<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 June 30, 2000
[_] 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)
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<S> <C>
DELAWARE 52-1869023
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
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: 29,487,400 shares of common
stock, $.001 par value, at August 8, 2000.
<PAGE>
ADVANCED RADIO TELECOM CORP.
INDEX
PART 1. FINANCIAL INFORMATION
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Page
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Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
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<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share data)
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June 30, December 31,
2000 1999
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Current assets:
Cash and cash equivalents ..................................................... $ 144,257 $ 108,161
Short-term investments ........................................................ -- 75,887
Pledged securities ............................................................ -- 9,407
Notes receivable .............................................................. 6,560 --
Accounts receivable ........................................................... 61 234
Prepaid expenses and other current assets ..................................... 175 227
--------- ---------
Total current assets ....................................................... 151,053 193,916
Property and equipment, net ...................................................... 27,274 14,747
FCC licenses, net ................................................................ 177,505 180,754
Deferred financing costs, net .................................................... 8,232 8,345
Other assets ..................................................................... 17,837 374
--------- ---------
Total assets ........................................................... $ 381,901 $ 398,136
========= =========
Current liabilities:
Accounts payable .............................................................. $ 7,199 $ 5,780
Accrued compensation and benefits ............................................. 4,054 3,022
Accrued taxes other than income ............................................... 5,434 5,034
Other accrued liabilities ..................................................... 4,751 2,826
Accrued interest payable ...................................................... 7,094 7,120
Current portion of long-term debt ............................................. 212 380
--------- ---------
Total current liabilities ................................................... 28,744 24,162
Long-term debt, net of current portion ........................................... 113,030 109,047
Deferred income tax liabilities .................................................. 28,704 29,326
--------- ---------
Total liabilities ........................................................... 170,478 162,535
--------- ---------
Commitments and contingencies
Convertible Preferred Stock:
Series A 2,411,667 and 2,288,289 shares issued and outstanding ................ 202,732 195,796
Series B 725,833 and 849,211 shares issued and outstanding ................... 40,804 47,740
--------- ---------
Total convertible preferred stock .......................................... 243,536 243,536
--------- ---------
Stockholders' deficit:
Common stock and additional paid-in capital, 29,475,926
and 27,967,975 shares issued and outstanding ................................. 239,345 231,513
Note receivable from stockholder .............................................. -- (887)
Accumulated other comprehensive income ........................................ -- 889
Accumulated deficit ........................................................... (271,458) (239,450)
--------- ---------
Total stockholders' deficit ................................................ (32,113) (7,935)
--------- ---------
Total liabilities, convertible preferred stock and stockholders' deficit $ 381,901 $ 398,136
========= =========
</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 Statements of Operations
(unaudited)
(in thousands, except per share data)
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Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
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Revenues ........................................................... $ 363 $ 339 $ 761 $ 565
-------- -------- -------- --------
Costs and expenses:
Technical and network operations ............................... 5,924 4,316 10,610 7,856
Sales and marketing ............................................ 1,720 1,453 2,955 2,919
General and administrative ..................................... 4,108 3,447 8,799 6,093
Provision for equipment impairment ............................. -- -- -- 6,376
Depreciation and amortization .................................. 3,340 3,654 6,499 6,784
-------- -------- -------- --------
Total operating costs and expenses .......................... 15,092 12,870 28,863 30,028
-------- -------- -------- --------
Loss from operations ............................................... (14,729) (12,531) (28,102) (29,463)
-------- -------- -------- --------
Interest and other:
Interest expense ............................................... (5,358) (8,742) (10,581) (16,078)
Other .......................................................... -- 545 -- 545
Interest income ................................................ 2,557 494 6,053 926
-------- -------- -------- --------
Total interest and other .................................... (2,801) (7,703) (4,528) (14,607)
-------- -------- -------- --------
Loss before income taxes ........................................... (17,530) (20,234) (32,630) (44,070)
Deferred income tax benefit ........................................ 347 757 622 1,062
-------- -------- -------- --------
Net loss ........................................................... $(17,183) $(19,477) $(32,008) $(43,008)
