(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
|
FOR
THE PERIOD ENDING MARCH 31, 2006
|
|
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
|
|||||||
|
March
31, 2006 (unaudited)
|
March
31, 2005
(unaudited)
|
|
||||
REVENUES
|
$
|
4,404,044
|
$
|
3,706,876
|
|||
COSTS
AND EXPENSES
|
|||||||
Cost
of products and services (exclusive of depreciation and amortization
shown
separately below)
|
2,056,527
|
1,872,268
|
|||||
Selling,
general and administrative
|
2,972,223
|
2,146,912
|
|||||
Depreciation
and amortization
|
1,302,456
|
1,148,867
|
|||||
Total
costs and expenses
|
6,331,206
|
5,168,047
|
|||||
LOSS
FROM OPERATIONS
|
(1,927,162
|
)
|
(1,461,171
|
)
|
|||
OTHER
EXPENSE
|
|||||||
Interest
expense
|
(304,681
|
)
|
(685,701
|
)
|
|||
Other
income (expense)
|
41,437
|
4,932
|
|||||
Total
other expense
|
(263,244
|
)
|
(680,769
|
)
|
|||
LOSS
FROM CONTINUING OPERATIONS
|
(2,190,406
|
)
|
(2,141,940
|
)
|
|||
GAIN
(LOSS) FROM DISCONTINUED OPERATIONS
|
2,200
|
(441,268
|
)
|
||||
NET
LOSS
|
(2,188,206
|
)
|
(2,583,208
|
)
|
|||
Preferred
stock dividends
|
263,106
|
931,084
|
|||||
LOSS
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
(2,451,312
|
)
|
$
|
(3,514,292
|
)
|
|
BASIC
AND DILUTED LOSS PER COMMON SHARE:
|
|||||||
LOSS
FROM CONTINUING OPERATIONS
|
$
|
(.07
|
)
|
$
|
(.08
|
)
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
$
|
-
|
$
|
(.01
|
)
|
||
NET
LOSS
|
$
|
(.07
|
)
|
$
|
(.09
|
)
|
|
LOSS
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
(.08
|
)
|
$
|
(.13
|
)
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED
|
32,155,873
|
27,216,574
|
March
31,
2006 (unaudited) |
December
31,
2005 (audited) |
|
|||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
2,100,540
|
$
|
3,100,427
|
|||
Accounts
receivable, net
|
2,102,391
|
2,367,864
|
|||||
Inventories
|
222,698
|
241,015
|
|||||
Prepaid
expenses and other
|
211,525
|
216,885
|
|||||
Current
portion of notes receivable
|
6,000
|
11,316
|
|||||
Total
Current Assets
|
4,643,154
|
5,937,507
|
|||||
PROPERTY
AND EQUIPMENT, NET
|
5,235,877
|
5,247,240
|
|||||
OTHER
ASSETS
|
|||||||
Goodwill
|
954,871
|
954,871
|
|||||
Intangible
assets, net
|
13,061,724
|
13,923,542
|
|||||
Notes
receivable - long-term, net
|
65,451
|
61,341
|
|||||
Other
assets
|
163,744
|
146,904
|
|||||
Total
Other Assets
|
14,245,790
|
15,086,658
|
|||||
TOTAL
ASSETS
|
$
|
24,124,821
|
$
|
26,271,405
|
CURRENT
LIABILITIES
|
|||||||
Checks
issued in excess of cash in bank
|
$
|
-
|
$
|
93,005
|
|||
Mandatory
redeemable preferred stock, 28,000 and 33,334 Class F preferred
shares
|
280,000
|
333,334
|
|||||
Current
portion of long-term debt
|
523,314
|
616,260
|
|||||
Current
portion of note payable - stockholder
|
30,000
|
32,837
|
|||||
Current
portion of capital lease obligations
|
179,434
|
179,932
|
|||||
Accounts
payable
|
1,951,326
|
1,761,249
|
|||||
Accrued
liabilities
|
2,860,840
|
2,741,054
|
|||||
Customer
deposits
|
62,685
|
64,161
|
|||||
Current
liabilities of discontinued operations
|
500,000
|
500,000
|
|||||
