<PAGE>
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
[ ] 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 000-21091
ADVANCED RADIO TELECOM CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1869023
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 108th Avenue, NE, Suite 2600
Bellevue, Washington 98004
(Address of principal executive offices)
(425) 688-8700
(Registrant's telephone number, including area code)
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 [ ].
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: 27,200,699 shares of common
stock, $.001 par value, at May 14, 1999.
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PART 1 - FINANCIAL INFORMATION
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1999 1998
------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................. $ 6,616,175 $ 11,864,218
Pledged securities ......................................... 18,231,815 18,504,263
Restricted cash ............................................ 32,060 32,060
Accounts receivable ........................................ 176,590 125,976
Other current assets ....................................... 93,273 681,468
------------- -------------
Total current assets ................................... 25,149,913 31,207,985
Pledged securities ......................................... 8,854,569
Property and equipment, net ................................ 24,896,339 33,202,310
FCC licenses, net .......................................... 190,553,944 186,513,591
Deferred financing costs, net .............................. 4,994,310 5,503,172
Other assets ............................................... 441,240 439,664
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Total assets ............................................. $ 246,035,746 $ 265,721,291
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Working Capital Facility ................................... $ 23,394,017 $ 16,229,121
Trade accounts payable ..................................... 2,499,015 2,533,612
Accrued compensation and benefits .......................... 1,661,675 2,936,454
Other accrued liabilities .................................. 5,066,062 4,759,689
Accrued interest payable ................................... 2,458,197 7,154,224
Current portion of long-term debt .......................... 602,917 525,313
------------- -------------
Total current liabilities ............................... 35,681,883 34,138,413
Long-term debt, net of current portion ....................... 118,105,092 117,845,932
Deferred income tax liability ................................ 31,195,929 31,382,026
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Total liabilities ....................................... $ 184,982,904 $ 183,366,371
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Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized,
27,141,946 and 26,707,036 shares issued and outstanding ... 27,142 26,707
Additional paid-in capital .................................. 228,196,556 225,967,684
Note receivable from stockholder ............................ (887,500) (887,500)
Accumulated deficit ......................................... (166,283,356) (142,751,971)
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Total stockholders' equity ............................... 61,052,842 82,354,920
------------- -------------
Total liabilities and stockholders' equity ............ $ 246,035,746 $ 265,721,291
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------
1999 1998
------------ ------------
(as restated)
<S> <C> <C>
Revenue ..................................... $ 225,962 $ 236,557
------------ ------------
Costs and expenses:
Technical and network operations ........ 3,540,308 1,750,726
Sales and marketing ..................... 1,465,559 1,512,078
General and administrative .............. 2,646,035 2,398,088
Equipment impairment .................... 6,375,996
Depreciation and amortization ........... 3,129,984 1,428,968
------------ ------------
Total operating costs and expenses ..... 17,157,882 7,089,860
------------ ------------
Loss from operations ........................ (16,931,920) (6,853,303)
------------ ------------
Interest and other:
Interest expense .......................... 6,679,665 5,121,701
Financing commitment expenses ............. 656,882
Interest income ........................... (432,068) (822,420)
------------ ------------
Loss before income taxes ................ (23,836,399) (11,152,584)
Deferred income tax benefit ................. 305,014 2,051,789
------------ ------------
Net loss ................................ $(23,531,385) $ (9,100,795)
============ ============
Basic and diluted net loss per common share . $ (0.87) $ (0.42)
============ ============
Weighted average common shares .............. 27,035,220 21,736,800
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
For the three months ended March 31, 1999
<TABLE>
<CAPTION>
Note
Common Stock Additional Receivable
--------------------- Paid-in from Accumulated
Shares Par Value Capital Stockholder Deficit Total
---------- --------- -------------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 26,707,036 $26,707 $225,967,684 $(887,500) $(142,751,971) $ 82,354,920
Common stock issued in exchange
for certain FCC licenses 154,114 154 847,473 847,627
Value ascribed to warrants issued in
connection with the Working
Capital Facility 1,241,710 1,241,710
Warrants exercised 276,848 277 2,492 2,769
Accrued stock compensation 137,201 137,201
Common stock issued under
employment agreements 3,948 4 (4)
Net loss (23,531,385) (23,531,385)
