-----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, DdPq1vZsrdwo5AjEiUju1COHs2h/HoWyp9Gf85cgr6bxASAgs4mWr0AYwloP+z+x 9y/JEZSeiZRmGRVAnzZ3Kg== 0000891618-99-002265.txt : 19990517 0000891618-99-002265.hdr.sgml : 19990517 ACCESSION NUMBER: 0000891618-99-002265 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 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: SEC FILE NUMBER: 000-19903 FILM NUMBER: 99623831 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 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 MARCH 31, 1999 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 95032-2375 (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 April 23, 1999 was 19,032,741. 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 Overview 9 Results of Operations 9 Liquidity and Capital Resources 11 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13 SIGNATURE PAGE 14 EXHIBIT INDEX
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31, DECEMBER 31, 1999 1998 --------- ---------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 21,842 $ 19,141 Accounts receivable, net.................................. 2,061 1,450 Inventories, net.......................................... 2,304 3,046 Prepaid expenses and other................................ 1,600 1,522 --------- --------- Total current assets.................................. 27,807 25,159 PROPERTY AND EQUIPMENT, net................................. 6,241 5,555 LONG-TERM INVESTMENTS....................................... 58 58 OTHER ASSETS, net........................................... 3,351 3,694 --------- --------- Total assets.......................................... $ 37,457 $ 34,466 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable $ 2,871 $ 5,061 Accrued liabilities 9,755 10,662 Note payable 18 40 --------- --------- Total current liabilities 12,644 15,763 --------- --------- LONG-TERM DEBT.............................................. 75,378 55,098 OTHER LIABILITIES........................................... 369 680 MINORITY INTEREST........................................... 5,184 5,184 STOCKHOLDERS' EQUITY (DEFICIT): Common stock.............................................. 19 19 Additional paid-in capital................................ 192,343 191,184 Accumulated deficit....................................... (248,480) (233,462) --------- --------- Total stockholders' equity (deficit).................. (56,118) (42,259) --------- --------- Total liabilities and stockholders' equity (deficit).. $ 37,457 $ 34,466 ========= =========
The accompanying notes are an integral part of these condensed consolidated statements. 3 4 METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED ------------------------ MARCH 31, MARCH 31, 1999 1998 -------- -------- REVENUES: Service revenues ................................ $ 2,431 $ 1,974 Product revenues ................................ 1,755 1,629 -------- -------- Total revenues .............................. 4,186 3,603 -------- -------- COSTS AND EXPENSES: Cost of service revenues ........................ 4,433 5,759 Cost of product revenues ........................ 1,326 1,375 Research and development ........................ 8,235 3,456 Selling, general and administrative ............. 4,140 4,261 -------- -------- Total costs and expenses ........................ 18,134 14,851 -------- -------- Loss from operations .......................... (13,948) (11,248) INTEREST EXPENSE .................................. (1,213) (1,012) INTEREST INCOME ................................... 143 553 -------- -------- Net loss....................................... $(15,018) $(11,707) ======== ======== BASIC & DILUTED NET LOSS PER SHARE............................... $ (0.80) $ (0.69) ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING .............................. 18,873 16,944 ======== ========
The accompanying notes are an integral part of these condensed consolidated statements. 4 5 METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED ------------------------ MARCH 31, MARCH 31, 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss......................................... $ (15,018) $(11,707) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization................ 942 2,231 Decrease in accounts receivable, prepaid expenses and other current assets........... (689) (1,330) (Increase) decrease in inventories.......... 742 (819) (Decrease) in accounts payable, accrued liabilities, and other.................... (3,121) (1,424) -------- -------- Net cash used in operating activities............................ (17,144) (13,049) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment.............. (1,292) (93) Other............................................ -- (85) Purchase of investments.......................... -- (111,403) Proceeds from the sale of investments............ -- 114,214 -------- -------- Net cash provided by investing activities............................ (1,292) 2,633 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock........... 1,159 54,909 Cash used to retire short-term debt, net......... (22) (5,000) Additions to long-term debt...................... 20,000 -- Contributions from minority interest............. -- 586 -------- -------- Net cash provided by financing activities............................. 21,137 50,495 -------- -------- NET INCREASE IN CASH AND EQUIVALENTS............... 2,701 40,079 CASH AND EQUIVALENTS, BEGINNING OF PERIOD.......... 19,141 9,784 -------- -------- CASH AND EQUIVALENTS, END OF PERIOD................ $ 21,842 $ 49,863 ======== ======== SUMMARY OF NON-CASH TRANSACTIONS: Property and equipment acquired under capital lease................................... $ 280 $ --