======== ======== ======== ========
Net loss ........................................................... $(17,183) $(19,477) $(32,008) $(43,008)
Deemed preferred dividend .......................................... (2,433) -- (6,936) --
-------- -------- -------- --------
Net loss applicable to common stockholders ......................... $(19,616) $(19,477) $(38,944) $(43,008)
======== ======== ======== ========
Basic and diluted net loss per common share, including
$0.08 and $0.24 loss per share relating to deemed preferred
dividends in 2000 .............................................. $ (0.67) $ (0.72) $ (1.35) $ (1.59)
======== ======== ======== ========
Weighted average common shares ..................................... 29,249 27,211 28,797 27,124
======== ======== ======== ========
</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' Deficit
(unaudited)
(in thousands)
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Note Accumulated
Common Stock and Receivable Other
Additional paid in capital from Comprehensive Accumulated
Shares Amount Stockholder Income Deficit Total
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Balance at December 31, 1999 27,968 $231,513 $ (887) $ 889 $(239,450) $ (7,935)
Repayment of note receivable 887 887
Warrants exercised 344 3 3
Stock options exercised 1,159 7,900 7,900
Stock issued pursuant to
employee benefit plan 5 67 67
Stock compensation expense (138) (138)
Value ascribed to beneficial conversion feature
of Series A Preferred Stock 6,936 6,936
Deemed dividend of beneficial conversion
feature of Series A Preferred Stock (6,936) (6,936)
Comprehensive loss:
Net loss (32,008) (32,008)
Decrease in unrealized appreciation on
investments available for sale (889) (889)
--------
Comprehensive loss (32,897)
------ -------- -------- ----- --------- --------
Balance at June 30, 2000 29,476 $239,345 $ - $ - $(271,458) $(32,113)
====== ======== ======== ===== ========= ========
</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 Statements of Cash Flows
(unaudited)
(in thousands)
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Six Months Ended June 30,
-------------------------
2000 1999
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Cash flows from operating activities:
Net loss.......................................................................... $(32,008) $(43,008)
Adjustments to reconcile net loss to net cash used by operating activities:
Non-cash provision for equipment impairment................................... - 6,376
Depreciation and amortization................................................. 6,499 6,784
Non-cash interest and financing commitment expense............................ 1,077 4,658
Non-cash stock-based compensation expense..................................... (138) 456
Gain on sale of FCC licenses.................................................. - (744)
Deferred income tax benefit................................................... (622) (1,062)
Changes in operating assets and liabilities:
Accrued interest payable.................................................. (26) 863
Accounts payable and accrued liabilities.................................. 4,776 7,934
Other......................................................................... (533) (153)
-------- --------
Net cash used by operating activities..................................... (20,975) (17,896)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment........................................... (13,952) (2,971)
Proceeds from disposition of property and equipment........................... 120 548
Additions to FCC licenses .................................................... - (4,311)
Proceeds from sale of FCC licenses............................................ - 6,872
Deposit for FCC license auction............................................... (15,394) -
Loans to BroadStream.......................................................... (6,530) -
Proceeds from sale of short-term investments.................................. 74,998 -
Proceeds from maturities of pledged securities................................ 9,450 9,450
Proceeds from repayment of notes receivable................................... 887 -
-------- --------
Net cash provided by investing activities................................. 49,579 9,588
-------- --------
Cash flows from financing activities:
Proceeds from bridge financing................................................ - 50,000
Proceeds from working capital facility borrowings............................. - 7,500
Proceeds from issuance of common stock........................................ 7,903 519
Principal payments of long-term debt.......................................... (262) (229)
Additions to deferred financing costs......................................... (149) (7,546)
-------- --------
Net cash provided by financing activities................................. 7,492 50,244
-------- --------
Net increase in cash and cash equivalents......................................... 36,096 41,936
Cash and cash equivalents, beginning of period.................................... 108,161 11,864
-------- --------
Cash and cash equivalents, end of period.......................................... $144,257 $ 53,800
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1 - The Company and Significant Accounting Policies
Advanced Radio Telecom Corp. (collectively with its subsidiaries, "ART" or the
"Company") is a broadband internet protocol service provider to businesses. ART
has a nationwide footprint of 39 GHz spectrum licenses in the United States, and
owns 26GHz and/or 39GHz spectrum licenses in the United Kingdom and several
Scandinavian countries. The Company has announced plans to build wireless
high-speed, internet protocol metropolitan area networks in 40 major United
States markets over the next three years. During the first half of 2000, the
Company launched its high-speed broadband metropolitan data networks in
Washington D.C., Houston, San Jose, Los Angeles, Seattle and Phoenix.