---------- ------- ------------ ----------- -------------- ------------
Balance, March 31, 1999 27,141,946 $27,142 $228,196,556 $(887,500) $(166,283,356) $ 61,052,842
========== ======= ============ =========== ============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1999 1998
------------ ------------
(as restated)
<S> <C> <C>
Cash flows from operating activities:
Net loss ....................................................... $(23,531,385) $ (9,100,795)
Adjustment to reconcile net loss to net cash used in operating
activities:
Non-cash compensation expense ................................ 137,201 180,244
Non-cash equipment impairment charges ........................ 6,375,996
Depreciation and amortization ................................ 3,129,984 1,428,968
Non-cash interest and financing commitment expense ........... 1,969,097 424,474
Deferred income tax benefit .................................. (305,014) (2,051,789)
Changes in operating assets and liabilities:
Accrued interest payable ................................... (4,696,027) (4,789,727)
Accounts receivable ........................................ (50,614) (55,560)
Accrued interest on pledged securities ..................... (322,983) (457,208)
Accounts payable and accrued liabilities ................... (1,003,003) (1,067,188)
Other assets ............................................... 586,619 23,795
------------ ------------
Net cash used in operating activities .................... (17,710,129) (15,464,786)
------------ ------------
Cash flows from investing activities:
Capital expenditures for property and equipment .............. (206,575) (1,828,134)
Proceeds from sales of property and equipment ................ 372,000
Additions to FCC licenses .................................... (4,310,877) (294,950)
Purchases of short-term investments .......................... (5,127,663)
Proceeds from sale of short-term investments ................. 13,277,000
Proceeds from maturities of pledged securities ............... 9,450,000 9,180,000
------------ ------------
Net cash provided by investing activities ................ 5,304,548 15,206,253
------------ ------------
Cash flows from financing activities:
Book overdraft ............................................... (3,055,759)
Proceeds from Working Capital Facility ....................... 7,500,000
Proceeds from stock option and warrant exercises ............. 2,769 72,284
Principal payments of long-term debt ......................... (143,155) (980,211)
Additions to deferred financing costs ........................ (202,076) (21,441)
------------ ------------
Net cash provided by (used in) financing activities ...... 7,157,538 (3,985,127)
------------ ------------
Net decrease in cash and cash equivalents ........................ (5,248,043) (4,243,660)
Cash and cash equivalents, beginning of period ................... 11,864,218 7,135,427
------------ ------------
Cash and cash equivalents, end of period ......................... $ 6,616,175 $ 2,891,767
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The Company and Basis of Presentation:
Advanced Radio Telecom Corp. (collectively with its subsidiaries, "ART" or
the "Company") provides wireless broadband telecommunications services in the 38
GHz band of the radio spectrum. The Company's initial business was selling
connectivity to various telecommunications companies as a wholesale carriers'
carrier, which the Company commenced in the fourth quarter of 1996. Following
the establishment of a new core management team, the Company altered its
strategy in the first quarter of 1998 and focused on selling a variety of
broadband Internet services to end-user customers and deploying a broadband data
network. During the year ended December 31, 1998, ART began offering its
Internet services in the Seattle, Washington, Portland, Oregon and Phoenix,
Arizona areas and, as such, revenues to date have been limited.
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company. The financial statements contain all
adjustments, consisting only of normal recurring adjustments which are, in the
opinion of the Company's management, necessary to present fairly the
consolidated financial position of the Company as of March 31, 1999, the
consolidated results of its operations for the three months ended March 31, 1999
and 1998 and its cash flows for the three months ended March 31, 1999 and 1998.
The Company will require significant additional capital to fully fund its
operations and long-term broadband data network buildout and business plan. The
Company currently estimates that it will require in excess of $1 billion over
the next several years to fund capital expenditures, working capital and
operations. During 1998, the Company and Lucent Technologies Inc. ("Lucent")
entered into a credit facility for Lucent to provide the Company with up to $25
million of unsecured revolving loans for working capital purposes (the "Working
Capital Facility"), due June 30, 1999 unless extended by Lucent. During 1998,
the Company and Lucent also entered into a purchase money credit facility (the
"Purchase Money Facility") setting forth the terms and conditions under which
Lucent will provide purchase money financing of up to $200 million, to be used
to finance the purchase of the Company's broadband data networks from Lucent.
Lucent has made available $10 million in initial purchase money loans and the
availability of the balance is subject to other conditions, including the
Company's ability to raise at least $50 million of certain debt or equity
capital. There can be no assurance that the funding will become available to
the Company.
