pdvWireless Restates Past Financials, Reports Quarterly Update, Reviews Business
Friday, August 10, 2018 | Comments

pdvWireless announced Aug. 9 that its previously issued financial statements for the quarter ended Dec. 31 and the year ended March 31 will be restated and should no longer be relied on. The company Aug. 10 reported its financial details for the fiscal first quarter ending June 30.

In connection with preparing its financial statements for the quarter ended June 30, the company determined that it incorrectly interpreted the effective date of a change to the accounting treatment of its net operating losses (NOLs) in accordance with the new tax laws in the Tax Cuts and Jobs Act of 2017 (TCJA), signed into law Dec. 22. The new tax law, among other items increased the NOL carry forward period from 20 years to an indefinite carry forward period and limited the percentage of NOLs that may be used to offset taxable income to 80 percent.

The company determined that it should recognize an additional deferred tax benefit of $5.6 million for the three months ended Dec. 31 and $6 million for the fiscal year ended March 31. Although these changes are non-cash items and do not change pdvWireless’ reported operating revenues or reported operating costs and expenses, the company determined that these changes have a material impact on the filed financial statements for the relevant periods, and the restatement of the two periods is required.

The company identified a material weakness in its internal control over financial reporting relating to its interpretation and application of the effective dates of the changes in the accounting treatment of its NOLs instituted by the TCJA. The company developed a plan to remediate this material weakness, which is discussed in its restated financial statements for the relevant periods.

Revenue for the company’s first fiscal quarter ended June 30 was $1.9 million, compared with $1.5 million in the same period of the prior year. The net loss for the company's first fiscal quarter was $12.3 million versus a net loss of $7.9 million for the similar period of the prior year.

pdvWireless’ revenue for the three months ended June 30 continued to principally represent its historical software-as-a-service (SaaS) business. The increase in revenue for that period, however, in comparison to the revenue for the same period of the prior year, was primarily from growth in its TeamConnect business.

Cost of revenue for the quarter was $2.1 million, an increase of about 26.2 percent over the prior fiscal year's comparable period. The increased cost of revenue for the three-month period in the current fiscal year primarily reflects the impairment charge taken to reduce the carrying value of the company's radios for the TeamConnect business because of lower future sales resulting from the company’s realigning its focus on spectrum initiatives.

Total operating expenses of $12.3 million for the three months ended June 30 was $5.2 million, or 73.4 percent, higher than the three months ended June 30, 2017. The increase was primarily attributable to a $4 million increase in restructuring charges; $500,000 for the impairment charge to adjust dispatch radios to their realizable value; and a $700,000 increase in general and administrative expenses, which includes costs associated with the company's regulatory initiatives.

“We remain close to the regulatory process and were pleased by a recent statement by FCC Chairman Ajit Pai in his testimony to a subcommittee of the Energy and Commerce Committee that he and his staff are working on drafting a notice of proposed rulemaking where the FCC is likely to lay out its preferred path to the future of 900 MHz broadband,” said Morgan E. O'Brien, CEO of pdvWireless. “We continue to believe that this is a compelling opportunity for the FCC to repurpose an underutilized spectrum band and to expand the base of broadband spectrum, and we are optimistic that action will be taken soon.”

The company remains debt free and has a strong cash position, with $90.9 million in available cash as of June 30, a decrease of $7.4 million from March 31, 2018. The decrease primarily resulted from payroll costs and investments in the pursuit of other business and spectrum initiatives.

pdvWireless also received information from one of its tier one carrier partners that the largest customer of the pdvConnect service planned to discontinue its use of that service during fiscal 2019. The revenues generated from this customer were $2.4 million, $1.8 million and $1.4 million for the years ended March 31, 2018, 2017 and 2016, respectively, representing 37 percent, 37 percent and 38 percent of total operating revenues for those same fiscal years, respectively.

“Our board of directors and management team have commenced a comprehensive review and assessment of our existing TeamConnect business in our initial seven markets, its prospects both as a stand-alone business and as a complementary business to potential future 900 MHz broadband network deployments in those markets …,” the filing said. “During this evaluation process, we will continue to operate our TeamConnect service in our seven existing markets and will continue to offer our pdvConnect service through our two tier one carrier partners in the United States.”

In June, pdvWireless said it would lay off 20 percent of its staff.

In May, the company revised its 900 MHz band realignment proposal in a new FCC filing.

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