The Company will require significant additional capital to fully fund its
operations and its long-term broadband data network buildout and business plan.
While the Company has raised substantial capital in the past, there can be no
assurance that the Company will be able to obtain additional financing, or, if
available, that it will be able to obtain such additional financing on
acceptable terms.
Interim financial statements - Certain information and footnote disclosures
normally included in financial statements have been condensed or omitted
pursuant to rules and regulations of the Securities and Exchange Commission. The
accompanying interim condensed consolidated financial statements are unaudited.
In the opinion of Company management, these financial statements include all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the Company's financial position and results of operation for the interim
periods presented. The unaudited condensed consolidated financial statements
should be read in conjunction with the Company's 1999 audited consolidated
financial statements and notes thereto contained in the Company's 1999 Annual
Report on Form 10-K.
Use of Estimates - Preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the financial statements. Actual
results could differ from these estimates. Among the more significant estimates
made by management include estimated useful lives of licenses and network
equipment and the recoverability of recorded values of long-lived assets.
Impairment of Long-Lived Assets - The Company evaluates its long-lived assets
for financial impairment and continues to evaluate them as events or changes in
circumstances indicate that the carrying amount of such assets may not be fully
recoverable. In cases where undiscounted expected cash flows associated with
such assets are less than their carrying value, an impairment provision is
recognized in an amount by which the carrying value exceeds the estimated fair
value of such assets. Recoverability of property and equipment and capitalized
FCC licenses is dependent on, among other things, the successful deployment of
networks in each of the respective markets, or sale of such assets. Management
estimates that the Company will recover the carrying amount of those costs from
undiscounted cash flows generated by the networks once deployed. However, it is
reasonably possible that such estimates may change in the near term as a result
of technological, regulatory or other changes.
Net Loss Per Share - Calculations of loss per share exclude the effect of
convertible preferred stock, options and warrants since inclusion in such
calculations would have been antidilutive. The net loss per common share for the
three and six months ended June 30, 2000, gives effect to a deemed preferred
stock dividend of approximately $2.4 million and $6.9 million, respectively,
representing the beneficial conversion feature of Series A preferred stock.
Note 2 - Property and Equipment
Capital expenditures for property and equipment during the six months ended June
30, 2000, included approximately $3.3 million which were funded by vendor
financing.
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Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 2 - Property and Equipment (continued)
During the six months ended June 30, 1999, the Company recorded a provision for
equipment impairment of approximately $6.4 million to write down the carrying
value of certain equipment not expected to be an integral part of the Company's
expanded broadband data network.
Note 3 - FCC Licenses and Recent Developments
In April 2000, the Company entered into an agreement to acquire up to all of the
39GHz licenses of BroadStream Communications Corporation and its affiliates
("BroadStream") in exchange for shares of Company common stock. The number of
shares of common stock to be issued as consideration for the acquired licenses
will be determined by a formula based on 1.25 times the population covered by
the licenses (as defined) divided by 36. The maximum number of shares that will
be issued if all licenses are acquired approximates 10.2 million shares. The
Company has also entered into an agreement to make available to BroadStream
bridge loans of up to $30 million, pursuant to which the Company has loaned
approximately $6.5 million at June 30, 2000; amounts borrowed are to be repaid
within 90 days of the transaction closing. In addition, in March 2000, the
Company entered into an agreement to acquire all of the 39 GHz licenses of
Bachow Communications Incorporated in exchange for approximately 2.2 million
shares of the Company's common stock. Closing of both transactions, which are
anticipated in the second half of 2000, are subject to various conditions,
including FCC approval and, in the case of the BroadStream transaction, for
certain licenses, license renewal.
