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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 1, 2001
Commission File Number 000-27707
AETHER SYSTEMS, INC.
(Exact name of registrant)
Delaware 52-2186634
(State of organization) (I.R.S. Employer Identification Number)
11460 Cronridge Drive, Owings Mills, Maryland 21117
(Address of principal executive offices and zip code)
(410) 654-6400
(Registrant's telephone number)
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ITEM 5. OTHER EVENTS
Aether Systems, Inc. made a preliminary announcement on August 1, 2001
of its financial results for the quarter and six month periods ended June 30,
2001. In the announcement Aether advised that continued demand for Aether
wireless data solutions drove total revenue to $32.1 million, a three-fold
increase over the second quarter of last year. The results include recurring
services revenue of $11.4 million, engineering services revenue of $2.8 million,
software product revenue of $9.9 million, and device sales of $8.0 million.
In the same period last year, total revenue was $10.8 million with
recurring services revenue of $6.2 million, engineering services revenue of $1.6
million, software product revenue of $2.4 million and device sales of
approximately $578,000. Aether's Q2 2001 revenue of $32.1 million represents a
4.6 percent increase over Q1 2001 revenue of $30.7 million.
Non-cash charges include a restructuring charge associated with
Aether's integration efforts, the amortization and impairment of goodwill
relating to acquisitions, the impairment of the company's investments, the
company's share of losses in joint ventures under equity method accounting, and
non-cash expenses relating to options and warrants, partially offset by a gain
due to the early extinguishment of debt.
As part of Aether's integration strategy to consolidate excess
facilities and eliminate redundant positions from acquired companies, the
company recognized a restructuring charge of $15.9 million. This charge relates
to a workforce reduction of 250 positions and the closing of six facilities.
Gross margins improved during the quarter to 42 percent compared to 35
percent during Q1 2001. All revenue categories realized improvements.
Results include an extraordinary gain related to the early
extinguishment of $20 million in senior convertible notes payable.
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For the first six months of 2001, Aether reported a four-fold increase
in revenue to $62.7 million, compared with $16.2 million for the same period in
2000. The results include recurring services revenue of $21.8 million,
engineering services revenue of $5.1 million, software product revenue of $21.7
million and device sales of $14.1 million. In the same period last year, Aether
recorded recurring services of $9.0 million, engineering services revenue of
$3.0 million, software product revenue of $3.4 million and device sales revenue
of approximately $713,000.
SAFE HARBOR STATEMENT
This statement includes forward-looking statements based on the current
expectations of Aether about future events. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions about Aether that
could cause actual results to differ materially from those in such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to, market acceptance of the products developed or to be developed
by Aether, the ability of Aether to develop new technologies and projects,
future decisions regarding investments and acquisitions and future market values
of similar businesses, the success of Aether's efforts to reduce marginal costs
while increasing sales, and the success of joint efforts with partner companies.
These risks and other risk factors are described under the caption, "Risk
Factors" in Aether's filings with the Securities and Exchange Commission. Aether
undertakes no obligation to update the forward-looking statements contained in
this press release.
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AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------- -------------- -------------
in thousands except per share data
Subscriber revenue $11,408 $6,178 $21,808 $8,972
Engineering services revenue 2,781 1,637 5,144 3,040
Software and related services 9,873 2,362 21,670 3,431
Device sales 8,022 578 14,121 713
------------ ------------- -------------- -------------
Total revenue 32,084 10,755 62,743 16,156
Cost of subscriber revenue 6,617 3,154 12,851 4,213
Cost of engineering services revenue 1,487 1,027 2,787 1,641
Cost of software and related services 2,574 851 6,656 1,529
Cost of device sales 7,922 595 16,139 1,268
------------ ------------- -------------- -------------
Total cost of revenue 18,600 5,627 38,433 8,651
------------ ------------- -------------- -------------
Gross profit 13,484 5,128 24,310 7,505
Operating expenses:
Research and development 18,705 5,014 35,876 7,045
General and administrative 23,680 8,507 49,484 13,438
Selling and marketing 20,511 16,544 40,727 22,356
In process research and development related
to acquisitions - 60 - 2,160
Depreciation and amortization 29,448 67,041 121,243 84,451
Option and warrant expense 4,358 3,605 8,938 6,050
Impairment of goodwill associated with acquisitions 2,211 - 961,580 -
Restructuring Charge 15,859 - 15,859 -
------------ ------------- -------------- -------------
114,772 100,771 1,233,707 135,500
------------ ------------- -------------- -------------
Operating loss (101,288) (95,643) (1,209,397) (127,995)
Other income (expense):
Interest income (expense), net 3,195 14,787 9,601 16,976
Equity in losses of investment (17,007) (10,721) (31,523) (13,828)
Investment loss, including impairments (1,147) - (95,891) -
Minority Interest 4,483 1,662 8,147 1,662
------------ ------------- -------------- -------------
loss before Income taxes (111,764) (89,915) (1,319,063) (123,185)
Income tax benefit 440 - 875 -
Net loss before extraordinary item and cumulative effect ------------ ------------- -------------- -------------
of a change in accounting principle (111,324) (89,915) (1,318,188) (123,185)
Extraordinary item relating to early extinguishment of debt 7,684 7,684 -
------------ ------------- -------------- -------------
Net loss before cumulative effect of a change in
accounting principle (103,640) (89,915) (1,310,504) (123,185)
Cumulative effect of change in accounting principle relating
to adoption of SFAS 133, Accounting for Derivatives - - 6,564 -
------------ ------------- -------------- -------------
Net loss (103,640) (89,915) (1,303,940) (123,185)
Net loss per share - basic and diluted before extraordinary item
and cumulative effect of a change in accounting principle ($2.74) ($2.36) ($32.54) ($3.65)
Extraordinary item relating to early extinguishment of debt $0.19 $0.00 $0.19 $0.00
Cumulative effect of a change in accounting principle relating to
adoption of SFAS 133, Accounting for Derivatives $0.00 $0.00 $0.16 $0.00
------------ ------------- -------------- -------------
Net loss per share - basic and diluted ($2.55) ($2.36) ($32.19) ($3.65)
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Weighted average shares outstanding - basic
and diluted 40,576 38,031 40,511 33,765
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AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, December 31,
2001 2000
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in thousands (unaudited)
Current assets:
Cash and cash equivalents $651,376 $872,747
Short-term investments 2,444 2,648
Trade accounts receivable 28,111 30,263
Inventory 44,109 19,130
Prepaid expenses and other current assets 18,981 17,081
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Total current assets 745,021 941,869
Furniture, computers, and equipment, net 72,454 53,223
Intangibles and other assets 506,366 1,682,283
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$1,323,841 $2,677,375
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,780 $9,747
Accrued expenses 44,961 66,949
Accrued employee compensation and benefits 10,991 12,566
Deferred revenue 17,727 14,170
Notes payable 14,914 18,813
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Total current liabilities 97,373 122,245
Long-term liabilities:
Convertible subordinated notes payable and other notes payable 310,845 321,201
Deferred tax liability 9,820 10,694
Minority interest in net assets of subsidiary 47,394 55,537
Stockholders' equity 858,409 2,167,698
Commitments and contingencies
$1,323,841 $2,677,375
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SIGNATURE
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.
Aether Systems, Inc.
By: /s/ David C. Reymann
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David C. Reymann
Chief Financial Officer
Dated: August 3, 2001