-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VxRdCZ/5+7DZqwNIGghdDM2Ext7YeCzlwX0eTiC9xIMxvGUkKNpfD27/xtVOtVpI AEijogF2D7/r/2JY+JMeuQ== 0000891618-97-003473.txt : 19970815 0000891618-97-003473.hdr.sgml : 19970815 ACCESSION NUMBER: 0000891618-97-003473 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRICOM INC / DE CENTRAL INDEX KEY: 0000884318 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 770294597 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19903 FILM NUMBER: 97663068 BUSINESS ADDRESS: STREET 1: 980 UNIVERSITY AVE CITY: LOS GRATOS STATE: CA ZIP: 95030 BUSINESS PHONE: 4083998200 MAIL ADDRESS: STREET 1: 980 UNIVERSITY AVE CITY: LOS GATOS STATE: CA ZIP: 95030 10-Q 1 FORM 10-Q FOR PERIOD ENDED 6/30/97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - ----- Exchange Act of 1934 For the quarterly period ended June 30, 1997 or - ----- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from_____________ to_____________ Commission file number 0-19903 METRICOM, INC. (A Delaware Corporation) I.R.S. Employer Identification #77-0294597 980 University Avenue Los Gatos, CA 95030-2375 (408) 399-8200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of common stock outstanding as of August 12, 1997 was 13,675,756. 2 TABLE OF CONTENTS
PAGE PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations 8 Liquidity and Capital Resources 10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURE PAGE 13 EXHIBIT INDEX 14
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DEC. 31, 1997 1996 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents .............................. $ 5,982 $ 15,246 Short-term investments ................................. 21,356 46,825 Accounts receivable, net ............................... 2,740 1,126 Inventories ............................................ 4,263 3,115 Prepaid expenses and other ............................. 1,931 1,744 --------- --------- Total current assets ............................... 36,272 68,056 PROPERTY AND EQUIPMENT, net .............................. 31,862 26,776 LONG-TERM INVESTMENTS .................................... 2,995 3,150 OTHER ASSETS ............................................. 2,124 3,817 --------- --------- Total assets ....................................... $ 73,253 $ 101,799 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ....................................... $ 3,513 $ 5,517 Accrued liabilities .................................... 5,428 4,801 --------- --------- Total current liabilities .......................... 8,941 10,318 --------- --------- LONG-TERM DEBT ........................................... 45,000 45,000 OTHER LIABILITIES ........................................ 807 768 MINORITY INTEREST ........................................ 4,598 2,407 STOCKHOLDERS' EQUITY: Common stock ........................................... 14 14 Additional paid-in capital ............................. 133,792 133,298 Unrealized holding loss on investments ................. (19) (36) Accumulated deficit .................................... (119,880) (89,970) --------- --------- Total stockholders' equity ......................... 13,907 43,306 --------- --------- Total liabilities and stockholders' equity ......... $ 73,253 $ 101,799 ========= =========
The accompanying notes are an integral part of these consolidated statements. 3 4 METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, 1997 JUNE 28, 1996 JUNE 30, 1997 JUNE 28, 1996 ------------- ------------- ------------- ------------- REVENUES: Service revenues ............. $ 2,209 $ 299 $ 3,373 $ 539 Product revenues ............. 2,533 2,305 3,163 3,718 -------- -------- -------- -------- Total revenues ........... 4,742 2,604 6,536 4,257 -------- -------- -------- -------- COSTS AND EXPENSES: Cost of service revenues ..... 6,792 4,249 13,674 7,477 Cost of product revenues ..... 1,412 1,220 1,687 1,946 Research and development ..... 2,868 2,419 5,889 4,615 Selling, general and administrative ............ 5,387 3,871 10,764 7,282 Provision for Overall Wireless 3,611 -- 3,611 -- -------- -------- -------- -------- Total costs and expenses .... 20,070 11,759 35,625 21,320 -------- -------- -------- -------- Loss from operations ....... (15,328) (9,155) (29,089) (17,063) INTEREST EXPENSE ............... 1,172 -- 2,131 -- INTEREST INCOME ................ 549 676 1,310 1,486 -------- -------- -------- -------- Net loss ................... $(15,951) $ (8,479) $(29,910) $(15,577) ======== ======== ======== ======== NET LOSS PER SHARE ............. $ (1.17) $ (0.63) $ (2.20) $ (1.17) ======== ======== ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING ........ 13,601 13,368 13,591 13,342 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. 4 5 METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED ---------------------- JUNE 30, JUNE 28, 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ........................................................ $(29,910) $(15,577) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization ............................... 3,819 1,437 Provision for Overall Wireless .............................. 