The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and liquidation of liabilities in the ordinary course of business. The
Company has limited financial resources, has incurred recurring losses from
operations since inception and does not expect to generate significant operating
revenues in the near term. The Company's ability to continue as a going concern
at least through December 31, 1999, which includes funding of its operations and
business plan, the repayment of the $25 million Working Capital Facility and
funding of its contractual commitments, is dependent upon its ability to raise
additional financing. The Company has engaged investment bankers to assist it
in obtaining financing and is in negotiations with potential investors to
provide equity financing. However, there can be no assurance that the Company
will be successful in its efforts to obtain such financing, or, if available,
that it will be able to obtain it on acceptable terms. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The year-end condensed consolidated
balance sheet was derived from audited financial statements but does not include
all disclosures required by generally accepted accounting principles. The
unaudited condensed consolidated financial
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<PAGE>
statements should be read in conjunction with the Company's December 31, 1998,
audited consolidated financial statements and notes thereto contained in the
1998 Form 10-K on file with the Securities and Exchange Commission.
Restatement of 1998 Comparative Financial Information
The Company has restated its interim financial results for the first,
second and third quarters of fiscal 1998 as a result of a change in Federal
income tax law that was not previously considered, which increased the net
operating loss carryforward period from 15 to 20 years. The effect of the
restatement of the March 31, 1998 comparative financial information increased
the deferred income tax benefit by $1,722,619 and decreased the net loss by
$1,722,619.
Property and Equipment
As of March 31, 1999, substantially all of the Company's property and
equipment, excluding certain wireless equipment held for disposal, had been
placed in service.
During the first quarter of 1999, the Company recorded a non-cash equipment
impairment charge of approximately $6.4 million to write down the carrying value
of certain equipment that management determined in March 1999 would be disposed
of and not used in its future broadband network buildout. The amount of the
write-down was based on the estimated salvage value of such equipment.
During the first quarter of 1999, the Company sold certain wireless
equipment resulting in cash proceeds of approximately $372,000, which
approximated its carrying value. At March 31, 1999 the carrying value of
certain wireless equipment to be disposed of was approximately $1.7 million.
During the first quarter of 1999, under its definitive purchase agreement
with Lucent, the Company issued a purchase order for certain wireless network
equipment in the amount of approximately $5 million. The cost of the equipment
could increase if the volume of the Company's future purchases does not meet
certain projections.
FCC Licenses
In January 1999, the Company consummated acquisitions of certain 38 GHz
licenses for $4.3 million in cash and certain other licenses for 154,114 shares
of common stock valued at approximately $990,000, including related deferred
taxes and acquisition costs.
Working Capital Facility
During the first quarter of 1999, the Company has drawn the remaining $7.5
million available under the Working Capital Facility and, in conjunction, the
Company issued warrants to purchase 191,988 shares of the Company's common
stock. The aggregate value ascribed to the warrants was approximately
$1,242,000.
During the first quarter of 1999, Lucent waived compliance by the Company
with certain operational covenants in the Working Capital Facility and the
Purchase Money Facility.
Purchase Money Facility
At December 31, 1998, the Company had utilized the entire $10 million of
initial purchase money loans made available by Lucent. The amount has been
included in long-term debt.
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<PAGE>
Supplemental Cash Flow Information:
Supplemental disclosure of cash flow information is summarized below for
the three months ended March 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Non-cash financing and investing activities:
Issuance of shares for FCC licenses............ $ 847,627 $1,171,215
Value ascribed to warrants..................... 1,241,710
Additions to property & equipment.............. 128,366
Interest paid.................................... $9,917,813 $9,481,546
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Advanced Radio Telecom Corp. (collectively with its subsidiaries, "ART" or the
"Company") provides wireless broadband telecommunications services in the 38 GHz
band of the radio spectrum. The Company's initial business was selling
connectivity to various telecommunications companies as a wholesale carriers'
carrier, which the Company commenced in the fourth quarter of 1996. Following
the establishment of a new core management team, the Company altered its
strategy in the first quarter of 1998 and focused on selling a variety of
broadband Internet services to end-user customers and deploying a broadband data
network. During the year ended December 31, 1998, ART began offering its
Internet services in the Seattle, Washington, Portland, Oregon and Phoenix,
Arizona areas and, as such, revenues to date have been limited.
Results of Operations
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31,
1998
Revenue for the three months ended March 31, 1999, was $225,962 compared to
$236,557 for the same period in 1998. The Company's revenue from the first
quarter of 1999 consisted of service revenue from its remaining carriers'
carrier operations and fees charged for the Company's Internet services in
Seattle, Portland and Phoenix. The Company's revenue from the first quarter of
1998 consisted primarily of revenue from the Company's carrier's carrier
operations.