The accompanying notes are an integral part of these condensed 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 adjustments (which include only normal recurring adjustments) which are necessary for a fair presentation of operations for the three month periods ended March 31, 1999 and March 31, 1998. 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 included in the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 1998, as filed with the Securities and Exchange Commission. The Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. At March 31, 1999, the Company had working capital of $15.2 million. At the Company's current level of operations and rate of negative cash flow, management anticipates that the Company's cash and cash equivalents will be adequate to satisfy the Company's operating loss and capital expenditure requirements through June 1999. The Company is working with an investment banking firm to identify a strategic partner that will facilitate the deployment of the Company's high-speed network. The Company is currently in discussions with various potential partnership candidates. Management anticipates that such strategic partner will also provide financing for the Company's future operations. In the event that the Company does not enter into a strategic partnership by the end of May 1999, management plans to reduce the level of operations of the Company and consider other financing alternatives that will enable the Company to continue as a going concern. There can be no assurance that financing will be available to the Company or that the Company will be able to successfully negotiate an agreement with a strategic partner. Certain amounts on the accompanying consolidated financial statements have been reclassified from the previously reported balances to conform to the 1999 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 6 7 period. Actual results could differ from those estimates. The results of operations for the three-month periods ended March 31, 1999 and March 31, 1998 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):
MARCH 31, DECEMBER 31, 1999 1998 -------- ----------- Raw materials $ 842 $ 680 Work-in-progress 21 3 Finished goods 1,441 2,363 -------- -------- Total $ 2,304 $ 3,046 ======== ========
NOTE 3. COMPREHENSIVE INCOME The Company adopted Statement of Financial Accounting Standard No. 130 "Reporting Comprehensive Income" ("SFAS 130") effective for fiscal years beginning after December 15, 1997. The adoption of this statement had no effect on the accompanying statements of operations. NOTE 4. BASIC AND DILUTED NET LOSS PER SHARE Basic and diluted net loss per share has been computed using the weighted average number of shares of common stock outstanding. Potential common equivalent shares from options and warrants to purchase common stock and from conversion of the convertible subordinated notes have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive. NOTE 5. INVESTMENTS In February 1996, the Company purchased an option to acquire Overall Wireless Communications Corporation ("Overall Wireless"), a company that holds a nationwide, wireless communications license in the 220 to 222 MHz frequency band. The Company paid $700,000 for the option and agreed to loan Overall Wireless up to $2.0 million for the construction of a system utilizing the license, of which approximately $1.8 million had been loaned as of December 31, 1997. In January 1997, the Company paid $500,000 to extend the option from January 1997 to July 1997. The option was subsequently extended to December 31, 2000 for no additional cash consideration. 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. In 7 8 January 1998, Overall Wireless canceled the option and the Company paid a termination fee of $1.8 million through cancellation of the indebtedness of Overall Wireless. NOTE 6. SEGMENT REPORTING The Company adopted SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information", during the fourth quarter 1998. SFAS No. 131 established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by chief operating decision makers or decision making groups, in deciding how to allocate resources and in assessing performance. The Company's reportable operating segments include Ricochet and Utilinet. Ricochet designs and manufactures and markets wireless data communications solutions. Utilinet manufactures and markets customer-owned networks and related products. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. A summary of operating results by reportable operating segment is as follows:
THREE MONTHS ENDED ------------------ MARCH 31, ------------------ 1999 1998 ------ ------ Ricochet Revenue ..................................... $2,900 $2,644 Utilinet Revenue ..................................... 1,286 959 ------ ------ Total ............................................ $4,186 $3,603 ====== ====== Cost of Service Ricochet ............................. $4,427 $5,686 Cost of Service Utilinet ............................. 6 73 ------ ------ Total ............................................ $4,433 $5,759 ====== ====== Cost of Product Ricochet ............................. $ 786 $ 965 Cost of Product Utilinet ............................. 540 410 ------ ------ Total ............................................ $1,326 $1,375 ====== ======
NOTE 7. NEW ACCOUNTING STANDARD In June, 1998, The FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, hedging activities, and exposure definition. The pronouncement is effective for fiscal years beginning after June 15, 1999. The Company believes the pronouncement will not have a material effect on its financial statements. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Since inception, the Company has devoted significant resources to the development, deployment and commercialization of its wireless network products and services. Historically, a significant portion of the Company's revenues have been derived primarily from the development contracts and sales of customer-owned networks and related products, known as UtiliNet, to utility companies. In recent years, the Company has deployed a commercial wireless data network known as Ricochet in various metropolitan areas of the United States. The Company currently provides Ricochet commercial service in the San Francisco Bay Area, the Seattle and Washington D.C. metropolitan areas, parts of Los Angeles, and in certain airports and corporate and university campuses. In 1997, in conjunction with the Company's acquisition of licensed spectrum in the 2.3 GHz Band in the FCC's WCS auctions, the Company began the development of a higher speed service known as Ricochet2. Ricochet2, an upgrade to Ricochet, has demonstrated in Company tests to provide the same service as Ricochet, but at faster downstream speeds of up to 128 Kbps. In conjunction with development of Ricochet2, the Company has continued to pursue right-of-way and site agreements to enable Ricochet2 deployment in various metropolitan areas. The Company plans to complete development of the Ricochet2 system in 1999 and subsequently deploy it in various metropolitan areas in the United States. 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, the completion of development of the Company's high-speed network (Ricochet2), uncertainty of market acceptance of the Company's products and services, availability of sufficient financial, management, technical and marketing resources, performance 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, 1998, 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 subscriber fees and modem rentals for Ricochet and fees for UtiliNet customer support and are 9 10 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 $4.2 million in the first quarter of 1999 from $3.6 million in the first quarter of 1998 due primarily to an increase in Ricochet service revenues. Service revenues increased to $2.4 million in 1999 from $2.0 million in 1998. The increase in service revenues is primarily due to increased Ricochet subscriber fees resulting from a larger Ricochet subscriber base. There were approximately 27% more Ricochet subscribers at March 31, 1999 than there were at March 31, 1998. Product revenues increased to $1.8 million in 1999 from $1.6 million in 1998. The increase in product revenues was primarily due to the timing of shipments of UtiliNet products, partially offset by reduced Ricochet product revenues as a result of a lower average selling price for Ricochet modems. Cost of Revenues Cost of service revenues is primarily costs incurred to operate Ricochet networks, the cost of providing customer support, certain excess capacity costs and manufacturing variances associated with manufacturing the Company's network components. Cost of service revenues also includes the cost to design the Ricochet networks and maintain site agreements for the Company's infrastructure in the metropolitan areas where commercial service is currently offered. These costs are expensed as incurred due to the uncertainties regarding the realizability of these costs. Cost of service revenues decreased to $4.4 million in 1999 from $5.8 million in 1998. The decrease is primarily due to reduced depreciation expense on network equipment resulting from the Company's 1998 write-down of Ricochet network equipment to fair value. In the fourth quarter of 1998, as a result of its plans to replace the Company's current Ricochet networks with Ricochet2 equipment, the Company recorded a $14.4 million charge to write down the carrying value of Ricochet network equipment to fair value. Cost of service revenues is expected to increase significantly as a result of the continued operation of Ricochet networks and planned future deployment of Ricochet2 networks. Cost of service revenues