The Company is a participant in an auction for 39 GHz licenses being conducted
by the FCC and in connection therewith in March 2000, the Company made a $31.5
million up front payment (the amount of which was determined in accordance with
auction notice and filing requirements) for additional licenses it may acquire
in the auction. As a result of the recently completed auction, the Company was
the high bidder for licenses having a total purchase price of approximately $77
million. In May 2000, the Company received from the FCC a return of
approximately $16.1 million of its up front payment. The net deposit of $15.4
million is included in other assets in the accompanying June 30, 2000
consolidated balance sheet. The remaining $61.6 million payment is expected to
be paid during the second half of 2000.
In May 1999, the Company sold 11 licenses for approximately $6.9 million,
resulting in a gain included in other income of approximately $700,000.
Note 4 - Long-term Debt and Other Financings
Financing Agreement with Cisco Systems - During 2000, the Company entered into a
credit agreement with Cisco Systems Capital Corporation, an affiliate of Cisco
Systems, Inc. ("Cisco"), for multi-year vendor financing to be used to fund the
Company's purchases of Cisco networking hardware and other costs associated with
the network installation and integration of such hardware. Funding under the
facility is available in tranches, approximately $14 million being immediately
available, $36 million available upon build-out of certain markets and the
remaining $125 million becoming available upon completion of additional market
build-outs or upon closing of additional financing facilities, as defined. Terms
of the credit agreement, among other things, include requirements for the
Company to maintain certain levels of financial ratios, to limit distributions,
dividends, redemptions or other acquisitions of the Company's capital stock, to
limit the amount of additional indebtedness and provides for mandatory principal
prepayments under certain circumstances. As of June 30, 2000, the Company had
borrowed approximately $3.3 million relating to this credit agreement, which is
included in long-term debt in the accompanying consolidated balance sheet.
Working Capital Facility - During 1999, the Company borrowed funds available on
a working capital facility, which facility was repaid in September 1999 and
terminated.
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<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 5 - Capital Stock
During the six months ended June 30, 2000, as a result of the automatic
conversion of approximately 123,000 shares of Series B convertible preferred
stock into Series A convertible preferred stock, the Company recognized a deemed
dividend of approximately $6.9 million.
As a result of declines in the market value of the Company's common stock,
general and administrative expenses for the three and six months ended June 30,
2000 include a credit to expense of $789,000 and $138,000, respectively,
relating to stock-based compensation. Stock-based compensation expense was
$319,000 and $456,000 for the three and six months ended June 30, 1999,
respectively.
Note 6 - Commitments and Contingencies
The Company is party to certain claims and makes routine filings with the FCC
and state regulatory authorities. Management believes that resolution of any
such claims or matters arising from such filings, if any, will not have a
material adverse impact on the Company's consolidated financial position,
results of operations or cash flows. In the normal course of business, the
Company has various legal claims and other contingent matters outstanding.
Management believes that any ultimate liability arising from these actions would
not have a material adverse effect on the Company's financial condition,
liquidity or operating results.