Operating costs and expenses were approximately $17.2 million for the three
months ended March 31, 1999, compared to approximately $7.1 million in 1998.
In future periods the Company expects increases in cash expenses for network
operations and sales and marketing as the Company implements its business plan.
In the three months ended March 31, 1999, the Company recorded a charge of
approximately $6.4 million to write down the carrying value of certain equipment
that management determined in March 1999 would be disposed of and not used in
the future buildout of the Company's broadband data network. The amount of the
write-down was based on the estimated salvage value of such equipment.
Depreciation and amortization was approximately $3.1 million for the three
months ended March 31, 1999, compared to approximately $1.4 million in 1998.
The increase was primarily due to increased depreciation resulting from the
deployment of network equipment and the acquisition of certain FCC licenses
during 1998. Excluding these non-cash and non-recurring items, operating costs
and expenses for the three months ended March 31, 1999 were approximately $7.7
million compared to approximately $5.7 million during the same period in 1998.
The increase was primarily due to the increase in technical and network
operating expenses, which were attributable to the Company's buildout of its
broadband data network and the commencement of operations in Seattle, Portland,
and Phoenix in the third and fourth quarters of 1998.
Net interest and other expenses were approximately $6.9 million for the
three months ended March 31, 1999 compared to approximately $4.3 million in
1998. The increase was primarily due to the financings obtained during 1998,
described below.
Deferred income tax benefit was approximately $300,000 for the three months
ending March 31, 1999 compared to approximately $2.1 million for the same period
in 1998 as a result of a change in tax law effective January 1, 1998, which
increased the net operating loss carryforward period from 15 to 20 years.
Liquidity and Capital Resources
Through March 31, 1999, funding for the Company's acquisitions, capital
expenditures and net operating losses has been provided from private placements
of equity and bridge financings in 1994 through 1996, the
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Company's initial public offering in November 1996, the Company's public
offering of units consisting of its Senior Notes and warrants in February 1997,
and the borrowings from Lucent Technologies Inc. ("Lucent") described below in
1998. Approximately $51 million of the approximately $130 million net proceeds
from the sale of the units was used to purchase a portfolio of U.S. Treasury
securities that will provide for interest payments on the Senior Notes through
February 2000. Because the Senior Notes have "significant original issue
discount" for tax purposes, the Company will not be able to deduct the interest
expense related to the accretion of this original issue discount for tax
purposes.
During the three months ended March 31, 1999, the Company consummated the
acquisition of certain FCC licenses approximately $4.3 million in cash, and
other FCC licenses for approximately 154,000 shares of common stock. The
Company may continue to acquire additional licenses in exchange for common stock
or cash.
An option to acquire from the Company twelve 38 GHz licenses in specified
markets in which the Company has more than one license was exercised in June
1997 and closed May 17, 1999. The Company received approximately $7.0 million
from such transaction.
In September 1998, the Company and Lucent entered into a credit facility
(the "Working Capital Facility") for Lucent to provide the Company with up to
$25 million of unsecured revolving loans for working capital purposes. As of
March 31, 1999, the Company had drawn the entire $25 million under the Working
Capital Facility. Loans made pursuant to the Working Capital Facility are due
June 30, 1999, unless extended by Lucent to no later than September 17, 1999.
The terms of the Working Capital Facility require ART to apply debt or equity
capital raised by ART in excess of $50 million to permanently repay the Working
Capital Facility.
In September 1998, the Company and Lucent entered into a purchase money
credit facility (the "Purchase Money Facility") setting forth the terms and
conditions under which Lucent will provide purchase money financing in an
aggregate amount of up to $200 million, to be used to finance the purchase of
the Company's data network from Lucent. The Company has borrowed $10 million in
initial purchase money loans (the "Initial Purchase Money Loans") under the
Purchase Money Facility. No additional amounts are currently available to the
Company under the Purchase Money Facility. Subject to certain conditions,
including ART's raising at least $50 million of certain debt or equity capital
and repayment and termination of the Working Capital Facility, Lucent will make
available purchase money loans equal to 200% of the aggregate capital raised,
not to exceed $200 million (including the $10 million Initial Purchase Money
Loans). There can be no assurance that the funding contemplated by the Purchase
Money Facility will become available to ART.
