ARC Wireless Solutions Reports 2006 Financial Results
April 02 2007 - 9:00AM
Business Wire
ARC Wireless Solutions, Inc. ("ARC") (OTCBB: ARCW) today announced
operating results for the year ended December 31, 2006 that
includes results for both continuing and discontinued operations.
As previously announced, effective October 31, 2006, the Company
sold its wholly owned subsidiary Winncom Technologies
Corp.("Winncom") for $17 million in cash. As a result of this sale,
for accounting purposes the operations of Winncom are being
reported as �discontinued operations.� Revenues, including both
continuing and discontinued operations for the year ended December
31, 2006, were $55,798,000 compared to $39,656,000 for the year
ended December 31, 2005. For the period ended December 31, 2006,
including both continuing and discontinued operations, the Company
had a net loss of $742,000, compared to net income of $1,292,000
for the period ended December 31, 2005. Gross profit, including the
continuing and discontinued operations, was 12% and 19% for the
periods ended December 31, 2006 and December 31, 2005,
respectively. The decrease in gross profit percentage was primarily
due to Winncom�s lower margin on its international business and a
decrease in margin at the Wireless Communications Solutions
Division due to significant increases in component and labor costs.
Net income for discontinued operations for the period ended
December 31, 2006 was $864,000 as compared to $719,000 for the
period ended December 31, 2005. The increase in net income was
primarily due to the increase in Winncom�s international sales
pursuant to its contract with JSC Kazakhtelecom. Gross profit for
discontinued operations was 10% and 14% for the periods ended
December 31, 2006 and December 31, 2005, respectively. The decrease
in gross profit percentage is primarily due to Winncom�s lower
margin on the JSC Kazakhtelecom contract. Net sales from continuing
operations for the year ended December 31, 2006 was $6,470,000 as
compared to $6,736,000 for the year ended December 31, 2005. The
net loss from continuing operations for the year ended December 31,
2006 was $1,606,000 as compared to net income of $573,000 for the
year ended December 31, 2005. The decrease in net income from
continuing operations is due primarily to 1) a decrease in gross
profit from 41% for the year ended December 31, 2005 to 22% for the
year ended December 31, 2006; 2) an increase in selling, general
and administrative ("SG&A") costs from $2.6 million for the
year ended December 31, 2005 to $3.1 million for the year ended
December 31, 2006; 3) a decrease of $490,000 in the recognition of
non-cash deferred tax assets due to a valuation allowance; and 4) a
loss on the sale of Winncom of $187,000. The decrease in gross
profit is mainly due to the significant increase in commodity costs
of raw materials used in the production of the antenna products,
the domestic overhead costs associated with the introduction and
subsequent domestic manufacturing of several new products, and the
costs associated with transitioning our manufacturing to China. The
increase in SG&A costs is primarily associated with increases
in expenses for the organization of ARC Wireless Hong Kong Limited
("ARCHK"), audit and legal fees incurred in connection with the
sale of Winncom, investor relations, directors fees, SOX 404
compliance costs, annual shareholders meeting costs and outside
mechanical engineering services. As previously announced, the
Company formed a subsidiary in Hong Kong, ARCHK, and began
manufacturing many of its antenna products in China. The completion
of this transition is expected to positively impact the Wireless
Communications Solutions Division�s gross margin by decreasing
manufacturing costs as more products are produced through our Hong
Kong subsidiary. Randall P. Marx, President and Chief Executive
Officer of the Company, commented, �2006 was a pivotal year for the
Company. Despite the loss from continuing operations, the Company
achieved critical goals to accomplish its strategic objectives and
strengthen its balance sheet. In an effort to improve shareholder
value for the long term, the Company successfully sold its largest
wholly owned subsidiary and has now implemented a reverse stock
split. �The divesture of Winncom has significantly improved the
Company�s balance sheet and offered the Company the opportunity to
expand its Wireless Communications Solutions Division with the
addition of its ARC Wireless Hong Kong Ltd. subsidiary and with
additions to our sales, marketing and engineering staff. The
investment in our antenna division will now enable us to offer a
broader, and increasingly competitive product line that includes
the anticipated introduction of over 20 new products for 2007.
�Additionally, we anticipate further lowering our operating costs
by transitioning our antenna production to China through our new
subsidiary which operates in Hong Kong and currently includes the
production of over 18,000 units per month. As this process is
ongoing, it will require comprehensive changes in business
procedures, including the product development and delivery cycles.
These efforts involve direct and indirect costs, but we believe
they will ultimately improve the Company�s financial performance
and competitive position. �We are implementing a number of changes
that we believe will have a positive impact on margins as
manufacturing costs decrease and sales increase. In addition to
transitioning manufacturing and production to our Hong Kong
operation and to increasing our sales, we are making other changes
that are intended to have a positive impact on operating results.
In coordination with our new Director of International Operations,
Gregory Smith, I have assumed responsibility of our Hong Kong
operations. In order to decrease component costs and further
decrease manufacturing costs our Hong Kong subsidiary is
independently sourcing components from China and also is
coordinating the manufacture of our proprietary product designs.�
Mr. Marx concluded, �Looking forward, the capital investments we
have made in Hong Kong, together with research and development and
the additions to our sales and marketing team, have positioned the
Company for organic growth as well as to seek long-term
opportunities in the form of strategic acquisitions. With the
implementation of the reverse stock split, the Company has
undertaken the key first steps necessary to be listed on a more
widely followed stock trading exchange. Coupled with the changes
outlined above, including our infrastructure and management team,
we expect to see continued benefit for both the Company and its
shareholders.� About ARC Wireless Solutions, Inc. ARC Wireless
Solutions, Inc. is involved in selective design, manufacturing,
marketing and selling of a broad range of wireless components and
network products and accessories. The Company develops,
manufactures and markets proprietary products, including Wi-Fi �
and WIMAX panel antennas, mobile GPS, and cellular antennas, as
well as base station antennas (for cellphone towers) through its
Wireless Communications Solutions Division; it designs,
manufactures and distributes cable assemblies for cable, satellite
and other markets through its Starworks Wireless Inc. subsidiary;
and negotiates and manages its contract manufacturing relationships
through its ARC Wireless Hong Kong Ltd. subsidiary. The Company�s
products and systems are marketed through the Company�s internal
sales force, OEMs, reseller distribution channels, retail, and the
Internet. ARC Wireless Solutions, Inc., together with its Wireless
Communications Solutions Division and its Starworks Wireless Inc.
subsidiary, are headquartered in Wheat Ridge, Colorado. The
Company�s Hong Kong subsidiary is located in Kowloon, Hong Kong.
For more information about the Company and its products, please
visit our web sites at www.arcwireless.net, www.antennas.com,
www.starworkswireless.com and www.arcwirelesshk.net. This is not a
solicitation to buy or sell securities and does not purport to be
an analysis of the Company�s financial position. This Release
contains forward-looking statements within the meaning of the
Securities Exchange Act of 1934. Although the Company believes that
the expectations reflected in the forward-looking statements and
assumptions upon which forward-looking statements are based are
reasonable, it can give no assurance that such expectations and
assumptions will prove to have been correct. See the Company�s most
recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K
for additional statements concerning important factors, such as
demand for products, manufacturing costs, and competition, and the
Company�s ability to successfully utilize its cash, that could
cause actual results to differ materially from the Company�s
expectations.
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