Note 7 - Supplemental Cash Flow Information:
Supplemental disclosure of non-cash financing and investing activities and other
cash flow information for the six months ended June 30 is summarized as follows
(in thousands):
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2000 1999
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Non-cash financing and investing activities:
Issuance of shares for FCC licenses $ - $ 848
Value ascribed to warrants - 1,242
Additions to property and equipment 3,261 -
Interest paid 9,504 10,683
</TABLE>
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<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Cautionary Statement
This report includes "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, regarding the
Company's financial and business prospects, the deployment of its network and
capital requirements. The Company cautions investors that any such statements
are not guarantees of future performance and that known and unknown risks,
uncertainties and other factors may cause actual results to differ materially
from those in the forward-looking statements. Those risks include, without
limitation, ability to raise additional capital, capital requirements and other
financial risks, customer demand, technological risks, management of growth,
competition and government regulation, as described in Exhibit 99 to the
Company's Report on Form 10-K for the year ended December 31, 1999. 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.
Overview
In September 1999, ART refocused its strategy to providing broadband internet
protocol services to businesses. Revenues for the 2000 and comparative 1999
interim periods represent sales to customers and for businesses that are not
part of the current strategy. Revenues and results for those periods are not
indicative of the Company's business plan being deployed in 2000.
The Company plans to deploy wireless high speed internet protocol metropolitan
networks in ten U.S. markets in 2000 and in an additional thirty markets over
the next three years. In March 2000, the Company launched its high-speed
broadband metropolitan data network in San Jose and followed with additional
network launches in Washington D.C., Houston, Los Angeles, Seattle and Phoenix
at the end of June 2000. Revenues from these recently opened markets have not
been material through June 30, 2000. The Company expects its operating expenses
to increase as it deploys networks and expands its business.
Results of Operations
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Revenues for the six months ended June 30, 2000, increased 35% to $761,000
compared to $565,000 for the comparative prior year period as increases in
internet access revenues exceeded decreases in revenues from the prior business
model.
Technical and network operations expenses increased 35% to $10.6 million during
the six months ended June 30, 2000 from approximately $7.9 million for the
comparative prior year period. The increase resulted primarily from operation of
legacy networks in four markets during the first half of 2000 as compared to
three markets during the prior year period and from increases relating to the
ongoing network buildout.
Sales and marketing expenses of approximately $3.0 million for the six months
ended June 30, 2000 increased 1% from approximately $2.9 million for the
comparative prior year period. These costs are expected to increase as the
Company's market roll-out continues.
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<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations (continued)
General and administrative expenses of approximately $8.8 million for the six
months ended June 30, 2000 increased $2.7 million, or 44%, over the comparative
prior year period. The increase was due to expanded operations and
infrastructure build-up in anticipation of network deployment, market
development and business expansion. As a result of declines in the market value
of the Company's common stock, general and administrative expenses for the six
months ended June 30, 2000 includes a credit to expense of $138,000 as compared
to expense of $456,000 for the six months ended June 30, 1999. Exclusive of
non-cash changes and credits relating to stock-based compensation, general and
administrative expenses approximated $8.9 million and $5.6 million for the six
months ended June 30, 2000 and 1999, respectively.
During the six months ended June 30, 1999, the Company recorded a provision for
equipment impairment of approximately $6.4 million related to the write-down of
certain equipment not expected to be an integral part of the Company's broadband
metropolitan data network.
Depreciation and amortization expense of approximately $6.5 million during the
six months ended June 30, 2000 decreased $285,000 as compared to the prior year
period due to recording provisions for equipment impairment charges in 1999. As
networks are deployed, depreciation expense will begin to increase as compared
to prior periods.
Interest and other expenses decreased during the six months ended June 30, 2000
to $4.5 million from $14.6 million during the comparative prior year period due
to a decrease in interest expense of $5.5 million and an increase in interest
income of $5.1 million. The higher interest expense in the 1999 period was
primarily due to amortization of the value ascribed to warrants issued in
equipment financings and borrowings under these facilities, which were repaid in
September 1999. The increase for interest income results from earnings on
increased balances of cash and short-term investments.
Deferred income tax benefits were $622,000 and $1.1 million during the six
months ended June 30, 2000 and 1999, respectively.