In July 1998, ART and Lucent entered into a definitive purchase agreement
(the "Lucent Purchase Agreement"), which amended and restated the Company's
purchase agreement with Lucent entered into in April 1998, under which Lucent
will design, engineer and construct the Company's wireless broadband data
network. The Company's purchase commitment under the Lucent Purchase Agreement
is initially $240 million upon the availability from Lucent of $200 million of
purchase money loans under the Purchase Money Facility, and increases to $1.2
billion if Lucent agrees to increase the amount of ART's purchase money loans to
$600 million on terms that are acceptable to ART. The Company's commitment is
subject to various other terms and conditions, including, among other things,
the availability of additional financing on terms that are acceptable to ART,
and Lucent meeting certain "best in class" requirements. During the three
months ended March 31, 1999, under its definitive purchase agreement with
Lucent, the Company issued a purchase order for certain wireless network
equipment in the amount of approximately $5 million under the Lucent Purchase
Agreement. The cost of the wireless network equipment was discounted based on
the projected volume of purchases in the future. Such cost could increase if
the volume of future purchases does not meet such projections.
The Company will require significant additional capital to fully fund its
operations and its long-term broadband data network buildout and business plan.
The Company currently estimates that it will require in excess of $1 billion
over the next several years to fund capital expenditures, working capital and
operations. The Company has
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limited financial resources, has incurred recurring losses from operations since
inception and does not expect to generate significant operating revenues in the
near term. The Company's ability to continue as a going concern at least through
December 31, 1999, which includes funding of its operations and business plan,
the repayment of the $25 million Working Capital Facility and funding of its
contractual commitments, is dependent upon its ability to raise additional
financing. The Company has engaged investment bankers to assist it in obtaining
financing and is in negotiations with potential investors to provide equity
financing. However, there can be no assurance that the Company will be
successful in its efforts to obtain such financing, or, if available, that it
will be able to obtain it on acceptable terms. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Inflation
Management does not believe that its business is impacted by inflation to a
significantly different extent than is the general economy.
Year 2000 Disclosure
Many existing computer programs use only two digits, rather than four, to
represent a year. Date-sensitive software or hardware written or developed in
this fashion may not be able to distinguish between 1900 and 2000, and programs
written in this manner that perform arithmetic operations, comparisons or
sorting of date fields may yield incorrect results when processing a Year 2000
date. This Year 2000 problem could potentially cause system failures or
miscalculations that could disrupt operations.
The Company's State of Readiness
The Company has implemented a survey to identify Year 2000 issues in three
areas: (i) financial and information technology systems (ii) non-IT network
equipment and (iii) third-party vendors and suppliers. The Company believes its
financial and information technology systems and its non-IT equipment will be
Year 2000 compliant by the end of 1999.
Because the Company's financial and information technology systems are
relatively new, having been purchased in 1996 or thereafter, the Company does
not expect to uncover any material noncompliant systems. The Company completed
its survey of financial and information technology systems in the first quarter
of 1999. As a result of the survey, the Company does not believe there are any
material noncompliant systems. However, the Company is conducting detailed
verification testing to confirm the results of its survey. If Year 2000 issues
are discovered, the Company will evaluate and prioritize the problems. The
Company expects to coordinate any Year 2000 problems with the vendors that
supplied the noncompliant systems. The Company expects that any remediation
efforts would continue through mid-1999. However, there can be no assurance
that the Company's survey will identify all Year 2000 problems in these systems
or that the necessary corrective actions will be completed in a timely manner.
The Company has received warranties from its network equipment suppliers
and integrators, including Lucent, that the Company's non-IT network equipment
is Year 2000 compliant. In addition, the tests conducted by the Company before
accepting delivery of such network equipment are designed to confirm whether the
equipment is Year 2000 compliant. Based on these warranties and acceptance
tests, the Company does not plan to take further action to ascertain whether its
network equipment is Year 2000 compliant. However, there can be no assurance
that this equipment will be Year 2000 compliant as warranted or that the
acceptance tests will identify all Year 2000 problems. In addition, the Year
2000 warranties that the Company has received limit the damages that the Company
would be able to recover if such systems were not Year 2000 compliant. The
Company is also reviewing the Year 2000 compatibility of its network management
software. If the Company discovers that this software is not Year 2000
compliant, it expects to coordinate its remediation efforts with the software
provider to remediate the system. The Company expects that these remediation
efforts, if any, will continue through mid-1999.
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The Company's survey is also assessing the Company's vulnerability to the
Year 2000 problems of third-party service suppliers and is communicating with
suppliers regarding the problem. The Company relies on third-party suppliers to
deliver fiber telecommunications links, Internet access, network equipment,
banking services and payroll services. The Company also intends to develop new
relationships with several providers of fiber-optic telecommunications service,
Internet service providers, telecommunications resellers and other companies in
the telecommunications industry. The Company intends to continuously identify
and prioritize critical suppliers and communicate with them about their plans
and progress in addressing the Year 2000 problem.
