YDI Acquires KarlNet

YDI Wireless acquires software developer KarlNet for up to $5.5M in cash and 1M shares

May 14, 2004

3 Min Read

FALLS CHURCH, Va. -- YDI Wireless, Inc. (OTCBB:YDIW), a developer and supplier of broadband wireless solutions, today announced that it has acquired KarlNet, Inc., a pioneer and leader in developing software for operating and managing wireless networks.

The KarlNet stockholders will receive up to $5.5 million in cash and 1 million shares of YDI common stock. $3.0 million of the cash component has been distributed to the KarlNet stockholders, which consisted of cash on hand at KarlNet and cash from YDI's working capital. YDI will pay up to an additional $2.5 million over the next two years based on achievement of certain milestones and compliance with other conditions. The remaining cash for the transaction is expected to come from YDI's operating capital. The shares of YDI common stock are being issued to the KarlNet stockholders in a private placement. For its fiscal year ending September 30, 2003, KarlNet generated approximately $3.8 million in revenue and produced a net loss of slightly less than $300,000.

This acquisition is expected to increase YDI's revenue, gross margins, breadth of products, ability to develop products, and speed to market for new products. Revenue is expected to increase incrementally through continued sales of KarlNet's current products to its customers as well as from the introduction of contemplated new products benefiting from the combined development capabilities. Gross margins are expected to increase due to the typically higher margins associated with a software company as well as the costs saved by YDI no longer having to pay a license fee to KarlNet for using its software in several of YDI's products.

This acquisition immediately bolsters YDI's product line due to the inclusion of KarlNet's current products. Also, the two companies have worked together for several years and produced several significant collaborative products. YDI's popular AP-Plus Access Points and YDI-FI, a long-range outdoor wireless data protocol, are powered by KarlNet's software. The combined company expects to begin shipping its new Marquee product soon. Marquee will be a point-to-point and point-to-multipoint OFDM system with enhanced functionality including Near Line of Sight (NLOS) operation within a several mile range and line of sight operating ranges of over 30 miles. It also will feature active polling, packet aggregation, dynamic bandwidth allocation, enhanced security, and actual data rates in excess of 20 Mbps. KarlNet is a member of WiMax, and many of the enhanced features of Marquee are similar to those specified by the IEEE 802.16(a) standard that are expected to be incorporated by WiMax.

YDI Chief Executive Officer Robert Fitzgerald said: "This strategic acquisition for YDI gives us some of the best wireless software capabilities in the world. Doug Karl is widely regarded as a pioneer in developing software solutions for wireless networking and extended range wireless applications. Doug has assembled a top-notch team of creative software engineers who have the real world experience to create robust and feature-rich products that hold up in the real world. The combination of the KarlNet software team and YDI's extensive RF expertise will create a powerful team that can develop and support the best license-free wireless communication products today and in the future."

"I am very excited about the opportunity to join forces with YDI," said Doug Karl, founder and president of KarlNet. "This merger will allow us to extend our reputation for innovation and position the company to become the leading supplier of broadband wireless solutions. I strongly believe the combination of YDI's RF expertise and our ability to deliver industry-leading wireless software will prove to be an unbeatable team. We look forward to continuing to serve our customers as part of YDI."

YDI Wireless Inc.

KarlNet Inc.

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