In February of 1999, the Company cancelled and reissued approximately 1 million
stock options which under recently issued interpretations of Accounting
Principles Board Opinion No. 25, would be accounted for as variable options
prospectively from July 1, 2000, the effective date of the interpretation, until
such options have been exercised.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Revenues for the three months ended June 30, 2000, increased 7% to $363,000
compared to $339,000 for the comparative prior year period as increases in
internet access revenues exceeded decreases in revenues from the prior business
model.
Technical and network operations expenses increased 37% to $5.9 million during
the three months ended June 30, 2000 from approximately $4.3 million for the
comparative prior year period. The increase resulted primarily from operation of
legacy networks in four markets during the 2000 quarter as compared to three
markets during the prior year period and from increases relating to the ongoing
network buildout.
Sales and marketing expenses of approximately $1.7 million for the three months
ended June 30, 2000 increased 18% from approximately $1.5 million for the
comparative prior year period as a result of increased marketing activities
relating to market roll-outs. These costs are expected to increase as the
Company's market roll-out continues.
-11-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations (continued)
General and administrative expenses of approximately $4.1 million for the three
months ended June 30, 2000 increased approximately $661,000, or 19%, over the
comparative prior year period. The increase was due to expanded operations and
infrastructure build-up in anticipation of network deployment, market
development and business expansion. As a result of declines in the market value
of the Company's common stock, general and administrative expenses for the three
months ended June 30, 2000 includes a credit to expense of $789,000 as compared
to expense of $319,000 for the three months ended June 30, 1999. Exclusive of
non-cash changes and credits relating to stock-based compensation, general and
administrative expenses approximated $4.9 million and $3.1 million for the three
months ended June 30, 2000 and 1999, respectively.
Depreciation and amortization expense of approximately $3.3 million during the
three months ended June 30, 2000 decreased $314,000 as compared to the prior
year period due to recording provisions for equipment impairment charges in
1999.
Interest and other expenses decreased during the three months ended June 30,
2000 to $2.8 million from $7.7 million during the comparative prior year period
due to a decrease in interest expense of $3.4 million and an increase in
interest income of $2.1 million. The higher interest expense in the 1999 quarter
was primarily due to amortization of the value ascribed to warrants issued in
equipment financings and borrowings under these facilities, which were repaid in
September 1999. The increase for interest income results from earnings on
increased balances of cash and short-term investments.
Deferred income tax benefits were $347,000 and $757,000 during the three months
ended June 30, 2000 and 1999, respectively.
Liquidity and Capital Resources
During the six months ended June 30, 2000, operating activities used cash of
approximately $21.0 million as compared to $17.9 million used by operating
activities during the comparative prior year period and approximately $8.2
million during the immediately preceding quarter. Cash used by operating
activities resulted primarily from the Company's net loss reduced by
depreciation and amortization and other non-cash charges and offset by increases
in accounts payable and accrued liabilities. The level of accounts payable and
accrued liabilities activity will increase or decrease cash used by operating
activities and may fluctuate on a quarter to quarter basis.
Investing activities provided cash of approximately $49.6 million and $9.6
million during the six months ended June 30, 2000 and 1999, respectively.
Investing activities provided cash primarily from maturities of short-term
investments during the six months ended June 30, 2000 of approximately $75
million and from maturities of pledged securities of approximately $9.4 million
during each of the 2000 and 1999 quarters. The February 15, 2000 Senior Notes
interest payment was made utilizing the last tranche of pledged securities;
accordingly future interest payments will no longer be funded by pledged
securities. Investing activities used cash of $15.4 million for a deposit
relating to the FCC license auction, approximately $14.0 million and $3.0
million for capital expenditures during the 2000 and 1999 six month periods,
respectively, and approximately $4.3 million for acquisitions of certain FCC
licenses during the 1999 period.
Financing activities provided cash of approximately $7.5 million during the six
months ended June 30, 2000, primarily the result of receipt of proceeds from
exercise of outstanding stock options and warrants to purchase Company common
stock.
