
|
8,955,558
|
3,591,598
|
|||||||||
Subscriber
lists
|
9,697,879
|
5,209,018
|
9,697,879
|
4,411,865
|
|||||||||
Debt
issuance costs
|
499,837
|
493,184
|
499,837
|
485,198
|
|||||||||
Total
|
16,210,560
|
8,662,418
|
19,237,024
|
8,572,411
|
|||||||||
Impairment
of intangibles
|
-
|
-
|
-
|
1,539,633
|
|||||||||
Total
including impairment
|
$
|
16,210,560
|
$
|
8,662,418
|
$
|
19,237,024
|
$
|
10,112,044
|
Three
months
ended
June
30, 2007
|
Three
months
ended
June
30, 2006
|
Six
months
ended
June
30, 2007
|
Six
months
ended
June
30, 2006
|
|||||
Risk-free
interest rate
|
4.50%
|
4.88%
|
4.63%
|
4.69%
|
||||
Expected
life of options granted
|
10
Years
|
10
Years
|
10
Years
|
10
Years
|
||||
Expected
volatility range
|
240%
|
215%
|
236%
|
215%
|
||||
Expected
dividend yield
|
0%
|
0%
|
0%
|
0%
|
Sale
price
|
||||
Cash
proceeds on March 1, 2007
|
$
|
1,214,000
|
||
Cash
proceeds at second closing March 30, 2007
|
100,000
|
|||
Total
initial sale price
|
1,314,000
|
|||
Debt
paid which was secured by assets sold
|
556,268
|
|||
Net
proceeds
|
757,732
|
|||
Net assets
sold - MCS segment
|
1,244,673
|
|||
Less
costs and expenses
|
109,437
|
|||
Loss
on sale of assets
|
$
|
40,110
|
Sale
price
|
||||
Cash
proceeds on April 20, 2007
|
$
|
416,754
|
||
Liabilities
assumed
|
267,143
|
|||
Total
initial sale price
|
683,897
|
|||
Net
assets sold - MCS segment
|
359,271
|
|||
Gain
on sale of assets
|
$
|
324,626
|
Number
of
Warrants
|
Weighted
- Average
Exercise Price
|
||||||
Outstanding,
December 31, 2006
|
3,488,329
|
7.94
|
|||||
Granted
|
14,202
|
3.23
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled
|
(319,300
|
)
|
(9.21
|
)
|
|||
Outstanding,
June 30, 2007
|
3,183,231
|
$
|
7.80
|
June
30, 2007
|
December
31, 2006
|
||||||
Payroll
and related taxes
|
$
|
520,111
|
$
|
535,919
|
|||
Accrued
preferred stock dividends
|
661,155
|
810,249
|
|||||
Accrued
liability - vendor chargebacks
|
630,800
|
1,103,414
|
|||||
Other
|
489,054
|
527,774
|
|||||
Total
|
$
|
2,301,120
|
$
|
2,977,356
|
Multiband
Corp.
|
MDU
|
MCS
|
Total
|
||||||||||
Three
months ended June 30, 2007:
|
|||||||||||||
Revenues
|
$
|
-
|
$
|
2,517,328
|
$
|
1,404,398
|
$
|
3,921,726
|
|||||
Income
(loss) from operations
|
(1,072,823
|
)
|
1,180,906
|
(1,361,089
|
)
|
(1,253,066
|
)
|
||||||
Identifiable
assets
|
1,827,449
|
5,645,281
|
6,085,316
|
13,558,046
|
|||||||||
Depreciation
and amortization
|
49,864
|
404,471
|
540,733
|
995,068
|
|||||||||
Capital
expenditures
|
-
|
-
|
120,196
|
120,196
|
Multiband
Corp.
|
MDU
|
MCS
|
Total
|
||||||||||
Three
months ended June 30, 2006:
|
|||||||||||||
Revenues
|
$
|
-
|
$
|
2,643,217
|
$
|
1,858,520
|
$
|
4,501,737
|
|||||
Income
(loss) from operations
|
(1,060,690
|
)
|
1,148,971
|
(1,742,094
|
)
|
(1,653,813
|
)
|
||||||
Identifiable
assets
|
3,734,559
|
7,259,784
|
11,439,124
|
22,433,467
|
|||||||||
Depreciation
and amortization
|
59,208
|
401,079
|
848,327
|
1,308,614
|
|||||||||
Capital
expenditures
|
1,110
|
-
|
216,933
|
218,043
|
Multiband
Corp.