Deferred
service obligations and revenue
|
637,475
|
587,093
|
|||||
Total
Current Liabilities
|
7,025,074
|
6,908,925
|
|||||
LONG-TERM
LIABILITIES
|
|||||||
Long-term
debt, net
|
3,778,088
|
3,816,536
|
|||||
Capital
lease obligations, net of current portion
|
416,434
|
452,649
|
|||||
Long-term
liabilities of discontinued operations
|
-
|
125,000
|
|||||
Total
Liabilities
|
11,219,596
|
11,303,110
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
STOCKHOLDERS'
EQUITY
|
|||||||
Cumulative
convertible preferred stock, no par value:
|
|||||||
8%
Class A (27,651 and 27,931 shares issued and outstanding, $290,336
and
$293,276 liquidation preference)
|
416,952
|
419,752
|
|||||
10%
Class B (8,300 and 8,390 shares issued and outstanding, $87,150 and
$88,095 liquidation preference)
|
58,000
|
58,900
|
|||||
10%
Class C (124,960 and 125,050 shares issued and outstanding, $1,249,600
and
$1,250,500 liquidation preference)
|
1,606,705
|
1,607,605
|
|||||
10%
Class F (150,000 and 150,000 shares issues and outstanding, $1,500,000
and
$1,500,000 liquidation preference)
|
1,500,000
|
1,500,000
|
|||||
8%
Class G (45,245 and 45,245 shares issued and outstanding, $452,450
and
$452,450 liquidation preference)
|
179,897
|
179,897
|
|||||
6%
Class H (2.0 and 2.0 shares issued and outstanding, $200,000 and
$200,000
liquidation preference)
|
-
|
-
|
|||||
Variable
rate % Class I (90,000 and 90,000 shares issued and outstanding,
$9,000,000 and $9,000,000 liquidation preference)
|
-
|
-
|
|||||
Common
stock, no par value (32,172,891 and 32,134,558 shares issued and
outstanding)
|
22,836,072
|
22,801,405
|
|||||
Stock
subscriptions receivable
|
(285,173
|
)
|
(297,105
|
)
|
|||
Options
and warrants
|
44,575,922
|
44,259,540
|
|||||
Unamortized
compensation
|
-
|
(29,861
|
)
|
||||
Accumulated
deficit
|
(57,983,150
|
)
|
(55,531,838
|
)
|
|||
Total
Stockholders' Equity
|
12,905,225
|
14,968,295
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
24,124,821
|
$
|
26,271,405
|
|||
THREE
MONTHS ENDED
MARCH 31, |
|||||||
2006
|
2005
|
||||||
|
(unaudited)
|
(unaudited)
|
|
||||
OPERATING
ACTIVITIES
|
|||||||
Net
loss
|
$
|
(2,188,206
|
)
|
$
|
(2,583,208
|
)
|
|
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
|||||||
Depreciation
and amortization
|
1,345,846
|
1,273,112
|
|||||
Amortization
of deferred compensation
|
29,480
|
17,761
|
|||||
Amortization
of original issue discount
|
114,908
|
500,098
|
|||||
Gain
on sale of segment
|
-
|
(103,491
|
)
|
||||
Common
stock issued for services
|
-
|
19,200
|
|||||
Increase
in notes receivable allowance
|
-
|
89,051
|
|||||
Reserve
for stock subscriptions and interest receivable
|
5,932
|
-
|
|||||
Stock
based compensation expense
|
316,763
|
-
|
|||||
Change
in allowance for doubtful accounts on accounts receivable
|
(191,450
|
)
|
-
|
||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
456,923
|
(515,012
|
)
|
||||
Inventories
|
18,317
|
(323,069
|
)
|
||||
Prepaid
expenses and other
|
5,360
|
(62,252
|
)
|
||||
Other
assets
|
(16,840
|
)
|
-
|
||||
Wholesale