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<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
In April 2000, the Company entered into an agreement to acquire up to all of the
39 GHz licenses of BroadStream in exchange for shares of the Company's common
stock. The number of shares of common stock to be issued as consideration for
the acquired licenses will be determined by a formula based on 1.25 times the
population covered by the licenses (as defined) divided by 36. The maximum
number of shares that will be issued if all licenses are acquired approximates
10.2 million shares. The Company has also entered into an agreement to make
available to BroadStream a bridge loan of up to $30 million, pursuant to which
the Company has loaned approximately $6.5 million at June 30, 2000; amounts
borrowed are to be repaid within 90 days of the transaction closing. In
addition, in March 2000, the Company entered into an agreement to acquire all of
the 39 GHz licenses of Bachow Communications Incorporated in exchange for
approximately 2.2 million shares of the Company's common stock. Closing of both
transactions, which are anticipated in the second half of the year, are subject
to various conditions, including FCC approval and, in the case of the
BroadStream transaction, for certain of the licenses, license renewal.
Since inception, the Company has financed its operations, capital expenditures
and acquisitions from issuances of debt and equity securities and vendor
financing. In September 1999, the Company raised $251 million from the private
placement of convertible preferred stock, and in 2000, the Company entered into
a credit agreement with Cisco for up to $175 million of financing for network
buildout. Funding under the facility is available in tranches, approximately $14
million being immediately available, $36 million available upon build-out of
certain markets and the remaining $125 million becoming available upon
completion of additional market build-outs or upon closing of additional
financing facilities, as defined. The Company will require significant
additional capital to fully fund its operations and its long-term broadband
metropolitan network build-out and business plan. The Company currently
estimates that it may require in excess of $750 million over the next several
years to fund capital expenditures, working capital and operations.
Additionally, the Company may require substantial additional cash relating to
acquisitions of licenses, including licenses to be acquired as a result of the
recently completed FCC Auction in which the Company was the high bidder for
licenses having a total purchase price of approximately $77 million.
Accordingly, the Company will need to raise substantial additional capital to
fully implement its business plan. While the Company has raised substantial
capital in the past, there can be no assurance that the Company will be able to
obtain additional financing, or, if available, that it will be able to obtain
such additional financing on acceptable terms. Actual capital requirements will
be affected, possibly materially, by various factors including the speed of the
Company's build-out, the cost and amount of equipment acquired, the number of
markets served and the penetration of those markets, customer acceptance and
demand and the prices charged for services, competition and technological
change. The Company expects to be able to adjust its capital requirements in
part in response to customer demand by changing the rate at which it adds new
markets and builds out existing markets.
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<PAGE>
Advanced Radio Telecom Corp.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to the Vote of Security Holders
The Company held its annual meeting of the stockholders (the "Annual Meeting")
on June 14, 2000. Matters submitted to a vote of Company stockholders and voting
results were as follows:
(i) Stockholders approved the issuance of shares in payment for
licenses and other assets of BroadStream Communications
Corporation and affiliates. Votes cast at the Annual Meeting
with respect to this matter included 21,937,597 votes in favor
of the approval of the issuance of shares, 99,514 votes were
against, and 50,020 votes abstained.
(ii) Stockholders elected Marc B. Weisberg and Alan Z. Senter as
directors of the Company. Votes cast at the Annual Meeting with
respect to this matter included 31,664,215 votes in favor of
election of Marc B. Weisberg and 455,130 votes to withhold
authority for the election of Marc B. Weisburg. Votes cast at
the Annual Meeting included 31,609,127 votes in favor of the
election of Alan Z. Senter and 510,218 votes to withhold
authority for the election of Alan Z. Senter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data Schedule.
(b) Reports on Form 8-K:
The Company did not file a Form 8-K during the quarter ended June 30, 2000.
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<PAGE>
Advanced Radio Telecom Corp.
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 11th day of August,
2000.
ADVANCED RADIO TELECOM CORP.
By: /s/ R. S. McCambridge
--------------------------------
R. S. McCambridge
President and
Chief Operating Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
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<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
EXHIBIT INDEX
Exhibit
Number Title
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27. Financial Data Schedule
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