|
MDU
|
MCS
|
Total
|
||||||||||
Six
months ended June 30, 2007:
|
|||||||||||||
Revenues
|
$
|
-
|
$
|
5,050,203
|
$
|
3,256,478
|
$
|
8,306,681
|
|||||
Income
(loss) from operations
|
(2,181,748
|
)
|
2,047,340
|
(2,350,643
|
)
|
(2,485,051
|
)
|
||||||
Identifiable
assets
|
1,827,449
|
5,645,281
|
6,085,316
|
13,558,046
|
|||||||||
Depreciation
and amortization
|
99,727
|
810,742
|
1,134,297
|
2,044,766
|
|||||||||
Capital
expenditures
|
-
|
-
|
240,881
|
240,881
|
Multiband
Corp.
|
MDU
|
MCS
|
Total
|
||||||||||
Six
months ended June 30, 2006:
|
|||||||||||||
Revenues
|
$
|
-
|
$
|
5,155,389
|
$
|
3,750,392
|
$
|
8,905,781
|
|||||
Income
(loss) from operations
|
(2,204,871
|
)
|
2,053,914
|
(3,430,018
|
)
|
(3,580,975
|
)
|
||||||
Identifiable
assets
|
3,734,559
|
7,259,784
|
11,439,124
|
22,433,467
|
|||||||||
Depreciation
and amortization
|
119,005
|
802,155
|
1,689,910
|
2,611,070
|
|||||||||
Capital
expenditures
|
24,919
|
-
|
555,130
|
580,049
|
DOLLAR
AMOUNTS AS A PERCENTAGE OF REVENUES
|
DOLLAR
AMOUNTS AS A PERCENTAGE OF REVENUES
|
||||||||||||
THREE
MONTHS ENDED
|
SIX
MONTHS ENDED
|
||||||||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||
REVENUES
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
|||||
COST
OF PRODUCTS & SERVICES (Exclusive of depreciation and amortization
shown below)
|
47.7
|
%
|
43.0
|
%
|
48.8
|
%
|
44.9
|
%
|
|||||
SELLING,
GENERAL & ADMINISTRATIVE
|
58.8
|
%
|
64.6
|
%
|
56.5
|
%
|
66.0
|
%
|
|||||
DEPRECIATION
& AMORTIZATION
|
25.4
|
%
|
29.1
|
%
|
24.6
|
%
|
29.3
|
%
|
|||||
LOSS
FROM OPERATIONS
|
-31.9
|
%
|
-36.7
|
%
|
-29.9
|
%
|
-40.2
|
%
|
|||||
INTEREST
EXPENSE & OTHER, NET
|
-0.7
|
%
|
-6.5
|
%
|
-1.9
|
%
|
-6.2
|
%
|
|||||
LOSS
FROM CONTINUING OPERATIONS
|
-32.6
|
%
|
-43.2
|
%
|
-31.8
|
%
|
-46.4
|
%
|
|||||
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS
|
-
|
-
|
-
|
-
|
|||||||||
NET
LOSS
|
-32.6
|
%
|
-43.2
|
%
|
-31.8
|
%
|
-46.4
|
%
|
1. |
Reduction
of operating expenses by controlling payroll, professional fees and
other
general and administrative
expenses.
|
2. |
Sale
of video subscriber assets on a strategic basis. The Company, based
on
recent transactions, believes there is an active market for its
video
subscriber assets. The Company believes that it can sell these
assets,
under certain circumstances, at prices at or above their current
carrying
value. However, there is no guarantee that these sales will ultimately
be
favorable to the Company. On July 19, 2007, the Company completed
an asset
purchase agreement with MDU Communications to sell 11,166 subscribers
and
the related assets located in 189 multi-family properties. The
acquisition
purchase price was $4.01 million payable in cash. Additional payments
may
accrue to Multiband over the next two year period based on certain
property and subscriber performance criteria. The selling price
approximates the net book value of the assets sold. Anticipated
net
proceeds generated from this sale are expected to exceed one million
dollars. Annual expense reduction is estimated to be a minimum
of $600,000.
|
3. |
Solicit
additional equity investment in the Company by either issuing preferred
or
common stock.
|
4. |
Continue
to market Multiband services and acquire additional multi-dwelling
unit
customers.
|
5. |
Control
capital expenditures by contracting Multiband services and equipment
through a landlord-owned equipment
program.
|
6. |
Establish
market for wireless internet
services.
|
7. |
Expansion
of call center support via sales of call center services to both
existing
and future system operators and to buyers of the Company’s video
subscribers.
|
·
|
our
capital expenditure objectives;
|
·
|
our
debt service obligations; or
|
·
|
our
working capital needs.
|
(a)
|
Exhibits
|
31.1 |
Certification
of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of
the
Exchange Act.
|
31.2 |
Certification
of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of
the
Exchange Act.
|
32.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section
1350.
|
32.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section
1350.
|
MULTIBAND
CORPORATION
Registrant
|
||
|
|
|
Date:
August 14, 2007
|
By: | /s/ James L. Mandel |
Chief
Executive Officer
|
|
|
|
Date:
August 14, 2007
|
By: | /s/ Steven M. Bell |
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
|