The Company's Year 2000 Risk
Based on the efforts described above, the Company currently believes that
its systems will be Year 2000 compliant in a timely manner. The Company
completed its survey of financial and information technology systems and non-IT
systems in the first quarter of 1999 and expects to complete any remediation
efforts by the end of the third quarter 1999. However, there can be no
assurance that all Year 2000 problems will be successfully identified, or that
the necessary corrective actions will be completed in a timely manner. Failure
to successfully identify and remediate such Year 2000 problems in a timely
manner could have a material adverse effect on the Company's results of
operations, financial position or cash flow.
In addition, the Company believes that there is a risk relating to
significant service suppliers' failure to remediate their Year 2000 issues in a
timely manner. Although the Company is communicating with its suppliers
regarding the Year 2000 problem, the Company does not know whether these
suppliers' systems will be Year 2000 compliant in a timely manner. Like most
telecommunications providers, the Company's ability to provide service is
dependent on key suppliers and equipment vendors. If one or more significant
suppliers are not Year 2000 compliant, this could have a material adverse effect
on the Company's results of operations, financial position or cash flow.
The Company's Contingency Plans
The Company has not created a formal contingency plan for Year 2000
problems. The Company intends to take appropriate actions to mitigate the
effects of third parties' failures to remediate their Year 2000 issues and for
unexpected failures in its own systems. Such actions may include having
arrangements for alternate suppliers and using manual intervention where
necessary. If it becomes necessary for the Company to take these corrective
actions, it is uncertain whether this would result in significant interruptions
in service or delays in business operations or whether it would have a material
adverse effect on the Company's results of operations, financial position or
cash flow.
Costs of Year 2000 Remediation
As of March 31, 1999, the Company has not incurred material costs related
to the Year 2000 problem, and does not expect to in the future. The Company has
not deferred other information technology projects due to Year 2000 expenses,
and does not expect to defer such projects in the future. However, there can be
no assurance that the costs associated with the Year 2000 problem will not be
greater than anticipated.
Readers are cautioned that forward-looking statements contained in the Year
2000 Disclosure should be read in conjunction with the Company's disclosures
under the heading: "Cautionary Statement" below.
-12-
<PAGE>
Cautionary Statement
This Item and other Items in this quarterly report include "forward-
looking" information as that term is defined in the Private Securities
Litigation Reform Act of 1995 or by the Securities and Exchange Commission in
its rules, regulations and releases. The Company cautions investors that any
such statements made by the Company are not guarantees of future performance and
that known and unknown risks, uncertainties and other factors including those
risk factors identified in Exhibit 99 to the Company's Report on Form 10-K for
the year ended December 31, 1998 may cause actual results to differ materially
from those in the forward-looking statements. The Company does not undertake to
update or revise its forward-looking statements publicly even if experience or
future changes make it clear that any projected results expressed or implied
herein will not be realized.
PART II -- OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Securityholders.
No matters were submitted for a vote of the stockholders in the quarter
ending March 31, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
-13-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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 on this 17th day of
May, 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ Robert S. McCambridge
--------------------------------
Robert S. McCambridge
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
-14-
<PAGE>
EXHIBIT INDEX
Exhibit
Index Title
- ------- -----
27 Financial Data Schedule
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,616,175
<SECURITIES> 18,231,815
<RECEIVABLES> 176,590
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,149,913
<PP&E> 31,815,562
<DEPRECIATION> (6,919,223)
<TOTAL-ASSETS> 246,035,746
<CURRENT-LIABILITIES> 35,681,883
<BONDS> 107,815,191
0
0
<COMMON> 27,142
<OTHER-SE> 61,025,700
<TOTAL-LIABILITY-AND-EQUITY> 246,035,746
<SALES> 225,962
<TOTAL-REVENUES> 225,962
<CGS> 0
<TOTAL-COSTS> 17,157,882
<OTHER-EXPENSES> 656,882
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,247,597<F1>
<INCOME-PRETAX> (23,836,399)
<INCOME-TAX> 305,014
<INCOME-CONTINUING> (23,531,385)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,531,385)
<EPS-PRIMARY> (0.87)
<EPS-DILUTED> (0.87)
<FN>
<F1>NET OF INTEREST INCOME OF $432,068
</FN>
</TABLE>