3,611 -- Increase in accounts receivable, prepaid expenses and other current assets ................. (1,362) (1,849) (Increase) decrease in inventories .......................... (1,148) 656 (Decrease) increase in accounts payable, accrued liabilities, customer deposits and other ............................... (1,338) 1,093 -------- -------- Net cash used in operating activities ............................................ (26,328) (14,240) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ............................. (9,228) (4,158) Increase in other assets ........................................ (2,034) (1,291) Sales of short-term and long-term investments .................................................. 25,641 18,749 -------- -------- Net cash provided by investing activities ............... 14,379 13,300 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock .......................... 494 716 Contributions from minority interest ............................ 2,191 1,103 -------- -------- Net cash provided by financing activities ............... 2,685 1,819 -------- -------- NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS ..................................................... (9,264) 879 CASH AND EQUIVALENTS, BEGINNING OF PERIOD ......................... 15,246 5,201 -------- -------- CASH AND EQUIVALENTS, END OF PERIOD ............................... $ 5,982 $ 6,080 ======== ========
The accompanying notes are an integral part of these consolidated statements. 5 6 METRICOM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The condensed consolidated financial statements of Metricom, Inc. (the "Company") presented in this Form 10-Q are unaudited. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair presentation of operations for the three- and six-month periods ended June 30, 1997 and June 28, 1996. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto incorporated by reference in the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 1996, as filed with the Securities and Exchange Commission. Certain amounts have been restated from the previously reported balances to conform to the 1997 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three- and six-month periods ended June 30, 1997 and June 28, 1996 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. NOTE 2. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and include purchased parts, labor and manufacturing overhead. Inventories consisted of the following (in thousands):
JUNE 30, DECEMBER 31, 1997 1996 ---- ---- Raw materials $2,231 $ 656 Work-in-progress 691 1,606 Finished goods 1,341 853 ------ ------ Total $4,263 $3,115 ====== ======
6 7 NOTE 3. NET LOSS PER SHARE Net loss per share has been computed using the weighted average number of shares of common stock outstanding. Common equivalent shares from options and warrants to purchase common stock have been excluded from the calculation as their effect would be anti-dilutive. NOTE 4. OPTION TO ACQUIRE OVERALL WIRELESS COMMUNICATIONS CORPORATION In February 1996, the Company purchased an option to acquire Overall Wireless Communications Corporation ("Overall Wireless"), a corporation that holds a nationwide, wireless communications license issued by the Federal Communications Commission (the "FCC") with respect to 50 kHz of radio spectrum in the 220 to 222 MHz frequency band. The Company paid $700,000 for the option and agreed to loan Overall Wireless up to $2 million for the construction of a system utilizing the license, of which approximately $1.9 million has already been loaned. In January 1997, the Company paid $500,000 to extend the option from January 1997 to July 1997. In July 1997, the option was extended to August 31, 1997 for no additional payment. The additional consideration payable upon exercise of the option includes a combination of cash and stock valued at $7.3 million in the aggregate. The Company's ability to exercise the option is conditioned upon the occurrence of a number of events, including approval by the FCC of the transfer of the license. There can be no assurance that these conditions will be met prior to expiration of the option. If the option expires unexercised under certain circumstances, the Company may be required to pay a termination fee of up to $2 million, which would be paid primarily through cancellation of the indebtedness of Overall Wireless. In June 1997, the Company recorded a charge of $3.6 million to fully reserve its investment in Overall Wireless due to uncertainties regarding its realization. NOTE 5. NEW ACCOUNTING STANDARDS In February 1997, Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"("SFAS 128") was issued. SFAS 128 replaces the presentation of primary earnings per share with a presentation of basic earnings per share, which excludes dilution. SFAS 128 also requires dual presentation of basic and diluted earnings per share on the face of the income statement for all entities with a complex capital structure. Diluted earnings per share is computed similarly to fully diluted earnings per share pursuant to APB No. 15. SFAS 128 must be adopted for financial statements issued for interim and annual periods ending after December 15, 1997. If SFAS 128 had been applied during the three- and six-month periods ended June 30, 1997 and June 28, 1996, basic earnings per share and diluted earnings per share would equal earnings per share as presented. In July 1997, SFAS No. 130 ("SFAS 130"), "Reporting Comprehensive Income" was issued and is effective for fiscal years ending after December 15, 1997. The adoption is not expected to have a material effect on the financial statements. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Except for historical information contained herein, this Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, uncertainty of market acceptance of the Company's products and services, availability of sufficient financial, management, technical and marketing resources, technological feasibility and availability of the Company's Ricochet(R) radios and modems, the ability of the Company to lease or acquire sites for the location of its network infrastructure and those factors discussed in the section entitled "Risk Factors" and elsewhere in the Company's Form 10-K, as amended, for the year ended December 31, 1996, as well as those elsewhere in this Form 10-Q. RESULTS OF OPERATIONS Revenues Revenues consist of service and product revenues. Service revenues are derived from the subscriber fees and modem rentals for Ricochet and fees for UtiliNet(R) customer support and are recognized ratably over the service period. Product revenues are derived from the sale of UtiliNet products and Ricochet modems and are recognized upon shipment. Total revenues increased to $4.7 million in the second quarter of 1997 and to $6.5 million for the first six months of 1997 from $2.6 million in the second quarter of 1996 and $4.3 million for the first six months of 1996. Service revenues increased to $2.2 million in the second quarter of 1997 and to $3.4 million for the first six months of 1997 from $299,000 in the second quarter of 1996 and $539,000 for the first six months of 1996. The increase in service revenues is primarily due to increased Ricochet subscriber fees and modem rentals resulting from a larger Ricochet subscriber base. Product revenues increased slightly to $2.5 million in the second quarter of 1997 and decreased to $3.2 million for the first six months of 1997 compared to $2.3 million in the second quarter of 1996 and $3.7 million for the first six months of 1996. The changes in product revenues were primarily due to the timing of shipments of UtiliNet products. 8 9 Cost of Revenues Cost of service revenues increased to $6.8 million in the second quarter of 1997 from $4.2 million in the second quarter of 1996 and increased to $13.7 million for the first six months of 1997 from $7,5 million in the comparable period of 1996. Cost of service revenues are primarily costs incurred to deploy and operate Ricochet networks, the cost to obtain site agreements for the Company's network infrastructure, the cost of providing customer support, certain costs associated with manufacturing the Company's network components and depreciation of modems rented to Ricochet subscribers. The increase in 1997 is primarily due to higher Ricochet network operating expenses resulting from increases in the Ricochet service territory during 1997 and higher customer service expenses and depreciation of modems rented to Ricochet subscribers as a result of the larger Ricochet subscriber base in 1997. These increases were partially offset by a reduced level of activity to obtain site agreements in the second quarter of 1997 as compared to the same period in 1996. The cost of service revenues is expected to continue at the current level for the foreseeable future. Cost of product revenues increased to $1.4 million in the second quarter of 1997 from $1.2 million in the second quarter of 1996 and decreased to $1.7 million for the first six months of 1997 from $1.9 million in the comparable period of 1996. The changes were primarily due to changes in product revenues in 1997 as compared to 1996. Research and Development Research and development expenses increased to $2.9 million in the second quarter of 1997 and to $5.9 million for the first six months of 1997 from $2.4 million in the second quarter of 1996 and from $4.6 million for the first six months of 1996. Research and development activities include enhancements to the technology employed by the Company's current networks and development of an ISDN speed network and Ricochet modems. The Company plans to continue a high level of investment in research and development in the foreseeable future. Selling, General and Administrative Selling, general and administrative expenses increased to $5.4 million for the second quarter of 1997 and to $10.8 million for the first six months of 1997 from $3.9 million for the second quarter of 1996 and from $7.3 million for the first six months of 1996. The increases were primarily due to increased selling expense as a result of personnel increases and additional efforts to increase the number of Ricochet subscribers. General and administrative expenses also increased primarily as a result of personnel increases and professional fees associated with addressing regulatory matters and developing strategic relationships. Selling, general and administrative expenses are expected to continue at the current level for the foreseeable future. 