is expected to be greater than service revenues for the foreseeable future. Cost of product revenues decreased to $1.3 million in 1999 from $1.4 million in 1998. Cost of product revenues as a percentage of product revenues decreased to 76% for the first quarter of 1999 from 84% in the first quarter of 1998. The decrease was primarily due to a higher percentage of product revenues in the first quarter of 1999 derived from the sale of higher margin UtiliNet products versus lower margin Ricochet modems. Research and Development Research and development expenses increased to $8.2 million in 1999 from $3.5 million in 1998. Over one-half of the increase in the first quarter of 1999 was due to an increase in costs incurred to obtain right-of-way and site agreements in metropolitan areas where the Company currently plans to offer service. The remainder of the increase is primarily attributable 10 11 to continued development of the high speed Ricochet2 network technology and subscriber devices. The Company expects research and development expenses to continue to increase in absolute dollars in future periods as the Company continues the acquisition of right-of-way and site agreements as well as the development of Ricochet2. Selling, General and Administrative Selling, general and administrative expenses decreased to $4.1 million for the first quarter of 1999 from $4.3 million for the first quarter of 1998. Slight decreases in administrative and sales costs were partially offset by a small increase in marketing costs. Selling, general and administrative expenses are expected to continue at the current level or increase for the foreseeable future as Ricochet2 networks are deployed. Interest Income and Expense Interest expense increased to $1.2 million in the first quarter of 1999 compared with $1.0 million in the same period of 1998. The increase is primarily due to interest paid on amounts outstanding against a line of credit with Vulcan Ventures Incorporated. Interest income decreased to $143,000 for the first quarter of 1999 from $553,000 for the same period of 1998 due to a lower average level of cash and cash equivalents in the first quarter of 1999. LIQUIDITY AND CAPITAL RESOURCES The Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. At March 31, 1999, the Company had working capital of $15.2 million. At the Company's current level of operations and rate of negative cash flow, management anticipates that the Company's cash and cash equivalents will be adequate to satisfy the Company's operating loss and capital expenditure requirements through June 1999. The Company is working with an investment banking firm to identify a strategic partner that will facilitate the deployment of the Company's high-speed network. The Company is currently in discussions with various potential partnership candidates. Management anticipates that such strategic partner will also provide financing for the Company's future operations. In the event that the Company does not enter into a strategic partnership by the end of May 1999, management plans to reduce the level of operations of the Company and consider other financing alternatives that will enable the Company to continue as a going concern. There can be no assurance that financing will be available to the Company or that the Company will be able to successfully negotiate an agreement with a strategic partner. The Company has financed its operations and capital expenditures primarily through the public and private sale of equity and convertible debt securities. Since inception, the Company has completed (i) private placements of preferred stock with net proceeds to the Company of approximately $18.9 million, of which $3.0 million was repurchased and the balance converted to Common Stock at the time of the Company's initial public offering in 1992, (ii) an initial 11 12 public offering of Common Stock with net proceeds to the Company of approximately $8.8 million in 1992, (iii) private placements of Common Stock with net proceeds to the Company of approximately $18.6 million in 1993, (iv) public and private placements of Common Stock with net proceeds to the Company of approximately $75.2 million in 1994, (v) a private placement of 8% Convertible Subordinated Notes due 2003 with net proceeds to the Company of approximately $43.4 million in 1996 and (vi) a private placement of Common Stock with Vulcan Ventures, Inc. with net proceeds to the Company of approximately $53.7 million in 1998. In October 1998, the Company secured a line of credit for $30 million from Vulcan Ventures, Inc. As of March 31, 1999, the Company had drawn down $30 million against this line of credit. 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 March 31, 1999, the Company had incurred $248.5 million of cumulative net losses. 