line of credit
|
-
|
(926,201
|
)
|
||||
Accounts
payable and accrued liabilities
|
(13,656
|
)
|
(377,715
|
)
|
|||
Deferred
service obligations and revenue
|
50,382
|
73,564
|
|||||
Liabilities
of discontinued operations
|
(125,000
|
)
|
-
|
||||
Customer
deposits
|
(1,476
|
)
|
265,249
|
||||
Net
cash flows from operating activities
|
(192,717
|
)
|
(2,652,913
|
)
|
|||
INVESTING
ACTIVITIES
|
|||||||
Purchases
of property and equipment
|
(362,006
|
)
|
(141,150
|
)
|
|||
Purchase
of intangible assets
|
(10,750
|
)
|
(120,000
|
)
|
|||
Purchase
of Ultravision
|
-
|
(287,050
|
)
|
||||
Proceeds
from sale of business segment
|
-
|
1,682,184
|
|||||
Collections
on notes receivable
|
1,206
|
-
|
|||||
Net
cash flows from investing activities
|
(371,550
|
)
|
1,133,984
|
||||
FINANCING
ACTIVITIES
|
|||||||
Checks
issued in excess of cash in bank
|
(93,005
|
)
|
1,003
|
||||
Payments
on short-term debt
|
-
|
(2,295,000
|
)
|
||||
Payments
on long-term debt
|
(246,302
|
)
|
(2,064,077
|
)
|
|||
Payments
on capital lease obligations
|
(36,713
|
)
|
(27,079
|
)
|
|||
Payments
on note payable to stockholder
|
(2,837
|
)
|
(51,964
|
)
|
|||
Payments
on mandatory redeemable preferred stock
|
(53,334
|
)
|
-
|
||||
Proceeds
from issuance of stock and warrants
|
-
|
11,116,458
|
|||||
Payments
received on stock subscriptions receivable
|
6,000
|
66,399
|
|||||
Redemption
of preferred stock
|
(4,600
|
)
|
(800
|
)
|
|||
Preferred
stock dividends
|
(22,829
|
)
|
(24,455
|
)
|
|||
Exercise
of stock options
|
18,000
|
-
|
|||||
Net
cash flows from financing activities
|
(435,620
|
)
|
6,720,485
|
||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(999,887
|
)
|
5,201,556
|
||||
CASH
AND CASH EQUIVALENTS
|
|||||||
Beginning
of period
|
3,100,427
|
726,553
|
|||||
End
of period
|
$
|
2,100,540
|
$
|
5,928,109
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|||||||
Cash
paid for interest, net of amortization of original issue
discount
|
$
|
132,433
|
$
|
255,060
|
|||
SUPPLEMENTAL
DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|||||||
Note
receivable recorded on sale of discontinued operations
|
$
|
-
|
$
|
339,051
|
|||
Conversion
of preferred stock and accrued dividends into common stock
|
-
|
673,335
|
|||||
Current
liabilities converted to common stock
|
-
|
10,603
|
|||||
Conversion
of notes payable into common stock
|
-
|
548,001
|
|||||
Conversion
of accrued dividends into common stock
|
16,667
|
94,748
|
1. |
Continued
reduction of operating expenses by controlling payroll, professional
fees
and other general and administrative
expenses.
|
2. |
Continue
to market Multiband services and obtain additional multi-dwelling
unit
customers.
|
3. |
Control
capital expenditures by contracting Multiband services and equipment
through a landlord-owned equipment program or by financing equipment
build-outs through a leasing
program.
|
4. |
Establish
market for wireless internet
services.
|
5. |
Solicit
additional equity investment in the Company by either issuing preferred
or
common stock.