9 10 Provision for Overall Wireless In February 1996, the Company purchased an option to acquire Overall Wireless, a corporation that holds a nationwide, wireless communications license issued by the FCC with respect to 50 kHz of radio spectrum in the 220 to 222 MHz frequency band. The Company paid $700,000 for the option and agreed to loan Overall Wireless up to $2 million for the construction of a system utilizing the license, of which approximately $1.9 million has already been loaned. In January 1997, the Company paid $500,000 to extend the option from January 1997 to July 1997. In July 1997, the option was extended to August 31, 1997 for no additional payment. If the option expires unexercised under certain circumstances, the Company may be required to pay a termination fee of up to $2 million, which may be paid through cancellation of the indebtedness of Overall Wireless. In June 1997, the Company recorded a charge of $3.6 million to fully reserve its investment in Overall Wireless due to uncertainties regarding its realizability. Interest Income and Expense Interest expense increased to $1.2 million for the second quarter of 1997 and to $2.1 million for the first six months of 1997 from $0 for the comparable periods in the 1996 as a result of the issuance of $45 million in principal amount of 8% Convertible Subordinated Notes due 2003 in August 1996. Interest income decreased to $549,000 for the second quarter of 1997 and to $1.3 million for the first six months of 1997 from $676,000 for the second quarter of 1996 and from $1.5 million for the first six months of 1996 due to a lower level of cash and investments in 1997 as compared to 1996. LIQUIDITY AND CAPITAL RESOURCES Since inception, the Company has devoted significant resources to the development, deployment and commercialization of wireless network products and services. As a result, as of June 30, 1997, the Company had incurred $119.9 million of cumulative net losses. The Company has financed operations primarily through the public and private sale of equity and convertible debt securities. The Company's operations have required substantial capital investments for the purchase of Ricochet network equipment, Ricochet modems, and computer and office equipment. Capital expenditures were $9.2 million and $4.2 million in the first six months of 1997 and 1996, respectively. To the extent capital is available, the Company expects to make significant capital expenditures in connection with the development, deployment and commercialization of its Ricochet networks including the costs associated with renting modems to Ricochet subscribers. The amount and timing of expenditures, however, may vary significantly depending on numerous factors including market acceptance of the Company's products and services, availability of sufficient financial, management, technical and marketing 10 11 resources, technological feasibility and availability of the Company's Ricochet radios and modems, the ability of the Company to lease or acquire sites for the location of its network infrastructure and those factors discussed in the section entitled "Risk Factors" and elsewhere in the Company's Form 10-K, as amended, for the year ended December 31, 1996, as well as those elsewhere in this Form 10-Q. At the current level of operating activity and deployment, the Company believes that additional capital will be required within the next 12 months. The Company is currently pursuing financing alternatives that may include debt, debt with equity, equity or equity linked securities. In addition, the Company is currently pursuing additional partnerships to deploy Ricochet networks. There can be no assurance that such funds would be available on commercially reasonable terms or at all. If sufficient financing is not available, the Company would be required to significantly reduce operating expenses and capital expenditures. As of June 30, 1997, the Company had cash and equivalents and short-term and long-term investments of $30.3 million and working capital of $27.3 million. Accounts receivable increased to $2.7 million as of June 30, 1997, from $1.1 million as of December 31, 1996, due to increased shipments of UtiliNet products at the end of the second quarter of 1997 as compared to the end of the fourth quarter of 1996. Inventories increased to $4.3 million as of June 30, 1997, from $3.1 million as of December 31, 1996 primarily due primarily to an increase in Ricochet subscriber devices and UtiliNet products. The Company believes that both accounts receivable and inventories will increase in the future in order to support the commercialization of Ricochet. 11 12 PART II. OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 27 Financial Data Schedule b. Reports on Form 8-K None 12 13 SIGNATURES 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 thereunto duly authorized. METRICOM, INC. (Registrant) /s/ Vanessa A. Wittman ----------------------------------- Date: August 12, 1997 By: Vanessa A. Wittman Vice President of Finance and Duly Authorized Officer 13 14 EXHIBIT INDEX 27 Financial Data Schedule 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE COMPANY'S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) REPORT. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 5,982 21,356 2,740 0 4,263 36,272 41,896 (10,034) 73,253 8,941 45,000 0 0 14 13,893 73,253 3,163 6,536 1,687 15,361 20,264 0 2,131 (29,910) 0 (29,910) 0 0 0 29,910 (2.20) (2.20)
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