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 approximately $1.6 million and $93,000 in the first quarter of 1999 and 1998, respectively. The Company expects to continue to make significant capital expenditures in connection with the development, deployment and marketing of its wireless networks. The Company also expects that to the extent the Company's subscriber base grows, significant capital expenditures will be required to procure Ricochet and Ricochet2 modems. The amount and timing of expenditures, however, may vary significantly depending on numerous factors including market acceptance; availability of radios and modems; availability of sufficient financial, management, marketing and technical resources, and technological feasibility. As of March 31, 1999, the Company had cash and cash equivalents of $21.8 million and working capital of $15.2 million. The Company's accounts receivable increased to $2.1 million as of March 31, 1999 from $1.5 million at December 31, 1998 due primarily to increased revenues in the first quarter of 1999 versus the fourth quarter of 1998. Inventories decreased to $2.3 million at March 31, 1999 from $3.0 million at December 31, 1998 due primarily to increased sales of Utilinet and Ricochet products. The Company believes that both accounts receivable and inventories will increase in the future in order to support the planned deployment and commercialization of Ricochet2. YEAR 2000 COMPLIANCE Many installed computer systems and software products are coded to accept only two digit entries in the date code field. As the year 2000 approaches, these code fields will need to accept four digit entries to distinguish years beginning with "19" from those beginning with "20" dates. As a result, in the next year, computer systems and/or software products used by many companies may need to be upgraded to comply with such year 2000 ("Y2K") requirements. In the third quarter of 1998, the Company began a plan to remedy the potential Y2K 12 13 problems. The Company is currently in various stages of assessment, testing and remediation of Y2K compliance, depending on the particular computer systems or software involved. The Company's business and financial systems have recently been upgraded to Oracle 10.7, a current revision which has been certified by the vendor to be Y2K compliant. The Company is in the process of assessing its microcellular commercial data networks for Y2K compliance. These networks are dependent upon third parties for telecommunications services and power. If the Company's providers of these services are not Y2K compliant, the usability of the Company's microcellular commercial networks could be impaired, which could have a material adverse effect on the Company's business, financial condition and results of operations. The Company intends to have its Y2K assessment, testing, remediation efforts and development of necessary contingency plans complete by the year 2000. To date, costs incurred to address Y2K compliance issues have not been material. The Company estimates that total costs to address Y2K compliance issues will be approximately $300,000. The total cost estimate is subject to change as the Company progresses in the execution of its Y2K plan. Costs related to Y2K issues continue to be funded through operating cash flows. There can be no assurance that the Company will be able to complete its Y2K assessment, testing, remediation efforts and development of necessary contingency plans by the year 2000. Any failure to complete the Y2K assessment, testing, remediation efforts and development of necessary contingency plans prior to the year 2000 could have a material adverse effect on the Company's business, financial condition and results of operations. The Company has begun communicating with its key suppliers to assess Y2K compliance. There can be no assurance that the Company's key suppliers have or will have information technology systems, non-information technology systems and products that are Y2K compliant. Similarly, there can be no assurance that the Company's customers have, or will have information technology systems, non-information technology systems and products that are Y2K compliant. Any Y2K problem facing the Company, its customers or suppliers could have a material adverse effect on the Company's business, financial condition and results of operations. In the event that the Company's planned actions do not resolve the Y2K issues, the Company is prepared to use backup systems, where possible, that do not rely on computers. In other critical functions where computer systems are essential, the Company intends to develop an alternative contingency plan in the coming months. PART II. OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 27.1 Financial Data Schedule b. Reports on Form 8-K: None filed by the Company in the first quarter of 1999 13 14 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) Date: May 14, 1999 /s/ TIMOTHY A. DREISBACH -------------------------------- Timothy A. Dreisbach President and Chief Executive Officer /s/ DAVID J. PANGBURN --------------------------------- David J. Pangburn Corporate Controller (Principal Financial and Accounting Officer) 14 15 EXHIBIT INDEX 27.1 Financial Data Schedule
EX-27.01 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 21,842 0 2,061 0 2,304 27,807 43,917 37,696 37,457 12,644 0 0 0 19 (56,137) 37,457 1,755 4,186 1,326 6,057 12,077 0 1,213 (15,018) 0 (15,018) 0 0 0 (15,018) (0.80) (0.80)
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