|
March
31, 2006
|
December
31, 2005
|
||||||||||||
|
Gross
Carrying
|
Accumulated
|
Gross
Carrying
|
Accumulated
|
|||||||||
|
Amount
|
Amortization
|
Amount
|
Amortization
|
|||||||||
Intangible
assets subject to amortization
|
|||||||||||||
Domain
name
|
$
|
83,750
|
$
|
76,771
|
$
|
83,750
|
$
|
72,583
|
|||||
Right
of entry contracts
|
9,139,778
|
2,724,579
|
9,129,028
|
2,300,664
|
|||||||||
Subscriber
lists
|
10,151,809
|
3,662,558
|
10,151,809
|
3,261,483
|
|||||||||
Debt
issuance costs
|
499,837
|
349,542
|
499,837
|
306,152
|
|||||||||
Total
|
$
|
19,875,174
|
$
|
6,813,450
|
$
|
19,864,424
|
$
|
5,940,882
|
|||||
Intangible
assets not subject to amortization
|
|||||||||||||
Goodwill
|
$
|
954,871
|
$
|
-
|
$
|
954,871
|
$
|
-
|
|
Three
months ended
March 31, 2005 |
|||
Loss
attributable to common stockholders
|
$
|
(3,514,292
|
)
|
|
Pro
forma loss attributable to common stockholders
|
(3,814,386
|
)
|
||
Basic
and diluted loss attributable to common stockholders:
|
||||
As
reported
|
$
|
(.13
|
)
|
|
Pro
forma loss attributable to common stockholders
|
(.14
|
)
|
||
Stock-based
compensation:
|
||||
As
reported
|
$
|
0
|
||
Pro
forma
|
300,094
|
|
Three
months ended
March 31, 2006 |
Three
months ended
March 31, 2005 |
|||||
Risk-free
interest rate
|
4.50%
|
|
3.38%
|
|
|||
Expected
life of options granted
|
10
Years
|
10
Years
|
|||||
Expected
volatility range
|
214%
|
|
203%
|
|
|||
Expected
dividend yield
|
0%
|
|
0%
|
|
|
Dinamo
|
|||
Allocation
of Purchase Price:
|
||||
Total
Cash/Stock/Notes Payable Consideration
|
$
|
1,727,500
|
||
Add:
Transaction Costs
|
176,525
|
|||
Add:
Liabilities assumed
|
170,200
|
|||
Total
Consideration
|
2,074,225
|
|||
Less:
Tangible assets
|
1,450,000
|
|||
Less:
Goodwill
|
150,000
|
|||
Intangible
assets
|
$
|
474,225
|
|
Number
of Warrants
|
Weighted
- Average Exercise Price
|
|||||
Outstanding,
December 31, 2005
|
18,715,979
|
$
|
1.68
|
||||
Granted
|
-
|
-
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled/Expired
|
(375,000
|
)
|
(4.00
|
)
|
|||
Outstanding,
March 31, 2006
|
18,340,979
|
$
|
1.63
|
|
March
31,
2006 |
December
31,
2005 |
|||||
Payroll
and related taxes
|
$
|
428,374
|
$
|
391,707
|
|||
Accrued
preferred stock dividends
|
730,146
|
506,535
|
|||||
Accrued
liability-vendor charge backs
|
1,347,673
|
1,347,673
|
|||||
Other
|
354,647
|
495,139
|
|||||
Total
|
$
|
2,860,840
|
$
|
2,741,054
|
Multiband
Corp.
|
MDU
|
MCS
|
Discontinued
Operations
|
Total
|
Three
months ended March 31, 2006:
|
||||||||||||||||
Revenues
|
$
|
-
|
$
|
2,512,172
|
$
|
1,891,872
|
$
|
-
|
$
|
4,404,044
|
||||||
Income
(loss) from operations
|
(1,144,181
|
)
|
904,943
|
(1,687,924
|
)
|
-
|
(1,927,162
|
)
|
||||||||
Total
assets
|
4,455,981
|
7,578,677
|
12,090,163
|
-
|
24,124,821
|
|||||||||||
Depreciation
and amortization
|
59,797
|
401,076
|
841,583
|
-
|
1,302,456
|
|||||||||||
Capital
expenditures
|
23,809
|
-
|
338,197
|
-
|
362,006
|
Multiband
Corp.
|
MDU
|
MCS
|
Discontinued
Operations
|
Total
|
||||||||||||
Three
months ended March 31, 2005:
|
||||||||||||||||
Revenues
|
$
|
-
|
$
|
1,911,505
|
$
|
1,795,371
|
$
|
-
|
$
|
3,706,876
|
||||||
Income
(loss) from operations
|
(560,301
|
)
|
352,083
|
(1,252,953
|
)
|
-
|
(1,461,171
|
)
|
||||||||
Total
assets
|
9,653,316
|
9,377,707
|
12,390,479
|
-
|
31,421,502
|
|||||||||||
Depreciation
and amortization
|
7,843
|
401,079
|
739,945
|
-
|
1,148,867
|
|||||||||||
Capital
expenditures
|
-
|
-
|
102,792
|
38,358
|
141,150
|
Sale
Price
|
|||||||
Cash
proceeds
|
$ | 1,682,184 | |||||
Note
receivable
|
400,000 | ||||||
Assumed
liabilities
|
438,868 | ||||||
Total
sale price
|
2,521,052 | ||||||
Assets
sold
|
|||||||
Inventory,
net of reserve
|
1,045,110
|
||||||
Property
and equipment
|
52,351
|
||||||
Net
assets sold
|
1,097,461
|
||||||
Less
costs and expenses
|
|||||||
Broker’s
fee
|
122,500
|
||||||
Other
selling expense
|
10,135
|
||||||
Sublease
for one year at no charge
|
500,000
|
||||||
Additional
free rent related to inventory adjustment
|
500,000
|
||||||
Legal
and accounting costs
|
37,600
|
||||||
Total
costs
|
1,170,235
|
||||||
Net
gain on sale
|
$
|
253,356
|
Statement
of Operations
|
2006
|
2005
|
|||||
Revenues
|
$
|
-
|
$
|
3,684,875
|
|||
Cost
of sales
|
-
|
2,712,781
|
|||||
Selling,
general and administrative
|
(2,200
|
)
|
1,414,410
|
||||
Depreciation
and amortization
|
-
|
56,188
|
|||||
Income
(loss) from operations
|
2,200
|
(498,504
|
)
|
||||
Other
income (expense)
|
-
|
(46,255
|
)
|
||||
Net
income (loss)
|
2,200
|
(544,759
|
)
|
||||
Gain
on sale
|
-
|
103,491
|
|||||
Income
(loss) from discontinued operations
|
$
|
2,200
|
$
|
(441,268
|
)
|
DOLLAR
AMOUNTS AS A PERCENTAGE OF REVENUES
|
|||
THREE
MONTHS ENDED
|
|||
March
31, 2006
(unaudited)
|
March
31, 2005
(unaudited) |
||
REVENUES
|
100%
|
100%
|
|
COST
OF PRODUCTS & SERVICES (Exclusive of depreciation and amortization
shown below)
|
46.7%
|
50.7%
|
|
SELLING,
GENERAL & ADMINISTRATIVE
|
67.5%
|
57.9%
|
|
DEPRECIATION
& AMORTIZATION
|
29.5%
|
31.0%
|
|
LOSS
FROM OPERATIONS
|
-43.7%
|
-39.6%
|
|
INTEREST
EXPENSE & OTHER, NET
|
-6.0%
|
-18.2%
|
|
LOSS
FROM CONTINUING OPERATIONS
|
-49.7%
|
-57.8%
|
|
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS
|
-
|
-11.9%
|
|
NET
LOSS
|
-49.7%
|
-69.7%
|
(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:
May 15, 2006
|
By:
|
/s/
James L. Mandel
Chief
Executive Officer
|
Date:
May 15, 2006
|
By:
|
/s/
Steven M. Bell
Chief
Executive Officer
(Principal
Financial and Accounting
Officer)
|